##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, 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, 2007ORo

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

54-1684963(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)501 Fifth Street, Bristol,
    TN

37620(Address of principal executive
    offices)

(Zip
    Code)   (423) 989-8000
 (Registrants telephone
    number, including area code)
  þ o
    þ o o
  Rule 12b-2 o þ




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##### 



TABLE OF
    CONTENTS
  PageReferencePart I 
    Financial InformationItem 1.

Financial
    Statements


1Condensed
    Consolidated Balance Sheets


1Condensed
    Consolidated Statements of Operations


2Condensed
    Consolidated Statements of Changes in Shareholders Equity
    and Other Comprehensive Income


3Condensed Consolidated Statements
    of Cash Flows


4Notes to Condensed
    Consolidated Financial Statements


5Item 2.

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


28Item 3.

Quantitative and
    Qualitative Disclosures about Market Risk


50Item 4.

Controls and
    Procedures


50Part II 
    Other InformationItem 1.

Legal
    Proceedings


51Item 1A.

Risk
    Factors


51Item 6.

Exhibits


52Signatures


53Ex-10.8 2007 Executive Management Incentive AwardEx-31.1 Section 302 CertificationEx-31.1 Section 302 CertificationEx-32.1 Section 906 CertificationEx-32.2 Section 906 Certification




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##### Table of Contents



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


December 31,2007


2006ASSETSCurrent Assets:Cash and cash equivalents

$
60,211


$
113,777Investments in debt securities


758,205



890,185Accounts receivable, net of
    allowance for doubtful accounts of $5,499 and $5,437,
    respectively


263,542



265,467Inventories


207,885



215,458Deferred income tax assets


61,152



81,991Prepaid expenses and other current
    assets


48,319



106,595Total current assets


1,399,314



1,673,473Property, plant and equipment, net


306,662



307,036Intangible assets, net


1,115,744



851,391Goodwill


121,152



121,152Marketable securities


10,500



11,578Deferred income tax assets


280,286



271,554Other assets (includes restricted
    cash of $16,116 and $15,968, respectively)


99,812



93,347Total assets

$
3,333,470


$
3,329,531LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
67,061


$
77,158Accrued expenses


353,675



510,137Income taxes payable


44,215



30,501Total current liabilities


464,951



617,796Long-term debt


400,000



400,000Other liabilities


58,812



23,129Total liabilities


923,763



1,040,925Commitments and contingencies
    (Note 8)Shareholders equity


2,409,707



2,288,606Total liabilities and
    shareholders equity

$
3,333,470


$
3,329,531    1




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands, except per share data)
    (Unaudited)  Three Months EndedMarch 31,2007


2006Revenues:Net sales

$
495,706


$
464,599Royalty revenue


20,324



19,636Total revenues


516,030



484,235Operating costs and expenses:Cost of revenues, exclusive of
    depreciation and amortization shown below


111,454



92,404Selling, general and
    administrative, exclusive of co-promotion fees


122,354



105,054Co-promotion fees


45,958



65,289Total selling, general and
    administrative expense


168,312



170,343Research and development


32,271



29,882Research and development-in
    process upon acquisition






85,000Total research and development


32,271



114,882Depreciation and amortization


35,678



34,365Restructuring charges
    (Note 12)


460



Total operating costs and expenses


348,175



411,994Operating income


167,855



72,241Other income (expense):Interest income


9,266



5,960Interest expense


(2,025
)


(2,984
)Gain on early extinguishment of
    debt






1,022Other, net


(543
)


(510
)Total other income


6,698



3,488Income from continuing operations
    before income taxes


174,553



75,729Income tax expense


58,499



24,894Income from continuing operations


116,054



50,835Discontinued operations
    (Note 17):Loss from discontinued operations


(220
)


(247
)Income tax benefit


(79
)


(89
)Total loss from discontinued
    operations, net


(141
)


(158
)Net income

$
115,913


$
50,677Income per common share:Basic:Income from continuing operations

$
0.48


$
0.21Total loss from discontinued
    operations


0.00



0.00Net income

$
0.48


$
0.21Diluted:Income from continuing operations

$
0.48


$
0.21Total loss from discontinued
    operations


0.00



0.00Net income

$
0.48


$
0.21    2




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##### Table of Contents



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


Unearned


Retained


ComprehensiveShares


Amount


Compensation


Earnings


Income (Loss)


TotalBalance at December 31, 2005


242,493,416


$
1,222,246


$
(8,764
)

$
754,953


$
4,987


$
1,973,422Adoption of Statement of FinancialAccounting Standard No. 123(R)






(8,764
)


8,764











Comprehensive income:Net income














50,677







50,677Net unrealized loss on marketable
    securities, net of tax of $1,213


















(2,252
)


(2,252
)Foreign currency translation


















(10
)


