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Another Knock for aaiPharma

Shares of aaiPharma (AAII) took another hit Thursday after the company said its chief operating officer, David M. Hurley, is leaving to become chief executive of another drug company.

The company's stock -- which has been pummeled by other news in recent days -- dropped 6.4%, losing $1.28, to close at $18.70. The shares fell as low as $18.50.

In a terse, two-paragraph statement, the company said Hurley was leaving to become CEO of Artisan Pharmaceuticals and that aaiPharma had no plans to fill his job at this time.

Hurley, 43, joined aaiPharma 24 months ago as executive vice president and president of the company's pharmaceuticals division. He was promoted to the chief operating officer's job five weeks ago. Prior to joining aaiPharma, Hurley had held a number of executive jobs at other health care companies, including CEO of HealthNexis, CEO of Geneva Pharmaceuticals, and several jobs at Novartis Nutrition.

"Given recent unexpected setbacks ... this comes as little surprise," said David W. Maris, a Banc of America Securities analyst, in a brief research report Thursday. Those setbacks, he said, include the company's setting a reserve for unsold inventory and the emergence of earlier-than-expected generic competition for one of aaiPharma's prescription painkillers.

"We view this as neither a negative nor a predictor of future issues," said Maris, who maintained his buy rating on the stock. Maris doesn't own shares; his firm is a market maker in aaiPharma's stock, and it has performed investment banking services for the company in the last 12 months.

The company's stock was rocked last Thursday -- falling 23% -- after aaiPharma said it was setting up a $15.9 million reserve against quarterly revenue for a higher-than-expected number of products that had been returned.

Although the company said it is now comfortable with inventories held by drug wholesalers, one analyst dropped his rating to hold from buy on concerns about the quality of aaiPharma's earnings and revenue. Another analyst has argued for nearly a year that inventory levels are too high for certain aaiPharma products.

The stock rebounded by 9% last Friday, but it sank 11% on Monday after the Food and Drug Administration approved for marketing another company's generic version of an aaiPharma prescription painkiller. The approval, although expected, came earlier than analysts had predicted. Based in Wilmington, N.C., aaiPharma specializes in pain management drugs such as Darvon and Darvocet as well as critical care and gastroenterology medications. It also provides drug development services for other companies.

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