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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
    Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008ORo

TRANSITION REPORT UNDER SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    Commission File Number
    001-15875
  King Pharmaceuticals,
    Inc.
 Exact name of registrant as
    specified in its charter
   TennesseeState or other jurisdiction
    of
    incorporation or organization

54-1684963I.R.S. Employer
    Identification No.501 Fifth Street
    Bristol, TennesseeAddress of Principal
    Executive Offices

37620Zip
    Code   Registrants telephone number, including area code:
    (423) 989-8000
  Securities registered under Section 12(b) of the
    Exchange Act:
   Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock

New York Stock Exchange    Securities registered under Section 12(g) of the
    Exchange Act:
    None
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company o   Rule 12b-2 o þ
    Documents
    Incorporated by Reference:
    Certain information required in Part III of this Annual
    Report on
    Form 10-K
    is incorporated
    by reference from the registrants Proxy Statement for its
    2009 annual meeting of shareholders.




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##### 






Table of
    Contents
   
 PART I


2Item 1.


Business


2Item 1A.


Risk Factors


23Item 2.


Properties


39Item 3.


Legal Proceedings


39PART II


40Item 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


40Item 6.


Selected Financial Data


42Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


43Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


79Item 8.


Financial Statements and Supplementary Data


79Item 9A.


Controls and Procedures


79PART III


80PART IV


81Item 15.


Exhibits, Financial Statement Schedules


81EX-10.88EX-10.89EX-10.90EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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PART I  Item 1.
    Business    (423) 989-8000 (423) 274-8677. Form 10-K, Form 10-Q, Form 8-K 1-800-SEC-0330
         research and development

   distribution   manufacturing

   sales and marketing   packaging

   business development   quality control and assurance

   regulatory management         
    securing from the U.S. Food and Drug Administration, which
    we refer to as the FDA, additional approved uses
    (indications) for our products;
    developing and producing different strengths;
    producing different package sizes; 2




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
    developing new dosage forms; and
    developing new product formulations.        Business
    Segments
    Segment
    Net Revenues Summary
  ®
  For the Years Ended December 31,2008


2007


2006Branded Prescription Pharmaceuticals

$
1,263,488


$
1,857,813


$
1,724,701Meridian Auto-Injector


218,448



183,860



164,760Royalties


79,442



82,589



80,357Contract Manufacturing


1,327



9,201



16,501Other


2,356



3,419



2,181Total

$
1,565,061


$
2,136,882


$
1,988,500     Branded
    Prescription Pharmaceuticals Segment
    
    neuroscience (including
    Skelaxin®,

    Avinza®

    and
    Flector®

    Patch), 3




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
    hospital (including
    Thrombin-JMI®),

    and
    legacy products (including
    Altace®,

    Levoxyl®,

    Cytomel®

    and
    Bicillin®).      Product

Product Description and IndicationNeuroscience

Products in this category are primarily marketed to
    primary care physicians, neurologists, orthopedic surgeons and
    pain specialists.Skelaxin®

A muscle relaxant tablet indicated for the relief of
    discomfort associated with acute, painful musculoskeletal
    conditions.Flector®

    Patch

A topical non-steroidal anti-inflammatory patch for
    the treatment of acute pain due to minor strains, sprains and
    contusions.Avinza®

A long-acting formulation of morphine indicated as a
    once-daily treatment for moderate to severe pain in patients who
    require continuous, around the clock opioid therapy for an
    extended period of time.Hospital

Products in this category are primarily marketed to
    hospitals.Thrombin-JMI®

A chromatographically purified topical (bovine)
    thrombin solution indicated as an aid to hemostasis whenever
    oozing blood and minor bleeding from capillaries and small
    venules is accessible.Legacy Products

Products in this category are not actively promoted
    through our sales force and many have generic competition.Altace®

An oral administration indicated for the treatment
    of hypertension and reduction of the risk of stroke, myocardial
    infarction (heart attack) and death from cardiovascular causes
    in patients 55 and over with either a history of coronary artery
    disease, stroke or peripheral vascular disease or with diabetes
    and one other cardiovascular risk factor (such as elevated
    cholesterol levels or cigarette smoking).
    Altace®

    is also indicated in stable patients who have demonstrated
    clinical signs of congestive heart failure after sustaining an
    acute myocardial infarction.Levoxyl®

Color-coded, potency-marked tablets indicated for
    thyroid hormone replacement or supplemental therapy for
    hypothyroidism.Cytomel®

A tablet indicated in the medical treatment of
    hypothyroidism.Bicillin®

A penicillin-based antibiotic suspension for deep
    muscular injection indicated for the treatment of infections due
    to penicillin-G-susceptible microorganisms.  4




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Net SalesNeuroscienceSkelaxin®

$
446.2Avinza®


135.5HospitalThrombin-JMI®

$
254.6Legacy BrandedAltace®

$
166.4Levoxyl®


73.1Cytomel®


51.1Bicillin®


50.5   ® ®
  Animal
    Health Segment
      Product

Product Description and IndicationAntibiotic Products

Products in this category are used primarily in
    poultry, swine and cattle to prevent and/or treat diseases and
    maintain health.Albac®

A bacitracin-based MFA used to prevent and/or treat
    diseases, maintain health and/or improve feed efficiency.Aureomycin®,

    Aureomycin®-

    combination products,
    Aurofac®

    and
    Chlormax®

Feed-grade antibiotics containing chlortetracycline
    used in combination with an antibacterial to prevent and/or
    treat diseases, maintain health and/or improve feed efficiency.BMD®

A bacitracin-based MFA used to prevent and/or treat
    diseases and maintain health.Anticoccidial Products

Products in this category are used primarily in
    poultry and cattle to prevent coccidiosis, a condition caused by
    an intestinal parasite that affects the health of the animal.Bio-Cox®

    and
    Cygro®

MFAs used to prevent and control coccidiosis in
    poultry.Bovatec®

    and
    Avatec®

MFAs used to prevent and control coccidiosis in
    cattle and poultry and to maintain health and improve feed
    efficiency in cattle.Deccox®

An MFA used to prevent and control coccidiosis in
    poultry, cattle and calves.Robenz®

    and
    Cycostat®

Used to prevent coccidiosis in poultry and rabbits. 5




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Product

Product Description and IndicationRofenaid®

Used to control disease in poultry.Antibacterial Products

Products in this category are used to prevent
    disease in poultry and swine.3-Nitro®

An MFA used to treat disease and improve feed
    efficiency in poultry and swine.Histostat®

An MFA used to prevent disease in chickens and
    turkeys.     Meridian
    Auto-Injector Segment
    ®
  ® ® ® ®
  Royalties
    Segment
  ® ® ® ®
  ®
 6




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Recent
    Developments
  Acquisition
    of Alpharma Inc.
      ® tm
    ® ®
  Potential
    Generic Substitution for
    Skelaxin®
  ® ® ®
       7




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®
  Branded
    Prescription Pharmaceuticals  Development
    Advances
  Embedatm
  tm tm tm tm tm
  Remoxy®
  ® ® non-clinical
  ® tm
  Acurox®

    Tablets
  ® ® ® ® ® ® ®
  CorVuetm(binodenoson) for injection
  tm tm tm
 8




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T-62
  7-day 28-day 14-day
  Branded
    Prescription Pharmaceuticals  Promoted Portfolio
    Developments
  Avinza®
  and/or
  ® class-wide class-wide
  ® ® class-wide ® ®
  tm ® class-wide tm and/or ®
 9




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##### Table of Contents



Thrombin-JMI®
  ®
  Sonata®
  ® ®
  Industries
  and/or
    
    the aging of the patient population, including diseases specific
    to the aging process and demographic factors, including obesity,
    diabetes, cardiovascular disease, and patient and physician
    demand for products that meet chronic or unmet medical needs;
    technological innovation, both in drug discovery and corporate
    processes;
    merger and acquisition activity whereby pharmaceutical companies
    acquire one another, biotechnology companies, or particular
    products;
    cost containment and downward price pressure from managed care
    organizations and governmental entities, both in the United
    States and in other countries;
    increasing drug development, manufacturing and compliance costs
    for pharmaceutical producers;
    the actions of generic pharmaceutical companies and challenges
    to patent protection and sales exclusivity;
    more frequent product liability litigation;
    increased governmental scrutiny of the healthcare sector,
    including issues of patient safety, cost, efficacy and
    reimbursement/insurance matters; and
    the cost of advertising and marketing, including
    direct-to-consumer advertising on television and in print.    
    technological innovation, both in drug discovery and corporate
    processes;
    merger and acquisition activity whereby animal health companies
    acquire one another, biotechnology companies, or particular
    products;
    cost containment and downward price pressure;
    increased drug development, manufacturing and compliance costs
    for producers of animal health products; 10




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
    more frequent product liability litigation; and
    increased governmental scrutiny of the sector, including
    governmental restrictions on the use of antibiotics in certain
    food-producing animals.  Sales and
    Marketing
  Branded
    Prescription Pharmaceuticals
      Meridian
    Auto-Injector
  ® ® ® ®
    Animal
    Health
   11




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Manufacturing
  Branded
    Prescription Pharmaceuticals and Meridian Auto-Injector
    Segments
    ® ® ® ® ® ®
      Animal
    Health Segment
  ® ® ® ®
  Research
    and Development
  Branded
    Prescription Pharmaceuticals and Meridian Auto-Injector
    Segments
   12




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
    Embedatm,

    a novel formulation of long-acting morphine with a proposed
    indication for the management of moderate to severe chronic
    pain, is specifically designed to resist certain common methods
    of misuse and abuse associated with long-acting morphine
    products that are currently available. The NDA for
    Embedatm

    was submitted to the FDA in June 2008. In December 2008, the FDA
    informed us that it is continuing its review of the
    Embedatm

    NDA.
    Remoxy®,

    a novel formulation of long-acting oxycodone with a proposed
    indication for the treatment of moderate to severe chronic pain,
    is specifically designed to resist certain common methods of
    misuse and abuse associated with long-acting oxycodone products
    that are currently available. In December 2008, the FDA issued a
    Complete Response Letter with respect to the NDA for
    Remoxy®,

    requiring additional non-clinical information to support
    approval of the product. We are working with our partner, Pain
    Therapeutics, Inc., to complete our assessment of the Complete
    Response Letter and prepare a written response. We together with
    PTI plan to meet with the FDA during the second quarter of 2009
    to discuss our response, following which we expect to have a
    better understanding of the additional steps and the time
    required to obtain approval. 13




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
    Acurox®

    Tablets, a novel formulation of immediate release oxycodone with
    a proposed indication for the treatment of moderate to severe
    pain, is specifically designed to deter certain common methods
    of misuse and abuse associated with immediate release oxycodone
    products that are currently available. Our partner, Acura,
    submitted the NDA for
    Acurox®

    in December 2008 and requested priority review.
    CorVuetm

    (binodenoson) is our next generation cardiac pharmacologic
    stress-imaging agent. We submitted an NDA to the FDA in December
    2008.
    Ketoprofen in
    Transfersome®

    gel, our topical non-steroidal anti-inflammatory drug, entered
    Phase III clinical trials in the second quarter of 2008.
    Vanquixtm,

    a diazepam-filled auto-injector with a proposed indication for
    the treatment of acute, repetitive epileptic seizures, is
    currently in Phase III clinical trials.
    T-62, an investigational drug for the treatment of neuropathic
    pain, is currently in Phase II clinical trials.
    Eladur®,

    an investigational transdermal bupivacaine patch for the
    treatment of pain associated with postherpetic neuralgia, is
    currently in Phase II clinical trials.
    Oxycodone NT, a novel formulation of long-acting oxycodone for
    the treatment of moderate to severe chronic pain, is currently
    in early stages of clinical development. Oxycodone NT is
    specifically designed to resist certain common methods of misuse
    and abuse associated with long-acting oxycodone products that
    are currently available.
    Hydrocodone NT, a novel formulation of long-acting hydrocodone
    for treatment of
    moderate-to-severe
    chronic pain, is currently in early stages of clinical
    development. Hydrocodone NT is specifically designed to resist
    certain common methods of misuse and abuse associated with
    long-acting hydrocodone products that are currently available.    Animal
    Health Segment
  in-licensing
  Government
    Regulation
  Branded
    Prescription Pharmaceuticals and Meridian Auto-Injector
    Segments
   14




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and/or
         15




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Animal
    Health Segment
        Environmental
    Matters
   16




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Competition
  Branded
    Prescription Pharmaceuticals and Meridian Auto-Injector
    Segments
      30-month 30-month Therapeutic
    Equivalence Evaluations 30-month
  30-month
  Animal
    Health Segment
   17




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Intellectual
    Property
  Patents,
    Licenses and Proprietary Rights
    ® ® ®
  ®
  ®
    ® ® ®
  ® ® tm ® tm ® ®
   18




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Trademarks
    Backlog
    Directors and Executive Officers
  Name

Age

Position with the CompanyBrian A. Markison


49



President, Chief Executive Officer and Chairman of the Board of
    DirectorsEarnest W. Deavenport, Jr.


70



DirectorElizabeth M. Greetham


59



DirectorPhilip A. Incarnati


54



DirectorGregory D. Jordan, Ph.D.


57



DirectorR. Charles Moyer, Ph.D.


63



DirectorD. Greg Rooker


61



DirectorTed G. Wood


71



Lead Independent  DirectorJoseph Squicciarino


52



Chief Financial OfficerStephen J. Andrzejewski


43



Chief Commercial OfficerFrederick Brouillette, Jr.


57



Corporate Compliance OfficerEric J. Bruce


52



President, Alpharma Animal HealthDr. Eric G. Carter


57



Chief Science OfficerJames W. Elrod


48



Chief Legal Officer, SecretaryJames E. Green


49



Executive Vice President, Corporate Affairs   Directors
  Brian A. Markison
  Earnest W. Deavenport, Jr.
 19




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Elizabeth M. Greetham
  Philip A. Incarnati
  Gregory D. Jordan, Ph.D.
  R. Charles Moyer, Ph.D.
  D. Greg Rooker
  Ted G. Wood
 20




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Executive
    Officers
  Joseph Squicciarino
  Stephen J. Andrzejewski ®
  Frederick Brouillette, Jr.
  Eric J. Bruce
  Eric G. Carter
 21




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James W. Elrod
  James E. Green
  Employees
   22




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Item 1A.
    Risk
    Factors  You should carefully consider the risks described below and
    the other information contained in this report, including our
    audited consolidated financial statements and related notes. The
    risks described below are not the only ones facing our company.
    Additional risks not presently known to us or that we currently
    deem immaterial may also impair our business operations. If any
    of the adverse events described in this Risk Factors
    section or other sections of this report actually occurs, our
    business, results of operations and financial condition could be
    materially adversely affected, the trading price, if any, of our
    securities could decline and you might lose all or part of your
    investment.
  Risks
    Related to Our Business
  If we
    cannot successfully defend our rights under the patents relating
    to our key products, such as
    Skelaxin®,

    or if we are unable to secure or defend our rights under other
    patents and trademarks and protect our trade secrets and other
    intellectual property, additional competitors could enter the
    market, and sales of affected products may decline
    materially.            In
    January 2009, two key patents associated with
    Skelaxin®

    were ruled invalid by a federal court, and net sales of
    Skelaxin®

    may decrease significantly as a result. Our related
    restructuring initiative might not succeed, and, in any event,
    the benefits of the initiative will not be sufficient to offset
    the loss of revenues from decreased
    Skelaxin®

    sales.  ®
 23




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®
  ®
  We
    undertook borrowings totaling $625 million in connection
    with our acquisition of Alpharma. Our obligations to repay these
    borrowings will materially limit our ability to invest in other
    aspects of our business, to borrow other funds, to engage in
    other transactions and to take a variety of other actions. In
    addition, our future cash flows may not be sufficient to repay
    these borrowings.             24




