##### 





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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    no. 001-15875
  King Pharmaceuticals,
    Inc.
 (Exact name of registrant as
    specified in its charter)
   Tennessee(State or other jurisdiction
    of
    incorporation or organization)

54-1684963(I.R.S. Employer
    Identification No.)501 Fifth Street, Bristol, TN(Address of principal
    executive offices)

37620(Zip Code)   (423) 989-8000
 (Registrants telephone
    number, including area code)
   þ o
  12b-2
  Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o  Rule 12b-2 o þ




---



##### 





TABLE OF
    CONTENTS
  PageReferencePart I



Financial InformationItem 1.



Financial Statements


3Condensed Consolidated Balance Sheets


3Condensed Consolidated Statements of Operations


4Condensed Consolidated Statements of Changes in
    Shareholders Equity and Other Comprehensive Income


5Condensed Consolidated Statements of Cash Flows


6Notes to Condensed Consolidated Financial Statements


7Item 2.



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


27Item 3.



Quantitative and Qualitative Disclosures about Market Risk


48Item 4.



Controls and Procedures


49PART II



Other InformationItem 1.



Legal Proceedings


49Item 1A.



Risk Factors


49Item 6.



Exhibits


49Signatures


50  2




---



##### 



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  KING
    PHARMACEUTICALS, INC.
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
 (In thousands)
 (Unaudited)
  March 31,


December 31,2008


2007ASSETSCurrent assets:Cash and cash equivalents

$
826,582


$
20,009Investments in debt securities


589,107



1,344,980Marketable securities


1,589



1,135Accounts receivable, net of allowance of $5,365 and $5,297


186,787



183,664Inventories


110,561



110,308Deferred income tax assets


95,836



100,138Income tax receivable






20,175Prepaid expenses and other current assets


40,311



39,245Total current assets


1,850,773



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


264,789



257,093Intangible assets, net


733,847



780,974Goodwill


129,150



129,150Deferred income tax assets


351,983



343,700Other assets (includes restricted cash of $16,336 and $16,480)


88,827



96,251Total assets

$
3,419,369


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

$
59,342


$
76,481Accrued expenses


293,304



376,604Income taxes payable


17,180



Total current liabilities


369,826



453,085Long-term debt


400,000



400,000Other liabilities


62,331



62,980Total liabilities


832,157



916,065Commitments and contingencies (Note 8)Shareholders equity


2,587,212



2,510,757Total liabilities and shareholdersequity

$
3,419,369


$
3,426,822    3




---



##### 



KING
    PHARMACEUTICALS, INC.



CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited) Three Months EndedMarch 31,2008


2007Revenues:Net sales

$
412,910


$
495,706Royalty revenue


19,123



20,324Total revenues


432,033



516,030Operating costs and expenses:Cost of revenues, exclusive of depreciation and amortization
    shown below


91,461



111,454Selling, general and administrative, exclusive of co-promotion
    fees


111,901



122,354Co-promotion fees


17,957



45,958Total selling, general and administrative expense


129,858



168,312Research and development


28,508



32,271Depreciation and amortization


59,698



35,678Restructuring charges (Note 12)


1,059



460Total operating costs and expenses


310,584



348,175Operating income


121,449



167,855Other income (expense):Interest income


13,629



9,266Interest expense


(1,804
)


(2,025
)Other, net


(704
)


(543
)Total other income


11,121



6,698Income from continuing operations before income taxes


132,570



174,553Income tax expense


44,937



58,499Income from continuing operations


87,633



116,054Discontinued operations (Note 15):Loss from discontinued operations






(220
)Income tax benefit






(79
)Total loss from discontinued operations, net






(141
)Net income

$
87,633


$
115,913Income per common share:Basic:Income from continuing operations

$
0.36


$
0.48Total loss from discontinued operations


0.00



0.00Net income

$
0.36


$
0.48Diluted:Income from continuing operations

$
0.36


$
0.48Total loss from discontinued operations


0.00



0.00Net income

$
0.36


$
0.48    4




---



##### 



KING
    PHARMACEUTICALS, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
    SHAREHOLDERS EQUITY
    AND OTHER COMPREHENSIVE INCOME
    (In thousands, except share data)
    (Unaudited)  AccumulatedOtherCommon Stock


Retained


ComprehensiveShares


Amount


Earnings


Income (Loss)


TotalBalance at December 31, 2006


243,151,223


$
1,244,986


$
1,043,902


$
(282
)

$
2,288,606Comprehensive income:Net income










115,913







115,913Net unrealized loss on marketable securities, net of tax of $285














(465
)


