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aaiPharma Inc. Reports 2003 Financial Results; * Fourth quarter net revenues increased 24% to $76.9 million; full-year net revenues grew 23% to $282.7 million, driven by 40% growth in net revenues from product sales.

aaiPharma Inc. , a science-based pharmaceutical company, today reported financial results for the fourth quarter and full-year of 2003.

"We are pleased with our overall performance in 2003 and the progress that the Company has made in implementing its strategic and operating plan focused on pain management," said Dr. Philip S. Tabbiner, President and Chief Executive Officer. "Furthermore, we recognize that our future success will be driven by our ability to effectively advance product candidates in our R&D pipeline, successfully launch new products, promote existing products, and execute strategic licensing agreements, partnerships and product acquisitions."

Net revenues for the fourth quarter of 2003 were a record $76.9 million, an increase of 24% over revenues of $62.2 million in the fourth quarter of 2002. Pharmaceutical products continued to drive this favorable trend, with quarterly sales of $48.3 million, up 28% as compared to $37.7 million in the 2002 fourth quarter. Sales of Roxicodone(R), Oramorph(R) SR and the other pain products acquired by the Company from Elan at the beginning of December 2003 more than accounted for this increase. Net revenues from product sales in the fourth quarter were negatively impacted by product returns of Brethine(R) injectable 100 pack sold during 2002, which were approximately $4.8 million in the quarter, a significantly greater level of returns than experienced in any prior quarter. Prior to the third quarter of 2003, as returns had not been significant, and differences between actual returns and estimated returns were immaterial, returns were charged in the quarter the product was returned. In the fourth quarter, return reserves were increased based on the Company's recent experience. The most significant addition to return reserves in the quarter was attributable to Brethine(R) 100 packs. Two of the Company's three major U.S. wholesalers have now depleted the majority of their 100 pack inventory. In addition, following the licensure of the exclusive rights to aaiPharma's 25 mg, 75 mg and 100 mg azathioprine products to Salix in the fourth quarter, the Company processed actual returns and established a returns reserve totaling $3.9 million, which covers the full amount of the remaining inventory of these products in the distribution chain. The aggregate effect of product returns and additions to product returns reserves reduced fourth quarter net revenues by $15.9 million.

Income from operations for the 2003 fourth quarter decreased 8% to $15.7 million compared with $17.0 million in the prior year period. Fourth quarter earnings advanced to $0.34 per diluted share, a 31% improvement over the 2002 period. The decline in income from operations for the 2003 fourth quarter was due primarily to the product returns discussed above and the investment in the accelerated build out of a national sales force. The increase in other income was primarily a result of the fees, net of merger- related fees and expenses, generated from the termination of the merger agreement with CIMA and proceeds related to the Company's investment in Endeavor Pharmaceuticals, which resulted from the acquisition of the assets of Endeavor Pharmaceuticals by Barr Laboratories.

For the year ended December 31, 2003, net revenues reached an all-time high of $282.7 million, compared to net revenues of $230.5 million in 2002, an increase of 23%. Net revenues from product sales for the 2003 full-year period were $179.7 million, up 40% as compared to $128.5 million in 2002. Year-over-year trends remained stable with gross margin for 2003 of 65.7%. Income from operations for the full-year of 2003 increased to $69.4 million, or 25% above the 2002 level of $55.4 million. aaiPharma reported net income for full-year 2003 of $34.3 million, or $1.17 per diluted share, up 92% over 2002.

aaiPharma achieved a number of milestones during the course of 2003 as part of the Company's strategy to become a fully-aligned, science-based pharmaceutical company focused in pain management. "Although we have made the strategic decision to focus primarily in pain management, we plan to fully leverage our existing portfolio of critical care products as well as our intellectual property and development projects in critical care and gastrointestinal diseases for the benefit of physicians, patients and our shareholders," commented Dr. Tabbiner.
 Selected highlights of these achievements include:

 * Submitted two New Drug Applications (NDAs) to the U.S. Food and Drug
 Administration (FDA) for M.V.I. Adult(TM). M.V.I. Adult(TM) is a
 reformulation of M.V.I.-12(R) in which concentrations of four vitamins
 are increased and vitamin K is added. The first NDA, regarding the
 single-dose and univial presentations of M.V.I. Adult(TM), was approved
 by the FDA on January 30, 2004. The remaining NDA filing, regarding the
 bulk pharmacy pack, continues to move forward within the FDA-approval
 process.