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If we
    cannot integrate the business of companies or products we
    acquire, or appropriately and successfully manage and coordinate
    third-party collaborative development activities, our business
    may suffer. In particular, there are risks associated with the
    integration of our business with Alpharma Inc., which we
    acquired in December 2008.        
    The combination may not enhance our business to the extent we
    expect or may not result in operating or product synergies, and
    could have a negative impact on our earnings;
    The process of integrating Alpharmas business with ours,
    and/or the
    measures required to effectively use acquired intellectual
    property, products or other assets, could be time consuming and
    may result in unforeseen operating difficulties
    and/or
    expenses;
    We may not be able to retain Alpharmas key employees or
    maintain its critical business and customer relationships;
    There may be unforeseen liabilities or other material facts that
    could adversely affect our business. For example, litigation or
    other claims made in connection with, or inheritance of claims
    or litigation risks as a result of, the acquisition of Alpharma
    could be time consuming and may create difficulties and expenses
    which are not currently anticipated. Please see Note 19,
    Commitments and Contingencies, in Part IV,
    Item 15(a)(1), Financial Statements.
    The intangible assets and goodwill recorded in connection with
    the acquisition could be subject to impairment charges. There is
    also the risk of significant accounting charges resulting from
    the completion and integration of this sizeable acquisition and
    increased capital expenditures.  The
    uncertainty and expense of the drug development process, actions
    by our competitors and other factors may adversely affect our
    ability to implement our strategy to grow our business through
    increased sales, acquisitions, development and in-licensing,
    and, as a result, our business or competitive position in the
    pharmaceutical industry may suffer.     25




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and/or
      
    Embedatm,

    a drug for the treatment of moderate to severe chronic pain;
    Remoxytm,

    a drug for the treatment of moderate to severe chronic pain that
    we are developing with Pain Therapeutics, Inc.;
    Acurox®

    Tablets, a drug for the treatment of moderate to severe pain
    that we are developing with Acura Pharmaceuticals, Inc.;
    CorVuetm

    (binodenoson), a myocardial pharmacologic stress imaging agent;
    Ketoprofen in
    Transfersome®

    gel, a topical drug for local pain relief;
    Eladur®,

    a patch for the treatment of pain associated with postherpetic
    neuralgia;
    Vanquixtm,

    a diazepam-filled auto-injector for the treatment of acute,
    repetitive epileptic seizures;
    T-62, a drug for the treatment of neuropathic pain;
    Oxycodone NT, a drug for treatment of moderate to severe chronic
    pain; and
    Hydrocodone NT, a drug for treatment of moderate to severe
    chronic pain.    
    engage in product life-cycle management to develop new
    indications and line extensions for existing and acquired
    products,
    successfully develop, license or commercialize new products on a
    timely basis or at all, 26




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
    continue to develop products already in development in a cost
    effective manner, or
    obtain any FDA approvals necessary to successfully implement the
    strategies described above.      
    Altace®

    has multiple generic substitutes that entered the market in
    December 2007 and in 2008.
    Skelaxin®

    competes in a highly genericized market with other muscle
    relaxants and could be subject to additional competition from
    generic products following a courts order ruling invalid
    two patents related to
    Skelaxin®

    in January 2009.
    Sonata®

    competes with other insomnia treatments in a highly competitive
    market. A generic substitute entered the market in the second
    quarter of 2008.
    Levoxyl®

    competes in a competitive and highly genericized market with
    other levothyroxine sodium products.
    Beginning in the fourth quarter of 2007,
    Thrombin-JMI®,

    our bovine thrombin product, faced new competition from human
    thrombin and recombinant human thrombin.        
    develop or license their products more rapidly than we can,
    complete any applicable regulatory approval process sooner than
    we can,
    market or license their products before we can market or license
    our products, or
    offer their newly developed or licensed products at prices lower
    than our prices.   27




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We are
    required annually, or on an interim basis as needed, to review
    the carrying value of our intangible assets and goodwill for
    impairment. If sales of our products decline because of, for
    example, generic competition or an inability to manufacture or
    obtain sufficient supply of product, the intangible asset value
    of any declining product could become impaired.    We
    have entered into agreements with manufacturers and/or
    distributors of generic pharmaceutical products with whom we are
    presently engaged, or have previously been engaged, in
    litigation, and these agreements could subject us to claims that
    we have violated federal and/or state anti-trust
    laws.  and/or and/or
    An
    expansion of the ban of the use of antibiotics used in
    food-producing animals could result in a decrease in our
    sales.     28




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
    the EU, countries within or outside the EU, or meat importers
    act to prevent the importation of meat products from countries
    that allow the use of bacitracin-based or other
    antibiotic-containing products,
    there is an expansion of the zinc bacitracin ban to additional
    countries, such as the U.S., where we have material sales of
    bacitracin-based products,
    a similar ban is instituted relating to other antibiotic feed
    additives sold by us in the U.S. or in one or more other
    countries where we have material sales, or
    there is an increase in public pressure to discontinue the use
    of antibiotic feed additives.      Unfavorable
    results in pending and future claims and litigation matters
    could have an adverse impact on us.    Potential
    adverse effects on human health linked to the raising or
    consumption of food-producing animals using our products could
    result in a decrease in our sales.   29




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Any
    significant delays or difficulties in the manufacture of, or
    supply of materials for, our products may reduce our profit
    margins and revenues, limit the sales of our products, or harm
    our products reputations.  ® ® ® ®
    Sales
    of
    Thrombin-JMI®

    may be affected by the perception of risks associated with some
    of the raw materials used in its manufacture. If we are unable
    to maintain purification procedures at our facilities that are
    in accordance with the FDAs expectations for biological
    products generally, the FDA could limit our ability to
    manufacture biological products at those
    facilities.  ® ® ® ®
  ® ® ® ® ®
  ®
 30




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®
  Wholesaler
    and distributor buying patterns and other factors may cause our
    quarterly results to fluctuate, and these fluctuations may
    adversely affect our short-term results. Further, our access to
    wholesaler and distributor inventory levels and sales data
    affects our ability to estimate certain reserves included in our
    financial statements.      Our
    relationships with the U.S. Department of Defense and other
    government entities subject us to risks associated with doing
    business with the government.
     31




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We are
    subject to the risks of doing business outside of the United
    States.        Compliance
    with the terms and conditions of our corporate integrity
    agreement with the Office of Inspector General of the United
    States Department of Health and Human Services requires
    significant resources and management time and, if we fail to
    comply, we could be subject to penalties or, under certain
    circumstances, excluded from government health care programs,
    which could materially reduce our sales.     32




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Our
    charter and bylaws and applicable state laws discourage
    unsolicited takeover proposals and could prevent shareholders
    from realizing a premium on their common stock.    
    a classified Board of Directors, although the classification of
    the Board is being phased out and will be eliminated in 2010;
    the ability of our Board of Directors to designate the terms of
    and issue new series of preferred stock;
    advance notice requirements for nominations for election to our
    Board of Directors; and
    special voting requirements for the amendment of our charter and
    bylaws.    At
    times, our stock price has been volatile, and such volatility in
    the future could result in substantial losses for our
    investors.    
    variations in our results of operations;
    perceived risks and uncertainties concerning our business;
    announcements of earnings;
    the commencement of, or adverse developments in, any material
    litigation or governmental investigation;
    failure to meet timelines for product development or other
    projections or forward-looking statements we may make to the
    public;
    failure to meet or exceed security analysts financial
    projections for our company;
    comments or recommendations made by securities analysts;
    general market conditions;
    perceptions about market conditions in the pharmaceutical
    industry;
    announcements of technological innovations or the results of
    clinical trials or studies;
    changes in marketing, product pricing and sales strategies or
    development of new products by us or our competitors;
    changes in domestic or foreign governmental regulations or
    regulatory approval processes; and
    announcements concerning regulatory compliance and government
    agency reviews. 33




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Risks
    Related to Our Industries
  Failure
    to comply with laws and government regulations could adversely
    affect our ability to operate our business.             34




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New
    legislation or regulatory proposals may adversely affect our
    revenues.  ®
    An
    increase in product liability claims or product recalls could
    harm our business.     35




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##### Table of Contents



If we
    fail to comply with our reporting and payment obligations under
    the Medicaid rebate program or other governmental pricing
    programs, we could be required to reimburse government programs
    for underpayments and could be required to pay penalties,
    sanctions and fines which could have a material adverse effect
    on our business.    The
    insolvency of any of our principal customers, who are wholesale
    pharmaceutical distributors, could have a material adverse
    effect on our business, financial condition, results of
    operations and cash flows.    Any
    reduction in reimbursement levels by managed care organizations
    or other third-party payors may have an adverse effect on our
    revenues.      If we
    fail to comply with the safe harbors provided under various
    federal and state laws, our business could be adversely
    affected.   36




---



##### Table of Contents



and/or
  In the
    future, the publication of negative results of studies or
    clinical trials may adversely affect the sales of our products
    or the values of the intangible assets associated with
    them.   37




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##### Table of Contents



A WARNING
    ABOUT FORWARD-LOOKING STATEMENTS
        
    the potential of, including anticipated net sales and
    prescription trends for, our branded prescription pharmaceutical
    products, particularly
    Altace®,

    Skelaxin®,

    Avinza®,

    Thrombin-JMI®,

    the
    Flector®

    Patch and
    Levoxyl®;
    expectations regarding the enforceability and effectiveness of
    product-related patents, including, in particular, patents
    related to
    Skelaxin®,

    Avinza®,

    and
    Adenoscan®;
    expected trends and projections with respect to particular
    products, reportable segment and income and expense line items;
    the adequacy of our liquidity and capital resources;
    anticipated capital expenditures;
    the development, approval and successful commercialization of
    Remoxy®,

    Embedatm,

    Acurox®

    Tablets,
    CorVuetm

    and other products;
    the cost of and the successful execution of our growth and
    restructuring strategies;
    anticipated developments and expansions of our business;
    our plans for the manufacture of some of our products, including
    products manufactured by third parties;
    the potential costs, outcomes and timing of research, clinical
    trials and other development activities involving pharmaceutical
    products, including, but not limited to, the magnitude and
    timing of potential payments to third parties in connection with
    development activities;
    the development of product line extensions;
    the expected timing of the initial marketing of certain products;
    products developed, acquired or in-licensed that may be
    commercialized;
    our intent, beliefs or current expectations, primarily with
    respect to our future operating performance;
    expectations regarding sales growth, gross margins,
    manufacturing productivity, capital expenditures and effective
    tax rates;
    expectations regarding the outcome of various pending legal
    proceedings including the
    Skelaxin®

    and
    Avinza®

    patent challenges, litigation, and other legal proceedings
    described in this report;
    expectations regarding our financial condition and liquidity as
    well as future cash flows and earnings; and
    expectations regarding our ability to liquidate our holdings of
    auction rate securities and the temporary nature of unrealized
    losses recorded in connection with some of those securities. 38




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##### Table of Contents



Item 2.
    Properties    Location

Principal Purposes

Business Segment(s)Bristol, Tennessee

Manufacturing, Distribution, and Administration

Branded Prescription PharmaceuticalsRochester, Michigan

Manufacturing

Branded Prescription PharmaceuticalsSt. Louis, Missouri

Manufacturing

Meridian Auto-InjectorSt. Petersburg, Florida

Manufacturing

Branded Prescription PharmaceuticalsMiddleton, Wisconsin

Manufacturing

Branded Prescription PharmaceuticalsPiscataway, New Jersey

Research and Development

Branded Prescription PharmaceuticalsVan Buren, Arkansas

Manufacturing

Animal HealthLongmont, Colorado

Manufacturing

Animal HealthChicago Heights, Illinois

Manufacturing

Animal HealthEagle Grove, Iowa

Manufacturing

Animal HealthSalisbury, Maryland

Manufacturing

Animal HealthWillow Island, West Virginia

Manufacturing

Animal HealthShenzhou, China

Manufacturing

Animal HealthYantai, China

Manufacturing

Animal Health         Item 3.
    Legal
    Proceedings   39




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##### Table of Contents



PART II  Item 5.
    Market
    for Common Equity and Related Stockholder Matters    2008High


LowFirst quarter

$
12.40


$
8.26Second quarter


10.61



8.47Third quarter


12.60



8.83Fourth quarter


10.66



6.98   2007High


LowFirst quarter

$
19.86


$
15.79Second quarter


22.25



19.40Third quarter


21.10



11.43Fourth quarter


11.82



9.75    40




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##### Table of Contents



PERFORMANCE
    GRAPH
  COMPARISON
    OF FIVE-YEAR CUMULATIVE TOTAL RETURN
  five-year 2830-2839,
  COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
 Among King Pharmaceuticals, Inc., the S&P 500 Index
 and NYSE US SIC Code 2830-2839, Drug
  
  12/03

12/04

12/05

12/06

12/07

12/08King Pharmaceuticals, Inc.


100.00



81.26



110.88



104.33



67.10



69.59S&P 500


100.00



110.88



116.33



134.70



142.10



89.53NYSE US SIC Code
    2830-2839,
    Drug


100.00



92.80



89.58



103.91



108.86



88.53   The stock price performance included in this graph is not
    necessarily indicative of future stock price performance.
   41




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##### Table of Contents



Item 6.
    Selected
    Financial Data    For the Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share data)Statement of Income Data:Total revenues

$
1,565,061


$
2,136,882


$
1,988,500


$
1,772,881


$
1,304,364Operating (loss) income


(219,645
)


227,513



402,546



180,079



(41,264
)(Loss) income from continuing operations before income taxes and
    discontinued operations


(201,704
)


250,818



424,312



178,115



(58,034
)Income tax expense (benefit)


131,359



67,600



135,730



61,485



(7,412
)(Loss) income from continuing operations


(333,063
)


183,218



288,582



116,630



(50,622
)(Loss) income from discontinued operations(1)






(237
)


367



1,203



(109,666
)Net (loss) income

$
(333,063
)

$
182,981


$
288,949


$
117,833


$
(160,288
)Income per common share:Basic:(Loss) income from continuing operations

$
(1.37
)

$
0.75


$
1.19


$
0.48


$
(0.21
)(Loss) income from discontinued operations














0.01



(0.45
)Net income (loss)

$
(1.37
)

$
0.75


$
1.19


$
0.49


$
(0.66
)Diluted:(Loss) income from continuing operations

$
(1.37
)

$
0.75


$
1.19


$
0.48


$
(0.21
)Income (loss) from discontinued operations














0.01



(0.45
)Net (loss) income

$
(1.37
)

$
0.75


$
1.19


$
0.49


$
(0.66
)Dividends declared per share of common stock

$
0.00


$
0.00


$
0.00


$
0.00


$
0.00   December 31,2008


2007


2006


2005


2004(In thousands)Balance Sheet Data:Working capital

$
662,143


$
1,366,569


$
1,055,677


$
276,329


$
438,133Total assets


4,257,696



3,426,822



3,329,531



2,965,242



2,924,156Total debt


1,407,499



400,000



400,000



345,000



345,000Shareholders equity


2,177,331



2,510,757



2,288,606



1,973,422



1,848,790     (1)
    
    Reflects the classification of
    Nordette®

    and
    Prefest®

    product lines as discontinued operations. 42




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    OVERVIEW
  Our
    Business
       research and development

   distribution   manufacturing

   sales and marketing   packaging

   business development   quality control and assurance

   regulatory management         
    securing from the U.S. Food and Drug Administration, which
    we refer to as the FDA, additional approved uses
    (indications) for our products;


    developing and producing different strengths;
    producing different package sizes;
    developing new dosage forms; and
    developing new product formulations.     43




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##### Table of Contents



Recent
    Developments
  Acquisition
    of Alpharma Inc.
      ® tm
  
  ® ® gross-profit
  Potential
    Generic Substitution for
    Skelaxin®
  No. 04-cv-5540 ® ® ® ®
  ®
 44




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##### Table of Contents



Branded
    Prescription Pharmaceuticals  Development
    Advances
  Embedatm
  tm tm tm tm
  Remoxy®
  ® ®
  ® tm
  Acurox®

    Tablets
  ® ® ® ® ® ®
 45




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##### Table of Contents



®
  CorVuetm(binodenoson) for injection
  tm tm tm
  T-62
  7-day 28-day 14-day
  Branded
    Prescription Pharmaceuticals  Promoted Portfolio
    Developments
  Avinza®
  and/or
  ® class-wide class-wide
  ® ® class-wide ® ®
 46




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##### Table of Contents



tm ® class-wide tm and/or ®
  Thrombin-JMI®
  ®
  Sonata®
  ® ®
  OPERATING
    RESULTS
    For the Years Ended December 31,2008


2007


2006(In thousands)Total RevenuesBranded prescription pharmaceuticals

$
1,263,488


$
1,857,813


$
1,724,701Meridian Auto-Injector


218,448



183,860



164,760Royalties


79,442



82,589



80,357Contract manufacturing


1,327



9,201



16,501Other


2,356



3,419



2,181Total revenues

$
1,565,061


$
2,136,882


$
1,988,500Cost of Revenues, exclusive of depreciation, amortization and
    impairmentsBranded prescription pharmaceuticals

