Alpharma to Take Impairment Charge on U.S. Generics Business

Alpharma is preparing to take a goodwill impairment charge on its U.S. generics business -- a decision prompted largely by difficult business conditions in the generics market, the company said.

Alpharma said it is currently performing a valuation of its U.S. generics unit, Faulding Pharmaceutical, after determining the book value of the business is below what it was when the company purchased it in December 2001. "The estimated fair value of this business has been affected by intensified competition, increased presence of low-cost entrants and authorized generics, among other factors," Alpharma said.

Kathleen Makrakis, Alpharma's vice president of investor relations, said Faulding's value has wilted in the face of stiff market competition. "Generic competition is a factor," she said. "We expect fewer earnings to be generated by the generic business than when it was purchased."

Makrakis added that there has been concern over generic competition during the last few weeks in the investment community. Generics firms have lost two major court battles recently, including lawsuits filed over declaratory judgment and authorized generics issues.

Makrakis said Alpharma will need to complete a series of appraisals before it knows the amount of the goodwill impairment charge or the quarter in which it will be assessed. "Accounting rules require you to look at assets and make sure they're not overvalued," Makrakis said. "If you think a business has less value than is on the books, you have to write that down," she said.