UPDATE 2-King Pharma to cut costs, 20 percent of work force

(Adds number of jobs to be cut)

By Bill Berkrot

NEW YORK, Oct 18 (Reuters) - King Pharmaceuticals Inc (KG.N), which last month had the patent on its biggest product -- the blood pressure treatment Altace -- declared invalid, said on Thursday it was cutting 20 percent of its work force, or about 520 jobs, and moving to reduce other expenses.

The Bristol, Tennessee-based drugmaker said it expects to save $75 million to $90 million in 2008 as a result of these actions.

Altace, which had sales of $163 million in the second quarter, accounts for roughly 35 percent of King's revenue.

After a victory for King in a lower court, the U.S. Court of Appeals ruled against the continued validity of the patent covering Altace, paving the way for competition from cheaper generic versions of the medicine, known chemically as ramipril.

King has filed a petition with the court seeking reconsideration of the decision, asserting that the patent ruling in favor of India's Lupin Ltd (LUPN.BO) involved significant errors.

A branded drug can very quickly lose 80 percent or more of its revenue once multiple generic versions hit the market.

King said it expects to take a one-time charge of about $70 million during 2007 related to the restructuring announced Thursday.

It also said it will incur special charges this year of about $150 million to recognize the impaired value of its intangible assets associated with Altace and about $90 million primarily related to the impaired value of raw material inventory and related contracts associated with the medicine.

"We believe the expense reduction measures announced today will enable us to continue generating strong cash flow to invest in our pipeline and business development opportunities," Chief Financial Officer Joseph Squicciarino said in a statement.

King shares edged higher in after hours trading to $10.83 from their close at $10.72 on the New York Stock Exchange.

The drugmaker's shares have plunged about 49 percent since hitting $21 in mid-July as investors showed concern about patent challenges to King's two biggest products -- Altace and the muscle relaxer Skelaxin. (Reporting by Bill Berkrot, editing by Phil Berlowitz)