Financially troubled

aaiPharma

(AAIIE)

continues to replace its top management as it tries to recover from a series of damaging stumbles.

The latest exec to leave the company -- which is in the process of restating 2003's earnings and is being investigated by the

Securities and Exchange Commission

and Justice Department -- is the chief financial officer, William L. Ginna Jr., who resigned Tuesday.

The Wilmington, N.C.-based drug company said that while it conducts a search for a new chief financial officer, Gina Gutzeit, a management consultant, is the interim CFO.

Gutzeit is a senior managing director with

FTI Consulting

(FCN) - Get Report

of Annapolis, Md., which specializes in financial and management restructuring. Gutzeit has served as interim CFO and as a financial adviser to "numerous companies," according to aaiPharma.

Gutzeit works for the same company as Gregory F. Rayburn, who was named interim chief operating officer of aaiPharma on March 29. Rayburn replaced David F. Hurley, who resigned Feb. 12 to join a start-up medical company. Rayburn has been the point man in aaiPharma's efforts to restructure its finances.

Hurley had been with aaiPharma for two years, but only for five weeks as chief operating officer. The company said it began investigating "unusual" sales in two product lines shortly after he left.

Rayburn's hiring came on the same day that aaiPharma replaced its chief executive, Dr. Philip Tabbiner, with the company's founder and chairman, Frederick D. Sancilio. Tabbiner joined aaiPharma in 2000 and became CEO in July 2002. Tabbiner also resigned as a member of the board of directors, taking a temporary consulting job with the company.

Other recent changes in top management include the hiring of a new president of the company's pharmaceuticals division and a new senior vice president for strategic marketing, analytics and planning.

Recently, aaiPharma's stock was down 26 cents, or 4.3%, to $5.77. That's just above the stock's 52-week low of $5.59 and well below the 52-week high of $31.85.

In recent weeks, aaiPharma has taken steps to restructure its debt, found a new senior lender, made a crucial interest payment on its debt and dodged default. The company also sold its injectable vitamin business in a move to help reduce its heavy debt load. The company is still revising its 2003 financial results because of the detection of "unusual" sales activity for its Darvocet painkiller and Brethine asthma products during the second half of 2003.

The company announced on March 1, just over three weeks after issuing its 2003 financial report, that it had hired an outside law firm and engaged a group of independent directors to investigate the revenue issues. The internal investigation, which took nine weeks, included interviews with more than 35 employees, directors and other parties, and required a review of more than 1 million pages of documents.

On April 27, the company reported that it is still working on its long-delayed year-end 10-K report to the SEC and that it will have to restate most of its quarterly 10-Q reports for 2003. Until these reports are filed, aaiPharma won't be able to issue quarterly financial reports for 2004 or provide financial guidance.

"While the results are currently still being reviewed, it is expected that the reduction of revenue recognized for 2003 will be a material amount, with a portion of that revenue expected to be realized in 2004," aaiPharma announced late last month.

The many changes and restructuring have done little to mollify bond-rating agencies that still consider aaiPharma's debt securities to bewell below investment grade.

For example, Standard & Poor's recently affirmed its CCC corporate credit and CC subordinated debt ratings on aaiPharma, but it removed the ratings from its CreditWatch designation. Escaping CreditWatch means the company improved its liquidity and cash flow generation thanks to the asset sale and the securing of $140 million senior secured credit facility provided by Silver Point Finance of Greenwich, Conn.

Still, the S&P outlook on aaiPharma is negative because of aaiPharma's "improved but still limited liquidity, given the lack of visibility of aaiPharma's profitability and cash-flow generation," S&P said last month. The agency added that "cash flows for the first half of 2004, and possibly beyond, are likely to be negative."

And last week, Moody's Investor Services said it was keeping under review its Ca rating on senior subordinated notes "with direction uncertain." Moody's said it remains concerned about the magnitude of the earnings restatements; the "lack of clear future plans and strategies of new management," the status of government investigations and "the effectiveness and cost of the additional controls, employee training and structural changes needed to provide tighter control of transaction reporting."