WILMINGTON–AaiPharma Inc.’s (Nasdaq:AAII) board said it has hired an independent law firm to assist it in investigating ” unusual sales” in two product lines last year. The company’s stock price began falling even before markets opened Monday morning and dropped 35 percent by noon.

The company said it believes “these matters will materially affect its previously announced guidance for the first quarter and full year of 2004 and is withdrawing its guidance for those periods.

In a statement released this morning the company said that: “subsequent to the issuance of the company press release announcing its 2003 financial results and the recent reorganization of the company’s management team, the board became aware of sales abnormalities in the company’s Brethine and Davrovcet product lines during the second half of 2003.”

The company appointed an independent committee of its board to conduct an inquiry into the alleged abnormalities. The committee hired King & Spalding LLP, an independent law firm to assist it in the investigation, it said.

Dr. Frederick D. Sancilio, chairman of aaiPharma, said
that “the Company will not comment further on these matters until the
independent inquiry has been concluded and the results of the inquiry have been publicly reported.”

He added, “We do not presently know how long this process will take, and in light of the March 15 filing deadline, this process could delay the filing of the Company’s 2003 annual report on Form 10-K.”

Gets $100 million cash

AaiPharma also said today that it has agreed to sell its’ M.V.I. (multi-vitamin infusion) and Aquasol product business to Mayne Pharma USA Inc. of Parmus, N.J., for $100 million in cash.

The agreement includes an additional $5 million cash payment upon U.S. Food and Drug Administration approval for a new M.V.I. product and subsequent royalties on sale of the product.

Mayne Pharma is a subsidiary of Australia’s Mayne Group Limited (ASX: MAY).

“The sale of this business is consistent with aaiPharma’s long-term
corporate strategy to focus on pain management,” stated Dr. Philip S. Tabbiner, president and CEO of aaiPharma.