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King Pharmaceuticals Plunges

The drugmaker takes enormous charges in the first quarter.
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Updated from 8:05 a.m. EDT

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King Pharmaceuticals


plunged Thursday after the drugmaker's first-quarter earnings fell far short of analysts' estimates, and withdrew full-year guidance as it wrestles with inventory controls.

The Bristol, Tenn.-based company had net income of $25.9 million, or 11 cents a share, on revenue of $290.6 million vs. $82.3 million, or 34 cents a share, on revenue of $338.4 million a year ago.

But including items, King's loss ballooned to $111.1 million, or 46 cents a share, from $7.2 million, or 3 cents a share, a year ago.

The consensus estimate was for net income of $81.3 million, or 33 cents a share, on revenue of $412.8 million.

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The company has been in negotiations with wholesalers to establish inventory management agreements to better control inventory levels.

"We anticipated that net sales of our key branded pharmaceutical products would be negatively affected during the first half of 2004, particularly in the first quarter," the company said in a statement. "As we also previously disclosed, the effect on first-quarter net sales of branded pharmaceutical products was even greater than we originally anticipated."

Analysts had expressed concern about what they described as uncomfortably high inventory levels of some King drugs, most notably Altace, which is used to reduce the risk of stroke and heart attacks, and Levoxyl, a treatment for thyroid disorders.

During the quarter, King posted after-tax charges of $137 million, including losses from discontinued operations, asset impairment and legal fees.

The company is facing a number of challenges. King remains under investigation by the

Securities and Exchange Commission

and the U.S. Department of Health and Human Services for underpaying the Medicaid program. Several of its top drugs will face patent challenges. And its CEO Jefferson Gregory, who had been an executive since King's founding in 1993, will relinquish his job as chief executive, but remain on as chairman.

Recently, shares were down $2.70, or 15.9%, to $14.24.

Revenue from branded pharmaceuticals, including royalties, fell 18% to $250 million.