(465
)Foreign currency translation














52



52Total comprehensive income


















115,500Adoption of Financial Accounting Standards Board Interpretation
    No. 48










(1,523
)






(1,523
)Stock-based compensation expense






4,596











4,596Exercise of stock options


156,385



2,528











2,528Issuance of share-based awards


195,244















Balance at March 31, 2007


243,502,852


$
1,252,110


$
1,158,292


$
(695
)

$
2,409,707Balance at December 31, 2007


245,937,709


$
1,283,440


$
1,225,360


$
1,957


$
2,510,757Comprehensive income:Net income










87,633







87,633Net unrealized gain on marketable securities, net of tax of $172














282



282Net unrealized loss on investments in debt securities, net of
    taxes of $10,799














(17,619
)


(17,619
)Foreign currency translation














(480
)


(480
)Total comprehensive income


















69,816Stock-based compensation expense






8,455











8,455Exercise of stock options


6,435



54











54Issuance of share-based awards


600,291















Other






(1,870
)










(1,870
)Balance at March 31, 2008


246,544,435


$
1,290,079


$
1,312,993


$
(15,860
)

$
2,587,212    5




---



##### 



KING
    PHARMACEUTICALS, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands)
    (Unaudited)  Three Months Ended March 31,2008


2007Cash flows provided by operating activities

$
100,232


$
108,084Cash flows from investing activities:Transfers from (to) restricted cash


144



(148
)Purchases of investments in debt securities


(279,175
)


(383,925
)Proceeds from maturities and sales of investments in debt
    securities


1,006,630



515,905Purchases of property, plant and equipment


(19,914
)


(11,785
)Proceeds from sale of property and equipment


13



3Acquisition of
    Avinza®


(34
)


(290,551
)Loan repayment from Ligand






37,750Purchases of intellectual property and product rights


(715
)


(31,452
)Net cash provided by (used in) investing activities


706,949



(164,203
)Cash flows from financing activities:Proceeds from exercise of stock options


54



2,611Other


(662
)


(58
)Net cash (used in) provided by financing activities


(608
)


2,553Increase (decrease) in cash and cash equivalents


806,573



(53,566
)Cash and cash equivalents, beginning of period


20,009



113,777Cash and cash equivalents, end of period

$
826,582


$
60,211    6




---



##### 



KING
    PHARMACEUTICALS, INC.
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    March 31, 2008 and 2007
    (in thousands, except share and per share data)
    (Unaudited)  1.
    General  Form 10-Q Rule 10-01 Regulation S-X Form 10-K
  wholly-owned
  2.
    Earnings
    Per Share    Three Months Ended March 31,2008


2007Basic income per common share:Weighted average common shares


243,290,375



242,390,241Diluted income per common share:Weighted average common shares


243,290,375



242,390,241Effect of stock options


34,750



483,922Effect of dilutive share awards


1,363,413



796,410Weighted average common shares


244,688,538



243,670,573   1 4
 7




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  3.
    Fair
    Value Measurements  Marketable Securities.
  Investments in Debt Securities. Accounting for Certain Investments in Debt and Equity
    Securities
          Fair Value
    Measurements No. 157-2, Effective Date of FASB Statement No. 157, The Fair
    Value Option for Financial Assets and Financial Liabilities contract-by-contract
 8




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Fair Value Measurements at 3/31/2008 UsingQuoted Prices in


Significant Other


SignificantActive Markets for


Observable


UnobservableIdentical Assets


Inputs


InputsDescription

3/31/2008


(Level 1)


(Level 2)


(Level 3)Marketable Securities

$
1,589


$
1,589


$



$
Investments in Debt Securities


589,107







47,750



541,357Total

$
590,696


$
1,589


$
47,750


$
541,357           Fair Value Measurements UsingSignificant UnobservableInputs (Level 3)Investments in Debt SecuritiesBeginning balance, December 31, 2007

$
Total gains or losses (realized/unrealized)Included in earnings (or changes in net assets)


Included in other comprehensive income (loss)


(28,418
)Purchases, issuances and settlements


Transfers in and/or out of Level 3


569,775Ending balance, March 31, 2008

$
541,357      9




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  4.
    Inventories    March 31,


December 31,2008


2007Raw materials

$
125,514


$
129,781Work-in-process


24,378



27,590Finished goods (including $4,009 and $3,901 of sample inventory,
    respectively)


68,952



61,324218,844



218,695Inventory valuation allowance


(108,283
)


(108,387
)Total inventories

$
110,561


$
110,308   5.
    Property,
    Plant and Equipment  ®
    6.
    Acquisitions,
    Dispositions, Co-Promotions and Alliances  ® ®
  ® ® ® ®
 10




