S&P: King Pharma on negative watch

Standard & Poor's said it placed its BB+ corporate credit and senior secured ratings and its BB senior unsecured debt ratings on King Pharmaceuticals Inc. on CreditWatch with negative implications.

The actions follow the company's announcement of significantly lower-than-expected sales and earnings for 2004. The company has also withdrawn its 2004 outlook because of excess inventory of its key drugs at the wholesaler level, including its top-selling drug Altace and its thyroid disorder treatment Levoxyl.

Though S&P believes that the prescription demand for the products remains steady, it is uncertain how much time King Pharmaceuticals will require to bring wholesaler inventory levels back in line with demand, and it is also uncertain about the impact of this development on the company's earnings and cash flows for 2004.

S&P said the company is already facing risks related to two regulatory investigations into its pricing and marketing practices, and it is also in the middle of a search for a new CEO to replace Jefferson J. Gregory, who is retiring.

In the meantime, S&P said, King Pharmaceuticals continues to maintain a solid financial profile and an adequate level of liquidity.

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