Merrill Lynch downgraded King Pharmaceuticals (KG) to neutral from buy.
Analyst Gregory Gilbert says the Securities and Exchange Commission subpoenaed documents related to sales of certain products in 1999 and 2000, as well as certain pricing issues and other general requests. Gilbert says the investigation is a surprise to him, and believes it is a surprise to investors as well. He says management was not aware of any inappropriate action taken by the company.
Gilbert notes the underlying reason for the probe is not disclosed. He also says it is now difficult to recommend the purchase of King shares until there's more clarity on the situation. He sees $1.70 2003 earnings per share (GAAP), and $2.14 for 2004.