(10
)Total comprehensive income






















48,415Stock-based compensation expense






3,889















3,889Exercise of stock options


394,330



6,724















6,724Issuance of share-based awards


168,500



















Balance at March 31, 2006


243,056,246


$
1,224,095


$



$
805,630


$
2,725


$
2,032,450Balance at December 31, 2006


243,151,223


$
1,244,986


$



$
1,043,902


$
(282
)

$
2,288,606Comprehensive income:Net income














115,913







115,913Adoption of Financial Accounting
    Standards Board Interpretation No. 48














(1,523
)






(1,523
)Net unrealized loss on marketable
    securities, net of tax of $285


















(465
)


(465
)Foreign currency translation


















52



52Total comprehensive income






















113,977Stock-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
)

$
2,409,707    3




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands)
    (Unaudited)  Three Months Ended March 31,2007


2006Cash flows provided by (used in)
    operating activities

$
108,084


$
(5,592
)Cash flows from investing
    activities:Transfers (to) from restricted cash


(148
)


130,279Purchases of investments in debt
    securities


(383,925
)


(192,275
)Proceeds from maturities and sales
    of investments in debt securities


515,905



200,784Purchases of property, plant and
    equipment


(11,785
)


(8,768
)Proceeds from sale of property and
    equipment


3



Acquisition of
    Avinza®


(290,551
)


Loan repayment from Ligand


37,750



Purchases of product rights


(6,452
)


(23,926
)Arrow International Limited
    collaboration agreement


(25,000
)


(35,000
)Net cash (used in) provided by
    investing activities


(164,203
)


71,094Cash flows from financing
    activities:Proceeds from exercise of stock
    options, net


2,462



6,468Excess tax benefits from
    stock-based compensation


91



274Proceeds from issuance of
    long-term debt






400,000Payments on long-term debt






(163,350
)Debt issuance costs






(10,610
)Net cash provided by financing
    activities


2,553



232,782(Decrease) increase in cash and
    cash equivalents


(53,566
)


298,284Cash and cash equivalents,
    beginning of period


113,777



30,014Cash and cash equivalents, end of
    period

$
60,211


$
328,298    4




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    March 31, 2007 and 2006
    (in thousands, except share and per share data)
    (Unaudited)  1.
    General  Form 10-Q Rule 10-01 Regulation S-X Form 10-K
    2.
    Earnings
    Per Share    Three Months Ended March 31,2007


2006Basic income per common share:Weighted average common shares


242,390,241



242,022,443Diluted income per common share:Weighted average common shares


242,390,241



242,022,443Effect of stock options


483,922



361,405Effect of dilutive share awards


796,410



197,468Weighted average common shares


243,670,573



242,581,316   1 4
  3 4
 5




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  1 4
  3.
    Inventories    March 31,


December 31,2007


2006Raw materials

$
121,337


$
141,227Work-in-process


27,808



21,857Finished goods (including $6,929
    and $6,813 of sample inventory, respectively)


73,626



65,967222,771



229,051Inventory valuation allowance


(14,886
)


(13,593
)Total inventories

$
207,885


$
215,458   4.
    Property,
    Plant and Equipment  ®
    ®
 6




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Acquisitions,
    Dispositions, Co-Promotions and Alliances  ® ® ® ®
  ®
  
    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

$
287,728Inventory


2,800$
290,528     tm ® tm ®
 7




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##### Table of Contents



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

$
23,985Inventory


618Fixed assets


3$
24,606     ®
      ®
 8




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Intangible
    Assets and Goodwill    March 31, 2007


December 31, 2006Gross





GrossCarrying


Accumulated


Carrying


AccumulatedAmount


Amortization


Amount


AmortizationTrademarks and product rights

$
1,153,939


$
389,380


$
1,152,433


$
371,410Patents


560,449



209,619



272,833



202,873Other intangibles


9,459



9,104



9,459



9,051Total intangible assets

$
1,723,847


$
608,103


$
1,434,725


$
583,334     ® ® ® and/or
    Branded


MeridianSegment


Segment


TotalGoodwill

$
12,742


$
108,410


$
121,152   7.
    Long-Term
    Debt    March 31,


December 31,2007


2006Convertible senior notes(a)

$
400,000


$
400,000Senior secured revolving credit
    facility(b)






Total long-term debt


400,000



400,000     (a)
    
    During the first quarter of 2006, the Company issued $400,000 of
    11/4% Convertible
    Senior Notes due April 1, 2026 (Notes). The
    Notes are unsecured obligations and are guaranteed by each of
    the Companys domestic subsidiaries on a joint and several
    basis. The Notes accrue interest at an initial rate of
    11/4%.
    Beginning with the six-month interest period that commences on
    April 1, 2013, the Company will pay additional interest
    during any six-month interest period if the average trading
    price of the Notes during the five consecutive trading days
    ending on the second trading day immediately preceding the first
    day of such six-month period equals 120% or more of the
    principal amount of the Notes. Interest is payable on
    April 1 and October 1 of each year, beginning
    October 1, 2006.On or after April 5, 2013, the Company may redeem for cash
    some or all of the Notes at any time at a price equal to 100% of
    the principal amount of the Notes to be redeemed, plus any
    accrued and unpaid interest, and liquidated damages, if any, to
    but excluding the date fixed for redemption. Holders may require
    the Company to purchase for cash some or all of their Notes on
    April 1, 2013, April 1, 2016 and April 1, 2021,
    or upon the occurrence of a fundamental change (such as a change
    of control or a 9




