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New CEO for aaiPharma

Now what?

AaiPharma's (AAII) CEO, Dr. Philip Tabbiner, was replaced Monday by the embattled company's founder and chairman, Frederick D. Sancilio.

The company's stock dropped 61 cents, or 7.2%, to $7.86 in late-morning trading.

The Wilmington, N.C.-based aaiPharma has been beset by a series of recent problems that have caused the company's stock to drop 75% since mid-January. Financial revelations have triggered several cuts in Wall Street equity ratings; provoked one equity analyst to drop coverage; sparked a downgrade to negative from stable by Standard & Poor's; and prompted Moody's Investor Services to place several aaiPharma debt issues under review for a possible downgrade.

Tabbiner also resigned as a director and will become a consultant to aaiPharma "for an extended period to facilitate this transition," the company said.

The company also appointed Gregory F. Rayburn as interim chief operating officer, replacing David M. Hurley, who resigned Feb. 12 to head a start-up medical company. Hurley had been chief operating officer for only five weeks. He had been employed by aaiPharma for two years. Rayburn is a senior managing director with a consulting firm, FTI Consulting, whose corporate headquarters is in Annapolis, Md.

Tabbiner joined the company in 2000 after holding jobs at several larger drug companies. He became chief operating officer in the spring of 2002 and was elevated to chief executive in July 2002, as Sancilio took the titles of executive chairman and chief science officer to focus on scientific strategy. Sancilio had held the CEO since he founded aaiPharma in 1979.

"We see this change as forward progress in getting to the heart of difficulties and addressing issues as soon as possible," said David W. Maris, of Banc of America Securities, in a research report Monday. Maris cut his rating to neutral from buy four weeks ago. (He doesn't own shares, but his firm is a market-maker in aaiPharma's stock and has had an investment banking relationship with the company in the past 12 months.)
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