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    ®
  
    If calendar year net sales are less than $200,000 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.  ® ® ®
    Intangible assets

$
285,700Goodwill


7,997Inventory


2,800$
296,497     TM ® TM ®
 11




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  7.
    Intangible
    Assets and Goodwill    March 31, 2008


December 31, 2007Gross





GrossCarrying


Accumulated


Carrying


AccumulatedAmount


Amortization


Amount


AmortizationTrademarks and product rights

$
893,887


$
450,030


$
890,091


$
407,264Patents


447,825



158,111



447,821



149,959Other intangibles


1,345



1,069



1,345



1,060Total intangible assets

$
1,343,057


$
609,210


$
1,339,257


$
558,283     ® and/or
    Branded

MeridianSegment

Segment

TotalGoodwill

$
20,740


$
108,410


$
129,150   8.
    Commitments
    and Contingencies  Intellectual
    Property Matters
  ® ®
  ®
  ® ® ®
 12




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  ®
  ® ® ® ® ®
  30-month 30-month 30-month
  ®
 13




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    ® ® ® ®
  ® ® ® ®
  ® ®
  ® ® ®
 14




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Average
    Wholesale Price Litigation
  In re: Pharmaceutical Industry
    Average Wholesale Pricing Litigation
         15




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Governmental
    Pricing Investigation and Related Matters
      and/or
       16




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Fen/Phen
    Litigation
  In re Fen-Phen Litigation. and/or
  ®
  ®
   17




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Hormone
    Replacement Therapy
  In re:
    Prempro Products Liability Litigation post-trial
  Other
    Contingencies
  ® ®
   18




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  9.
    Accounting
    Developments  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
  10.
    Income
    Taxes    11.
    Segment
    Information  ®
 19




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        Three Months EndedMarch 31,2008


2007Total revenues:Branded pharmaceuticals

$
369,372


$
449,087Meridian Auto-Injector


42,912



43,015Royalties


19,123



20,324Contract manufacturing


133,826



158,386Other


313



396Eliminations


(133,513
)


(155,178
)Consolidated total net revenues

$
432,033


$
516,030Segment profit:Branded pharmaceuticals

$
297,003


$
362,213Meridian Auto-Injector


26,305



24,575Royalties


16,805



17,881Contract manufacturing


151



204Other


308



(297
)Other operating costs and expense


(219,123
)


(236,721
)Other income


11,121



6,698Income from continuing operations before tax

$
132,570


$
174,553   As of


As ofMarch 31,


December 31,2008


2007Total assets:Branded pharmaceuticals

$
3,084,938


$
3,097,153Meridian Auto-Injector


305,937



299,098Royalties


27,957



30,562Contract manufacturing


537



9Consolidated total assets

$
3,419,369


$
3,426,822  20




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Three Months EndedMarch 31,2008


2007Total revenues:Neuroscience

$
164,617


$
145,370Hospital


70,917



70,160Acute care


19,789



24,770Legacy:Cardiovascular/metabolic


109,547



194,390Other


4,502



14,397Consolidated branded pharmaceutical revenues

$
369,372


$
449,087   12.
    Restructuring
    Activities  ®
    tm
    ®
 21




---



##### 



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











AccruedBalance at


Income








Balance atDecember 31,


Statement


Cash


Non-Cash


March 31,2007


Impact


Payments


Costs


2008Third quarter of 2007 actionEmployee separation payments

$
21,144


$
1,530


$
21,428


$



$
1,246Contract termination






(101
)


(297
)


196



Accelerated depreciation(1)






(88
)






(88
)


Other


880



179



1,059







First quarter of 2007 actionEmployee separation payments


1,061



(1,061
)










Third quarter of 2006 actionEmployee separation payments


3,475



30



170



37



3,298Accelerated depreciation(1)






711







711



Fourth quarter of 2005 actionEmployee separation payments


774



482



570







686$
27,334


$
1,682


$
22,930


$
856


$
5,230     (1)
    
    Included in depreciation and amortization on the Consolidated
    Statements of Operations.    13.
    Stock-Based
    Compensation          14.
    Change in
    Estimate   22




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    15.
    Discontinued
    Operations  ® ®
  ® ® ® ®
    Three MonthsEndedMarch 31, 2007Total revenues

$
(222
)Operating loss


(220
)Net loss

$
(141
)     16.
    Guarantor
    Financial Statements  1 4
   23




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  GUARANTOR
    SUBSIDIARIES
  CONDENSED
    CONSOLIDATING BALANCE SHEETS
 (In thousands)
 (Unaudited)
  March 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