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  termination of trading), at 100% of the principal amount of the
    Notes to be purchased, plus any accrued and unpaid interest, and
    liquidated damages, if any, to but excluding the purchase date.Prior to April 1, 2012, the Notes are convertible under the
    following circumstances:  
    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.  The Notes are convertible at any time on and after April 1,
    2012, until the close of business on the business day
    immediately preceding maturity. Subject to certain exceptions,
    the Company will deliver cash and shares of the Companys
    common stock, as follows: (i) an amount in cash equal to
    the lesser of (a) the principal amount of Notes surrendered
    for conversion and (b) the product of the conversion rate
    and the average price of the Companys common stock (the
    conversion value), and (ii) if the conversion
    value is greater than the principal amount, a specified amount
    in cash or shares of the Companys common stock, at the
    Companys election. The initial conversion price is
    approximately $20.83 per share of common stock. If certain
    corporate transactions occur on or prior to April 1, 2013,
    the Company will increase the conversion rate in certain
    circumstances.The Company has reserved 23,732,724 shares of common stock
    in the event the Notes are converted into shares of the
    Companys common stock.In connection with the issuance of the Notes, the Company
    incurred approximately $10,680 of deferred financing costs that
    are being amortized over seven years.(b)
    
    On April 23, 2002, the Company established a $400,000
    five-year Senior Secured Revolving Credit Facility which was
    scheduled to mature in April 2007 (the 2002 Credit
    Facility). On April 19, 2007, this facility was
    terminated and replaced with a new $475,000 five-year Senior
    Secured Revolving Credit Facility which matures in April 2012
    (the 2007 Credit Facility).   8.
    Commitments
    and Contingencies  Fen/Phen
    Litigation
  In re Fen-Phen
    Litigation. and/or
  ®
 10




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    ®
      Thimerosal
    / Childrens Vaccine Related Litigation
     11




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Hormone
    Replacement Therapy
  In re: Prempro Products Liability Litigation
  Average
    Wholesale Price Litigation
  In re: Pharmaceutical Industry
    Average Wholesale Pricing Litigation.
 12




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Settlement
    of Governmental Pricing Investigation
       13




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      SEC
    Investigation
      Securities
    Litigation
  and/or
   14




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             Other
    Legal Proceedings
  ® ® ® ®
  ® ® Approved Drug Products With Therapeutic
    Equivalence Evaluations method-of-use
 15




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  30-month ®
    ® ®
  ® ® ®
  ® ® method-of-use ®
 16




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ®
  30-month 30-month
  ®
  ® ® ®
  ®
 17




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ® ®
  ® ®
  ® method-of-use ® ® ® method-of-use ® ®
  ® ® ®
 18




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Other
    Contingencies
  ® ® ® and/or
  ® ®
  9.
    Accounting
    Developments  Fair Value Measurements
  The Fair Value Option for
    Financial Assets and Financial Liabilities
  Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
  10.
    Income
    Taxes   19




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          non-U.S. income
  11.
    Segment
    Information  ®
   20




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Three Months EndedMarch 31,2007


2006Total revenues:Branded pharmaceuticals

$
449,087


$
417,620Meridian Medical Technologies


43,015



41,284Royalties


20,324



19,636Contract manufacturing


158,386



121,282Other


396



Eliminations


(155,178
)


(115,587
)Consolidated total net revenues

$
516,030


$
484,235Segment profit:Branded pharmaceuticals

$
362,213


$
352,229Meridian Medical Technologies


24,575



22,037Royalties


17,881



17,266Contract manufacturing


204



299Other


(297
)


Other operating costs and expense


(236,721
)


(319,590
)Other income (expense)


6,698



3,488Income from continuing operations
    before tax

$
174,553


$
75,729   As of


As ofMarch 31,


December 31,2007


2006Total assets:Branded pharmaceuticals

$
2,994,917


$
2,994,580Meridian Medical Technologies


296,091



294,455Royalties


28,110



21,626Contract manufacturing


14,352



18,870Other






Consolidated total assets

$
3,333,470


$
3,329,531  21




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedMarch 31,2007


2006Total revenues:Cardiovascular/metabolic

$
194,390


$
203,868Neuroscience


145,370



119,893Hospital/acute care


94,930



81,016Other


14,397



12,843Consolidated branded
    pharmaceutical revenues

$
449,087


$
417,620   12.
    Restructuring
    Activities  ®
    Accrued











AccruedBalance at


Income








Balance atDecember 31,


Statement


Cash


Non-Cash


March 31,2006


Impact


Payments


Costs


2007First quarter of 2007
    actionEmployee separation payments

$



$
460


$



$



$
460Third quarter of 2006
    actionEmployee separation payments


2,163















2,163Accelerated depreciation(1)