$
298,861


$
467,507


$
317,677Meridian Auto-Injector


85,550



76,050



74,576Royalties


9,720



10,158



9,748Contract manufacturing


680



9,434



17,636Other


14



3,385



171Total cost of revenues

$
394,825


$
566,534


$
419,808  47




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##### Table of Contents



For the Years Ended December 31,2008


2007


2006(In thousands)Gross Sales

$
1,899,096


$
2,623,330


$
2,461,588Commercial Rebates


87,646



188,966



188,652Medicare Part D Rebates


28,110



59,103



54,221Medicaid Rebates


39,658



39,608



27,219Chargebacks


92,252



97,251



102,876Returns


12,892



11,679



14,832Trade Discounts/Other


73,477



90,211



84,720$
1,565,061


$
2,136,512


$
1,989,068Discontinued Operations






(370
)


568Net Sales

$
1,565,061


$
2,136,882


$
1,988,500   ® ® ®
  ®
    ® ® ® ® ® ®
 48




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##### Table of Contents



Accrual
    for Rebates, including Administrative Fees
  2008


2007


2006(In thousands)Balance at January 1, net of prepaid amounts

$
65,301


$
53,765


$
126,240Current provision related to sales made in current period


151,014



285,253



282,603Current provision related to sales made in prior periods


4,400



2,424



(12,511
)Rebates paid


(199,912
)


(276,141
)


(342,567
)Alpharma acquisition


37,326







Balance at December 31, net of prepaid amounts

$
58,129


$
65,301


$
53,765           ® ® ® ® ® ® ® ® ®
 49




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##### Table of Contents



Accrual
    for Returns
  2008


2007


2006(In thousands)Balance at January 1

$
32,860


$
42,001


$
50,902Current provision


12,892



11,679



14,832Actual returns


(21,658
)


(20,820
)


(23,733
)Alpharma acquisition


9,377







Ending balance at December 31

$
33,471


$
32,860


$
42,001       Accrual
    for Chargebacks
  2008


2007


2006(In thousands)Balance at January 1

$
11,120


$
13,939


$
13,153Current provision


92,252



97,251



102,876Actual chargebacks


(93,563
)


(100,070
)


(102,090
)Alpharma acquisition


156







Ending balance at December 31

$
9,965


$
11,120


$
13,939  50




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##### Table of Contents



Branded
    Prescription Pharmaceuticals Segment
  ChangeFor the Years Ended December 31,


2008 vs. 2007


2007 vs. 20062008


2007


2006


$


%


$


%(In thousands)Branded prescription pharmaceuticals revenue:Skelaxin®

$
446,243


$
440,003


$
415,173


$
6,240



1.4
%

$
24,830



6.0
%Thrombin-JMI®


254,581



267,354



246,520



(12,773
)


(4.8
)


20,834



8.5Altace®


166,406



645,989



652,962



(479,583
)


(74.2
)


(6,973
)


(1.1
)Avinza®


135,452



108,546







26,906



24.8



108,546



Levoxyl®


73,064



100,102



111,771



(27,038
)


(27.0
)


(11,669
)


(10.4
)Sonata®


31,158



78,695



85,809



(47,537
)


(60.4
)


(7,114
)


(8.3
)Other


156,584



217,124



212,466



(60,540
)


(27.9
)


4,658



2.2Total revenue

$
1,263,488


$
1,857,813


$
1,724,701


$
(594,325
)


(32.0
)%

$
133,112



7.7
%Cost of Revenues, exclusive of depreciation, amortization and
    impairments

$
298,861


$
467,507


$
317,677


$
(168,646
)


(36.1
)%

$
149,830



47.2
%   ® ® ® ® ® ®
  ®
  ® ®
  Sales
    of Key Products
  Skelaxin®
  No. 04-cv-5540 ® ® ® ®
  ®
 51




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##### Table of Contents



® ® ® ®
   ® ® ® ®
  Thrombin-JMI®
  ® ®
  ®
  Altace®
  ® ® ® ®
  ® ®
  ®
  Avinza®
  ® ® ® ® ®
  ® ®
 52




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##### Table of Contents



®
  ®
  ®
  Levoxyl®
  ® ® ® ®
  ® ® ®
  Other
  ® ®
  ® ® ®
  ® ® ®
  ® ®
 53




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##### Table of Contents



Cost
    of Revenues
  ® ®
  ® ® ®
      
    A charge of $8.1 million in 2008 primarily associated with
    minimum purchase requirements under a supply agreement to
    purchase raw materials associated with
    Altace®.  
    An inventory valuation allowance that resulted in a charge of
    $78.8 million for inventories associated with
    Altace®

    in 2007. For additional information please see Note 7,
    Inventory, in Part IV, Item 15(a)(1),
    Financial Statements.  
    A charge of $25.4 million primarily associated with minimum
    purchase requirements under a supply agreement to purchase raw
    material inventory associated with
    Altace®

    in 2007. For additional information please see Note 7,
    Inventory, in Part IV, Item 15(a)(1),
    Financial Statements.
    A contract termination that resulted in a charge of
    $3.8 million in 2007.  ®
  Meridian
    Auto-Injector
  ChangeFor the Years Ended December 31,


2008-2007


2007-20062008


2007


2006


$


%


$


%(In thousands)Meridian Auto-Injector revenue

$
218,448


$
183,860


$
164,760


$
34,588



18.8
%

$
19,100



11.6
%Cost of Revenues, exclusive of depreciation, amortization and
    impairments


85,550



76,050



74,576



9,500



12.5
%


1,474



2.0$
132,898


$
107,810


$
90,184


$
25,088



23.3
%

$
17,626



19.5
%   ® ®
 54




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##### Table of Contents



® ® ®
    ® ®
    Royalties
    Segment
  ChangeFor the Years Ended December 31,


2008-2007


2007-20062008


2007


2006


$


%


$


%(In thousands)Royalty revenue

$
79,442


$
82,589


$
80,357


$
(3,147
)


(3.8
)%

$
2,232



2.8
%Cost of Revenues, exclusive of depreciation, amortization and
    impairments


9,720



10,158



9,748



(438
)


(4.3
)%


410



4.2$
69,722


$
72,431


$
70,609


$
(2,709
)


(3.7
)%

$
1,822



2.6
%   ®
  ® ® ® ®
  ®
 55




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##### Table of Contents



Operating
    Costs and Expenses
  ChangeFor the Years Ended December 31,


2008-2007


2007-20062008


2007


2006


$


%


$


%(In thousands)Cost of revenues, exclusive of depreciation, amortization and
    impairments

$
394,825


$
566,534


$
419,808


$
(171,709
)


(30.3
)%

$
146,726



35.0
%Selling, general and administrative


446,020



691,034



713,965



(245,014
)


(35.5
)


(22,931
)


(3.2
)Research and development


743,673



184,735



253,596



558,938



>100



(68,861
)


(27.2
)Depreciation and amortization


150,713



173,863



147,549



(23,150
)


(13.3
)


26,314



17.8Asset impairments


40,995



223,025



47,842



(182,030
)


(81.6
)


175,183



>100Restructuring charges


7,098



70,178



3,194



(63,080
)


(89.9
)


66,984



>100Acquisition related costs


1,382











1,382



100.0







Total operating costs and expenses

$
1,784,706


$
1,909,369


$
1,585,954


$
(124,663
)


(6.5
)%

$
323,415



20.4
%   Selling,
    General and Administrative Expenses
  ChangeFor the Years Ended December 31,


2008-2007


2007-20062008


2007


2006


$


%


$


%(In thousands)Selling, general and administrative, exclusive of co-promotion
    fees

$
408,955


$
511,303


$
496,215


$
(102,348
)


(20.0
)%

$
15,088



3.0
%Co-promotion fees


37,065



179,731



217,750



(142,666
)


(79.4
)


(38,019
)


(17.5
)Total selling, general and administrative

$
446,020


$
691,034


$
713,965


$
(245,014
)


(35.5
)%

$
(22,931
)


(3.2
)%     ® ® ® ® ®
   56




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##### Table of Contents



® ®
    
    Income of $4.4 million during 2008 and charges of
    $2.1 million and $0.1 million during 2007 and 2006,
    respectively, primarily due to professional fees related to the
    previously completed investigation of our company by the
    HHS/OIG, and the SEC, and the private plaintiff securities
    litigation. During 2008, 2007 and 2006, we received payment from
    our insurance carriers for the recovery of legal fees in the
    amount of $11.0 million, $3.4 million and
    $6.8 million, respectively, related to the securities
    litigation. These recoveries have been reflected as reductions
    of professional fees in 2008, 2007 and 2006. For additional
    information, please see Note 19, Commitments and
    Contingencies, in Part IV, Item 15(a)(1),
    Financial Statements.
    A charge of $45.1 million during 2006 related to the
    results of a binding arbitration proceeding with Elan
    Corporation, plc regarding an agreement concerning the
    development of a modified release formulation of
    Sonata®.

    During 2004, we incurred a charge of $5.0 million as
    estimated settlement costs related to the termination of this
    agreement.  Research
    and Development Expense
  ChangeFor the Years Ended December 31,


2008-2007


2007-20062008


2007


2006


$


$(In thousands)Research and development

$
145,173


$
149,425


$
143,596


$
(4,252
)

$
5,829Research and development  in-process upon acquisition


598,500



35,310



110,000



563,190



(74,690
)Total research and development

$
743,673


$
184,735


$
253,596


$
558,938


$
(68,861
)   ® ®
    
    A charge of $590.0 million for our acquisition of
    in-process research and development related to the completion of
    our acquisition of Alpharma on December 29, 2008. The
    charge represents purchase price allocation associated with
    Embedatm,

    Oxycodone NT and Hydrocodone NT projects of $410.0 million,
    $90.0 million and $90.0 million, respectively. The
    amounts associated with each of these projects were expensed as
    the in-process research and development projects had not
    received regulatory approval and had no alternative future use.
    The
    Embedatm

    NDA was submitted to the FDA in June 2008. We currently believe
    we will obtain approval of the
    Embedatm

    NDA during 2009. The success of the project is dependent upon
    NDA approval by the FDA. Oxycodone NT and Hydrocodone NT, each
    long-acting treatments for moderate to severe chronic pain, are
    currently in the early stages of development. Oxycodone NT and
    Hydrocodone NT are each designed to resist certain common
    methods of misuse and abuse associated with long-acting
    oxycodone and hydrocodone products that are currently available.
    If the clinical development programs are successful, we would
    not expect to commercialize 57




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##### Table of Contents



these products any sooner than 2011. The estimated cost to
    complete the development of these products is approximately
    $35 million each. We believe there is a reasonable
    probability of completing these projects successfully, but the
    success of the projects depends on the outcome of the clinical
    development programs and approval by the FDA.  
    Charges totaling $6.0 million in 2008 for our acquisition
    of in-process research and development related to the exercise
    of our options for a third and fourth immediate-release opioid
    product under a License, Development and Commercialization
    Agreement with Acura to develop and commercialize certain opioid
    analgesic products utilizing Acuras
    Aversion®

    Technology in the United States, Canada and Mexico. The amount
    of each option exercise was $3.0 million. We believe there
    is a reasonable probability of completing the projects
    successfully, but the success of the projects depends on the
    successful outcome of the clinical development programs and
    approval of the products by the FDA. The estimated cost to
    complete each project at the time of the execution of the option
    was approximately $16.0 million for each product.
    A charge of $2.5 million in 2008 for our acquisition of
    in-process research and development associated with our Product
    Development Agreement with CorePharma LLC
    (CorePharma) to develop new formulations of
    Skelaxin®.

    Any intellectual property created as a result of the agreement
    will belong to us and we will grant CorePharma a non-exclusive,
    royalty-free license to use this newly created intellectual
    property with any product not containing metaxalone. The success
    of the project depends on additional development activities and
    FDA approval. The estimated cost to complete the development
    activities at the time of the execution of the agreement was
    approximately $2.5 million.
    A charge of $32.0 million during 2007 associated with our
    collaborative agreement with Acura to develop and commercialize
    certain immediate-release opioid analgesic products utilizing
    Acuras proprietary
    Aversion®

    Technology in the United States, Canada and Mexico. The
    agreement provides us with an exclusive license for
    Acurox®

    (oxycodone HCl/niacin) tablets and another immediate-release
    opioid product utilizing Acuras
    Aversion®

    Technology. In addition, the agreement provides us with an
    option to license all future opioid analgesic products developed
    utilizing Acuras
    Aversion®

    Technology.  ®
  
    A charge of $3.1 million during 2007 for a payment to
    Mutual Pharmaceutical Company (Mutual) to jointly
    research and develop one or more improved formulations of
    metaxalone. Under the agreement with Mutual, we sought
    Mutuals expertise in developing improved formulations of
    metaxalone, including improved formulations Mutual developed
    prior to execution of this agreement and access to Mutuals
    and United Research Laboratories rights in intellectual
    property pertaining to these formulations. Development
    activities under this agreement ceased in December 2007.
    A charge of $110.0 million during 2006 for our acquisition
    of in-process research and development associated with our
    collaboration with Arrow to commercialize one or more novel
    formulations of ramipril, the active ingredient in our
    Altace®

    product. Under a series of agreements, Arrow granted us rights
    to certain current and future NDAs regarding novel formulations
    of ramipril and intellectual property, including patent rights
    and technology licenses relating to these novel formulations.
    This project included a NDA filed by Arrow for a tablet
    formulation of ramipril in January 2006 (the Ramipril
    Application). The FDA approved the NDA on
    February 27, 2007. Arrow granted us an exclusive option to
    acquire their entire right, title and interest to the Ramipril
    Application or any future filed Amended Ramipril Application for
    the amount of $5.0 million. In April 2007, we exercised our
    option and paid $5.0 million to Arrow. We do not currently
    anticipate any future revenues as a result of our rights to
    these ramipril formulations. 58




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##### Table of Contents



Depreciation
    and Amortization Expense
  ® ® ®
  ® ® ® ®
  ® ® ®
  ® ® ® ® ®
  ® ®
  ®
  ® ® ® ®
     59




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##### Table of Contents



Other
    Operating Expenses
    
    Asset impairment charges of $40.9 million in 2008 primarily
    associated with a decline in end-user demand for
    Synercid®.
    An intangible asset impairment charge of $146.4 million in
    2007 related to our
    Altace®

    product as a result of the invalidation of the 722 patent
    which covered the
    Altace®

    product. Following the Circuit Courts decision, we reduced
    the estimated useful life of this product and forecasted net
    sales. This decrease in estimated remaining useful life and
    forecasted net sales reduced the probability-weighted estimated
    undiscounted future cash flows associated with
    Altace®

    intangible assets to a level below their carrying value. We
    determined the fair value of these assets based on
    probability-weighted estimated discounted future cash flows.
    A charge of $46.4 million in 2007 related to the write-down
    of our Rochester, Michigan sterile manufacturing facility and
    certain legacy branded prescription pharmaceutical products. On
    October 1, 2007, we closed the asset purchase agreement
    with JHP, pursuant to which JHP acquired our Rochester, Michigan
    sterile manufacturing facility, some of our legacy products that
    are manufactured there and the related contract manufacturing
    business. For additional information, please see Note 10,
    Intangible Assets and Goodwill, in Part IV,
    Item 15(a)(1), Financial Statements.
    Intangible asset impairment charges of $30.2 million in
    2007 primarily related to our decision to no longer pursue the
    development of a new formulation of
    Intal®

    utilizing hydroflouroalkane as a propellant.
    An intangible asset impairment charge in 2006 of
    $47.8 million, which is primarily related to lower than
    expected prescription growth for
    Intal®

    and
    Tilade®.

