Akorn Inc has arranged financing to complete its state of the art lyophilization facility located in Illinois. The financing is being provided by NeoPharm Inc, which has promising Neolipid products in Phase I, II, and III clinical trials that require lyophilization. Akorn initiated this project in 1999, but suspended further efforts until satisfactory financing arrangements had been made.

Under terms of the financing, Akorn will receive $3.25 million from NeoPharm, structured as a five-year loan. The principal and accrued interest is due and payable at the end of the five-year term. In return for the financing, NeoPharm will receive priority for 15% of the production capacity of the new lyophilization facility. Akorn anticipates that the facility will be completed and validated by the end of the third quarter of 2002. Dr. John N. Kapoor, Akorn's chairman and interim chief executive officer is also chairman of NeoPharm and holds substantial stock positions in both companies.

Many biotechnology products require lyophilization, which is the process of freeze drying sterile solutions to permit a shelf stable dosage form. Due to the expanding development and commercial pipeline in the biotechnology industry, a shortage of capacity has occurred. Since Akorn launched this development project, the Company has received a significant number of inquiries by major pharmaceutical and biotechnology companies regarding availability of lyophilization capacity. In addition, Akorn currently has substantial operations in contract manufacturing of liquid products for major pharmaceutical and biotechnology companies. The addition of lyophilization capacity will complement and further strengthen the contract manufacturing business segment of Akorn.

Tony Pera, Akorn's president and chief operating officer stated, "We are extremely excited to have structured this agreement with NeoPharm. This allows Akorn to complete the lyophilization project and to establish a key customer relationship. It will provide new and highly valuable production capacity for Akorn and is an important component of our future growth."