1,500







(1,500
)


Fourth quarter of 2005
    actionEmployee separation payments


521















521$
2,684


$
1,960


$



$
(1,500
)

$
3,144     (1)
    
    Included in depreciation and amortization on the Consolidated
    Statements of Operations.    13.
    Investments
    in Debt Securities   22




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   14.
    Marketable
    Securities    15.
    Stock-Based
    Compensation          16.
    Change in
    Estimate    17.
    Discontinued
    Operations  ® ®
  ® ®
 23




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  ® ®
    Three Months EndedMarch 31,2007


2006Total revenues

$
(222
)

$
(250
)Operating loss


(220
)


(247
)Net loss

$
(141
)

$
(158
)     18.
    Guarantor
    Financial Statements         24




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##### Table of Contents



KING
    PHARMACEUTICALS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  GUARANTOR
    SUBSIDIARIES
  CONDENSED
    CONSOLIDATING BALANCE SHEETS
 (In thousands)
 (Unaudited)
  March 31, 2007


December 31, 2006Non














NonGuarantor


Guarantor


Eliminating


King





Guarantor


Guarantor


Eliminating


KingKing


Subsidiaries


Subsidiaries


Entries


Consolidated


King


Subsidiaries


Subsidiaries


Entries


ConsolidatedASSETSCurrent assets:Cash and cash equivalents

$
48,514


$
6,531


$
5,166


$



$
60,211


$
101,210


$
8,749


$
3,818






$
113,777Investments in debt securities


758,205















758,205



890,185















890,185Accounts receivable, net


441



262,239



862







263,542



3,056



260,353



2,058







265,467Inventories


167,546



39,909



430







207,885



176,389



38,814



255







215,458Deferred income tax assets


11,552



49,600











61,152



30,051



51,940











81,991Prepaid expenses and other current
    assets


35,943



12,345



31







48,319



99,678



6,891



26







106,595Total current assets


1,022,201



370,624



6,489







1,399,314



1,300,569



366,747



6,157







1,673,473Property, plant and equipment, net


113,639



193,023











306,662



109,572



197,464











307,036Intangible assets, net






1,112,838



2,906







1,115,744







848,425



2,966







851,391Goodwill






121,152











121,152







121,152











121,152Marketable securities


10,500















10,500



11,578















11,578Deferred income tax assets


(1,613
)


281,079



820







280,286



(2,111
)


272,868



797







271,554Other assets


41,190



58,622











99,812



40,142



53,205











93,347Investments in subsidiaries


1,568,095











(1,568,095
)






2,615,029











(2,615,029
)


Total assets

$
2,754,012


$
2,137,338


$
10,215


$
(1,568,095
)

$
3,333,470


$
4,074,779


$
1,859,861


$
9,920


$
(2,615,029
)

$
3,329,531LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
46,997


$
19,631


$
433


$



$
67,061


$
51,671


$
25,063


$
424


$



$
77,158Accrued expenses


31,419



322,252



4







353,675



134,089



376,051



(3
)






510,137Income taxes payable


42,936



1,279











44,215



28,045



2,456











30,501Total current liabilities


121,352



343,162



437







464,951



213,805



403,570



421







617,796Long-term debt


400,000















400,000



400,000















400,000Other liabilities


51,314



7,498











58,812



16,243



6,886











23,129Intercompany payable (receivable)


(228,361
)


228,038



323











1,156,125



(1,168,516
)


12,391







Total liabilities


344,305



578,698



760







923,763



1,786,173



(758,060
)


12,812







1,040,925Shareholders equity


2,409,707



1,558,640



9,455



(1,568,095
)


2,409,707



2,288,606



2,617,921



(2,892
)


(2,615,029
)


2,288,606Total liabilities and
    shareholders equity

$
2,754,012


$
2,137,338


$
10,215


$
(1,568,095
)

$
3,333,470


$
4,074,779


$
1,859,861


$
9,920


$
(2,615,029
)

$
3,329,531  25




---



##### Table of Contents



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, 2007


Three Months Ended March 31, 2006Non














NonGuarantor


Guarantor





King





Guarantor


Guarantor





KingKing


Subsidiaries


Subsidiaries


Eliminations


Consolidated


King


Subsidiaries


Subsidiaries


Eliminations


ConsolidatedRevenues:Net sales

$
127,762


$
495,261


$
49


$
(127,366
)

$
495,706


$
97,832


$
462,668


$
1,557


$
(97,458
)

$
464,599Royalty revenue






20,324











20,324







19,636











19,636Total revenues


127,762



515,585



49



(127,366
)


516,030



97,832



482,304



1,557



(97,458
)


