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Buy Akorn: Unjustly Punished By Mylan Controversy

Summary

Shares of Akorn have been unjustly punished due to the Mylan controversy.

The company trades at a very cheap valuation considering the premium quality of its business.

I think Akorn will be acquired for nearly twice its current market price.

Some of my favorite investing opportunities have occurred when the market extrapolates a headline risk at one company in a certain sector to some of its competitors. Such is the case with Akorn Pharmaceuticals (NASDAQ:AKRX) in the wake of the Mylan (NASDAQ:MYL) EpiPen controversy.

I love when my favorite stocks are down, but I love even more when my favorite stocks are down without a change in fundamentals.

Source: Google Finance

In light of the recent sell-off, shares sell for a tremendous bargain relative to peers as well as comparable transactions in the space. I think the company could be worth as much as $55 on a DCF basis, which provides investors with nearly 100% upside from current levels. Let's see why shares are down, why I think shares are cheap, and the catalysts to unlock shareholder value.

Why are shares down so much?

Shares of Akorn have reacted negatively to the controversy regarding Mylan's EpiPen pricing. To make a long story short, Mylan charges a high price for EpiPens and there has not been generic competition for the product in spite of a lack of IP protection. I have no interest to address the morality behind drug pricing issues, and I believe that ultimately distracts from what makes Akorn so special.

So, why is Akorn similar to Mylan? Akorn specializes in hard to manufacture generic products that have higher margins than...


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