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Akorn Pharmaceuticals (NASDAQ: AKRX) will pay $24 million to settle a class action lawsuit accusing the company of inflating revenue figures and using faulty accounting practices after a federal judge granted preliminary approval for a deal between the two parties.
The company faced a plethora of investor lawsuits beginning in March 2015 after it was forced to delay filing its annual report. The following day, the company’s stock price fell by 8 percent – and the company began a process of announcing accounting errors that led to a restatement of 2014 results.
Akorn, an Illinois-based specialty drug manufacturer, has made two major acquisitions in 2014, picking up both Hi-Tech Pharmacal Co. Inc. and VersaPharma Inc. for a combined $1.1 billion.
But the company had consistently failed to fix internal controls identified in earlier audits, and the process of integrating the acquisitions into Akorn’s accounting system exacerbated the errors. The accounting mistakes reduced Akorn’s revenue by $47 million and its net income by $27 million.
The lawsuits accused the company and two of its corporate officers, Rajat Rai and Timothy Dick, of having inflicted losses of as much as $146.6 million on the company’s investors.
A 2016 attempt by Akorn to dismiss the suit was denied, and the case headed to what was described as “extensive arm’s-length negotiations” through a court-appointed mediator. The mediator suggested the $24 million settlement amount, which represents 16.4 percent of the recoverable damages sough by the plaintiffs.
In court, U.S. District Court Judge Gary Feinerman said that the deal is “within the range of potentially reasonable outcomes” had the case gone to trial. He noted that Akorn could have defended itself based on the very complex nature of the accounting reports in question.
According to the agreement, settlement class members will receive cash based on when they purchased Akorn stock and how long they kept it. Judge Feinerman ordered small tweaks to the order, including adding email addresses to settlement notices.
Settlement of Akorn Pharmaceuticals (NASDAQ: AKRX) Shareholder Lawsuit
Akorn Pharmaceuticals (NASDAQ: AKRX) investors may be able to collect significant financial compensation for their losses. The recent settlement with the company has set aside tens of millions of dollars for compensating shareholders.
Own shares of Akorn Pharmaceuticals (NASDAQ: AKRX) ? Akorn Pharmaceuticals (NASDAQ: AKRX) Shareholder Lawsuit Settlement. Contact us to protect your rights.
If you have purchased shares of Akorn Pharmaceuticals (NASDAQ: AKRX) , complete the form on this page or call 1-800-934-2921 right now to protect your rights.