484,235Operating costs and expenses:Cost of revenues


47,186



191,442



192



(127,366
)


111,454



37,355



151,782



725



(97,458
)


92,404Selling, general and administrative


70,867



97,574



(129
)






168,312



49,086



121,661



(404
)






170,343Research and development


788



31,483











32,271



873



114,009











114,882Depreciation and amortization


4,797



30,821



60







35,678



4,010



30,295



60







34,365Restructuring charges


460















460



















Total operating costs and expenses


124,098



351,320



123



(127,366
)


348,175



91,324



417,747



381



(97,458
)


411,994Operating income (loss)


3,664



164,265



(74
)






167,855



6,508



64,557



1,176







72,241Other income (expense):Interest income


9,223



39



4







9,266



5,853



107











5,960Interest expense


(2,003
)


(22
)










(2,025
)


(2,981
)


(3
)










(2,984
)Gain on early extinguishment of debt






















1,022















1,022Other, net


(559
)


(45
)


61







(543
)


(57
)


(534
)


81







(510
)Equity in earnings (loss) of
    subsidiaries


108,944











(108,944
)






51,218











(51,218
)


Intercompany dividend income


969,849











(969,849
)






















Intercompany interest (expense)
    income


(4,937
)


4,995



(58
)










(10,649
)


10,781



(132
)






Total other income (expense)


1,080,517



4,967



7



(1,078,793
)


6,698



44,406



10,351



(51
)


(51,218
)


3,488Income (loss) from continuing
    operations before income taxes


1,084,181



169,232



(67
)


(1,078,793
)


174,553



50,914



74,908



1,125



(51,218
)


75,729Income tax expense (benefit)


(1,581
)


60,104



(24
)






58,499



237



24,263



394







24,894Income (loss) from continuing
    operations


1,085,762



109,128



(43
)


(1,078,793
)


116,054



50,677



50,645



731



(51,218
)


50,835Discontinued operations:(Loss) income from discontinued
    operations, including loss on impairment






(220
)










(220
)






(247
)










(247
)Income tax (benefit) expense






(79
)










(79
)






(89
)










(89
)(Loss) income from discontinued
    operations, net






(141
)










(141
)






(158
)










(158
)Net income (loss)

$
1,085,762


$
108,987


$
(43
)

$
(1,078,793
)

$
115,913


$
50,677


$
50,487


$
731


$
(51,218
)

$
50,677  26




---



##### Table of Contents



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, 2007


Three Months Ended March 31, 2006Non











NonGuarantor


Guarantor


King





Guarantor


Guarantor


KingKing


Subsidiaries


Subsidiaries


Consolidated


King


Subsidiaries


Subsidiaries


ConsolidatedCash flows from operating
    activities of continuing operations

$
10,345


$
96,714


$
1,025


$
108,084


$
(38,462
)

$
33,187


$
(317
)

$
(5,592
)Cash flows from investing
    activities of continuing operations:Transfers from (to) restricted cash


(148
)










(148
)


130,279











130,279Purchases of investments in debt
    securities


(383,925
)










(383,925
)


(192,275
)










(192,275
)Proceeds from maturities and sales
    of investments in debt securities


515,905











515,905



200,784











200,784Acquisition of
    Avinza®


(23
)


(290,528
)






(290,551
)














Loan repayment from Ligand


37,750











37,750















Purchases of property, plant and
    equipment


(8,105
)


(3,680
)






(11,785
)


(5,095
)


(3,673
)






(8,768
)Proceeds from sale of property and
    equipment






3







3















Purchases of product rights






(6,452
)






(6,452
)






(23,926
)






(23,926
)Arrow International Limited
    collaboration agreement






(25,000
)






(25,000
)






(35,000
)






(35,000
)Net cash provided by (used in)
    investing activities of continuing operations


161,454



(325,657
)






(164,203
)


133,693



(62,599
)






71,094Cash flows from financing
    activities of continuing operations:Proceeds from exercise of stock
    options, net


2,462











2,462



6,468











6,468Excess tax benefit from stock-based
    compensation


91











91



274











274Proceeds from issuance of long-term
    debt


















400,000











400,000Payments on long-term debt


















(163,350
)










(163,350
)Debt issuance costs


















(10,610
)










(10,610
)Intercompany


(227,048
)


226,725



323







(29,304
)


28,761



543



Net cash provided by (used in)
    financing activities of continuing operations


(224,495
)


226,725



323



2,553



203,478



28,761



543



232,782Increase (decrease) in cash and
    cash equivalents


(52,696
)


(2,218
)


1,348



(53,566
)


298,709



(651
)


226



298,284Cash and cash equivalents,
    beginning of period


101,210



8,749



3,818



113,777



26,802



1,071



2,141



30,014Cash and cash equivalents, end of
    period

$
48,514


$
6,531


$
5,166


$
60,211


$
325,511


$
420


$
2,367


$
328,298  27




---



##### Table of Contents



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 set out below and in our Annual Report on
    Form 10-K
    for the year ended December 31, 2006, 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, 2006; 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
        Recent
    Developments
  ® ® ® ®
  tm ® tm ®
  ®
 28




