Updated from 11:22 a.m. EST

Shares of aaiPharma ( AAII) were pounded Monday following the company's announcement it had detected "unsual sales" in two product lines during the second half of 2003.

At the close, the drugmaker's stock was off $5.52, or 36.1%, to $9.76, having closed at $31.50 just six weeks ago.

As a consequence of this discovery, the Wilmington, N.C.-based company withdrew financial guidance for the first quarter and full-year 2004, saying the irregularities would "materially affect" previous financial estimates.

It also said it may have to make "an adjustment in the 2003 financial results" depending on the results of an investigation by a group of independent directors and an outside law firm.

Previously, the company had predicted first-quarter 2004 earnings of 27 cents to 30 cents a share and full-year EPS of $1.45 to $1.52. The company had also forecast full-year sales in the range of $340 million to $355 million.

Monday's announcement prompted two investment banking firms to cut their ratings, and Moody's Investor Service said it had placed the company's debt under review for a possible downgrade.

The company's investigation concerns the sales of Darvocet, a painkiller, and Brethine, a treatment for the wheezing and lung discomfort associated with asthma, emphysema and bronchitis. The company said the problems came to light after it had released its 2003 financial report Feb. 5.

"The company will not comment further on these matters until the independent inquiry has been concluded and the results of the inquiry have been publicly reported," said Dr. Frederick D. Sancillo, aaiPharma's chairman, in a prepared statement.

Even if the internal review doesn't lead to restating earnings, "management credibility has been significantly diminished," said Elliott Wilbur, of CIBC World Markets, in a research report Monday. He cut his rating to sector underperformer from sector performer. (He doesn't own shares; his firm is a market maker, and it expects to receive or intends to seek compensation for investment banking services in the next three months.)

Banc of America Securities cut its 12-month price target to $13.50 from $30 and reduced its rating on the stock to neutral from buy. Analyst David W. Maris told clients Monday that he still liked the company's long-term prospects, but worried about "the uncertainty surrounding an ongoing internal review of inventory levels and the change this uncertainty represents." (He doesn't own shares; his firm is a market maker for aaiPharma and has performed investment banking services for the company in the last 12 months).

Monday's announcement is another in a series of recent setbacks that have eroded aaiPharma's stock recently. Several analysts have expressed concern that aaiPharma has too many products sitting for too long in drug wholesalers' warehouses, imperiling the quality of the company's reported sales and earnings. Others say its debt level is too high for the drug industry.

Three weeks ago, aaiPharma announced it had set aside a $15.9 million reserve against revenue in the fourth quarter of 2003 to account for products that are returned. One of those products was Brethine, whose returns, the company said, were "significantly greater" in the fourth quarter than in any other quarter. When it announced the reserve, company executives said they were comfortable with inventory levels among wholesalers.

Just after aaiPharma announced creation of the reserve and made forecasts for 2004, it reported that its chief operating officer, David M. Hurley, was leaving to become president of a start-up drug company. Hurley had been with aaiPharma for two years and had held the COO job for only five weeks.

In recent weeks, at least eight shareholder lawsuits have been filed against the company. They allege, as one complaint puts it, that the company engaged in securities fraud by issuing "materially false and misleading" financial statements between April 24, 2002 and Feb. 4, 2004 , "artificially inflating the market price."