Akorn Inc. agreed with the lead plaintiffs to settle a securities class action lawsuit for an estimated cost and corresponding liability of $74 million that will be recorded in the U.S. drugmaker's quarterly results for the period ending June 30.
The lawsuit claimed that Akorn's CEO, CFO and chief accounting officer made materially false or misleading statements and failed to disclose sooner the existence of investigations into data integrity at the company. The company said in a May 9 regulatory filing that it disputes the claims.
Data integrity was an issue in the terminated acquisition of Akorn by German healthcare company Fresenius SE & Co. KGaA in 2018. The termination kicked off a legal battle between the companies.
Under the agreement in the securities class action lawsuit, Akorn will pay a combination of up to $30 million in insurance proceeds and issue about 6.5 million common shares along with additional common shares that are released as a result of the expiration of out of the money options through Dec. 31, 2024.
Akorn also will issue five-year contingent value rights, or CVRs, that can be extended to two more years under certain conditions. The company will make annual payments to the holders of CVRs. These payments are capped at an average of $12 million per year and $60 million for the term of the CVR.
The court has ordered the parties to file a motion for approval by Aug. 9 and will accept objections to the approval until Aug. 19. The hearing is set for Aug. 26.
The settlement is subject to execution of a definitive settlement agreement among the parties and final approval by the court.