aaiPharma has wrapped up the review of its finances, stated a delayed earnings report for the first quarter of 2004, and expects to remain listed on Nasdaq.

However, the restatements were not good news. And aaiPharma said that changes will be made in its structure, including possible layoffs.

“While the company is presented with challenges, we have clearly identified the tasks before us,” said founder and CEO Fred Sancilio, in a statement issued by the company Thursday night. “I know I speak for the entire management team when I say we are realistic about the challenges that lie ahead, but are confident about the future.”

The first quarter earnings report reflects the challenges. aaiPharma (Nasdaq: aaiie) reported a loss of $49.6 million, or $1.74 per share. The filing beat a June 30 deadline set by the Nasdaq to remain listed on the exchange. aaiPharma had also restated three quarterly earnings report for 2003 on June 15.

Driving up the losses on revenues of $24.4 million was a $31.5 million payment that came due to AstraZeneca after the FDA approved reformulation of a drug for aaiPharma. The drug was sold in the second quarter for $37 million and will be reported as positive revenue that will “more than offset the amount of the first quarter charge”.

The review of aaiPharma’s finances, which started after questions were raised about bookkeeping and sales techniques, cost the company some $3.2 million.

aaiPharma also announced that it has “initiated litigation” against Athlon Pharmaceuticals for the contracting of a sales force from that firm at a cost of $3.6 million. The statement did not specify the reason for the suit.

As a result of the internal review and changes in management which included Sancilio returning to the CEO’s chair, aaiPharma said it will be “implementing significant cost-cutting initiatives”. Among those are a refocusing of the firm’s sales force on hospitals and pain management centers plus “an expected reduction in the size of the company’s global work force.”

aaiPharma stock closed at $5.55, down 10 cents, before the statement was issued. It traded as high as $31.20 earlier this year before collapsing in price as the financial review began, a federal grand jury inquiry was launched, and numerous class-action lawsuits were filed. It hit a low of $3.96 on June 15.

In its June 15 restatement, aaiPharma reported a loss of $21.3 million for 2003 on revenues of $225 million. On Feb. 5, its initial filing showed a $69.4 million profit on revenues of $282.7 million. AaiPharma also cut its net income for 2002 to $48.6 million from $55.4 million.

aaiPharma: www.aaiPharama.com