 * Submitted a Supplemental New Drug Application (SNDA) for a complementary
 M.V.I. (R) line extension in December 2003. The Company expects a
 response from the FDA within the next six months. For competitive
 reasons, the details of this filing remain confidential.

 * Acquired exclusive rights to a parenterally administered methadone
 product to treat severe pain, formerly branded as Dolophine(R)
 Hydrochloride Injection, from Roxane Laboratories, Inc. aaiPharma
 initiated limited sales of the product late in December under a supply
 schedule outlined by the FDA in order to address drug shortage concerns
 for the product. The Company received site approval for manufacturing
 the product in early January and is continuing to work with the Agency
 on updating the label and indication for the product.

 * Filed a SNDA for Brethine(R) Ampuls with the FDA in June 2003.

 * Acquired, received FDA approval of and launched Darvocet A500(TM)
 (propoxyphene napsylate and acetaminophen) for the management of mild
 to moderate pain. In the three months since launch, prescriptions and
 extended units are trending upward consistent with the Company's
 expectations.

 * Expanded the pharmaceutical sales force to 240 representatives by the
 end of 2003 through collaboration with Athlon Pharmaceuticals.

 * Acquired a portfolio of three brands of Schedule II pain
 products -- Roxicodone(R) (oxycodone hydrochloride) tablets and oral
 solutions, Oramorph(R) SR (morphine sulfate sustained-release) tablets,
 and Roxanol(TM) (morphine sulfate) oral solutions -- as well as a
 non-scheduled pain management product, Duraclon(R) (clonidine
 hydrochloride injection), from Elan Corporation, plc companies in
 December 2003.

 * Granted Salix Pharmaceuticals an exclusive license to market the 25 mg,
 75 mg and 100 mg strengths of Azasan(R) (azathioprine). The agreement
 called for Salix to make a licensing payment to aaiPharma as well as an
 on-going royalty on net sales. aaiPharma will continue to manufacture
 the products and supply all of Salix's needs for the products.




During the fourth quarter of 2003, the Company announced the termination of its merger agreement with CIMA. As a result, the Company received an $11.5 million termination fee from CIMA, as provided in the terminated merger agreement, against which $5.9 million of merger-related fees and expenses were applied.

On January 15, 2004, aaiPharma announced that Aventis submitted a new drug application (NDA) to the FDA for Allegra-D(R) 24-hour tablets, a formulation developed with aaiPharma using a patented extended release drug delivery technology, ProSlo II(TM). Upon approval, aaiPharma will receive a milestone payment and royalties on sales of the product.

During 2003 and 2004, aaiPharma continued to incur legal fees and expenses in its ongoing omeprazole patent litigation against Schwarz Pharma Inc., Schwarz Pharma AG, Kremers Urban Development Co. and certain affiliates (the KUDCO defendants). Omeprazole is the active ingredient used in Prilosec(R) sold by AstraZeneca and in the KUDCO defendants' generic equivalent of Prilosec(R). The litigation has been brought under aaiPharma's U.S. Patent No. 6,268,385 and, following the filing of an amended complaint during 2003, U.S. Patent No. 6,326,384. These patents include, among other claims, claims directed to compositions and methods wherein certain isomeric characteristics of solid state omeprazole are essentially the same in formulated drug product as in its active ingredient. aaiPharma is seeking damages equal to a reasonable royalty on all infringing sales by the KUDCO defendants since commercial launch of their generic substitute for Prilosec(R) on December 9, 2002 through the date of a judicial decision in the litigation, and a permanent injunction on subsequent sales thereafter absent KUDCO taking a license, among other remedies, in the event that aaiPharma ultimately prevails in the litigation. The KUDCO defendants have publicly confirmed sales of their generic omeprazole product from launch through the first nine months of 2003 of approximately $949 million.

"After a year of litigation, we are now well advanced in the discovery phase and have a court date set for the first months of 2005," stated Dr. Fred Sancilio, Executive Chairman and Chief Scientific Officer. "Given our extensive experience with and robust science around omeprazole compounds and the strength of our associated patent estate, we intend to continue to vigorously pursue the litigation."

Outlook:

aaiPharma's expectations for 2004 financial performance remain substantially unchanged. The Company expects net revenues for 2004 to be between $340 million and $355 million. Diluted earnings per share for 2004 are expected to remain, as previously disclosed, between $1.45 and $1.52. Based on current trends, milestones achieved and other developments, the Company expects to generate earnings of $0.27 to $0.30 per diluted share during the first quarter of 2004.

