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Sales Grow at King Pharmaceuticals

First-quarter earnings top previously raised guidance and analysts' estimates.

Updated from 10:56 a.m. EDT

Shares of

King Pharmaceuticals


rose Monday after the company posted first-quarter results that topped its previously raised guidance and exceeded analysts' expectations.

King also raised its full-year revenue guidance to a range of $1.45 billion to $1.55 billion from a range of $1.4 billion to $1.5 billion. It didn't provide earnings per share guidance. The consensus of analysts polled by Thomson First Call predicted full-year earnings of 81 cents a share and revenue of $1.53 billion.

Including special items, King earned $70.1 million, or 29 cents a share, on revenue of $368.6 million for the three months ended March 31. For the same period last year, King lost $104.1 million, or 43 cents a share, on revenue of $291.5 million. The loss was heavily influenced by discontinued operations.

Excluding one-time items, the Bristol, Tenn., drugmaker earned $76.1 million, or 31 cents a share, compared with the Thomson First Call consensus of 22 cents a share on revenue of $365.7 million.

Earlier this month, King had raised its first-quarter EPS guidance, suggesting that it would earn 28 cents a share. Analysts' reluctance to raise their ratings no doubt reflects King's previous performance. In the previous 10 quarters, King's actual EPS fell below the Wall Street consensus eight times and matched the consensus twice.

In midafternoon trading Monday, King's stock was up 30 cents, or 3.4%, to $9.29.

Brian A. Markison, the chief executive, said the first-quarter performance reflects the reduction of inventories that had hampered the company's performance. "Accordingly, we believe our future financial results should closely reflect demand-based sales for our products," he said.

King has struggled to overcome the effect of excessive inventories held by wholesalers,

restated earnings, government investigations, a diminished reputation on Wall Street and the

busted marriage proposal by

Mylan Laboratories


. The first quarter is a start to what Markison called the "implementing of our improved business model."

Most of King's revenue comes from the sale of brand-name drugs, which were up 38% to $321.8 million for the first quarter. King said the inventory reduction enabled it to lower the amount of reserves for product returns by about $25 million, thus improving sales.

First-quarter charges included $3.3 million related to the Mylan deal; $3.7 million for professional fees related to the ongoing investigations by the

Securities and Exchange Commission

and Department of Health and Human Services; $2 million for restructuring; and $6.9 million for an equity investment in another drug company. The company partially offset these charges by one-time gains of $6.9 million.

"We don't view the stronger than expected quarter as anything sustainable, given the revenue upside came from accounting changes, which also had a positive impact on the gross margin," says Marc Goodman of Morgan Stanley in a research note to clients on Monday. He has an equal weight rating on the stock. He doesn't own shares, but his firm has an investment banking relationship with King.