Generic drugs are hitting

King Pharmaceuticals

(KG)

where it hurts. Still, the company managed to top Wall Street's targets (when taking into account charges for King's acquisition of Alpharma late last year), and also announced that its product pipeline is strong.

Trading in King stock was brisk Monday, with shares changing hands midday at $9.05, up 4% on volume of 5 million shares. Average daily volume is 5.8 million.

Sales from branded products -- which constitute the lion's share of the King's business -- dropped 25% from the year-earlier quarter to $278 million, the company said. Altace, King's one-time blockbuster blood-pressure drug, was particularly hurt by cheaper competition. After King's patent protection on the medicine expired last year, generic rivals flooded the market.

That's one of the reasons King bought Alpharma for $1.6 billion in December: to refresh its drug pipeline. With the purchase King got Embeda, a painkiller related to morphine that -- per FDA request -- is designed to be less addicting than morphine.

In a statement, King's CFO, Joseph Squicciarino, said the company expects "strong cash flow from operations" for the rest of the year. He said King plans to use that cash to pay down long-term debt, which stood at $838 million as of the end of the quarter, and "explore business development opportunities consistent with our strategy for growth."

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