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KV Pharmaceutical Reaches Agreement with U.S. Department of Justice

"This settlement marks an important milestone in our efforts to restore normalized business operations at KV, regain full regulatory and legal compliance and set KV on a new path moving forward," said David Van Vliet, interim CEO of KV Pharmaceutical. "Management and the Board have been working diligently to address this issue and we are looking forward to having this matter resolved. Looking ahead, we remain focused on working alongside the FDA in accordance with our consent decree and demonstrating cGMP compliance so we can resume manufacturing and return our products to market."

Terry Hatfield, Chairman of the Board of Directors stated, "David Van Vliet and his management team assumed leadership of KV under difficult circumstances and during a critical period for the Company. The Board recognizes the commitment and focus David and his team have demonstrated as KV works towards rectifying prior regulatory and compliance issues and returning the Company to market."

Under the terms of the settlement, ETHEX's payment of $25.8 million includes $2.3 million in restitution to the federal government. The amounts would be paid through a pre-determined schedule running through July 2012. ETHEX will plead guilty to two felony counts of failure in 2008 to file Field Alerts for the drugs Dextroamphetamine and Propafenone. In light of the plea and likely exclusion of ETHEX from government programs, the company has determined to cease operations of ETHEX.

Because pharmaceutical manufacturing is conducted by the parent company, KV, this settlement, if accepted by the court, would not restrict KV from a return to manufacturing its generic pharmaceutical products upon regaining compliance with cGMP in accordance with the Company's consent decree with the Food and Drug Administration (FDA). KV will also retain all related intellectual property, including all New Drug Applications (NDA's) for brand drugs and Abbreviated New Drug Applications (ANDA's) for generic drugs and the ability to conduct marketing and distribution of all of its previously approved products.

About KV Pharmaceutical Company

KV Pharmaceutical Company is a fully integrated specialty pharmaceutical company that develops, manufactures, markets, and acquires technology-distinguished branded and generic/non-branded prescription pharmaceutical products. For further information about KV Pharmaceutical Company, please visit the Company's corporate Web site at www.kvpharmaceutical.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains various forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 (the "PSLRA") and which may be based on or include assumptions concerning the operations, future results and prospects of the Company. Such statements may be identified by the use of words like "plan," "expect," "aim," "believe," "project," "anticipate," "commit," "intend," "estimate," "will," "should," "could," "potential" and other expressions that indicate future events and trends.

All statements that address expectations or projections about the future, including without limitation, statements about product development, product launches, regulatory approvals, governmental and regulatory actions and proceedings, market position, acquisitions, sale of assets, revenues, expenditures, resumption of manufacturing and distribution of products and the impact of the recall and suspension of shipments on revenues, and other financial results, are forward-looking statements.

All forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the PSLRA's "safe harbor" provisions, the Company provides the following cautionary statements identifying important economic, competitive, political, regulatory and technological factors, among others, that could cause actual results or events to differ materially from those set forth or implied by the forward-looking statements and related assumptions.

Such factors include (but are not limited to) the following:

    1. the ability to continue as a going concern;
    2. difficulties and uncertainties with respect to obtaining additional
       capital;
    3. the consent decree between the Company and the U.S. Food and Drug
       Administration (the "FDA") and the Company's suspension of the production
       and shipment of all of the products that the Company manufactures and the
       related nationwide recall affecting all of the products that the Company
       manufactures, as well as the related material adverse effect on the
       Company's revenue, assets and liquidity and capital resources, all as
       more fully described in the Company's Form 8-K filed with the SEC on
       January 26, 2009, the Company's Form 8-K filed with the SEC on February
       26, 2009, the Company's Form 8-K filed with the SEC on March 3, 2009, the
       Company's Form 8-K filed with the SEC on April 30, 2009, the Company's
       Form 8-K filed with the SEC on July 24, 2009 and the Company's Form 8-K
       filed with the SEC on November 12, 2009;
    4. the plea agreement between the Company and the U.S. Department of Justice
       and the Company's obligations in connection therewith, as well as the
       related material adverse effect, if any, on the Company's revenue, assets
       and liquidity and capital resources;
    5. changes in the current and future business environment, including
       interest rates and capital and consumer spending;
    6. the difficulty of predicting FDA approvals, including timing, and that
       any period of exclusivity may not be realized;
    7. the possibility of not obtaining FDA approvals or delay in obtaining FDA
       approvals;
    8. acceptance of and demand for the Company's new pharmaceutical products;
    9. the introduction and impact of competitive products and pricing,
       including as a result of so-called authorized-generic drugs;
    10. new product development and launch, including the possibility that any
        product launch may be delayed;
    11. reliance on key strategic alliances;
    12. the availability of raw materials and/or products manufactured for the
        Company under contract manufacturing arrangements with third parties;
    13. the regulatory environment, including regulatory agency and judicial
        actions and changes in applicable law or regulations;
    14. fluctuations in revenues;
    15. the difficulty of predicting international regulatory approvals,
        including timing;
    16. the difficulty of predicting the pattern of inventory movements by the
        Company's customers;
    17. the impact of competitive response to the Company's sales, marketing and
        strategic efforts, including the introduction or potential introduction
        of generic or competing products against products sold by the Company
        and its subsidiaries;
    18. risks that the Company may not ultimately prevail in litigation,
        including challenges to the Company's intellectual property rights by
        actual or potential competitors or to the Company's ability to market
        generic products due to brand company patents and challenges to other
        companies' introduction or potential introduction of generic or
        competing products by third parties against products sold by the Company
        or its subsidiaries, including without limitation the litigation and
        claims referred to in Note 16 of the Notes to the Consolidated Financial
        Statements in the Company's Quarterly Report on Form 10-Q for the
        quarter ended June 30, 2008 and under the heading "Certain Other
        Matters" in the Company's Form 8-K filed with the SEC on April 30, 2009;
    19. the possibility that the Company's current estimates of the financial
        effect of certain announced product recalls could prove to be incorrect;
    20. whether any product recalls or product introductions result in
        litigation, agency action or material damages;
    21. the satisfaction or waiver of the terms and conditions for the
        acquisition of the full U.S. and worldwide rights to Gestiva(TM) set
        forth in the previously disclosed Gestiva(TM) acquisition agreement, as
        amended;
    22. the series of putative class action lawsuits alleging violations of the
        federal securities laws by the Company and certain individuals, all as
        more fully described in the Company's Form 8-K filed with the SEC on
        January 26, 2009, the Company's Form 8-K filed with the SEC on February
        26, 2009, the Company's Form 8-K filed with the SEC on April 30, 2009,
        as well as certain other of the Company's SEC filings;
    23. the possibility that insurance proceeds are insufficient to cover
        potential losses that may arise from litigation, including with respect
        to product liability or securities litigation;
    24. the informal inquiry initiated by the SEC and any related or additional
        governmental investigative or enforcement proceedings, including actions
        by the FDA and the U.S. Department of Justice, as more fully described
        in the Company's Form 8-K filed with the SEC on January 26, 2009, the
        Company's Form 8-K filed with the SEC on February 26, 2009, the
        Company's Form 8-K filed with the SEC on April 30, 2009, the Company's
        Form 8-K filed with the SEC on July 24, 2009, the Company's Form 8-K
        filed with the SEC on November 12, 2009 and the Company's Form 8-K filed
        with the SEC on February 25, 2010;
    25. delays in returning, or failure to return, certain or many of the
        Company's approved products to market, including loss of market share as
        a result of the suspension of shipments, and related costs;
    26. the ability to sell or license certain assets, and the terms of such
        transactions;
    27. the possibility that default on one type or class of the Company's
        indebtedness could result in cross default under, and the acceleration
        of, the Company's other indebtedness;
    28. the possibility that the failure to timely file the Company's Annual
        Report on Form 10-K for fiscal year 2009 with the SEC could result in
        the delisting of the Company's securities by the New York Stock
        Exchange; and
    29. the risks detailed from time to time in the Company's filings with the
        SEC.

This discussion is not exhaustive, but is designed to highlight important factors that may impact the Company's forward-looking statements.

Because the factors referred to above, as well as the statements included elsewhere in this press release, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by the Company or on the Company's behalf, you should not place undue reliance on any forward-looking statements. All forward-looking statements attributable to the Company are expressly qualified in their entirety by the cautionary statements in this "Cautionary Note Regarding Forward-Looking Statements" and the risk factors that are included under the caption "Item 1A--Risk Factors" in the Company's Annual Report on Form 10-K for the year ended March 31, 2008, as supplemented by the Company's subsequent SEC filings. Further, any forward-looking statement speaks only as of the date on which it is made and the Company is under no obligation to update any of the forward-looking statements after the date of this press release. New factors emerge from time to time, and it is not possible for the Company to predict which factors will arise, when they will arise and/or their effects. In addition, the Company cannot assess the impact of each factor on the Company's future business or financial condition or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

SOURCE KV Pharmaceutical Company