---



##### Table of Contents



II. RESULTS
    OF OPERATIONS
  Three
    Months Ended March 31, 2007 and 2006
    For the Three MonthsEnded March 31,2007


2006(In thousands)Total RevenuesBranded pharmaceuticals

$
449,087


$
417,620Meridian Medical Technologies


43,015



41,284Royalties


20,324



19,636Contract manufacturing


3,208



5,695Other


396



Total revenues

$
516,030


$
484,235Cost of Revenues, exclusive of
    depreciation, amortization and impairmentsBranded pharmaceuticals

$
86,874


$
65,391Meridian Medical Technologies


18,440



19,247Royalties


2,443



2,370Contract manufacturing


3,004



5,396Other


693



Total cost of revenues

$
111,454


$
92,404     For the Three MonthsEnded March 31,2007


2006(In thousands)Gross Sales

$
634,839


$
607,859Commercial Rebates


48,938



56,278Medicare Part D Rebates


14,966



11,168Medicaid Rebates


8,718



8,712Chargebacks


23,645



29,390Returns


(1,254
)


(702
)Trade Discounts/Other


24,018



19,028515,808



483,985Discontinued Operations


(222
)


(250
)Net Sales

$
516,030


$
484,235   ®
   29




---



##### Table of Contents



Accrual
    for Rebates, including Administrative Fees:
  2007


2006Balance at January 1, net of
    prepaid amounts

$
53,765


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


72,088



79,690Current provision related to sales
    made in prior periods


534



(3,532
)Rebates paid


(67,255
)


(115,998
)Balance at March 31, net of
    prepaid amounts

$
59,132


$
86,400         Accrual
    for Returns (in thousands):
  2007


2006Balance at January 1

$
42,001


$
50,902Current provision


(1,254
)


(702
)Actual returns


(6,295
)


(7,692
)Ending balance at March 31

$
34,452


$
42,508    30




---



##### Table of Contents



Accrual
    for Chargebacks (in thousands):
  2007


2006Balance at January 1

$
13,939


$
13,153Current provision


23,645



29,390Actual chargebacks


(26,557
)


(25,972
)Ending balance at March 31

$
11,027


$
16,571   Branded
    Pharmaceuticals Segment
  For the Three Months


ChangeEnded March 31,


2007 vs. 20062007


2006


$


%(In thousands)Branded pharmaceutical revenue:Altace®

$
156,620


$
158,848


$
(2,228
)


(1.4
)%Skelaxin®


112,118



98,626



13,492



13.7Thrombin-JMI®


63,975



58,197



5,778



9.9Avinza®


9,399







9,399



Levoxyl®


22,057



30,955



(8,898
)


(28.7
)Sonata®


23,853



21,267



2,586



12.2Other


61,065



49,727



11,338



22.8Total revenue


449,087



417,620



31,467



7.5Cost of revenues, exclusive of
    depreciation, amortization and impairments


86,874



65,391



21,483



32.9   ® ® ® ® ® ® ® ® ® ®
  Sales
    of Key Products
  Altace®
  ® ® ®
  ®
  Skelaxin®
  ® ® ®
 31




---



##### Table of Contents



®
  Thrombin-JMI®
  ® ®
  Avinza®
  ® ® ® ® ®
  Levoxyl®
  ® ® ®
  Sonata®
  ® ® ® ® ® ® ® ®
  ®
  Other
  ® ® ®
 32




---



##### Table of Contents



Cost
    of Revenues
  ® ®
  Meridian
    Medical Technologies
  For the Three Months


ChangeEnded March 31,


2007 vs. 20062007


2006


$


%(In thousands)Meridian MedicalTechnologies revenue

$
43,015


$
41,284


$
1,731



4.2
%Cost of revenues, exclusive of
    depreciation, amortization and impairments


18,440



19,247



(807
)


(4.2
)   ® ® ® ®
  Royalties
  For the Three Months


ChangeEnded March 31,


2007 vs. 20062007


2006


$


%(In thousands)Royalty revenue

$
20,324


$
19,636


$
688



3.5
%Cost of revenues, exclusive of
    depreciation, amortization and impairments


2,443



2,370



73



3.1   ® ®
  Contract
    Manufacturing
  For the Three Months


ChangeEnded March 31,


2007 vs. 20062007


2006


$


%(In thousands)Contract manufacturing revenue

$
3,208


$
5,695


$
(2,487
)


(43.7
)%Cost of revenues, exclusive of
    depreciation, amortization and impairments


3,004



5,396



(2,392
)


(44.3
)    33




---



##### Table of Contents



Operating
    Costs and Expenses
  For the Three Months


ChangeEnded March 31,


2007 vs. 20062007


2006


$


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

$
111,454


$
92,404


$
19,050



20.6
%Selling, general and administrative


168,312



170,343



(2,031
)