Conference Call:

In conjunction with this release, aaiPharma management will conduct a conference call and web cast to discuss the financial results for the fourth quarter and full-year of 2003 at 8:30 a.m. Eastern Time on Thursday, February 5, 2004. Analysts, investors and other interested parties are invited to participate visiting the Company's web site at http://www.aaipharma.com/. A replay of the web cast will be available on this website beginning February 5, 2004 at 1:00 p.m. The replay will be available through February 20, 2004 at 5:00 p.m. Eastern Time.

About aaiPharma

aaiPharma Inc. is a leading, science-based pharmaceutical company focused on pain management, with corporate headquarters in Wilmington, North Carolina. With more than 24 years of drug development expertise and a proven sales and marketing track record, the Company is focused on developing, acquiring, and marketing well-known, branded medicines in its targeted therapeutic areas. aaiPharma 's development efforts are focused on developing improved medicines from established molecules through its significant research and development capabilities. For more information on the Company, including its product development organization AAI Development Services, please visit aaiPharma's website at http://www.aaipharma.com/.

Forward-Looking Statements

Information in this press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, including the quoted statements by Drs. Tabbiner and Sancilio and the statements pertaining to future, anticipated or expected product growth and launch plans, sales and prescription growth and trends, contract milestones and royalties, corporate strategies, asset and product line leveraging plans, regulatory approval plans and expectations, litigation plans and expectations, and development, commercialization and growth of the products in the Company's pipeline and portfolio, as well as guidance as to future earnings and revenue expectations and shares of stock outstanding. The "forward-looking statements" herein involve risks and uncertainties that could cause actual results to differ materially, including, without limitation, risks and uncertainties pertaining the actual future market growth; the commercial and medical attractiveness of the Company's present and planned products in light of sales of competitive or generic products; regulatory decisions by the FDA and other agencies regulating the Company; and the Company's ability to successfully acquire, finance, conduct successful research on, develop, improve, obtain timely regulatory approval for, launch, extend product life cycles of, and sell, on a commercially profitable basis, pharmaceutical products; to obtain, use, enforce, defend and license valid and commercially valuable patents, including, without limitation, in the Company's patent litigation; to obtain and enforce existing and future contracts; and on the commercial success of the contemplated products. Additional factors that may cause the actual results to differ materially are discussed in aaiPharma's recent filings with the Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K filed on March 28, 2003, including its exhibits; its Forms 10-Q filed on May 15, 2003, August 14, 2003 (including its Exhibit 99.1) and November 14, 2003, its Form 8-Ks; and its other periodic filings.

Darvocet A500(TM), ProSlo II(TM), and Roxanol(TM) are trademarks, and Roxicodone(R) and Oramorph(R) SR are registered trademarks, of aaiPharma Inc. M.V.I. Adult(TM) is a trademark, and Darvocet(R), Darvon(R), Darvocet-N(R), and M.VI-12(R) are registered trademarks, of aaiPharma LLC.

Prilosec(R) is a registered trademark of AstraZeneca. Allegra-D(R) is a registered trademark of Aventis Pharmaceuticals Inc. Dolophine(R) is a registered trademark of Roxane Laboratories, Inc. Azasan(R) is a registered trademark of Salix Pharmaceuticals, Inc. Duraclon(R) is a registered trademark of Fujisawa Healthcare, Inc..
 aaiPharma Inc.
 Consolidated Statements of Operations
 (In thousands, except per share amounts)

 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2003 2002 2003 2002
 Net revenues:
 Product sales $48,342 $37,687 $179,745 $128,462
 Product development
 (royalties & fees) 5,237 5,343 16,468 19,610
 Development services 23,329 19,204 86,488 82,438
 76,908 62,234 282,701 230,510

 Operating costs and expenses:
 Direct costs (excluding
 depreciation and royalty expense):
 Product sales 12,751 8,350 45,161 32,645
 Development services 15,182 10,892 51,867 48,813
 Total direct costs 27,933 19,242 97,028 81,458
 Selling, general and
 administrative expenses 24,159 17,893 80,278 63,185
 Research and development 5,543 5,479 20,984 20,854
 Depreciation and amortization 3,127 2,606 11,165 9,571
 Royalty expense 453 - 3,890 -
 Total operating costs and expenses 61,215 45,220 213,345 175,068