    These charges were recorded in order to adjust the carrying
    value of the intangible assets on our balance sheet associated
    with these products so as to reflect the estimated fair value of
    these assets at the time the charges were incurred.
    Restructuring charges in the amount of $7.1 million in 2008
    primarily related to our integration of Alpharma.
    Restructuring charges in the amount of $68.6 million in
    2007 primarily due to our restructuring initiative designed to
    accelerate a planned strategic shift emphasizing our focus on
    the neuroscience and hospital markets and separation payments
    associated with the sale of the Rochester, Michigan sterile
    manufacturing facility discussed above.
    Restructuring charges of $1.6 million and $3.2 million
    during 2007 and 2006, respectively, for separation payments that
    primarily arose in connection with our decision to transfer the
    production of
    Levoxyl®

    from our St. Petersburg, Florida facility to the Bristol,
    Tennessee facility.  ® ® and/or
  ® ® ® ® ®
   60




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##### Table of Contents



NON-OPERATING
    ITEMS
  For the Years Ended December 31,2008


2007


2006(In thousands)Interest income

$
36,970


$
42,491


$
32,152Interest expense


(7,943
)


(7,818
)


(9,857
)Loss on investment


(7,451
)


(11,591
)


Gain on early extinguishment of debt










628Other, net


(3,635
)


223



(1,157
)Income tax expense


131,359



67,600



135,730Discontinued operations






(237
)


367   Other
    Income (Expense)
  Interest
    Income
    Interest
    Expense
    14-1, Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion 14-1). 14-1 14-1 14-1 14-1, 1 4 14-1 1 4 14-1
 61




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##### Table of Contents




    A loss of $7.5 million in 2008 related to our investment in
    debt securities.
    A loss of $11.6 million in 2007 related to our investment
    in Palatin.
    Income of $0.6 million during 2006 resulting from the early
    retirement of our
    23/4% Convertible
    Debentures due November 15, 2021.  Income
    Tax Expense
          Off-Balance
    Sheet Arrangements, Contractual Obligations and Commercial
    Commitments
      Payment Due by PeriodLess Than


One to


Four to


More ThanTotal


One Year


Three Years


Five Years


Five Years(In thousands)Contractual Obligations:Long-term debt

$
1,402,269


$
436,401


$
266,447


$
699,421


$
Operating leases


78,901



14,489



24,804



24,974



14,634Unconditional purchase obligations


431,941



201,527



91,303



53,370



85,741Interest on long-term debt


121,349



43,015



64,410



13,924



Total

$
2,034,460


$
695,432


$
446,964


$
791,689


$
100,375    62




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##### Table of Contents



® ®
    Liquidity
    and Capital Resources
  General
    Investments
    in Debt Securities
      Fair Value Measurements
  The Fair Value
    Option for Financial Assets and Financial Liabilities
 63




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##### Table of Contents



Skelaxin®
  ® No. 04-cv-5540 ® ®
      Alpharma
  ® tm
 64




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##### Table of Contents



® ® ® ®
  ®
  Maximum PurchasePrice PaymentFirst Quarter 2009

$
30.0 millionSecond Quarter 2009

$
25.0 millionThird Quarter 2009

$
25.0 millionFourth Quarter 2009

$
20.0 millionFirst Quarter 2010

$
20.0 millionSecond Quarter 2010

$
7.5 million   ® ®
        Senior
    Secured Revolving Credit Facility
   65




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##### Table of Contents



December 31, 2009

$
403.8 millionDecember 31, 2010

$
308.8 millionDecember 31, 2011

$
213.8 millionMarch 31, 2012

$
190.0 million     Senior
    Secured Term Facility
      2009

$
30.0 million2010

$
40.0 million2011

$
40.0 million2012

$
90.0 million       CorePharma
  ®
 66




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##### Table of Contents



Acura
  ® ® ® ®
  ® ® ®
  Altace®
  ® ® ® ® ®
  ®
  Rochester
    Facility
   67




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##### Table of Contents



Avinza®
  ® ® ® ® short-term
  ® ®
  
    If calendar year net sales are less than $200.0 million,
    the royalty payment will be 5% of all net sales.
    If calendar year net sales are greater than $200.0 million,
    then the royalty payment will be 10% of all net sales up to
    $250.0 million, plus 15% of net sales greater than
    $250.0 million.  ® ® ®
  Other
  ® ® ® ®
  
    For 2006, 15% of
    Altace®

    net sales up to $165.0 million, 42.5% of
    Altace®

    net sales in excess of $165.0 million and less than or
    equal to $465.0 million, and 52.5% of
    Altace®

    net sales that are in excess of $465.0 million and less
    than or equal to $585.0 million.
    For 2007, 30% of
    Altace®

    net sales, with the fee not to exceed $178.5 million.
    For 2008, 22.5% of
    Altace®

    net sales, with the fee not to exceed $134.0 million. 68




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##### Table of Contents




    For 2009, 14.2% of
    Altace®

    net sales, with the fee not to exceed $84.5 million.
    For 2010, 25% of
    Altace®

    net sales, with the fee not to exceed $5.0 million.  ® ®
  ® ®
  ®
  ® ® ® ® ®
  ® ® ® ®
  Governmental
    Pricing Investigation and Related Matters
   69




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##### Table of Contents



Patent
    Challenges
  ® ® ® ®
  Cash
    Flows
  Operating
    Activities
  For the Years Ended December 31,2008


2007


2006(In thousands)Net cash provided by operating activities

$
491,391


$
672,649


$
465,627   ®
          2008


2007


2006(In thousands)Accounts receivable, net of allowance

$
37,956


$
80,106


$
(41,746
)Inventories


22,785



55,056



48,275Prepaid expenses and other current assets


16,785



(43,555
)


(45,796
)Accounts payable


9,673



(16,276
)


(8,568
)Accrued expenses and other liabilities


(180,960
)


(33,408
)


(50,458
)Income taxes payable


24,713



(9,009
)


8,479Deferred revenue


(4,680
)


(4,680
)


(6,886
)Other assets


27,078



(3,470
)


(20,173
)Deferred taxes


37,313



(91,229
)


(39,010
)Total changes from operating assets and liabilities and deferred
    taxes

$
(9,337
)

$
(66,465
)

$
(155,883
)  70




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##### Table of Contents



Investing
    Activities
  For the Years Ended December 31,2008


2007


2006(In thousands)Net cash used in investing activities

$
(156,110
)

$
(776,251
)

$
(436,315
)     ®
  ® ®
    Financing
    Activities
  2008


2007


2006(In thousands)Net cash provided by financing activities

$
584,922


$
9,834


$
54,451      71




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##### Table of Contents



1 4 3 4
  Certain
    Indebtedness and Other Matters
  1 4 1 4
    Senior
    Secured Revolving Credit Facility
        
    a base rate generally defined as the sum of (i) the greater
    of (a) the prime rate of Credit Suisse and (b) the
    federal funds effective rate plus 0.5% and (ii) an
    applicable percentage of 4.0%; or
    an adjusted LIBO rate generally defined as the sum of
    (i) the product of (a) LIBOR (by reference to the
    British Banking Association Interest Settlement Rates) and
    (b) a fraction, the numerator of which is one and the
    denominator of which is the number one minus certain maximum
    statutory reserves for eurocurrency liabilities and (ii) an
    applicable percentage of 5.0%.   72




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##### Table of Contents




    maintenance of maximum funded debt to consolidated EBITDA ratios
    that range from 1.50 to 1 to 3.25 to 1 (depending on dates and
    the occurrence of certain events relating to certain
    patents); and
    maintenance of minimum consolidated EBITDA to interest expense
    ratios that range from 3.75 to 1 to 4.00 to 1 (depending on
    dates and the occurrence of certain events relating to certain
    patents).          Senior
    Secured Term Facility
        
    5.00% plus the Adjusted LIBO Rate or
    4.00% plus the Alternate Base Rate.   73




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##### Table of Contents




    maintenance of maximum funded debt to consolidated EBITDA ratios
    that range from 1.50 to 1 to 3.25 to 1 (depending on dates and
    the occurrence of certain events relating to certain
    patents); and
    maintenance of minimum consolidated EBITDA to interest expense
    ratios that range from 3.75 to 1 to 4.00 to 1 (depending on
    dates and the occurrence of certain events relating to certain
    patents).        Alpharma
    Convertible Senior Notes
      Impact
    of Inflation
    Critical
    Accounting Policies and Estimates
     74




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##### Table of Contents




    Intangible assets, goodwill, and other long-lived
    assets.  When we acquire product rights in
    conjunction with either business or asset acquisitions, we
    allocate an appropriate portion of the purchase price to
    intangible assets, goodwill and other long-lived assets. The
    purchase price is allocated to product rights and trademarks,
    patents, acquired research and development, if any, and other
    intangibles using the assistance of valuation consultants. We
    estimate the useful lives of the assets by factoring in the
    characteristics of the products such as: patent protection,
    competition by products prescribed for similar indications,
    estimated future introductions of competing products, and other
    issues. The factors that drive the estimate of the life of the
    asset are inherently uncertain. However, patents have specific
    legal lives over which they are amortized. Conversely,
    trademarks and product rights have no specific legal lives. We
    use a straight-line method of amortization for our intangible
    assets.     75




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##### Table of Contents



GrossCarrying


Accumulated


Net BookAmount


Amortization


Value(In thousands)Branded Prescription PharmaceuticalsAvinza®

$
285,700


$
48,933


$
236,767Skelaxin®


278,853



161,874



116,979Sonata®


61,961



61,961



Flector®

    Patch


130,000







130,000Neuroscience


756,514



272,768



483,746Synercid®


70,959



41,951



29,008Other hospital


8,442



6,427



2,015Hospital


79,401



48,378



31,023Bicillin®


92,350



31,270



61,080Other legacy products


324,035



274,817



49,218Legacy products


416,385



306,087



110,298Total Branded


1,252,300



627,233



625,067Animal Health


170,000







170,000Meridian Auto-Injector


179,879



41,281



138,598Royalties


3,731



3,177



554Contract manufacturing










All other










Total intangible assets

$
1,605,910


$
671,691


$
934,219  76




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##### Table of Contents



Year Ended


Year EndedDecember 31,


December 31,2008


2007Amortization





AmortizationImpairments


Expense


Impairments


Expense(In thousands)


(In thousands)Branded Prescription PharmaceuticalsAvinza®

$



$
26,553


$



$
22,380Skelaxin®






23,620







17,427Sonata®






315







270Neuroscience






50,488







40,077Synercid®


39,630



7,731







9,499Other hospital






304



968



1,231Hospital


39,630



8,035



968



10,730Bicillin®






3,702







3,702Other legacy products


1,251



41,624



175,703



69,349Legacy products


1,251



45,326



175,703



73,051Total Branded


40,881



103,849



176,671



123,858Animal Health














Meridian Auto-Injector






7,860







8,001Royalties






737







279Contract manufacturing














All other














Total intangible assets

$
40,881


$
112,446


$
176,671


$
132,138     Remaining Life at December 31, 2008Skelaxin®


1 year 6 monthsAvinza®


8 years 11 monthsSynercid®


5 yearsBicillin®


16 years 6 monthsFlector®

    Patch


11 years   
    Inventories.  Our inventories are valued at the
    lower of cost or market value. We evaluate our entire inventory
    for short-dated or slow-moving product and inventory commitments
    under supply agreements based on projections of future demand
    and market conditions. For those units in inventory that are so
    identified, we estimate their market value or net sales value
    based on current realization trends. If the projected net
    realizable value is less than cost, on a product basis, we make
    a provision to reflect the lower value of that inventory. This
    methodology recognizes projected inventory losses at the time
    such losses are evident rather than at the time goods are
    actually sold. We maintain supply agreements with some of our
    vendors which contain minimum purchase requirements. We estimate
    future inventory requirements based on current facts and trends.
    Should our minimum purchase requirements under supply agreements
    or if our estimated future inventory requirements exceed actual
    inventory quantities that we will be able to sell to our
    customers, we record a charge in costs of revenues.
    Accruals for rebates, returns and
    chargebacks.  We establish accruals for returns,
    chargebacks, Medicaid, Medicare and commercial rebates in the
    same period we recognize the related sales. The 77




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##### Table of Contents



accruals reduce revenues and are included in accrued expenses.
    At the time a rebate or chargeback payment is made or a product
    return is received, which occurs with a delay after the related
    sale, we record a reduction to accrued expenses and, at the end
    of each quarter, adjust accrued expenses for differences between
    estimated and actual payments. Due to estimates and assumptions
    inherent in determining the amount of returns, chargebacks and
    rebates, the actual amount of product returns and claims for
    chargebacks and rebates may be different from our estimates.      
    Revenue recognition.  Revenue is recognized
    when title and risk of loss are transferred to customers,
    collection of sales is reasonably assured, and we have no
    further performance obligations. This is generally at the time
    products are received by the customer. Accruals for estimated
    returns, rebates and chargebacks, determined based on historical
    experience, reduce revenues at the time of sale and are included
    in accrued expenses. Medicaid and certain other governmental
    pricing programs involve particularly difficult interpretations
    of relevant statutes and regulatory guidance, which are complex
    and, in certain respects, ambiguous. Moreover, prevailing
    interpretations of these statutes and guidance can change over
    time. Royalty revenue is recognized based on a percentage of
    sales (namely, contractually
    agreed-upon
    royalty rates) reported by third parties. For additional
    information, please see Note 2, Summary of
    Significant Accounting Policies, in Part IV, Item
    15(a)(1), Financial Statements.  Recently
    Issued Accounting Standards
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   78




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##### Table of Contents



Interest
    Rate Risk
      Foreign
    Currency Exchange Rate Risk
      Investment
    Risk
    Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
   79




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##### Table of Contents



Rule 13a-15(b) Rule 13a-15(e))
    Managements
    Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f).
  Internal Control  Integrated
    Framework
      Changes
    in Internal Control over Financial Reporting
    PART III  Form 10-K
 80




---



##### 



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Documents filed as a part of this report:
     
 Page NumberReport of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 31, 2008 and 2007


F-3Consolidated Statements of Operations for the
    years ended December 31, 2008, 2007 and 2006


F-4Consolidated Statements of Shareholders
    Equity and Other Comprehensive Income (Loss) for the years ended
    December 31, 2008, 2007 and 2006


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2008, 2007 and 2006


F-6Notes to Consolidated Financial Statements


F-7(2) Financial Statement Schedule Valuation
    and Qualifying Accounts


S-1      (b)
    Exhibits    ExhibitNumber

Description1
.1(1)

Underwriting Agreement, dated March 15, 2007, between
    Alpharma Inc. and Banc of America Securities LLC2
.1(2)

Stock and Asset Purchase Agreement among Alpharma Inc., Alpharma
    (Luxembourg) S.ar.l., Alpharma Bermuda G.P., and Alpharma
    International (Luxembourg) S.ar.l., Alfanor 7152 AS (under
    change of name to Otnorbidco AS), Otdenholdco ApS and
    Otdelholdco Inc., dated February 6, 20082
.2(3)

Agreement and Plan of Merger, dated as of November 23,
    2008, among King Pharmaceuticals, Inc., Albert Acquisition Corp.
    and Alpharma Inc.3
.1(4)

Third Amended and Restated Charter of King Pharmaceuticals, Inc.3
.2(5)

Amended and Restated Bylaws of King Pharmaceuticals, Inc.4
.1(5)

Specimen Common Stock Certificate for King Pharmaceuticals, Inc.4
.2(1)

First Supplemental Indenture between Alpharma and U.S. Bank
    National Association, dated as of March 20, 20074
.3(6)

Warrant Certificate, dated October 3, 2007, issued by
    Alpharma Inc. to IBSA Institut Biochimique SA4
.4(7)

Warrant Certificate, dated October 12, 2007, issued by
    Alpharma Inc. to IDEA AG4
.5(7)

Warrant Certificate, dated October 12, 2007, issued by
    Alpharma Inc. to IDEA AG10
.1(8)*

Alpharma Inc. Amended and Restated Deferred Compensation Plan,
    effective July 1, 1984, amended October 14, 199410
.2(8)*

Amendment No. 1 to the Alpharma Inc. Amended and Restated
    Deferred Compensation Plan10
.3(9)*

Amendment to the Alpharma Inc. Deferred Compensation Plan,
    effective as of June 22, 200610
.4(10)*

1989 Incentive Stock Option Plan of Jones Medical Industries,
    Inc.10
.5(10)*

Jones Medical Industries, Inc. 1994 Incentive Stock Plan10
.6(5)*

1997 Incentive and Nonqualified Stock Option Plan for Employees
    of King Pharmaceuticals, Inc. 81




---



##### Table of Contents



ExhibitNumber

Description10
.7(10)*

Jones Medical Industries, Inc. 1997 Incentive Stock Plan10
.8(11)

King Pharmaceuticals, Inc. 1998 Non-Employee Director Stock
    Option Plan10
.9(12)*

King Pharmaceuticals, Inc. 401(k) Retirement Savings Plan10
.10(13)*

The Medco Research, Inc. 1989 Stock Option and Stock
    Appreciation Rights Plan, as amended through July 29, 199810
.11(14)*

