Feb. 26 (Bloomberg) -- King Pharmaceuticals Inc., the drugmaker betting its future on abuse-deterrent painkillers, reported a fourth-quarter loss on costs tied to its $1.3 billion purchase of Alpharma Inc.

The loss was $548.5 million, or $2.25 a share, compared with net income of $42.8 million, or 18 cents, a year earlier, the Bristol, Tennessee-based company said today in a statement. Earnings excluding unusual items beat analysts’ estimates by a penny, even as sales fell for most of King’s top products.

Delays in U.S. approval of painkillers Remoxy and Embeda and generic competition to its biggest drugs forced King to trim spending, including 720 job cuts announced on Feb. 3. The company is among the worst performers this year on the Standard & Poor’s 500 Pharmaceuticals Index as investors question whether it will succeed in transforming the multibillion-dollar pain market.

“It’s too early to get constructive on King, given that Embeda and Remoxy approval timing is in doubt and as generic Skelaxin could be approved theoretically sooner than later, but it does appear that, when the fog eventually burns off, King’s streamlining could be a boon to earnings,” said Corey Davis, an analyst at Natixis Bleichroeder in New York, in a note to clients today. He rates the shares hold and owns none.

King gained 10 cents, or 1.3 percent, to $8.10 at 4:01 p.m. in New York Stock Exchange composite trading. The company has dropped 24 percent so far this year, second-worst in the S&P index of 13 drug companies. Pfizer Inc. has fallen 28 percent.

Pain Focus

Loss of patent protection for the blood-pressure pill Altace in late 2007 led King to shift its focus to neuroscience. The company formed two partnerships to develop abuse-resistant painkillers and gained additional technology by buying Alpharma on Dec. 30. Pressure to win approval for these drugs mounted last month after a court ruling invalidated two patents on the muscle- relaxant Skelaxin, which has overtaken Altace as King’s biggest seller.

Fourth-quarter revenue sank 35 percent to $347.7 million, largely because generic competition eroded $144 million in Altace sales. Skelaxin sales also fell $1 million to $113 million.

Earnings included a $590 million charge to write down the value of research and development acquired from Alpharma, King said. Excluding unusual items, the company said it would have earned 24 cents a share in the quarter.

King didn’t forecast 2009 earnings. The job cuts announced earlier this month and “other cost-saving initiatives” will save about $90 million this year, said Joseph Squicciarino, the company’s chief financial officer, in the statement.

To contact the reporter on this story: Catherine Larkin in Washington at clarkin4@bloomberg.net.

Last Updated: February 26, 2009 16:16 EST