KV Pharma suspends operations, delays Gestiva

More bad news for the embattled KV Pharmaceuticals. The Missouri-based company announced today that it has voluntarily suspended all manufacturing and shipping operations, as well as issued a recall for most of its products. According to its latest report to the Securities and Exchange Commission, the company will continue to distribute products manufactured by other companies. 

KV Pharma is currently being investigated by both the FDA and the SEC. The company is also facing mounting lawsuits from shareholders, former employees and patients. KV Pharma said it has enlisted a third-party consulting group to review its manufacturing and packaging processes and created a special committee to deal with the lawsuits and federal investigations.

“The new leadership team at KV realizes that we are in a very challenging time for the company," said interim President and CEO David Van Vliet said in a statement. "We are committed, however, to resolving these issues and resuming production as soon as possible by working closely with the FDA and the independent experts from Lachman Consultant Services."

Vliet was hired in early December after the Board of Directors fired then CEO and Chairman Marc S. Hermelin. Terry B. Hatfield was appointed non-executive Chairman.

As a result of recalls and suspensions, KV Pharma says it “may not be in compliance with one or more covenants included in a credit agreement with its lenders.” Although the company has yet to determine the 4th quarter 2008 financial results, KV Pharma reports in its latest SEC disclosure that it is “reasonably likely” that the company has not been in compliance with that agreement since December. The company has borrowed $30 million from that line of credit. A default could spell more problems for the company, but according to its SEC report, KV Pharma will try to reach an agreement with lenders to avoid any adverse actions.

The problems don't stop there. KV Pharma also announced today that the FDA did not approve the new drug application for Gestiva--Hologic's drug candidate designed to prevent preterm birth. The company was set to purchase the rights to the drug from Hologic upon approval. A decision was expected by January 25, but now the FDA says it needs additional data, and has requested that a portion of the patients in the post-approval trial be enrolled in the trial prior to final approval.

The company said it does not expect to generate revenues from Gestiva sales before the close of the current fiscal year, which ends March 31, 2009.

- read KV's release on the suspension
- check out KV’s release on Gestiva