Offer Letter to Brian A. Markison, dated July 15, 200410
.12(15)*

Offer letter to Joseph Squicciarino dated May 25, 200510
.13(15)*

Offer letter to Eric J. Bruce dated May 19, 200510
.14(16)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Stock Certificate and Restricted Stock Grant Agreement10
.15(16)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Option
    Certificate and Nonstatutory Stock Option Grant Agreement10
.16(17)

Settlement Agreement, dated as of October 31, 2005, among
    the United States of America acting through the entities named
    therein, King Pharmaceuticals, Inc. and Monarch Pharmaceuticals,
    Inc.10
.17(17)

Settlement Agreement, dated as of October 31, 2005, among
    the state of Massachusetts, King Pharmaceuticals, Inc. and
    Monarch Pharmaceuticals, Inc. and general description of the
    other state settlement agreements10
.18(17)

Corporate Integrity Agreement, dated as of October 31,
    2005, between the Office of Inspector General of the Department
    of Health and Human Services and King Pharmaceuticals, Inc.10
.19(18)*

King Pharmaceuticals, Inc. Incentive Plan10
.20(19)

Collaboration Agreement by and between King Pharmaceuticals,
    Inc. and Pain Therapeutics, Inc., dated as of November 9,
    200510
.21(19)

License Agreement by and between King Pharmaceuticals, Inc. and
    Pain Therapeutics, Inc., dated as of December 29, 200510
.22(19)

License Agreement, by and between King Pharmaceuticals, Inc. and
    Mutual Pharmaceutical Company, Inc., dated as of
    December 6, 200510
.23(20)

Amended and Restated Copromotion Agreement between King
    Pharmaceuticals, Inc. and Wyeth, effective as of January 1,
    200610
.24(9)*

Amendment No. 1 to the A.L. Pharma Inc. Supplemental
    Pension Plan (Amended and Restated as of January 1, 2005),
    effective March 31, 200610
.25(21)

Indenture, dated as of March 29, 2006, among King
    Pharmaceuticals, Inc., the Subsidiary Guarantors parties hereto
    and The Bank of New York Trust Company, N.A., as Trustee10
.26(21)

Registration Rights Agreement dated as of March 29, 2006
    between King Pharmaceuticals, Inc., the Guarantors and the
    Initial Purchasers of Kings 1 1 / 4% Convertible
    Notes due 2026, represented by Citigroup Global Markets Inc.10
.27(22)

Amended and Restated Loan and Security Agreement, among Alpharma
    Inc., certain of its subsidiaries, various financial
    institutions party thereto and Bank of America, N.A., in its
    capacity as Lender, Issuing Bank, and collateral and
    administrative agent, dated March 10, 200610
.28(9)

Letter Amendment to Amended and Restated Loan and Security
    Agreement, among Alpharma Inc., certain of its subsidiaries,
    various financial institutions party thereto from time to time
    and Bank of America, N.A., in its capacity as collateral and
    administrative agent, dated July 28, 200610
.29(9)

Letter Amendment to Amended and Restated Loan and Security
    Agreement, among Alpharma Inc., certain of its subsidiaries,
    various financial institutions party thereto from time to time
    and Bank of America, N.A., in its capacity as collateral and
    administrative agent, dated October 6, 200610
.30(1)

Letter Amendment to Amended and Restated Loan and Security
    Agreement, among Alpharma Inc., certain of its subsidiaries,
    various financial institutions party thereto from time to time
    and Bank of America, N.A., in its capacity as collateral and
    administrative agent, dated March 14, 2007 82




---



##### Table of Contents



ExhibitNumber

Description10
.31(7)

Letter Amendment to Amended and Restated Loan and Security
    Agreement, among Alpharma Inc., certain of its subsidiaries,
    various financial institutions party thereto from time to time
    and Bank of America, N.A., in its capacity as collateral and
    administrative agent, dated August 24, 200710
.32(7)

Letter Amendment to Amended and Restated Loan and Security
    Agreement, among Alpharma Inc., certain of its subsidiaries,
    various financial institutions party thereto from time to time
    and Bank of America, N.A., in its capacity as collateral and
    administrative agent, dated September 3, 200710
.33(7)

Letter Amendment to Amended and Restated Loan and Security
    Agreement, among Alpharma Inc., certain of its subsidiaries,
    various financial institutions party thereto from time to time
    and Bank of America, N.A., in its capacity as collateral and
    administrative agent, dated October 22, 200710
.34(23)

Letter Amendment to Amended and Restated Loan and Security
    Agreement, among Alpharma Inc., certain of its subsidiaries,
    various financial institutions party thereto from time to time
    and Bank of America, N.A., in its capacity as collateral and
    administrative agent, dated October 7, 200810
.35(24)

Generic Distribution Agreement by and between King
    Pharmaceuticals, Inc. and Cobalt Pharmaceuticals, Inc., dated as
    of February 12, 200610
.36(24)

Product Supply Agreement by and among King Pharmaceuticals,
    Inc., Selamine Limited, Robin Hood Holdings Limited and Arrow
    Pharm Malta Limited, dated as of February 12, 200610
.37(24)

Ramipril Application License Agreement by and among King
    Pharmaceuticals, Inc., King Pharmaceuticals Research and
    Development, Inc., Arrow International Limited and Robin Hood
    Holdings Limited, dated as of February 12, 200610
.38(24)

Ramipril Patent License Agreement by and among King
    Pharmaceuticals, Inc., King Pharmaceuticals Research and
    Development, Inc., Selamine Limited and Robin Hood Holdings
    Limited, dated as of February 12, 200610
.39(24)

Amended and Restated U.S. Product Manufacturing Agreement by and
    between King Pharmaceuticals, Inc. and Sanofi-Aventis
    Deutschland GmbH, dated as of February 27, 200610
.40(24)

First Amendment to the U.S. Product Agreement by and between
    King Pharmaceuticals, Inc., Sanofi-Aventis U.S. LLC and
    Sanofi-Aventis Deutschland GmbH, dated as of February 27,
    200610
.41(24)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term
    Performance Unit Agreement (One Year Performance Cycle)10
.42(24)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term
    Performance Unit Agreement (Three Year Performance Cycle)10
.43(25)

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Unit Certificate and Restricted Unit Grant Agreement10
.44(26)

Purchase Agreement between Ligand Pharmaceuticals Incorporated,
    King Pharmaceuticals, Inc. and King Pharmaceuticals Research and
    Development, Inc., dated as of September 6, 200610
.45(27)

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Unit Certificate and Restricted Unit Grant Agreement10
.46(28)

Amendment No. 1 to Purchase Agreement, Contract Sales Force
    Agreement and Confidentiality Agreement by and between Ligand
    Pharmaceuticals Incorporated, King Pharmaceuticals, Inc. and
    King Pharmaceuticals Research and Development, Inc., dated as of
    January 3, 2007, effective as of November 30, 200610
.47(29)

Amendment No. 2 to Purchase Agreement, by and between King
    Pharmaceuticals, Inc., King Pharmaceuticals Research and
    Development, Inc. and Ligand Pharmaceuticals Incorporated,
    effective as of February 26, 200710
.48(30)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Option and
    Nonstatutory Stock Option Agreement10
.49(30)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Stock Certificate and Restricted Stock Grant Agreement10
.50(30)*

King Pharmaceuticals, Inc. Incentive Plan: Form Of
    Long-Term Performance Unit Award Agreement (One Year Performance
    Cycle) 83




---



##### Table of Contents



ExhibitNumber

Description10
.51(30)*

King Pharmaceuticals, Inc. Incentive Plan: Form Of
    Long-Term Performance Unit Award Agreement (Three Year
    Performance Cycle)10
.52(31)*

2007 Executive Management Incentive Awards10
.53(32)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Retention
    Grant Agreement10
.54(32)

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Stock Unit Certificate and Restricted Stock Unit Grant Agreement10
.55(32)*

King Pharmaceuticals, Inc. Incentive Plan: Form Of
    Long-Term Performance Unit Award Agreement (One Year Performance
    Cycle)10
.56(32)*

King Pharmaceuticals, Inc. Incentive Plan: Form Of
    Long-Term Performance Unit Award Agreement (Three Year
    Performance Cycle)10
.57(32)

Director Compensation Policy for Non-Employee Directors, amended
    May 16, 200710
.58(4)

Credit Agreement dated as of April 19, 2007 among King
    Pharmaceuticals, Inc.; the Lenders named therein; Credit Suisse,
    Cayman Islands Branch, as Administrative Agent, Collateral Agent
    and Swingline Lender; Bank of America, N.A. and UBS Securities
    LLC, as Co-Syndication Agents; Citigroup Global Markets Inc.,
    Wachovia Bank, National Association and The Royal Bank of
    Scotland plc, as Co-Documentation Agents; U.S. Bank National
    Association as Managing Agent; and Credit Suisse Securities as
    Sole Lead Arranger and Bookrunner10
.59(33)

Asset Purchase Agreement by and among King Pharmaceuticals,
    Inc., Monarch Pharmaceuticals, Inc., Parkedale Pharmaceuticals,
    Inc., King Pharmaceuticals Research and Development, Inc., and
    JHP Pharmaceuticals, LLC dated as of July 14, 200710
.60(7)

Exclusive License and Distribution Agreement, by and between
    IBSA Institut Biochimique SA (Switzerland) and Alpharma
    Pharmaceuticals LLC, dated as of August 16, 200710
.61(7)

Exclusive License and Distribution Agreement for TIROSINT by and
    between IBSA Institut Biochimique SA (Switzerland) and Alpharma
    Pharmaceuticals LLC, dated as of August 16, 200710
.62(7)

Exclusive License Agreement, dated September 4, 2007,
    between IDEA AG and Alpharma Ireland Limited10
.63(7)

Registration Rights Agreement, dated October 12, 2007
    between Alpharma Inc., IDEA AG and any Stockholders10
.64(34)*

Amended and Restated King Pharmaceuticals, Inc. Severance Pay
    Plan: Tier I, effective October 16, 200710
.65(35)*

License, Development and Commercialization Agreement, between
    King Pharmaceuticals Research and Development, Inc. and Acura
    Pharmaceuticals, Inc., dated October 30, 200710
.66(35)

King Pharmaceuticals, Inc. Deferred Compensation Plan10
.67(36)*

Amended and Restated King Pharmaceuticals, Inc. Non-Employee
    Directors Deferred Compensation Plan10
.68(36)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Stock Certificate and Restricted Stock Grant Agreement10
.69(37)*

Alpharma Inc. 2005 Supplemental Savings Plan, Amended and
    Restated, effective January 1, 200810
.70(37)*

Alpharma Inc. 2007 Supplemental Savings Plan, effective
    January 1, 200810
.71(37)*

A.L. Pharma Inc. Supplemental Pension Plan (amended and
    restated, effective January 1, 2008)10
.72(37)*

Alpharma Inc. Supplemental Savings Plan (amended and restated,
    effective January 1, 2008)10
.73(38)

Termination of Litigation Agreement, dated January 2, 2008,
    by and among King Pharmaceuticals, Inc., King Pharmaceuticals
    Research and Development, Inc. and CorePharma LLC10
.74(38)

Metaxalone 800 mg Product Agreement, dated January 2,
    2008, by and among King Pharmaceuticals, Inc., King
    Pharmaceuticals Research and Development, Inc. and CorePharma LLC10
.75(37)*

Alpharma Inc. Severance Plan, Amended and Restated Effective
    January 25, 200810
.76(37)*

Alpharma Inc. Change in Control Plan, Amended and Restated
    Effective January 25, 2008 84




---



##### Table of Contents



ExhibitNumber

Description10
.77(39)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Option
    Certificate and Nonstatutory Stock Option Agreement10
.78(39)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Stock Certificate and Restricted Stock Grant Agreement10
.79(39)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term
    Performance Unit Award Agreement (One-Year Performance Cycle)10
.80(39)*

King Pharmaceuticals, Inc. Incentive Plan: Form of Long-Term
    Performance Unit Award Agreement (Three-Year Performance Cycle)10
.81(40)*

2008 Executive Management Incentive Awards10
.82(41)

King Pharmaceuticals, Inc. Incentive Plan: Form of Restricted
    Unit Certificate and Restricted Unit Grant Agreement10
.83(42)

First Amendment to License Agreement, dated March 31, 2008,
    between IDEA AG and Alpharma Ireland Limited10
.84(43)

Product Development Agreement between King Pharmaceuticals,
    Inc., King Pharmaceuticals Research and Development, Inc. and
    CorePhrma LLC, dated June 18, 200810
.85(43)

Director Compensation Policy for Non-Employee Directors of King
    Pharmaceuticals, Inc., amended July 30, 200810
.86(44)

Settlement Agreement, dated August 21, 2008, by and among
    King Pharmaceuticals, Inc., other defendants, and Representative
    Plaintiffs related to a certain consolidated shareholder
    derivative action entitled, In Re: King Pharmaceuticals, Inc.
    Derivative Litigation10
.87(23)

Development and License Agreement between Durect Corporation and
    Alpharma Ireland Limited, dated as of September 19, 200810
.88(45)

Amendment No. 1, dated as of December 5, 2008, to
    Credit Agreement, dated as of April 19, 2007, among King
    Pharmaceuticals, Inc.; the Lenders named therein; Credit Suisse,
    Cayman Islands Branch, as Administrative Agent, Collateral Agent
    and Swingline Lender; Bank of America, N.A. and UBS Securities
    LLC, as Co-Syndication Agents; Citigroup Global Markets Inc.,
    Wachovia Bank, National Association and The Royal Bank of
    Scotland plc, as Co-Documentation Agents; U.S. Bank National
    Association as Managing Agent; Credit Suisse Securities (USA)
    LLC and Wachovia Capital Markets, LLC, as Joint Lead Arrangers
    and Joint Bookrunners10
.89(45)

Asset Purchase Agreement by and between King Pharmaceuticals,
    Inc. and Actavis Elizabeth, L.L.C., dated as of
    December 17, 2008.10
.90(45)

Term Loan Credit Agreement, dated as of December 29, 2008,
    among King Pharmaceuticals, Inc., the Lenders party thereto,
    Credit Suisse, as Administrative Agent and Collateral Agent,
    Credit Suisse Securities (USA) LLC and Wachovia Capital Markets,
    LLC as Joint Bookrunners and Joint Lead Arrangers, Wachovia
    Bank, National Association and SunTrust Bank as Co-Syndication
    Agents, DNB First Bank and U.S. Bank National Association as
    Co-Documentation Agents, DZ Bank AG, Deutsche
    Zentral-Genossenschaftsbank, New York Branch, Siemens Financial
    Services, Inc., The PrivateBank and Trust Company and Union
    Bank, N.A. as Senior Managing Agents14
.1(46)

Corporate Code of Conduct and Ethics21
.1

Subsidiaries of the Registrant as of February 25, 200923
.1

Consent of PricewaterhouseCoopers LLP31
.1

Certificate of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certificate of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certificate of Chief Executive Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232
.2

Certificate of Chief Financial Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Denotes management contract or compensatory plan or arrangement.
    
