“AaiPharma Stock Plunges 36 Percent”
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“AaiPharma Board Withdraws 2004 Guidance, Investigates “Unusual Sales”
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ATLANTA–Chitwood & Harley LLP, which has filed a class action complaint against aaiPharma Inc. (Nasdaq:AAII) alleging it used improper sales practices to artificially boost revenues in 2003, jumped at the chance to call attention to its suit Monday.

The Wilmington pharmaceutical company withdrew its first quarter and 2004 guidance Monday morning, saying in a statement that it was investigating “unusual sales” in the last two quarters of 2003. The stock dropped precipitously before the opening bell Monday morning and by Monday afternoon, Banc of America cut its rating to “Neutral” from “Buy.”

The class action complaint alleges that aaiPharma violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. Specifically, the complaint alleges throughout the class period, aaiPharma issued quarter after quarter of “record” financial results.

It says the company emphasized increased revenues throughout the class period, fueled by strong sales of pharmaceutical products. The complaint alleges that aaiPharma failed to disclose that these “stellar financial results” were made possible through improper sales practices, such as “channel stuffing” or flooding wholesalers with products in order to artificially boost sales, and failing to properly account for product returns in violation of generally accepted accounting principles.

The complaint states that on February 5, 2004, before the market opened, aaiPharma shocked the market by announcing fourth quarter net revenues were reduced by $15.9 million. The complaint says that in response to the news concerning aaiPharma’s previously undisclosed inventory issues, the price of aaiPharma stock dropped from over $27 per share on February 4, 2004 to $21.30 on February 5, a drop of over 23 percent on unusually large trading volumes of 4.8 million shares traded.

“The stock continued to drop as the fraudulent nature of the company’ s sales and accounting practices came to light, trading at only $20 per share on February 9, 2004. Today, in response to the Company’s admissions of sales abornmalities, the stock plunged even further. By 11:13 a.m. this morning, the stock was down $5.45 or over 35% on unusually heavy trading volume,” the class action law firm said in a statement Monday.

Any member of the class (i.e. an investor who purchased or otherwise acquired aaiPharma securities during the period April 24, 2002 through and including February 4, 2004, inclusive, and who suffered a loss, whether realized or unrealized) who desires to be appointed lead plaintiff in the class action must file a motion with the Court no later than April 13, 2004 on their own or through counsel of their own choice, the law firm notes.

Two other law firms bringing class action complaints agains aaiPharma extended the class period of their suits last week.