“AaiPharma Withdraws 2004 Guidance, Starts Investigation”

WILMINGTON–AaiPharma Inc. (Nasdaq:AAII)saw its stock price plunge more than 36 percent to close at $9.77, a $5.51 drop Monday after the company said it was withdrawing 2004 guidance due to sales irregularities in 2003 sales reports.

In its recent first quarter report, the company forecast a first-quarter profit of 27 cents to 30 cents a share and for $1.45 to $1.52 for the year.

The company has started an independent investigation of the “unusual sales” involving the asthma drug Brethine and the pain treatment Darvocet. The later product is part of the company’s best-selling line.

The company said the investigation is connected its recent management reorganization. The company also said it will not elaborate on the nature of the sales abnormalities until it reports the results of its investigation and that may delay submission of a revised 2003 annual report and 10K.

On the heels of the news, Banc of America lowered its rating on AaiPharma stock to “neutral” from “buy,” and Moody’s investor’s service said it may lower the company’s dept ratings.

Approximately $431 million of debt securities could be affected.

The following ratings were affected by this action:

    Guaranteed senior term loan, $156 million due 2009.
  • B2 Guaranteed senior subordinated notes, $175 million due 2013.
  • Caa1 Guaranteed senior secured revolver, $100 million due 2007.
  • B2 (increased from $75 million) Senior Implied.
  • B2 Senior Unsecured Issuer Rating.
  • B3 Moody’s rating review will also focus on aaiPharma Inc.’s independent board committee’s efforts to determine the size, magnitude and materiality of the unusual sales and, the resulting effects, if any, on the company’s financial flexibility over the near term.