Finance & Business World

KV Pharmaceutical Co., plagued by product recalls and the subject of several federal investigations, announced this morning that it is eliminating 700 jobs as part of a cost-cutting measure aimed at resuming drug production.

Two weeks ago, the Brentwood-based drug maker announced it was suspending the manufacture and shipment of all products it makes, while recalling voluntarily most of its drugs.

The company didn’t give details for the shutdown, only saying that it might have failed to comply with manufacturing standards established by the Food and Drug Administration.

Although numerous employees began contacting the Post-Dispatch last week about the layoffs, the company did not return phone calls. The information was confirmed Monday when KV issued a statement.
Trading in its stock on the New York Stock Exchange had been suspended on Friday afternoon pending the release of news. Trading resumed Monday morning.

The job reduction includes a combination of terminations and layoffs, KV said. The company expects to recall some employees when production and shipment of approved products resume.

"KV Pharmaceutical plans to emerge from these challenges on a solid foundation of a smaller, more focused organization and the return to providing excellent products to our customers," David Van Vliet, interim chief executive officer and president, said in a statement today.

Vliet was hired in early December after the board fired then Chief Executive and Chairman Marc S. Hermelin.

KV had about 1,590 employees as of March 31, 2008. Information was not immediately available as to a current count or as to how many are located in St. Louis. However, according to information filed with regulators last year, all of its manufacturing facilities are located in the St. Louis area.

The company didn’t say when they expected to restart manufacturing operations. KV workers, who told the Post-Dispatch that they were laid off last week, said they were informed that the company hoped to resume manufacturing within six months saving account payday loan.

The U.S. Food and Drug Administration began an inspection of KV in December 2008. According to recent regulatory filings, these inspection activities are continuing and, in addition, the FDA’s Office of Criminal Investigations is in discussions with the company. No further details were given.

KV said it is cooperating with the FDA and has taken steps to resolve its problems. For example, it is working with Lachman Consulting to review its manufacturing and packaging processes. However, the FDA could still take legal action, which might include criminal prosecution, against KV, the company warned.

KV also said it is also providing information to the Securities and Exchange Commission and the U.S. Attorney for the Eastern District of Missouri.

In addition to regulatory probes, KV is a defendant in private class action litigation including cases alleging it violated of the federal securities laws. It is also being sued by former employees and consumers who used the company’s drugs.

As a result of recalls and suspensions, KV said last month that it might not be not be in compliance with one or more covenants included in a $320 million credit agreement with its lenders.

In addition to its problems, last month the company said that its new drug application for Gestiva would not be approved by the FDA until further data was obtained.

Last year KV agreed to acquire rights to Gestiva, a drug to prevent preterm births from Hologic Inc. for $82 million in cash.

At the time, it said it expected Gestiva to add to its earnings per share in the first 12 months following its launch. Now the company does not anticipate that it will generate revenues from sales of Gestiva during this fiscal year, which ends on March 31.

gappleson@post-dispatch.com | 314-340-8331

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