$
815,728


$
4,641


$
6,213


$



$
826,582


$
9,718


$
4,645


$
5,646


$



$
20,009Investments in debt securities


589,107















589,107



1,344,980















1,344,980Marketable Securities


1,589















1,589



1,135















1,135Accounts receivable, net


537



185,174



1,076







186,787



9



182,575



1,080







183,664Inventories


69,318



41,054



272



(83
)


110,561



76,981



33,361



269



(303
)


110,308Deferred income tax assets


54,600



41,197



39







95,836



54,917



45,182



39







100,138Income tax receivable






















18,721



1,454











20,175Prepaid expenses and other current assets


28,662



11,634



15







40,311



28,315



10,926



4







39,245Total current assets


1,559,541



283,700



7,615



(83
)


1,850,773



1,534,776



278,143



7,038



(303
)


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


136,366



128,423











264,789



125,847



131,246











257,093Intangible assets, net






731,181



2,666







733,847







778,248



2,726







780,974Goodwill






129,150











129,150







129,150











129,150Deferred income tax assets


13,960



338,023











351,983



4,529



339,107



64







343,700Other assets


39,046



49,781











88,827



42,315



53,936











96,251Investments in subsidiaries


1,748,705











(1,748,705
)






1,671,776











(1,671,776
)


Total assets

$
3,497,618


$
1,660,258


$
10,281


$
(1,748,788
)

$
3,419,369


$
3,379,243


$
1,709,830


$
9,828


$
(1,672,079
)

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

$
37,936


$
21,317


$
89


$



$
59,342


$
52,664


$
23,408


$
409


$



$
76,481Accrued expenses


46,302



246,996



6







293,304



69,849



306,732



23







376,604Income taxes payable


18,716



(1,660
)


124







17,180



















Total current liabilities


102,954



266,653



219







369,826



122,513



330,140



432







453,085Long-term debt


400,000















400,000



400,000















400,000Other liabilities


56,167



6,164











62,331



55,227



7,753











62,980Intercompany payable (receivable)


351,285



(352,059
)


774











290,443



(291,114
)


671







Total liabilities


910,406



(79,242
)


993







832,157



868,183



46,779



1,103







916,065Shareholders equity


2,587,212



1,739,500



9,288



(1,748,788
)


2,587,212



2,511,060



1,663,051



8,725



(1,672,079
)


2,510,757Total liabilities and shareholders equity

$
3,497,618


$
1,660,258


$
10,281


$
(1,748,788
)

$
3,419,369


$
3,379,243


$
1,709,830


$
9,828


$
(1,672,079
)

$
3,426,822  24




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  GUARANTOR
    SUBSIDIARIES
    CONDENSED CONSOLIDATING STATEMENTS OF INCOME
    (In thousands)
    (Unaudited)
  Three Months Ended March 31, 2008


Three Months Ended March 31, 2007Non














NonGuarantor


Guarantor





King





Guarantor


Guarantor





KingKing


Subsidiaries


Subsidiaries


Eliminations


Consolidated


King


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenues:Net sales

$
119,137


$
412,242


$
338


$
(118,807
)

$
412,910


$
127,762


$
495,261


$
49


$
(127,366
)

$
495,706Royalty revenue






19,123











19,123







20,324











20,324Total revenues


119,137



431,365



338



(118,807
)


432,033



127,762



515,585



49



(127,366
)


516,030Operating costs and expenses:Cost of revenues


34,999



175,460



30



(119,028
)


91,461



47,186



191,442



192



(127,366
)


111,454Selling, general and administrative


72,905



56,912



41







129,858



70,867



97,574



(129
)






168,312Research and development


582



27,926











28,508



788



31,483











32,271Depreciation and amortization


4,166



55,472



60







59,698



4,797



30,821



60







35,678Restructuring charges


(344
)


1,403











1,059



460















460Total operating costs and expenses


112,308



317,173



131



(119,028
)


310,584



124,098



351,320



123



(127,366
)


348,175Operating income (loss)


6,829



114,192



207



221



121,449



3,664



164,265



(74
)






167,855Other income (expense):Interest income


13,595



29



5







13,629



9,223



39



4







9,266Interest expense


(1,790
)


(14
)










(1,804
)


(2,003
)


(22
)










(2,025
)Other, net


(376
)


(873
)


545







(704
)


(559
)


(45
)


61







(543
)Equity in earnings (loss) of subsidiaries


77,713











(77,713
)






108,944











(108,944
)


Intercompany interest (expense) income


(3,566
)


3,573



(7
)










(4,937
)


4,995



(58
)






Total other income (expense)


85,576



2,715



543



(77,713
)


