What happened

Shares of Akorn (AKRX) dropped by nearly 24% as investors prepared for a hearing scheduled for today regarding its spat with Fresenius, which in April pulled out of an agreement to acquire the generic drug manufacturer.

Fresenius nixed the merger agreement after alleging it had uncovered "blatant fraud at the very top level of Akorn's executive team, stunning evidence of blatant and pervasive data integrity violations," according to reporting by Reuters on the original court filing. That likely doesn't leave much room for Akorn to have a good argument about why the merger should proceed, and news trickling out of the courtroom today seems to indicate just that.

As of 3:47 p.m. EDT, the stock had settled to a 17.3% loss.

A finger pointing to a sliding stock chart on a screen

Image source: Getty Images.

So what

Investors were right to worry. According to Bloomberg, the judge in the case said he had a lot of work to do before making a decision, although the lawyer for Fresenius said it had a powerful case that Akorn violated the merger agreement. 

AKRX Chart

AKRX data by YCharts.

While investors still need more details about the results of the hearing and future direction of the proceedings, it's pretty much a forgone conclusion that Akorn and Fresenius will not be merging.

Now what

It goes without saying that these allegations of fraud are very serious and shouldn't be overlooked by investors. If true, they cast doubt on the integrity of operations. At the very least, they give both institutional and individual investors reason to park their money elsewhere -- and that seems to be what has happened so far in 2018. The best-case scenario now would be for the hearing to be decided and for all parties to move forward, but that will take time to play out.

Editor's note: This article has been corrected to note that it was a lawyer for Fresenius who said it had a powerful case.