    Portions of this Exhibit have been omitted and filed separately
    with the Securities and Exchange Commission as part of an
    application for confidential treatment pursuant to the
    Securities Exchange Act of 1934. 85




---



##### Table of Contents



(1)
    
    Incorporated by reference to Alpharma Inc.s Current Report
    on
    Form 8-K
    filed on March 20, 2007.(2)
    
    Incorporated by reference to Alpharma Inc.s Current Report
    on
    Form 8-K
    filed on February 7, 2008.(3)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed November 24, 2008.(4)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed August 7, 2007.(5)
    
    Incorporated by reference to Kings Registration Statement
    on
    Form S-1
    (Registration
    No. 333-38753)
    filed October 24, 1997.(6)
    
    Incorporated by reference to Alpharma Inc.s Current Report
    on
    Form 8-K
    filed October 10, 2007.(7)
    
    Incorporated by reference to Alpharma Inc.s Quarterly
    Report on
    Form 10-Q
    filed on October 30, 2007.(8)
    
    Incorporated by reference to Alpharma Inc.s Annual Report
    on
    Form 10-K
    filed on March 16, 2006.(9)
    
    Incorporated by reference to Alpharma Inc.s Annual Report
    on
    Form 10-K
    filed on March 1, 2007.(10)
    
    Incorporated by reference to Kings Registration Statement
    on
    Form S-8
    (File
    No. 333-45284)
    filed September 6, 2000.(11)
    
    Incorporated by reference to Kings Registration Statement
    on
    Form S-8
    (File
    No. 333-45276)
    filed September 6, 2000.(12)
    
    Incorporated by reference to Kings Registration Statement
    on
    Form S-8
    (File
    No. 333-73053)
    filed February 26, 1999.(13)
    
    Incorporated by reference to Kings Registration Statement
    on
    Form S-8
    (File
    No. 333-32072)
    filed March 9, 2000.(14)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed March 21, 2005.(15)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed August 9, 2005.(16)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed November 9, 2005.(17)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed November 4, 2005.(18)
    
    Incorporated by reference to Kings Definitive Proxy
    Statement, filed April 28, 2005, related to the 2005 annual
    meeting of shareholders.(19)
    
    Incorporated by reference to Kings Annual Report on
    Form 10-K
    filed March 3, 2006.(20)
    
    Incorporated by reference to Kings Quarterly Report of
    Form 10-Q
    filed November 9, 2006.(21)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed March 30, 2006.(22)
    
    Incorporated by reference to Alpharma Inc.s Quarterly
    Report on
    Form 10-Q
    filed on May 2, 2006.(23)
    
    Incorporated by reference to Alpharma Inc.s Quarterly
    Report on
    Form 10-Q
    filed on October 29, 2008.(24)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed May 10, 2006.(25)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed August 9, 2006.(26)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed September 12, 2006.(27)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed November 9, 2006.(28)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed January 5, 2007.(29)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed March 2, 2007.(30)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed March 27, 2007.(31)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed May 10, 2007.(32)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed May 21, 2007.(33)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed July 19, 2007.(34)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed October 22, 2007.(35)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed November 5, 2007.(36)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed December 5, 2007.(37)
    
    Incorporated by reference to Alpharma Inc.s Annual Report
    on
    Form 10-K
    filed February 27, 2008.(38)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed January 8, 2008. 86




---



##### Table of Contents



(39)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed April 1, 2008.(40)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed May 8, 2008.(41)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed May 21, 2008.(42)
    
    Incorporated by reference to Alpharma Inc.s Quarterly
    Report on
    Form 10-Q
    filed May 9, 2008.(43)
    
    Incorporated by reference to Kings Quarterly Report on
    Form 10-Q
    filed August 7, 2008.(44)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed August 27, 2008.(45)
    
    Filed as an Exhibit to this Report.(46)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed December 8, 2005. 87




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     Internal Control  Integrated
    Framework
         F-1




---



##### Table of Contents



F-2




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.CONSOLIDATED BALANCE SHEETSas of December 31, 2008 and 2007
    (In thousands, except share data)
  2008


2007ASSETSCurrent assets:Cash and cash equivalents

$
940,212


$
20,009Investments in debt securities


6,441



1,344,980Marketable securities


511



1,135Accounts receivable, net of allowance of $4,713 and $5,297


245,070



183,664Inventories


258,303



110,308Deferred income tax assets


89,513



100,138Income tax receivable






20,175Prepaid expenses and other current assets


129,214



39,245Total current assets


1,669,264



1,819,654Property, plant and equipment, net


421,321



257,093Intangible assets, net


934,219



780,974Goodwill


450,548



129,150Deferred income tax assets


303,722



343,700Investments in debt securities


353,848



Other assets (includes restricted cash of $16,580 and $16,480)


124,774



96,251Total assets

$
4,257,696


$
3,426,822LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
140,908


$
76,481Accrued expenses


411,488



376,604Income taxes payable


10,448



Short-term debt


5,230



Current portion of long-term debt


439,047



Total current liabilities


1,007,121



453,085Long-term debt


963,222



400,000Other liabilities


110,022



62,980Total liabilities


2,080,365



916,065Commitments and contingencies (Note 19)Shareholders equity:Preferred stock, 15,000,000 shares authorized, no shares
    issued or outstanding






Common stock, no par value, 600,000,000 shares authorized,
    246,487,232 and 245,937,709 shares issued and outstanding


1,313,321



1,283,440Retained earnings


892,297



1,225,360Accumulated other comprehensive income (loss)


(28,287
)


1,957Total shareholders equity


2,177,331



2,510,757Total liabilities and shareholders equity

$
4,257,696


$
3,426,822    F-3




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF OPERATIONSfor the years ended December 31, 2008, 2007 and 2006
    (In thousands, except share data)
  2008


2007


2006Revenues:Net sales

$
1,485,619


$
2,054,293


$
1,908,143Royalty revenue


79,442



82,589



80,357Total revenues


1,565,061



2,136,882



1,988,500Operating costs and expenses:Costs of revenues, exclusive of depreciation, amortization and
    impairments shown below


394,825



566,534



419,808Selling, general and administrative, exclusive of co-promotion
    fees


408,955



511,303



496,215Co-promotion fees


37,065



179,731



217,750Total selling, general and administrative


446,020



691,034



713,965Research and development


145,173



149,425



143,596Research and development  in process upon acquisition


598,500



35,310



110,000Total research and development


743,673



184,735



253,596Depreciation and amortization


150,713



173,863



147,549Asset impairments


40,995



223,025



47,842Restructuring charges


7,098



70,178



3,194Acquisition related costs


1,382







Total operating costs and expenses


1,784,706



1,909,369



1,585,954Operating (loss) income


(219,645
)


227,513



402,546Other income (expense):Interest income


36,970



42,491



32,152Interest expense


(7,943
)


(7,818
)


(9,857
)Loss on investment


(7,451
)


(11,591
)


Gain on early extinguishment of debt










628Other, net


(3,635
)


223



(1,157
)Total other income


17,941



23,305



21,766(Loss) income from continuing operations before income taxes


(201,704
)


250,818



424,312Income tax expense


131,359



67,600



135,730(Loss) income from continuing operations


(333,063
)


183,218



288,582Discontinued operations:(Loss) income from discontinued operations






(369
)


572Income tax (benefit) expense






(132
)


205Total (loss) income from discontinued operations






(237
)


367Net (loss) income

$
(333,063
)

$
182,981


$
288,949(Loss) income per common share:Basic: (Loss) income from continuing operations

$
(1.37
)

$
0.75


$
1.19(Loss) income from discontinued operations










Net (loss) income

$
(1.37
)

$
0.75


$
1.19Diluted: (Loss) income from continuing operations

$
(1.37
)

$
0.75


$
1.19(Loss) income from discontinued operations










Net (loss) income

$
(1.37
)

$
0.75


$
1.19    F-4




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY
    AND OTHER COMPREHENSIVE INCOME (LOSS)for the years ended December 31, 2006, 2007 and 2008
    (In thousands, except share data)
  AccumulatedOtherCommon Stock


Unearned


Retained


ComprehensiveShares


Amount


Compensation


Earnings


Income (Loss)


TotalBalance, December 31, 2005


242,493,416


$
1,222,246


$
(8,764
)

$
754,953


$
4,987


$
1,973,422Adoption of Statement of Financial Accounting Standard 123(R)






(8,764
)


8,764











Comprehensive income:Net income














288,949







288,949Net unrealized loss on marketable securities, net of tax of
    $2,761


















(5,067
)


(5,067
)Foreign currency translation


















(202
)


(202
)Total comprehensive income






















283,680Stock-based award activity


657,807



31,504















31,504Balance, December 31, 2006


243,151,223


$
1,244,986


$



$
1,043,902


$
(282
)

$
2,288,606Comprehensive income:Net income














182,981







182,981Reclassification of unrealized losses on marketable securities
    to earnings, net of tax of $377


















615



615Foreign currency translation


















1,624



1,624Total comprehensive income






















185,220Adoption of Financial Accounting Standards Board Interpretation
    No. 48














(1,523
)






(1,523
)Stock-based award activity


2,786,486



38,454















38,454Balance, December 31, 2007


245,937,709


$
1,283,440


$



$
1,225,360


$
1,957


$
2,510,757Comprehensive income:Net loss














(333,063
)






(333,063
)Net unrealized loss on investments in debt securities, net of
    taxes of $17,219


















(28,092
)


(28,092
)Foreign currency translation


















(2,152
)


(2,152
)Total comprehensive loss






















(363,307
)Stock-based award activity


549,523



29,881















29,881Balance at December 31, 2008


246,487,232


$
1,313,321


$



$
892,297


$
(28,287
)

$
2,177,331    F-5




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSfor the years ended December 31, 2008, 2007 and 2006
    (In thousands)
  2008


2007


2006Cash flows from operating activities of continuing operations:Net (loss)/income

$
(333,063
)

$
182,981


$
288,949Loss (income) from discontinued operations






237



(367
)Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Depreciation and amortization


150,713



173,863



147,549Amortization of deferred financing costs


2,148



2,057



2,874Deferred income taxes


37,313



(91,229
)


(39,010
)Impairment of intangible assets


40,995



176,671



47,842Loss on sale of assets






46,354



Inventory write-down






79,807



In-process research and development charges


598,500



35,310



110,000Gain on early extinguishment of debt










(628
)Loss on investment


7,451



11,591



Other non-cash items, net


(530
)


2,591



573Stock based compensation


34,514



27,652



24,718Changes in operating assets and liabilities net of effects from
    acquisitions:Accounts receivable


37,956



80,106



(41,746
)Inventories


22,785



55,056



48,275Prepaid expenses and other current assets


16,785



(43,555
)


(45,796
)Other assets


27,078



(3,470
)


(20,173
)Accounts payable


9,673



(16,276
)


(8,568
)Accrued expenses and other liabilities


(180,960
)


(33,408
)


(50,458
)Deferred revenue


(4,680
)


(4,680
)


(6,886
)Income taxes


24,713



(9,009
)


8,479Net cash provided by operating activities of continuing
    operations


491,391



672,649



465,627Cash flows from investing activities of continuing operations:Purchases of investments in debt securities


(279,175
)


(2,744,575
)


(1,705,517
)Proceeds from maturity and sale of investments in debt securities


1,207,080



2,289,780



1,309,995Transfer (to)/from restricted cash


(100
)


(512
)


128,561Acquisition of Alpharma, net of cash acquired


(1,024,761
)






Acquisition of
    Avinza®


(44
)


(296,437
)


Purchases of property, plant and equipment


(57,455
)


(49,602
)


(45,816
)Purchases of product rights and intellectual property


(12,065
)


(98,942
)


(85,795
)Proceeds from sale of assets


10,410



86,287



Loan to Ligand






37,750



(37,750
)Other investing activities










7Net cash used in investing activities of continuing operations


(156,110
)


(776,251
)


(436,315
)Cash flows from financing activities of continuing operations:Proceeds from exercise of stock options, net


439



10,656



7,338Net (payments) proceeds related to stock-based award activity


(2,441
)


705



484Proceeds from issuance of long-term debt


617,000







400,000Payments on long-term debt










(342,691
)Debt issuance costs


(30,076
)


(1,527
)


(10,680
)Net cash provided by financing activities of continuing
    operations


584,922



9,834



54,451Increase (decrease) in cash and cash equivalents


920,203



(93,768
)


83,763Cash and cash equivalents, beginning of year


20,009



113,777



30,014Cash and cash equivalents, end of year

$
940,212


$
20,009


$
113,777Supplemental disclosure of cash paid for: Interest

$
5,985


$
6,047


$
8,200Supplemental disclosure of cash paid for: Taxes

$
69,207


$
171,924


$
163,901    F-6




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (in
    thousands, except share and per share data)
  1.
    The
    Company  ®
    ® ®
  2.
    Summary
    of Significant Accounting Policies  Use of Estimates.
       F-7




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Revenue recognition. agreed-upon
  Intangible Assets and Goodwill.
  Accruals for rebates, returns, and
    chargebacks.
     F-8




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Shipping and Handling Costs.
  Cash and Cash Equivalents.
  Restricted Cash.
  Investments in Debt Securities. Accounting for Certain Investments in Debt and Equity
    Securities
      Marketable Securities.
  Accounts Receivable and Allowance for Doubtful
    Accounts.
  Inventories. first-in,
 F-9




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Income Taxes.
  Litigation.
  Foreign currency translation and
    transactions.
  Financial Instruments and Derivatives.
  Property, Plant and Equipment.
      Research and Development Costs.
 F-10




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred Financing Costs.
  Insurance.
  Advertising.
  Promotional Fees to Wyeth. ® ® ® ® ® ® ®
  3.
    Invalidation
    of
    Altace®

    Patent  ® en banc 180-day ® ®
  ® ® ® ® ® ® ® ®
 F-11




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    Change in
    Estimate        5.
    Receivables    2008


2007Trade

$
218,027


$
159,362Royalty


18,182



21,753Other


8,861



2,549Total Receivables

$
245,070


$
183,664   6.
    Concentrations
    of Credit Risk    2008


2007Customer A


17
%


25
%Customer B


23
%


26
%Customer C


12
%


14
%     2008


2007


2006Customer A


30
%


35
%


32
%Customer B


28
%


27
%


29
%Customer C


14
%


13
%


13
%  F-12




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Inventory    2008


2007Raw materials

$
82,273


$
129,781Work-in process


62,836



27,590Finished goods (including $7,385 and $3,901 of sample inventory,
    respectively)


176,582



61,324321,691



218,695Less inventory valuation allowance


(63,388
)


(108,387
)$
258,303


$
110,308   ® ® ® ® ®
  8.
    Property,
    Plant and Equipment    2008


2007Land

$
16,415


$
12,072Buildings and improvements


199,707



123,063Machinery and equipment


333,510



213,522Capital projects in progress


59,731



62,638609,363



411,295Less accumulated depreciation


(188,042
)


(154,202
)$
421,321


$
257,093         ®
 F-13




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ®
    9.
    Acquisitions,
    Dispositions, Co-Promotions and Alliances  ® tm
     F-14




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ValuationCurrent Assets

$
914,083Current deferred income taxes


27,198Property, plant and equipment


160,708Intangible Assets


300,000Goodwill


321,398In-Process Research and Development


590,000Other Long Term Assets


26,680Current Liabilities


(235,823
)Convertible Debentures


(385,227
)Long-term deferred income taxes


(55,076
)Other Long-Term Liabilities


(51,067
)$
1,612,874     Weighted AverageValuation


Amortization PeriodFlector®

    Patch

$
130,000



11 yearsAnimal health intangibles


170,000



19 yearsTotal

$
300,000     Branded prescription pharmaceuticals

$
237,352Animal health


84,046Total

$
321,398       tm
  tm tm
   F-15




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year EndedDecember 31,2008


2007Total revenues

$
2,221,423


$
2,671,685Net (loss) income


(292,339
)


(471,784
)Basic (loss) earnings per common share


(1.20
)


(1.94
)Diluted (loss) earnings per common share


(1.20
)


(1.94
)   ® ® ® ®
  ®
  Maximum PurchasePrice PaymentFirst Quarter 2009

$
30,000Second Quarter 2009

$
25,000Third Quarter 2009

$
25,000Fourth Quarter 2009

$
20,000First Quarter 2010

$
20,000Second Quarter 2010

$
7,500   ® ®
 F-16




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ® ® ® tm
    
    $15,750 during 2008 as a result of the acceptance by the FDA of
    the NDA filing for
    Remoxy®,
    $5,100 during 2008 as a result of the acceptance by the FDA of
    an investigational new drug application for the third opioid
    painkiller under this alliance, and
    $5,000 in 2006 as a result of the acceptance of an
    investigational new drug application for the second opioid
    painkiller in development under this alliance.  ® ®
  ®
  ® ®
    ®
 F-17




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ® ® ® ® ®
    ® ®
  ® ®
   F-18




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          ® ® ® ®
  ®
  
    If calendar year net sales are $200,000 or less the royalty
    payment will be 5% of all net sales.
    If calendar year net sales are greater than $200,000 then the
    royalty payment will be 10% of all net sales up to $250,000,
    plus 15% of net sales greater than $250,000.  ® ® ®
 F-19