11,121



110,668



4,967



7



(108,944
)


6,698Income (loss) from continuing operations before income taxes


92,405



116,907



750



(77,492
)


132,570



114,332



169,232



(67
)


(108,944
)


174,553Income tax expense (benefit)


4,772



39,977



188







44,937



(1,581
)


60,104



(24
)






58,499Income (loss) from continuing operations


87,633



76,930



562



(77,492
)


87,633



115,913



109,128



(43
)


(108,944
)


116,054Discontinued operations:Loss from discontinued operations


























(220
)










(220
)Income tax benefit


























(79
)










(79
)Loss from discontinued operations, net


























(141
)










(141
)Net income (loss)

$
87,633


$
76,930


$
562


$
(77,492
)

$
87,633


$
115,913


$
108,987


$
(43
)

$
(108,944
)

$
115,913  25




---



##### 



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  GUARANTOR
    SUBSIDIARIES
  CONDENSED
    CONSOLIDATING STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
  Three Months Ended March 31, 2008


Three Months Ended March 31, 2007Non











NonGuarantor


Guarantor


King





Guarantor


Guarantor


KingKing


Subsidiaries


Subsidiaries


Consolidated


King


Subsidiaries


Subsidiaries


ConsolidatedCash flows provided by operating activities

$
32,908


$
66,860


$
464


$
100,232


$
10,345


$
96,714


$
1,025


$
108,084Cash flows from investing activities:Transfers from (to) restricted cash


144











144



(148
)










(148
)Purchases of investments in debt securities


(279,175
)










(279,175
)


(383,925
)










(383,925
)Proceeds from maturities and sales of investments in debt
    securities


1,006,630











1,006,630



515,905











515,905Purchases of property, plant and equipment


(16,434
)


(3,480
)






(19,914
)


(8,105
)


(3,680
)






(11,785
)Proceeds from sale of property and equipment


13











13







3







3Acquisition of
    Avinza®


(34
)










(34
)


(23
)


(290,528
)






(290,551
)Loan repayment from Ligand


















37,750











37,750Purchases of intellectual property and product rights






(715
)






(715
)






(31,452
)






(31,452
)Net cash provided by (used in) investing activities


711,144



(4,195
)






706,949



161,454



(325,657
)






(164,203
)Cash flows from financing activities:Proceeds from exercise of stock options


54











54



2,611











2,611Other


(662
)










(662
)


(58
)










(58
)Intercompany


62,566



(62,669
)


103







(227,048
)


226,725



323



Net cash provided by (used in) financing activities


61,958



(62,669
)


103



(608
)


(224,495
)


226,725



323



2,553Increase (decrease) in cash and cash equivalents


806,010



(4
)


567



806,573



(52,696
)


(2,218
)


1,348



(53,566
)Cash and cash equivalents, beginning of period


9,718



4,645



5,646



20,009



101,210



8,749



3,818



113,777Cash and cash equivalents, end of period

$
815,728


$
4,641


$
6,213


$
826,582


$
48,514


$
6,531


$
5,166


$
60,211  26




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion contains certain forward-looking
    statements that reflect managements current views of
    future events and operations. This discussion should be read in
    conjunction with the following: (a) Risk
    Factors in our Annual Report on
    Form 10-K
    for the year ended December 31, 2007, which are
    supplemented by the discussion which follows; (b) our
    audited consolidated financial statements and related notes
    which are included in our Annual Report on
    Form 10-K
    for the year ended December 31, 2007; and (c) our
    unaudited consolidated financial statements and related notes
    which are included in this report on
    Form 10-Q.
    Please see the sections entitled Risk Factors and
    A Warning About Forward-Looking Statements for a
    discussion of the uncertainties, risks and assumptions
    associated with these statements.
  I.
    OVERVIEW  Our
    Business
          
    neuroscience (including
    Skelaxin®,
    Avinza®
    and
    Sonata®),
    hospital (including
    Thrombin-JMI®
    and
    Synercid®),
    acute care (including
    Bicillin®
    and
    Intal®), and
    legacy products (including
    Altace®,
    Levoxyl®
    and
    Cytomel®).  ®
  Recent
    Developments
  tm tm tm
 27




---



##### 



tm
  II.
    RESULTS
    OF OPERATIONS  Three
    Months Ended March 31, 2008 and 2007
    For the Three MonthsEnded March 31,2008


2007(In thousands)Total RevenuesBranded pharmaceuticals

$
369,372


$
449,087Meridian Auto-Injector


42,912



43,015Royalties


19,123



20,324Contract manufacturing


313



3,208Other


313



396Total revenues

$
432,033


$
516,030Cost of Revenues, exclusive of depreciation, amortization and
    impairments Branded pharmaceuticals

