K-V Pharmaceutical needs more capital; going concern status in doubt

By Caroline Salls

Pittsburgh, July 24 - K-V Pharmaceutical Co. said there is substantial doubt about its ability to continue as a going concern in the upcoming fiscal year, according to an 8-K filed with the Securities and Exchange Commission.

If it is able to maintain its projected cash expenditures and monetize its auction-rate securities, the company said it will have enough cash to meet expected near-term obligations during the quarter ending Sept. 30.

However, K-V said it will need to obtain additional capital through asset sales and external financing.

The company has retained Morris Anderson & Associates Ltd. to advise it on restructuring its financial operations and on its cash management efforts, and it has retained Robert W. Baird & Co. Inc. to help it raise additional capital.

K-V said a board of directors audit committee and Food and Drug Administration regulatory counsel conducted an internal investigation of allegations involving FDA regulatory and other compliance matters and management misconduct.

The investigation was completed in June, and the board has approved a framework of recommended remedial measures.

As a result of the investigation, the company said it has not been able to file quarterly and yearly financial reports.

In addition, K-V said it is still evaluating the financial statement implications of a consent decree it entered into with the FDA in March, as well as the implications of a recall of all of the products the company manufactured, the suspension of manufacturing and shipment of its products, the reduction of its workforce and the realignment of its cost and organizational structure.

When it is able to file the financial reports, K-V said it expects its independent registered public accounting firm to issue a statement warning that there is substantial doubt regarding its ability to continue as a going concern.

K-V said its actions and the requirements under the FDA consent decree have had an adverse effect on its liquidity position, and it does not expect to generate significant revenues until it can resume shipping many of its approved products.

In addition, the company said it is faced with compensating customers for the cost of replacement products.

K-V said it has also incurred significant costs related to the multi-product recall, and it expects to pay $7 million to $9 million in processing fees during the remainder of fiscal year 2010.

K-V is a St. Louis specialty pharmaceutical company.

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