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Intangible assets

$
285,700Goodwill


7,997Inventory


2,800$
296,497     tm ® tm ® tm ® tm
  ® ®
    Intangible assets

$
23,985Inventory


618Fixed assets


3$
24,606     ®
   F-20




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ® Co-Promotion ® ® ®
  
    For 2006, 15% of
    Altace®

    net sales up to $165,000, 42.5% of
    Altace®

    net sales in excess of $165,000 and less than or equal to
    $465,000, and 52.5% of
    Altace®

    net sales that are in excess of $465,000 and less than or equal
    to $585,000.
    For 2007, 30% of
    Altace®

    net sales, with the fee not to exceed $178,500.
    For 2008, 22.5% of
    Altace®

    net sales, with the fee not to exceed $134,000.
    For 2009, 14.2% of
    Altace®

    net sales, with the fee not to exceed $84,500.
    For 2010, 25% of
    Altace®

    net sales, with the fee not to exceed $5,000.  ® ®
  10.
    Intangible
    Assets and Goodwill    2008


2007Gross carrying amount

$
1,605,910


$
1,339,257Accumulated amortization


671,691



558,283Net book value

$
934,219


$
780,974  F-21




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal Year Ended December 31,

Amount2009

$
152,2732010


108,4622011


71,6472012


71,6472013


71,647   ®
  ® ® ® ®
  ®
  ® ® ®
  ® ® ® ® ® ® ® ® ®
  ® ® ® ®
  ®
 F-22




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
    Branded


Animal Health


MeridianSegment


Segment


Segment


TotalGoodwill at December 31, 2007

$
20,740


$



$
108,410


$
129,150Acquisition of Alpharma


237,352



84,046







321,398Goodwill at December 31, 2008

$
258,092


$
84,046


$
108,410


$
450,548   11.
    Lease
    Obligations    2009

$
14,4892010


12,5362011


12,2682012


12,4282013


12,546Thereafter


14,634     12.
    Accrued
    Expenses    2008


2007Rebates

$
79,353


$
117,199Accrued co-promotion fees


3,057



32,720Product returns


33,471



32,860Chargebacks


9,965



11,120Royalties


39,003



41,397Restructuring


47,878



24,399Accrued bonuses


41,827



35,969Alpharma stock compensation


51,201



Other


105,733



80,940$
411,488


$
376,604  F-23




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  13.
    Long-Term
    Debt   2008


2007Convertible senior notes

$
400,000


$
400,000Senior secured revolving credit facility


425,000



Senior secured term facility


192,042



Alpharma convertible senior notes


385,227



Total long-term debt


1,402,269



400,000Less current portion


439,047



Long-term portion

$
963,222


$
400,000   Convertible
    Senior Notes
  1 4 1 4
      
    if the price of the Companys common stock reaches a
    specified threshold during specified periods,
    if the Notes have been called for redemption, or
    if specified corporate transactions or other specified events
    occur.     F-24




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Senior
    Secured Revolving Credit Facility
        December 31, 2009

$
403,750December 31, 2010

$
308,750December 31, 2011

$
213,750March 31, 2012

$
190,000       
    a base rate generally defined as the sum of (i) the greater
    of (a) the prime rate of Credit Suisse and (b) the
    federal funds effective rate plus 0.5% and (ii) an
    applicable percentage of 4.0%; or
    an adjusted LIBO rate generally defined as the sum of
    (i) the product of (a) LIBOR (by reference to the
    British Banking Association Interest Settlement Rates) and
    (b) a fraction the numerator of which is one and the
    denominator of which is the number one minus certain maximum
    statutory reserves for eurocurrency liabilities and (ii) an
    applicable percentage of 5.0%.   F-25




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    maintenance of maximum funded debt to consolidated EBITDA ratios
    that range from 1.50 to 1 to 3.25 to 1 (depending on dates and
    the occurrence of certain events relating to certain
    patents); and
    maintenance of minimum consolidated EBITDA to interest expense
    ratios that range from 3.75 to 1 to 4.00 to 1 (depending on
    dates and the occurrence of certain events relating to certain
    patents).          Senior
    Secured Term Facility
      2009

$
30,0002010


40,0002011


40,0002012


90,000      F-26




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    5.00% plus the Adjusted LIBO Rate or
    4.00% plus the Alternate Base Rate.      
    maintenance of maximum funded debt to consolidated EBITDA ratios
    that range from 1.50 to 1 to 3.25 to 1 (depending on dates and
    the occurrence of certain events relating to certain
    patents); and
    maintenance of minimum consolidated EBITDA to interest expense
    ratios that range from 3.75 to 1 to 4.00 to 1 (depending on
    dates and the occurrence of certain events relating to certain
    patents).        Alpharma
    Convertible Senior Notes
   F-27




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      14.
    Other
    Liabilities    2008


2007Income taxes payable

$
56,375


$
42,353Restructuring


21,124



Pension and postretirement benefits


11,839



Other


20,684



20,627$
110,022


$
62,980   15.
    Fair
    Value Measurements  Cash and Cash Equivalents.
  Derivatives.
  Marketable Securities.
 F-28




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Investments in Debt Securities. Accounting for Certain Investments in Debt and
    Equity Securities
      The Fair Value Option for
    Financial Assets and Financial Liabilities
      Fair Value Measurements No. 157-2, Effective Date of FASB Statement No. 157,
 F-29




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  contract-by-contract
    Fair Value Measurements at December 31, 2008 UsingQuoted Prices in


Significant Other


SignificantActive Markets for


Observable


UnobservableDecember 31,


Identical Assets


Inputs


InputsDescription

2008


(Level 1)


(Level 2)


(Level 3)Assets:Money Market Funds

$
833,653


$
833,653


$



$
Marketable Securities


511



511







Investments in Debt Securities


360,289







2,400



357,889Right to Sell Debt Securities


4,024











4,024Total assets

$
1,198,477


$
834,164


$
2,400


$
361,913Liabilities:Forward foreign exchange contracts

$
2,582


$



$
2,582


$
        F-30




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value Measurements UsingSignificant UnobservableInputs (Level 3)Investments in DebtSecuritiesBeginning balance, December 31, 2007

$
Transfers in and/or out of Level 3


774,099Total gains or losses (realized/unrealized)Included in earnings


(11,475
)Included in other comprehensive income (loss)


(45,311
)Settlements


(355,400
)Ending balance, December 31, 2008

$
361,913   16.
    Pension
    Plans and Postretirement Benefits         F-31




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Funded
    Status
    PostretirementPension Benefits


BenefitsFunded status, end of year:Fair value of plan assets

$
45,787


$
Benefit obligations


(51,081
)


(6,816
)Funded status

$
(5,294
)

$
(6,816
)Amounts recognized in the Consolidated Balance Sheet
    consist of:Current liability

$
(12
)

$
(259
)Noncurrent liability


(5,282
)


(6,557
)Liability recognized

$
(5,294
)

$
(6,816
)     December 31,2008Projected Benefit Obligation in Excess of Plan AssetsProjected benefit obligation, end of year

$
(51,081
)Fair value of plan assets, end of year


45,787     December 31,2008Accumulated Benefit Obligation in Excess of Plan AssetsProjected benefit obligation, end of year

$
(51,081
)Accumulated benefit obligation, end of year


(51,081
)Fair value of plan assets, end of year


45,787     One-Percentage-PointIncrease


DecreaseAccumulated postretirement benefit obligation change

$
923


$
(772
)   Expected
    Cash Flows
  Pension


PostretirementBenefits


BenefitsExpected employer contributions in 2009

$
12


$
259  F-32




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Expected
    Benefit Payments
  Pension


PostretirementBenefits


Benefits2009

$
1,143


$
2592010


1,268



2792011


1,470



3002012


1,730



3222013


1,949



3802014 - 2018


13,115



2,309   Pension


PostretirementBenefit


BenefitObligation


Obligation2008


2008Weighted-average assumptions used to
    determine benefit obligations as of December 31:Discount Rate


6.00
%


6.00
%Rate of compensation increase


N/A



N/AHealth care cost trend rateInitial Rate


N/A



8
%Ultimate Rate


N/A



5
%Number of years to ultimate rate


N/A



6   17.
    Income
    Taxes    2008


2007


2006CurrentFederal

$
83,902


$
144,655


$
169,130State


8,369



5,453



4,575Total current

$
92,271


$
150,108


$
173,705DeferredFederal

$
37,578


$
(83,690
)

$
(36,281
)State


1,510



1,182



(1,694
)Total deferred

$
39,088


$
(82,508
)

$
(37,975
)Total expense

$
131,359


$
67,600


$
135,730  F-33




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006Federal statutory tax rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal benefit


(4.9
)


2.7



0.7Research and development in process upon acquisition


(102.4
)






Charitable donations










(0.9
)Domestic Manufacturing Deduction


2.4



(3.7
)


(1.2
)Tax-exempt interest income


4.3



(5.4
)


(2.0
)Other


0.5



(1.6
)


0.4Effective tax rate


(65.1
)%


27.0
%


32.0
%     2008


2007Accrued expenses and reserves

$
93,934


$
98,483Net operating losses


300,057



1,824Intangible assets


295,400



353,250Charitable contribution carryover






3,576Other


41,843



31,812Total deferred tax assets


731,234



488,945Valuation allowance


(276,416
)


(9,094
)Net deferred tax assets


454,818



479,851Property, plant and equipment


(57,530
)


(20,069
)Other


(4,053
)


(15,944
)Total deferred tax liabilities


(61,583
)


(36,013
)Net deferred tax asset

$
393,235


$
443,838   Accounting for Uncertainty in Income Taxes
   F-34




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Liability ForUnrecognizedTax BenefitsBalance at January 1, 2007

$
36,748Additions based on tax positions of the current year


5,279Additions for tax provisions of prior years


51Reduction for expiration of applicable Statute of Limitations


(7,568
)Balance at December 31, 2007

$
34,510Additions based on tax positions of the current year


4,017Additions for tax positions of prior years


4,101Reduction for expiration of applicable Statute of Limitations


(4,195
)Alpharma acquisition


11,514Balance at December 31, 2008

$
49,947     non-U.S. income
      18.
    Benefit
    Plans   F-35




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  19.
    Commitments
    and Contingencies  Intellectual
    Property Matters
  Altace®
  ® ® ®
  ® ® ®
  ®
  Skelaxin®
  ® ® ® ® ®
   F-36




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  30-month 30-month 30-month
  ® ®
  ® ®
  ®
 F-37




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ® ® ®
  ® ® ® ®
  Avinza®
  ® ®
  ® ® ®
  Adenoscan®
  ®
 F-38




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Average
    Wholesale Price Litigation
  In re:
    Pharmaceutical Industry Average Wholesale Pricing Litigation
         F-39




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Governmental
    Pricing Investigation and Related Matters
      and/or
    and/or
     F-40




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Fen/Phen
    Litigation
  In re Fen-Phen Litigation. and/or
  ®
  ®
     F-41




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Hormone
    Replacement Therapy
  In re: Prempro Products
    Liability Litigation
  Alpharma
    Litigation
  and/or
  Department
    of Justice Investigation
  ® ® and/or ® ® ® ®
    Chicken
    Litter Litigation
   F-42




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        AWP
    Litigation
  ®
   F-43




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Contingencies
    2009

$
201,5272010


55,6382011


35,6652012


27,5102013


25,860Thereafter


85,741Total

$
431,941     ® ®
  20.
    Segment
    Information  ®
   F-44




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ®
  For the Years Ended December 31,2008


2007


2006Total revenues:Branded prescription pharmaceuticals

$
1,263,488


$
1,857,813


$
1,724,701Meridian Auto-Injector


218,448



183,860



164,760Royalties


79,442



82,589



80,357Contract manufacturing(1)


481,044



707,667



555,362All other


2,356



3,419



2,181Eliminations(1)


(479,717
)


(698,466
)


(538,861
)Consolidated total revenues

$
1,565,061


$
2,136,882


$
1,988,500Segment profit:Branded prescription pharmaceuticals

$
964,627


$
1,390,306


$
1,407,024Meridian Auto-Injector


132,898



107,810



90,185Royalties


69,722



72,431



70,609Contract manufacturing


647



(233
)


(1,135
)All other


2,342



34



2,009Other operating costs and expenses


(1,389,881
)


(1,342,835
)


(1,166,146
)Other income (expense)


17,941



23,305



21,766Income from continuing operations before tax

$
(201,704
)

$
250,818


$
424,312   As of December 31,2008


2007Total assets:Branded prescription pharmaceuticals

$
3,063,511


$
3,097,153Animal health


860,524



Meridian Auto-Injector


307,425



299,098Royalties


26,175



30,562Contract manufacturing


61



9All other






Consolidated total assets

$
4,257,696


$
3,426,822     (1)
    
    Contract manufacturing revenues include $479,717, $698,466 and
    $538,861 of intercompany sales for the years ended
    December 31, 2008, 2007 and 2006, respectively. F-45




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     For the Years Ended December 31,2008


2007


2006Total revenues:Neuroscience

$
612,853


$
627,244


$
500,982Hospital


267,913



292,380



274,136Legacy:Cardiovascular/metabolic


299,951



809,888



829,166Other


82,771



128,301



120,417Consolidated branded prescription pharmaceutical revenues

$
1,263,488


$
1,857,813


$
1,724,701       RevenuesFor the Years Ended December 31,2008


2007


2006Total revenues:United States

$
1,514,185


$
2,096,920


$
1,963,398Other


50,876



39,962



25,102Total

$
1,565,061


$
2,136,882


$
1,988,500   Long lived assetsAs of December 31,2008


2007


2006Total long lived assets:United States

$
1,724,658


$
1,164,114


$
1,276,572Other


81,430



3,103



3,007Total

$
1,806,088


$
1,167,217


$
1,279,579   21.
    Stock-Based
    Compensation    Restricted
    Stock Awards, Restricted Stock Units and Long-Term Performance
    Unit Awards
     F-46




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           F-47




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedAverageGrant-DateShares


Fair ValueRestricted Stock Awards:Nonvested balance at December 31, 2007


2,757,936


$
13.67Granted


543,430



8.89Vested


(528,511
)


15.43Forfeited


(24,740
)


9.66Nonvested balance at December 31, 2008


2,748,115


$
12.40Restricted Stock Units:Nonvested balance at December 31, 2007


41,069


$
20.45Granted


96,139



9.96Vested


(41,069
)


20.45Forfeited


(490
)


8.91Nonvested balance at December 31, 2008


95,649


$
9.97Long-Term Performance Unit Awards (one-year performance
    cycle):Nonvested balance at December 31, 2007


1,928,665


$
19.52Granted


412,200



8.91Vested


(155,648
)


19.51Forfeited


(105,106
)


19.47Nonvested balance at December 31, 2008


2,080,111


$
17.37Long-Term Performance Unit Awards (three-year performance
    cycle):Nonvested balance at December 31, 2007


277,625


$
29.39Granted


178,570



12.25Vested


(10,630
)


29.88Forfeited






Nonvested balance at December 31, 2008


445,565


$
22.51     Stock
    Options
   F-48




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006Expected volatility


43.9
%


43.7
%


52.4
%Expected term (in years)


6



6



6Risk-free interest rate


2.98
%


4.40
%


4.64
%Expected dividend yield


0.00
%


0.00
%


0.00
%       WeightedAverageWeighted


Remaining


AggregateAverage


Contractual


IntrinsicShares


Exercise Price


Term (Years)


ValueOutstanding options, December 31, 2007


4,964,430


$
18.37



5.72


$
461Granted


2,152,320



9.31Exercised


(68,333
)


6.43Expired


(673,601
)


19.42Forfeited


(109,676
)


18.14Outstanding options, December 31, 2008


6,265,140


$
15.44



6.60


$
2,964Exercisable, December 31, 2008


3,911,387


$
18.27



5.17


$
280Expected to vest, December 31, 2008


1,921,969


$
10.93



8.96


$
2,283           2008Total intrinsic value of stock options exercised

$
224Total fair value of RSAs vested

$
8,202Total fair value of LPUs vested

$
3,354    F-49




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  22.
    Stockholders
    Equity  Preferred
    Shares
    Accumulated
    Other Comprehensive Income
    2008


2007Net unrealized losses on investments in debt securities, net of
    tax

$
(28,092
)

$
Foreign currency translation


(195
)


1,957$
(28,287
)

$
1,957   23.
    Income
    per Common Share    2008


2007


2006Basic income per common share:Weighted average common shares


243,539,157



242,854,421



242,196,414Diluted income per common share:Weighted average common shares


243,539,157



242,854,421



242,196,414Effect of stock options






402,208



304,004Effect of dilutive share awards






872,765



298,575Weighted average common shares


243,539,157



244,129,394



242,798,993     1 4
 F-50




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  24.
    Recently
    Issued Accounting Standards  14-1, Accounting for Convertible Debt Instruments that May be
    Settled in Cash Upon Conversion 14-1). 14-1 14-1 14-1, 1 4 14-1 1 4 14-1
  Disclosures about Derivative
    Instruments and Hedging Activities  an amendment of
    FASB Statement No. 133
  07-01, Accounting for Collaborative Arrangements 07-01). 07-01 07-01 07-01
  Business Combinations
 F-51