(1.2
)Research and development


32,271



114,882



(82,611
)


(71.9
)Depreciation and amortization


35,678



34,365



1,313



3.8Restructuring charges


460







460



Total operating costs and expenses

$
348,175


$
411,994


$
(63,819
)


(15.5
)%   Selling,
    General and Administrative Expenses
  For the Three Months


ChangeEnded March 31,


2007 vs. 20062007


2006


$


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

$
122,354


$
105,054


$
17,300



16.5
%Co-promotion fees


45,958



65,289



(19,331
)


(29.6
)Total selling, general and
    administrative

$
168,312


$
170,343


$
(2,031
)


(1.2
)%     ® Co-Promotion ® ®
    HHS/OIG
 34




---



##### Table of Contents



Research
    and Development Expense
  For the Three Months


ChangeEnded March 31,


2007 vs. 20062007


2006


$Research and development

$
32,271


$
29,882


$
2,389Research and
    development  in process upon acquisition






85,000



(85,000
)Total research and development

$
32,271


$
114,882


$
(82,611
)     ®
  Depreciation
    and Amortization Expense
  ® ®
  ® ® ® and/or
  ® ®
 35




---



##### Table of Contents



® ®
  ®
    Non-Operating
    Items
  For the Three MonthsEnded March 31,2007


2006(In thousands)Interest income

$
9,266


$
5,960Interest expense


(2,025
)


(2,984
)Gain on early extinguishment of
    debt






1,022Other, net


(543
)


(510
)Total other income


6,698



3,488Income tax expense


58,499



24,894Discontinued operations


(141
)


(158
)   3 4
  Interest
    Income
    Income
    Tax Expense
    Discontinued
    Operations
  ® ®
 36




---



##### Table of Contents



® ®
  Liquidity
    and Capital Resources
  General
      ® ® ® ®
  ®
  
    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.  ® ® ®
  tm ® tm ®
 37




---



##### Table of Contents



® Co-Promotion ® ® ®
  
    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.
    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 tm tm tm tm tm
  ® ®
  ® ®
 38




---



##### Table of Contents



®
  ®
  tm tm moderate-to-severe tm tm tm
    ® ® ® ®
  Settlement
    of Governmental Pricing Investigation
   39




---



##### Table of Contents



Form 8-K
  SEC
    Investigation
      Securities
    Litigation
     40




---



##### Table of Contents



Patent
    Challenges
  ® ® ® ® ® ® ® ®
  Cash
    Flows
  Operating
    Activities
  For the Three MonthsEnded March 31,2007


2006(In thousands)Net cash provided by (used in)
    operating activities

$
108,084


$
(5,592
)       For the Three MonthsEnded March 31,2007


2006(In thousands)Accounts receivable, net of
    allowance

$
1,663


$
(44,588
)Inventories


10,373



10,807Prepaid expenses and other current
    assets


(12,446
)


(22,750
)Accounts payable


(8,888
)


(14,730
)Accrued expenses and other
    liabilities


(92,037
)


(128,460
)Income taxes payable


47,498



53,021Deferred revenue


(1,170
)


(2,273
)Other assets


(7,008
)


(3,579
)Deferred taxes


12,367



(27,295
)Total changes from operating
    assets and liabilities and deferred taxes

$
(49,648
)

$
(179,847
)  41




---



##### Table of Contents



Investing
    Activities
  For the Three MonthsEnded March 31,2007


2006(In thousands)Net cash (used in) provided by
    investing activities

$
(164,203
)

$
71,094   ®
  ®
    Financing
    Activities
  For theThree MonthsEnded March 31,2007


2006(In thousands)Net cash provided by financing
    activities

$
2,553


$
232,782   1 4 3 4
  Certain
    Indebtedness and Other Matters
  1 4 1 4
 42




---



##### Table of Contents



3 4
         43




---



##### Table of Contents



Form S-3 and/or
  Impact
    of Inflation
    Recently
    Issued Accounting Standards
  Fair Value Measurements
  The Fair Value Option for
    Financial Assets and Financial Liabilities
  Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
  Critical
    Accounting Policies and Estimates
     44




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
    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.     45




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##### Table of Contents



Accumulated


Net BookCost


Amortization


Value(In thousands)BrandedAltace®

$
276,150


$
89,201


$
186,949Other Cardiovascular/metabolic


80,770



47,215



33,555Cardiovascular/metabolic


356,920



136,416



220,504Intal®


61,726



23,876



37,850Other Hospital/acute care


189,018



61,391



127,627Hospital/acute care


250,744



85,267



165,477Skelaxin®


203,015



52,066



150,949Sonata®


23,146



23,146



Neuroscience


226,161



75,212



150,949Other


144,674



63,900



80,774Total Branded


978,499



360,795



617,704Meridian Medical
    Technologies


172,970



26,450



146,520Royalties


2,470



2,135



335Contract
    manufacturing










All other










Total trademark and product rights

$
1,153,939


$
389,380


$
764,559  46




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##### Table of Contents



Three Months Ended





Three Months EndedMarch 31, 2007





March 31, 2006Amortization


Life





AmortizationImpairments


Expense


(Years)