$
72,369


$
86,874Meridian Auto-Injector


16,607



18,440Royalties


2,318



2,443Contract manufacturing


162



3,004Other


5



693Total cost of revenues

$
91,461


$
111,454     For the Three MonthsEnded March 31,2008


2007(In thousands)Gross Sales

$
549,419


$
634,839Commercial Rebates


41,676



48,938Medicare Part D Rebates


16,197



14,966Medicaid Rebates


12,264



8,718Chargebacks


20,212



23,645Returns


4,450



(1,254
)Trade Discounts/Other


22,587



24,018432,033



515,808Discontinued Operations






(222
)Net Sales

$
432,033


$
516,030  28




---



##### 



® ® ®
  ® ® ® ® ®
    Accrual
    for Rebates, including Administrative Fees:
  2008


2007Balance at January 1, net of prepaid amounts

$
65,301


$
53,765Current provision related to sales made in current period


67,155



72,088Current provision related to sales made in prior periods


2,982



534Rebates paid


(83,660
)


(67,255
)Balance at March 31, net of prepaid amounts

$
51,778


$
59,132     Accrual
    for Returns (in thousands):
  2008


2007Balance at January 1

$
32,860


$
42,001Current provision


4,450



(1,254
)Actual returns


(4,135
)


(6,295
)Ending balance at March 31

$
33,175


$
34,452     Accrual
    for Chargebacks (in thousands):
  2008


2007Balance at January 1

$
11,120


$
13,939Current provision


20,212



23,645Actual chargebacks


(21,080
)


(26,557
)Ending balance at March 31

$
10,252


$
11,027  29




---



##### 



Branded
    Pharmaceuticals Segment
  For the Three Months


ChangeEnded March 31,


2008 vs. 20072008


2007


$


%(In thousands)Branded pharmaceutical revenue:Skelaxin®

$
115,884


$
112,118


$
3,766



3.4
%Altace®


79,811



156,620



(76,809
)


(49.0
)Thrombin-JMI®


67,151



63,975



3,176



5.0Avinza®


32,023



9,399



22,624



>100.0Levoxyl®


15,658



22,057



(6,399
)


(29.0
)Other


58,845



84,918



(26,073
)


(30.7
)Total revenue

$
369,372


$
449,087


$
(79,715
)


(17.8
)%Cost of revenues, exclusive of depreciation, amortization and
    impairments

$
72,369


$
86,874


$
(14,505
)


(16.7
)%   Sales
    of Key Products
  Skelaxin®
  ® ® ® ®
  ®
  Altace®
  ® ® ® ®
  ®
  Thrombin-JMI®
  ® ®
  Avinza®
  ® ® ®
 30




---



##### 



®
  ® ®
  ®
  ®
  Levoxyl®
  ®
  Other
  ® ®
  ® ® ® ® ® ® ®
  ® ®
 31




---



##### 



Cost
    of Revenues
  ® ®
  Meridian
    Auto-Injector
  For the Three Months


ChangeEnded March 31,


2008 vs. 20072008


2007


$


%(In thousands)Meridian Auto-Injector revenue

$
42,912


$
43,015


$
(103
)


(0.2
)%Cost of revenues, exclusive of depreciation, amortization and
    impairments


16,607



18,440



(1,833
)


(9.9
)   ® ® ®
  Royalties
  For the Three Months


ChangeEnded March 31,


2008 vs. 20072008


2007


$


%(In thousands)Royalty revenue

$
19,123


$
20,324


$
(1,201
)


(5.9
)%Cost of revenues, exclusive of depreciation, amortization and
    impairments


2,318



2,443



(125
)


(5.1
)   ®
  ® ® ® ®
 32




---



##### 



Operating
    Costs and Expenses
  For the Three Months


ChangeEnded March 31,


2008 vs. 20072008


2007


$


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

$
91,461


$
111,454


$
(19,993
)


(17.9
)%Selling, general and administrative


129,858



168,312



(38,454
)


(22.8
)Research and development


28,508



32,271



(3,763
)


(11.7
)Depreciation and amortization


59,698



35,678



24,020



67.3Restructuring charges


1,059



460



599



> 100Total operating costs and expenses

$
310,584


$
348,175


$
(37,591
)


(10.8
)%   Selling,
    General and Administrative Expenses
  For the Three Months


ChangeEnded March 31,


2008 vs. 20072008


2007


$


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

$
111,901


$
122,354


$
(10,453
)


(8.5
)%Co-promotion fees


17,957



45,958



(28,001
)


