Leiner reports $26.3 million loss for quarter

CARSON, Calif. -- Leiner Health Products, the generic drug and vitamin manufacturer with a plant in Fort Mill Township, reported a net loss of $26.3 million Friday when it released its quarterly results for the second quarter of fiscal year 2008.

The company has lost more than $53 million, according to the earnings report, since it stopped production of its over-the-counter drugs in March and laid off 600 workers at Fort Mill in June. The layoffs followed an FDA investigation, sparked by an employee's anonymous tip, that uncovered multiple manufacturing violations, FDA documents state.

CEO Bob Kaminski attributed the quarter's losses and $72.4 million dip in net sales (a 37 percent drop from this period last year) to the over-the-counter shut down.

But despite a grim year so far, Leiner officials are optimistic because the FDA recently cleared them to begin shipping some over-the-counter drugs held in limbo since a spring recall. Officials have not released which drugs will be sold.

Deal with Indiana company

The company, the nation's leading maker of generic vitamins, also announced this week it will purchase drugs from India-based Wockhardt so it can fill more orders that have been on hold. Leiner's new deal with Wockhardt will allow the company to be supplied with common antihistamines, according to a securities filing.

Kaminski said the latest developments demonstrate progress toward the company's goal of returning to the over-the-counter market. He said over-the-counter drugs, sold as store brands at Wal-Mart, Costco, CVS and other stores, could begin hitting store shelves by early next year.

"The bad news is the company is six months behind schedule returning to the OTC market," Kaminski said during a conference call Friday. He noted Leiner has hired a new vice president of quality control and begun to revamp its quality control measures.

"While we still have work to do, much of the issues have been resolved," Kaminski said.

Controversy has swirled around Leiner and its products since January, when an employee inside the company's Fort Mill plant reported violations of good manufacturing practices to the FDA, including allegations that the company manipulated quality tests and falsified records, according to an affidavit filed in U.S. District Court. An FDA investigation followed, and Leiner shut down all over-the-counter drug manufacturing and distribution in March. In April, it recalled all its over-the-counter products and in June laid off 600 Fort Mill workers, changing the Fort Mill production facility into a distribution center.

The FDA inspected the Fort Mill plant in January and February and issued a list of violations, including allowing drugs that failed quality tests to remain in the market, failing to properly train staff, not cleaning equipment properly and not identifying black specks found in some products, according to an FDA document.

Leiner officials have repeatedly declined to comment on the FDA investigation.