Impairments


Expense(In thousands)





(In thousands)BrandedAltace®

$



$
3,977



20


$



$
3,677Other Cardiovascular/metabolic






1,802











1,823Cardiovascular/metabolic






5,779











5,500Intal®






1,402



11







1,902Other Hospital/acute care






3,054











3,402Hospital/acute care






4,456











5,304Skelaxin®






3,887



13.5







3,887Other






1,871











2,060Total Branded






15,993











16,751Meridian Medical
    Technologies






1,966











1,494Royalties






11











11Contract
    manufacturing


















All other


















Total trademark and product rights

$



$
17,970






$



$
18,256     Remaining Life at March 31, 2007Trademark &Patent


Product RightsAltace®


2 years 1 month



11 years 9 monthsSkelaxin®






9 years 9 monthsAvinza®


10 years 8 months



Intal®






6 years 9 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 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 47




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##### Table of Contents



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. 48




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##### Table of Contents



A WARNING
    ABOUT FORWARD-LOOKING STATEMENTS
        
    the future potential of, including anticipated net sales and
    prescription trends for our branded pharmaceutical products,
    particularly
    Altace®,
    Skelaxin®,
    Thrombin-JMI®,
    Sonata®
    and
    Levoxyl®;
    expectations regarding the enforceability and effectiveness of
    product-related patents, including in particular patents related
    to
    Altace®,
    Skelaxin®,
    Sonata®
    and
    Adenoscan®;
    expected trends and projections with respect to particular
    products, reportable segment and income and expense line items;
    the timeliness and accuracy of wholesale inventory data provided
    by our customers;
    the adequacy of our liquidity and capital resources;
    anticipated capital expenditures;
    the development, approval and successful commercialization of
    Remoxytm,
    an investigational drug for the treatment of
    moderate-to-severe
    chronic pain; bremelanotide, an investigational new drug for the
    treatment of erectile dysfunction and female sexual dysfunction;
    and product life-cycle development projects;
    the successful execution of our growth strategies;
    anticipated developments and expansions of our business;
    our plans for the manufacture of some of our products;
    the cost and uncertainty of research, clinical trials and other
    development activities involving pharmaceutical products;
    the development of product line extensions;
    the unpredictability of the duration or future findings and
    determinations of proceedings of the FDA and other regulatory
    agencies worldwide;
    products developed, acquired or in-licensed that may be
    commercialized;
    the intent, belief 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
    Altace®
    and
    Skelaxin®
    patent challenges, the SEC investigation, other possible
    governmental investigations, securities litigation, and other
    legal proceedings described in this report; and
    expectations regarding our financial condition and liquidity as
    well as future cash flows and earnings. 49




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##### Table of Contents



Form 10-K,
  Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk          Item 4.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e)
  Rules 13a-15(f) 15d-15(f)
 50




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##### Table of Contents



PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-K
  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.
  ® ® ® ® ® ® ®
  ® ® ® ®
  ® ® ® ® ®  ® ®
  ® ® and/or ® ®
 51




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##### Table of Contents



Item 6.
    Exhibits  ExhibitNumber

Description10
.1(1)*

Form of Option Certificate and
    Nonstatutory Stock Option Agreement10
.2(1)*

Form of Restricted Stock
    Certificate and Restricted Stock Grant Agreement10
.3(1)*

Form of Long-Term Performance Unit
    Award Agreement  One Year Performance Cycle10
.4(1)*

Form of Long-Term Performance Unit
    Award Agreement  Three Year Performance Cycle10
.5(2)

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
.6(3)

Amendment No. 1 to Purchase
    Agreement, Contract Sales Force Agreement and Confidentiality
    Agreement by and between King Pharmaceuticals, Inc., King
    Pharmaceuticals Research and Development, Inc. and Ligand
    Pharmaceuticals Incorporated, dated as of January 3, 2007,
    effective as of November 30, 200610
.7(3)

Side Letter among King
    Pharmaceuticals, Inc., King Pharmaceuticals Research and
    Development, Inc. and Ligand Pharmaceuticals Incorporated dated
    December 29, 200610
.8*

2007 Executive Management
    Incentive Award     *
    
    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 March 27, 2007.(2)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed March 2, 2007.(3)
    
    Incorporated by reference to Kings Current Report on
    Form 8-K
    filed January 5, 2007. 52




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##### Table of Contents



SIGNATURES      By:
    /s/  BRIAN
    A. MARKISON   President and Chief Executive Officer
    By:
    /s/  JOSEPH
    SQUICCIARINO   Chief Financial Officer
   53