(60.9
)Total selling, general and administrative

$
129,858


$
168,312


$
(38,454
)


(22.8
)%     ® ® ® ® ®
   33




---



##### 



Research
    and Development Expense
  For the Three Months


ChangeEnded March 31,


2008 vs. 20072008


2007


$


%Research and development

$
28,508


$
32,271


$
(3,763
)


(11.7
)%     Depreciation
    and Amortization Expense
  ® ® ® ® ® ® ® ® ®
  ® and/or
  ® ® ® ®
 34




---



##### 



Non-Operating
    Items
  For the Three MonthsEnded March 31,2008


2007(In thousands)Interest income

$
13,629


$
9,266Interest expense


(1,804
)


(2,025
)Other, net


(704
)


(543
)Total other income


11,121



6,698Income tax expense


44,937



58,499Discontinued operations






(141
)   Interest
    Income
    Income
    Tax Expense
    Liquidity
    and Capital Resources
  General
         35




---



##### 



Fair Value
    Measurements
            ® tm ® ®
  tm tm
  ® ® ®
 36




---



##### 



®
  ®
      ® ® ® ®
  ®
  
    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.  ® ®
 37




---



##### 



®
  tm ® tm ®
  ® ® ® ®
  
    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.
    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.  ® ®
  tm
  ® ®
  ® ®
 38




---



##### 



®
    ®
  tm tm tm tm tm
  ® ® ® ®
  Governmental Pricing Investigation and Related
    Matters
      Patent
    Challenges
  ® ® ® ®
 39




---



##### 



Cash
    Flows
  Operating
    Activities
  For the Three MonthsEnded March 31,2008

2007(In thousands)Net cash provided by operating activities

$
100,232


$
108,084   ®
    For the Three MonthsEnded March 31,2008


2007(In thousands)Accounts receivable, net of allowance

$
(3,539
)

$
1,663Inventories


(253
)


10,373Prepaid expenses and other current assets


(1,066
)


(12,446
)Accounts payable


(14,418
)


(8,888
)Accrued expenses and other liabilities


(84,201
)


(92,037
)Income taxes payable


38,907



47,498Deferred revenue


(1,170
)


(1,170
)Other assets


3,649



(7,008
)Deferred taxes


5,438



12,367Total changes from operating assets and liabilities and deferred
    taxes

$
(56,653
)

$
(49,648
)   Investing
    Activities
  For the Three MonthsEnded March 31,2008

2007(In thousands)Net cash provided by (used in) investing activities

$
706,949


$
(164,203
)     ®
 40




---



##### 



Financing
    Activities
  For theThree MonthsEnded March 31,2008

2007(In thousands)Net cash (used in) provided by financing activities

$
(608
)

$
2,553     Certain
    Indebtedness and Other Matters
  1 4 1 4
       41




---



##### 



Form S-3 and/or
  Impact
    of Inflation
    Recently
    Issued Accounting Standards
  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
  Critical
    Accounting Policies and Estimates
   42




---



##### 




    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.
    Trademarks and product rights will continue to be an asset to us
    after the expiration of the patent, as their economic value is
    not tied exclusively to the patent. We believe that by
    establishing separate lives for the patent versus the trademark
    and product rights, we are in essence using an accelerated
    method of amortization for the product as a whole. This results
    in greater amortization in earlier years when the product is
    under patent protection, as we are amortizing both the patent
    and the trademark and product rights, and less amortization when
    the product faces potential generic competition, as the
    amortization on the patent is eliminated. Because we have no
    discernible evidence to show a decline in cash flows for
    trademarks and product rights, or for patents, we use the
    straight-line method of amortization for both intangibles.   43