 Income from operations 15,693 17,014 69,356 55,442

 Other income (expense):
 Interest, net (5,457) (5,484) (21,078) (19,366)
 Loss from extinguishment of debt (1,511) - (1,511) (8,053)
 Other, net 6,674 335 6,695 461
 (294) (5,149) (15,894) (26,958)

 Income before income taxes 15,399 11,865 53,462 28,484
 Provision for income taxes 5,144 4,509 19,135 11,170

 Net income $10,255 $7,356 $34,327 $17,314

 Basic earnings per share $0.37 $0.27 $1.24 $0.63
 Weighted average shares outstanding 27,925 27,501 27,730 27,348

 Diluted earnings per share $0.34 $0.26 $1.17 $0.61
 Weighted average shares outstanding 30,004 27,969 29,299 28,359


 aaiPharma Inc.
 Consolidated Balance Sheets
 (In thousands)

 December 31, December 31,
 2003 2002
 ASSETS
 Current assets:
 Cash and cash equivalents $8,785 $6,532
 Accounts receivable, net 46,314 29,467
 Work-in-progress 12,503 10,515
 Inventories, net 19,057 17,004
 Prepaid and other current assets 12,619 7,633
 Total current assets 99,278 71,151
 Property and equipment, net 57,236 53,125
 Goodwill, net 275,314 210,792
 Intangibles, net 123,375 89,078
 Other assets 15,162 16,179

 Total assets $570,365 $440,325

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
 Current maturities of long-term debt $4,000 $5,921
 Accounts payable 23,501 17,671
 Customer advances 17,630 15,051
 Accrued wages and benefits 5,320 6,718
 Interest payable 5,511 5,232
 Other accrued liabilities 12,426 5,201
 Total current liabilities 68,388 55,794
 Long-term debt, less current portion 338,844 277,899
 Other liabilities 17,184 7,182
 Stockholders' equity:
 Common stock 28 27
 Paid-in capital 88,049 79,049
 Retained earnings 54,919 20,592
 Accumulated other comprehensive income (loss) 3,197 (218)
 Deferred compensation (244) -
 Total stockholders' equity 145,949 99,450

 Total liabilities and
 stockholders' equity $570,365 $440,325


 aaiPharma Inc.
 Consolidated Statements of Cash Flows
 (In thousands)

 Twelve Months Ended
 December 31,
 2003 2002
 Cash flows from operating activities:
 Net Income $34,327 $17,314
 Adjustments to reconcile net income
 to net cash provided by operating activities:
 Depreciation and amortization 11,165 9,571
 Write-off of deferred financing
 and other costs, net of tax 967 5,339
 Other 434 145
 Changes in operating assets and liabilities:
 Accounts receivable, net (16,332) (2,380)
 Work-in-progress (1,085) 643
 Inventories (1,915) (7,853)
 Prepaid and other assets (6,747) (10,761)
 Accounts payable 5,471 1,937
 Customer advances 2,062 1,227
 Interest payable 279 4,861
 Accrued wages and benefits and
 other accrued liabilities 7,235 10,921
 Net cash provided by operating activities 35,861 30,964

 Cash flows from investing activities:
 Purchases of property and equipment (11,910) (8,529)
 Purchase of property and equipment
 previously leased - (14,145)
 Proceeds from sales of property and equipment 606 131
 Acquisitions (99,974) (211,997)
 Other (502) (593)
 Net cash used in investing activities (111,780) (235,133)

 Cash flows from financing activities:
 Proceeds from long-term borrowings 160,000 244,486
 Payments on long-term borrowings (93,500) (51,900)
 Proceeds from interest rate swap, net 1,703 10,486
 Issuance of common stock 8,757 3,243
 Other 1,086 (2,153)
 Net cash provided by financing activities 78,046 204,162

 Net increase (decrease) in cash and
 cash equivalents 2,127 (7)
 Effect of exchange rate changes on cash 126 168
 Cash and cash equivalents, beginning of period 6,532 6,371

 Cash and cash equivalents, end of period $8,785 $6,532



CONTACT: Media - Andrea L. Johnston, Vice President, Corporate Communications, +1-910-254-7340, or Investors - James B. Sloan, Jr., Senior Vice President, Corporate Finance, +1-910-254-7690, both of aaiPharma Inc.

Web site: http://www.aaipharma.com/
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