Jeffries Keeps Underperform on AaiPharma

Analyst David Windley says the specialty drug maker's 10-K delay could impact its debt ratings

Jeffries keeps its underperform rating on aaiPharma (AAII ).

AaiPharma says its 10-K report won't be filed, as planned, by the extension deadline. The stock is subject to delisting. Analyst David Windley says this will trigger defaults on the company's debt, and could precipitate defaults on its senior subordinated notes as well.

He says an independent inquiry is potentially expanding into all of 2003, vs. the second-half of 2003 only. He had believed all along that aaiPharma's problems started before mid-year last year.

Windley cut the price target to $7, from $4. He sees 68 cents 2004 earnings per share, and 52 cents in 2005. Windley thinks aaiPharma is a falling knife; it's hard to know where the bottom is. He suggests that those uninvolved stay that way.

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