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  25.
    Restructuring
    Activities  Fourth
    Quarter of 2008 Action
      Third
    Quarter of 2008 Action
  ®
  Third
    Quarter of 2007 Action
  ®
    tm
    Third
    Quarter of 2006 Action
  ®
 F-52




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accrued














AccruedBalance at


Income











Balance atDecember 31,


Statement


Alpharma


Cash


Non-Cash


December 31,2007


Impact in 2008


Acquisition


Payments


Costs


2008Fourth quarter of 2008 actionEmployee separation payments

$



$
5,350


$
44,196


$



$
109


$
49,437Contract termination






5



16,796











16,801Other










182











182Third quarter of 2008 actionEmployee separation payments






272







261



2



9Third quarter of 2007 actionEmployee separation payments


21,144



1,530







22,571







103Contract termination






(94
)






(291
)


197



Accelerated depreciation(1)






(88
)










(88
)


Other


880



174







1,054







First quarter of 2007 actionEmployee separation payments


1,061



(1,061
)














Third quarter of 2006 actionEmployee separation payments


3,475



180







1,009



184



2,462Accelerated depreciation(1)






2,685











2,685



Fourth quarter of 2005 actionEmployee separation payments


774



743







1,509







8$
27,334


$
9,696


$
61,174


$
26,113


$
3,089


$
69,002     (1)
    
    Included in depreciation and amortization on the Consolidated
    Statements of Income.   F-53




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  26.
    Quarterly
    Financial Information (unaudited)    First


Second


Third


Fourth2008 By QuarterTotal revenues

$
432,033


$
396,851


$
388,445


$
347,732Operating income (loss)


121,449



57,839



122,999



(521,932
)Net income (loss)


87,633



43,021



84,750



(548,467
)Basic income (loss) per common share(1)

$
0.36


$
0.18


$
0.35


$
(2.25
)Diluted income (loss) per common share(1)

$
0.36


$
0.18


$
0.34


$
(2.25
)   First


Second


Third


Fourth2007 By QuarterTotal revenues

$
516,030


$
542,726


$
544,854


$
533,272Operating income (loss)


167,855



88,311



(78,127
)


49,474Net income (loss)


115,913



64,785



(40,538
)


42,821Basic income (loss) per common share(1)

$
0.48


$
0.27


$
(0.17
)

$
0.18Diluted income (loss) per common share(1)

$
0.48


$
0.26


$
(0.17
)

$
0.18     (1)
    
    Quarterly amounts may not total to annual amounts due to the
    effect of rounding on a quarterly basis.  27.
    Subsequent
    Events  Skelaxin®
  ® ® ® ® ®
  Restructuring
  ®
   F-54




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Intangible
    Assets
  ® ® and/or
  Alpharma
    Convertible Senior Notes
    28.
    Guarantor
    Financial Statements  1 4
   F-55




---



##### Table of Contents






KING
    PHARMACEUTICALS, INC.
 NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  GUARANTOR SUBSIDIARIES
  CONDENSED CONSOLIDATING BALANCE SHEETS
  December 31, 2008


December 31, 2007Non














NonGuarantor


Guarantor


Eliminating


King





Guarantor


Guarantor


Eliminating


KingKing


Subsidiaries


Subsidiaries


Entries


Consolidated


King


Subsidiaries


Subsidiaries


Entries


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
401,657


$
52


$
538,503


$



$
940,212


$
9,718


$
4,645


$
5,646


$



$
20,009Investments in debt securities


6,441















6,441



1,344,980















1,344,980Marketable securities


511















511



1,135















1,135Accounts receivable, net


61



140,502



104,507







245,070



9



182,575



1,080







183,664Inventories


59,279



26,406



172,618







258,303



76,981



33,361



269



(303
)


110,308Deferred income tax assets


36,041



26,146



27,326







89,513



54,917



45,182



39







100,138Income tax receivable






















18,721



1,454











20,175Prepaid expenses and other current assets


14,090



8,283



106,841







129,214



28,315



10,926



4







39,245Total current assets


518,080



201,389



949,795







1,669,264



1,534,776



278,143



7,038



(303
)


1,819,654Property, plant, and equipment, net


137,544



122,828



160,949







421,321



125,847



131,246











257,093Intangible assets, net






633,300



300,919







934,219







778,248



2,726







780,974Goodwill






129,150



321,398







450,548







129,150











129,150Marketable securities






































Deferred income tax assets


18,216



340,404



(54,898
)






303,722



4,529



339,107



64







343,700Investments in debt securities


353,848















353,848



















Other assets


74,390



23,704



26,680







124,774



42,315



53,936











96,251Investments in subsidiaries


2,891,214











(2,891,214
)






1,671,776











(1,671,776
)


Total assets

$
3,993,292


$
1,450,775


$
1,704,843


$
(2,891,214
)

$
4,257,696


$
3,379,243


$
1,709,830


$
9,828


$
(1,672,079
)

$
3,426,822LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
61,255


$
20,107


$
59,546


$



$
140,908


$
52,664


$
23,408


$
409


$



$
76,481Accrued expenses


32,456



165,460



213,572







411,488



69,849



306,732



23







376,604Income taxes payable


1,288



169



8,991







10,448



















Short term debt










5,230







5,230



















Current portion of long term debt


53,820







385,227







439,047



















Total current liabilities


148,819



185,736



672,566







1,007,121



122,513



330,140



432







453,085Long-term debt


963,222















963,222



400,000















400,000Other liabilities


54,355



4,595



51,072







110,022



55,227



7,753











62,980Intercompany payable (receivable)


649,565



(655,145
)


5,580











290,443



(291,114
)


671







Total liabilities


1,815,961



(464,814
)


729,218







2,080,365



868,183



46,779



1,103







916,065Shareholders equity


2,177,331



1,915,589



975,625



(2,891,214
)


2,177,331



2,511,060



1,663,051



8,725



(1,672,079
)


2,510,757Total liabilities and shareholders equity

$
3,993,292


$
1,450,775


$
1,704,843


$
(2,891,214
)

$
4,257,696


$
3,379,243


$
1,709,830


$
9,828


$
(1,672,079
)

$
3,426,822  F-56




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
 NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  GUARANTOR SUBSIDIARIES
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS INCOME
    (LOSS)
  Twelve Months Ended 12/31/2008


Twelve Months Ended 12/31/2007


Twelve Months Ended 12/31/2006Non














Non














NonGuarantor


Guarantor





King





Guarantor


Guarantor





King





Guarantor


Guarantor





KingKing


Subsidiaries


Subsidiaries


Eliminations


Consolidated


King


Subsidiaries


Subsidiaries


Eliminations


Consolidated


King


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenues:Net sales

$
430,901


$
1,456,260


$
36,770


$
(438,312
)

$
1,485,619


$
578,050


$
2,049,800


$
437


$
(573,994
)

$
2,054,293


$
431,105


$
1,903,630


$
1,478


$
(428,070
)

$
1,908,143Royalty revenue






79,442











79,442







82,589











82,589







80,357











80,357Total revenues


430,901



1,535,702



36,770



(438,312
)


1,565,061



578,050



2,132,389



437



(573,994
)


2,136,882



431,105



1,983,987



1,478



(428,070
)


1,988,500Operating costs and expenses:Cost of revenues


128,399



690,554



14,488



(438,616
)


394,825



284,626



855,196



403



(573,691
)


566,534



155,472



691,399



1,007



(428,070
)


419,808Selling, general and administrative


250,830



191,774



3,416







446,020



301,522



389,218



294







691,034



269,512



445,137



(684
)






713,965Research and development


6,556



147,117



590,000







743,673



6,414



178,321











184,735



4,670



248,926











253,596Depreciation and amortization


19,559



130,836



318







150,713



19,489



154,134



240







173,863



20,818



126,491



240







147,549Asset impairments


114



39,315



1,566







40,995







223,025











223,025







47,842











47,842Restructuring charges


3,750



3,348











7,098



37,729



32,449











70,178



202



2,992











3,194Acquisition related costs


1,381



1











1,382







































Total operating costs and expenses


410,589



1,202,945



609,788



(438,616
)


1,784,706



649,780



1,832,343



937



(573,691
)


1,909,369



450,674



1,562,787



563



(428,070
)


1,585,954Operating income (loss)


20,312



332,757



(573,018
)


304



(219,645
)


(71,730
)


300,046



(500
)


(303
)


227,513



(19,569
)


421,200



915







402,546Other income (expense):Interest income


36,873



64



33







36,970



42,376



106



9







42,491



31,911



239



2







32,152Interest expense


(7,914
)


(29
)










(7,943
)


(7,764
)


(54
)










(7,818
)


(9,694
)


(163
)










(9,857
)Loss on investment


(7,451
)














(7,451
)


(11,591
)














(11,591
)


















Gain on early extinguishment of debt










































628















628Other, net


(2,798
)


150



(987
)






(3,635
)


(1,093
)


827



489







223



(650
)


(1,022
)


515







(1,157
)Equity in (loss) earnings of subsidiaries


(335,454
)










335,454







211,051











(211,051
)






315,395











(315,395
)


Intercompany interest income (expense)


(11,682
)


28,909



(17,227
)










(8,729
)


8,807



(78
)










(49,739
)


50,287



(548
)






Total other income (expenses)


(328,426
)


29,094



(18,181
)


335,454



17,941



224,250



9,686



420



(211,051
)


23,305



287,851



49,341



(31
)


(315,395
)


21,766(Loss) income from continuing operations before income taxes


(308,114
)


361,851



(591,199
)


335,758



(201,704
)


152,520



309,732



(80
)


(211,354
)


250,818



268,282



470,541



884



(315,395
)


424,312Income tax expense (benefit)


24,949



105,389



1,021







131,359



(30,764
)


97,669



695







67,600



(20,667
)


156,305



92







135,730(Loss) income from continuing operations


(333,063
)


256,462



(592,220
)


335,758



(333,063
)


183,284



212,063



(775
)


(211,354
)


183,218



288,949



314,236



792



(315,395
)


288,582Discontinued operations:(Loss) income from discontinued operations


























(369
)










(369
)






572











572Income tax (benefit) expense


























(132
)










(132
)






205











205Total (loss) income from discontinued operations


























(237
)










(237
)






367











367Net (loss) income

$
(333,063
)

$
256,462


$
(592,220
)

$
335,758


$
(333,063
)

$
183,284


$
211,826


$
(775
)

$
(211,354
)

$
182,981


$
288,949


$
314,603


$
792


$
(315,395
)

$
288,949  F-57




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    GUARANTOR SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
  December 31, 2008


December 31, 2007


December 31, 2006Non














Non














NonGuarantor


Guarantor





King





Guarantor


Guarantor





King





Guarantor


Guarantor





KingKing


Subsidiaries


Subsidiaries


Eliminations


Consolidated


King


Subsidiaries


Subsidiaries


Eliminations


Consolidated


King


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedCash flows provided by (used in) operating activities of
    continuing operations

$
104,480


$
383,528


$
3,383


$



$
491,391


$
50,989


$
620,503


$
1,157


$



$
672,649


$
(20,771
)

$
485,704


$
694


$



$
465,627Cash flows from investing activities of continuing operations:Purchase of investments in debt securities


(279,175
)














(279,175
)


(2,744,575
)














(2,744,575
)


(1,705,517
)














(1,705,517
)Proceeds from maturity and sale of investments in debt securities


1,207,080















1,207,080



2,289,780















2,289,780



1,309,995















1,309,995Transfer (to)/from restricted cash


(100
)














(100
)


(512
)














(512
)


128,561















128,561Acquisition of Alpharma, net of cash acquired


(1,557,347
)






532,586







(1,024,761
)






































Acquisition of
    Avinza®


(44
)














(44
)


(23
)


(296,414
)










(296,437
)


















Purchases of property, plant and equipment


(43,676
)


(13,766
)


(13
)






(57,455
)


(31,844
)


(17,758
)










(49,602
)


(22,505
)


(23,311
)










(45,816
)Purchases of product rights and intellectual property






(12,065
)










(12,065
)






(98,942
)










(98,942
)






(85,795
)










(85,795
)Proceeds from sale of marketable securities


























































Proceeds from sale of assets


10,350



60











10,410



8



86,279











86,287



















Loan to Ligand






















37,750















37,750



(37,750
)














(37,750
)Other investing activities










































6



1











7Net cash used in investing activities of continuing operations


(662,912
)


(25,771
)


532,573







(156,110
)


(449,416
)


(326,835
)










(776,251
)


(327,210
)


(109,105
)










(436,315
)Cash flows from financing activities of continuing operations:Proceeds from exercise of stock options, net


439















439



10,656















10,656



7,338















7,338Excess tax benefits from stock-based compensation


(2,441
)














(2,441
)


705















705



484















484Proceeds from issuance of long-term debt


617,000















617,000























400,000















400,000Payments on other long-term debt










































(342,691
)














(342,691
)Debt issuance costs


(30,076
)














(30,076
)


(1,527
)














(1,527
)


(10,680
)














(10,680
)Intercompany


365,449



(362,350
)


(3,099
)










297,101



(297,772
)


671











367,938



(368,921
)


983







Net cash provided by financing activities of continuing
    operations


950,371



(362,350
)


(3,099
)






584,922



306,935



(297,772
)


671







9,834



422,389



(368,921
)


983







54,451Increase (decrease) in cash and cash equivalents


391,939



(4,593
)


532,857







920,203



(91,492
)


(4,104
)


1,828







(93,768
)


74,408



7,678



1,677







83,763Cash and cash equivalents, beginning of year


9,718



4,645



5,646







20,009



101,210



8,749



3,818







113,777



26,802



1,071



2,141







30,014Cash and cash equivalents, end of year

$
401,657


$
52


$
538,503


$



$
940,212


$
9,718


$
4,645


$
5,646


$



$
20,009


$
101,210


$
8,749


$
3,818


$



$
113,777  F-58




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Brian
    A. Markison   Chairman of the Board,
 President and Chief Executive Officer
      Signature

Capacity

Date/s/  BRIAN
    A. MARKISONBrian
    A. Markison

Chairman of the Board, President and Chief Executive Officer

February 27, 2009/s/  JOSEPH
    SQUICCIARINOJoseph
    Squicciarino

Chief Financial Officer (principal financial and accounting
    officer)

February 27, 2009/s/  TED
    G. WOODTed
    G. Wood

Lead Independent Director

February 27, 2009/s/  EARNEST
    W. DEAVENPORT, JR.Earnest
    W. Deavenport, Jr.

Director

February 27, 2009/s/  ELIZABETH
    M. GREETHAMElizabeth
    M. Greetham

Director

February 27, 2009/s/  PHILIP
    A. INCARNATIPhilip
    A. Incarnati

Director

February 27, 2009/s/  GREGORY
    D. JORDANGregory
    D. Jordan

Director

February 27, 2009/s/  R.
    CHARLES MOYERR.
    Charles Moyer

Director

February 27, 2009/s/  D.
    GREG ROOKERD.
    Greg Rooker

Director

February 27, 2009  II-1




---



##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  Schedule II.
    Valuation and Qualifying Accounts
  Column A

Column B


Column C Additions


Column D


Column EChargedBalances at


Charged to


(Credited)





Balance atBeginning of


Cost and


to Other





End ofDescription

Period


Expenses


Accounts


Deductions(1)


Period(In thousands)Allowance for doubtful accounts, deducted from accounts
    receivable in the balance sheetYear ended December 31, 2008


5,297



266



863



1,713



4,713Year ended December 31, 2007


5,437



950







1,090



5,297Year ended December 31, 2006


12,280



(138
)






6,705



5,437Valuation allowance for deferred tax assets, deducted from
    deferred income tax assets in the balance sheetYear ended December 31, 2008


9,094



885



267,090



653



276,416Year ended December 31, 2007


8,085



2,248







1,239



9,094Year ended December 31, 2006


9,214



1,040







2,169



8,085     (1)
    
    Amounts represent write-offs of accounts.(2)
    
    Reserve related to certain state and foreign net operating
    losses and certain other deferred tax assets of Alpharma. S-1