---



##### 



GrossCarrying


Accumulated


Net BookAmount


Amortization


Value(In thousands)BrandedAvinza®

$
285,700


$
29,018


$
256,682Skelaxin®


278,832



144,065



134,767Sonata®


61,961



61,961



Neuroscience


626,493



235,044



391,449Synercid®


110,589



36,595



73,994Other hospital


8,442



6,199



2,243Hospital


119,031



42,794



76,237Intal®


34,033



29,655



4,378Bicillin®


92,350



28,493



63,857Other acute care


5,992



5,746



246Acute care


132,375



63,894



68,481Altace®


156,744



156,744



Other legacy products


128,517



73,733



54,784Legacy products


285,261



230,477



54,784Total Branded


1,163,160



572,209



590,951Meridian Auto-Injector


176,175



34,379



141,796Royalties


3,722



2,622



1,100Contract manufacturing










All other










Total intangible assets

$
1,343,057


$
609,210


$
733,847  44




---



##### 



Trademarks, Product


Net BookPatents


Rights and Other


Value(In thousands)BrandedAvinza®

$
256,682


$



$
256,682Skelaxin®






134,767



134,767Neuroscience


256,682



134,767



391,449Synercid®


32,226



41,768



73,994Other hospital






2,243



2,243Hospital


32,226



44,011



76,237Intal®






4,378



4,378Bicillin®






63,857



63,857Other acute care






246



246Acute care






68,481



68,481Altace®










Other legacy products






54,784



54,784Legacy products






54,784



54,784Total Branded


288,908



302,043



590,951Meridian Auto-Injector






141,796



141,796Royalties


806



294



1,100Contract manufacturing










All other










Total intangible assets

$
289,714


$
444,133


$
733,847  45




---



##### 



Three Months Ended


Three Months EndedMarch 31, 2008


March 31, 2007Amortization





AmortizationImpairments


Expense


Impairments


Expense(In thousands)


(In thousands)BrandedAvinza®

$



$
6,638


$



$
2,230Skelaxin®






5,811







3,887Sonata®






315







Neuroscience






12,764







6,117Synercid®






2,375







2,375Other hospital






76







418Hospital






2,451







2,793Intal®






1,459







1,402Bicillin®






925







926Other acute care






83







372Acute care






2,467







2,700Altace®






29,687







7,465Other legacy products






1,456







3,717Legacy products






31,143







11,182Total Branded






48,825







22,792Meridian Auto-Injector






1,920







1,966Royalties






182







11Contract manufacturing














All other














Total intangible assets

$



$
50,927


$



$
24,769     Remaining Life at March 31, 2008Trademark &Patent


Product RightsAltace®






Skelaxin®






5 years 9 monthsAvinza®


9 years 8 months



Intal®






9 monthsSynercid®


7 years 9 months



7 years 9 monthsBicillin®






17 years 3 months   
    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 46




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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 and Medicaid, Medicare and commercial rebates in the
    same period we recognize the related sales. The 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.  A WARNING
    ABOUT FORWARD-LOOKING STATEMENTS
     47




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
    the potential of, including anticipated net sales and
    prescription trends for, our branded pharmaceutical products,
    particularly
    Altace®,
    Skelaxin®,
    Avinza®,
    Thrombin-JMI®,
    Levoxyl®
    and
    Sonata®;
    expectations regarding the enforceability and effectiveness of
    product-related patents, including in particular patents related
    to
    Skelaxin®,
    Avinza®,
    Sonata®
    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
    Remoxytm,
    Acuroxtm
    Tablets,
    CorVuetm
    and other products;
    the successful execution of our growth and restructuring
    strategies, including our accelerated strategic shift;
    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, securities litigation and other legal
    proceedings described in this report; and
    expectations regarding the NDA that Purdue submitted to the FDA
    for a reformulated version of its long-acting oxycodone product;
    expectations regarding our financial condition and liquidity as
    well as future cash flows and earnings.    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk       48




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Item 4.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
  Rules 13a-15(f) 15d-15(f)
 PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-K
  Item 6.
    Exhibits  ExhibitNumber

Description10
.1*

2008 Executive Management Incentive Award10
.2

Compensation Policy for Non-Employee Directors10
.3(1)

Termination of Litigation Agreement, dated as of January 2,
    2008, by and among King Pharmaceuticals, Inc., King
    Pharmaceuticals Research and Development, Inc. and CorePharma
    LLC.10
.4(1)

Metaxalone 800 mg Product Agreement, dated as of January 2,
    2008, by and among King Pharmaceuticals, Inc., King
    Pharmaceuticals Research and Development, Inc. and CorePharma
    LLC.10
.5(2)*

Form of Option Certificate and Nonstatutory Stock Option
    Agreement10
.6(2)*

Form of Restricted Stock Certificate and Restricted Stock Grant
    Agreement10
.7(2)*

Form of Long-Term Performance Unit Award Agreement 
    One-Year Performance Cycle10
.8(2)*

Form of Long-Term Performance Unit Award Agreement 
    Three-Year Performance Cycle31
.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.
    
    Pursuant to
    Rule 24b-2
    of the Securities Exchange Act of 1934, as amended, confidential
    portions of this exhibit have been omitted and filed separately
    with the Securities and Exchange Commission (SEC)
    pursuant to a Confidential Treatment Request filed with the SEC.(1)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed January 8, 2008.(2)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed April 1, 2008. 49




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SIGNATURES
      By:
    /s/  BRIAN
    A. MARKISON   President and Chief Executive Officer
    By:
    /s/  JOSEPH
    SQUICCIARINO   Chief Financial Officer
   50