Forest Laboratories, Inc. Reports Fiscal Year Second Quarter 2013 GAAP Earnings Per Share of $0.08

  Forest Laboratories, Inc. Reports Fiscal Year Second Quarter 2013 GAAP
  Earnings Per Share of $0.08

 Company Provides Fiscal Year 2013 Revised GAAP EPS Guidance in the Range of
                            $0.15-$0.30 Per Share
          Non-GAAP EPS will be in the Range of $0.45-$0.60 Per Share

Business Wire

NEW YORK -- October 16, 2012

Forest Laboratories, Inc. (NYSE: FRX), an international pharmaceutical
manufacturer and marketer, today announced that reported GAAP earnings per
share equaled $0.08 in the second quarter of fiscal 2013 compared with $0.91
in the second quarter of fiscal 2012 . Non-GAAP earnings per share equaled
$0.15 per share in the second quarter of fiscal 2013 compared with $0.95 share
in the second quarter of fiscal 2012.

Net sales for the quarter decreased 38.8% to $692.0 million, from $1,130.3
million in the year-ago period. Namenda® (memantine HCl), an NMDA receptor
antagonist for the treatment of moderate and severe Alzheimer’s disease,
recorded sales of $367.6 million during the quarter, an increase of 9.1% from
last year’s second quarter. Sales of Bystolic® (nebivolol), a beta-blocker for
the treatment of hypertension, were $106.5 million, an increase of 29.4% over
the year-ago period. Sales of Savella® (milnacipran HCl), a selective
serotonin norepinephrine dual reuptake inhibitor (SNRI) for the management of
fibromyalgia, were $26.2 million, an increase of 2.7% from last year’s second
quarter.

The Company commercially launched two of its newest products, Daliresp® and
Viibryd® in August 2011. Daliresp (roflumilast), a PDE4 enzyme inhibitor for
the treatment to reduce the risk of exacerbations in patients with chronic
obstructive pulmonary disease (COPD) recorded sales of $19.5 million in the
current quarter. Viibryd (vilazodone HCl), a selective serotonin reuptake
inhibitor (SSRI) and a partial agonist at serotonergic 5-HT[1A] receptors for
the treatment of adults with major depressive disorder (MDD) recorded sales of
$39.9 million in the current quarter. Teflaro® (ceftaroline fosamil), a
broad-spectrum bactericidal cephalosporin antibiotic for the treatment of
adults with community-acquired bacterial pneumonia and with acute bacterial
skin and skin structure infections, recorded sales of $10.0 million in the
current quarter. Teflaro was commercially launched in March 2011 and recorded
sales of $5.3 million in last year’s second quarter. Sales of Lexapro®
(escitalopram oxalate), an SSRI for the initial and maintenance treatment of
MDD in adults and adolescents and generalized anxiety disorder in adults were
$44.7 million compared with $596.1 million in the year-ago period. Patent
protection for Lexapro expired on March 14, 2012.

Contract revenue was $54.3 million in the current quarter compared to $33.6
million last year. Benicar® (olmesartan medoxomil) co-promotion income totaled
$30.2 million, a decrease of $1.3 million compared to $31.5 million in last
year’s first quarter. Contract revenue also included $22.7 million of income
from a distribution agreement with Mylan, Inc. (Mylan) pursuant to which Mylan
is authorized to sell a generic version of Lexapro and the Company retains a
portion of the profits from those sales. The six-month Hatch-Waxman
exclusivity period related to generic Lexapro expired on September 13, 2012.

Cost of sales as a percentage of sales was 21.6% compared with 23.4% in last
year’s second quarter. Selling, general and administrative expense for the
current quarter was $374.9 million as compared to $388.7 million in the
year-ago quarter. The current level of spending reflects the resources and
activities we believe are required to support our currently marketed products,
particularly our newest products: Teflaro, Daliresp and Viibryd and the
pre-launch commercial costs associated with Tudorza™  (aclidinium bromide) for
the long-term maintenance treatment of COPD, and Linzess™  (linaclotide) for
the treatment of irritable bowel syndrome with constipation (IBS-C) and
chronic idiopathic constipation (CIC).

Research and development spending for the current quarter was $202.8 million
compared with $197.3 million in last year’s second quarter. The current
quarter had no product development milestone charges compared to $30.0 million
of milestone payments in the prior year’s quarter.

Income tax expense for the quarter was $12.4 million, reflecting a quarterly
effective tax rate of 37.4%. The higher effective tax rate is due principally
to the repeal of the R&D tax credit and the mix of earnings in different
jurisdictions. The Company now expects the annual effective tax rate to be
approximately 24% for fiscal 2013. Reported net income for the quarter ended
September 30, 2012 was $20.8 million or $0.08 per share compared to $249.8
million or $0.91 per share reported for last year’s second quarter.

Diluted shares outstanding for the three months ended September 30, 2012 were
approximately 267,169,000, a reduction of approximately 6.6 million shares
compared to the year-ago period primarily due to the Company’s accelerated
share repurchase programs.

Six Month Results

Revenues for the six months ended September 30, 2012 decreased 31.9% to
$1,581.8 million from $2,321.0 million in the prior year.

Net income for the six months ended September 30, 2012 decreased 85.0% to
$76.1 million from $508.0 million reported in the six months of the prior
year. Reported diluted GAAP earnings per share decreased 84.5% to $0.28 per
share in the current year’s six months as compared to diluted earnings per
share of $1.81 per share in last year’s six months.

Fiscal 2013 Guidance

The Company now expects that GAAP earnings per share for the fiscal year
ending March 31, 2013 will be in the range of $0.15 to $0.30 including
acquisition related amortization. Non-GAAP earnings per share will be in the
range of $0.45 to $0.60.

Total net revenue (includes product sales as well as the earnings contribution
from Benicar, authorized generic sales of Lexapro, interest income and other
income) is now expected to be $3.2 billion compared with previous guidance of
$3.4 billion as a result of the following:

  *As previously disclosed in June 2012, sales of Lexapro are now expected to
    be approximately $215 million compared to the previous estimate of $250
    million and royalty income earned on sales of the Company’s authorized
    generic version of Lexapro is now expected to be $60 million compared with
    previous guidance of $115 million. Shipments of Levothroid have not
    resumed due to manufacturing issues affecting our third party licensor and
    supplier. Annual sales of Levothroid are approximately $17 million.
  *Sales of Namenda are now expected to end the year 11% higher than last
    year compared with previous guidance of a 17% increase. New initiatives to
    improve dementia care in nursing homes, while primarily directed toward
    reducing antipsychotic use, appear to have also reduced demand for
    Alzheimer’s medications. The impact to Namenda is a projected reduction in
    sales of approximately $85 million.
  *Sales of Linzess are now expected to be $25 million compared with previous
    guidance of $60 million due to a delay in launch resulting from the
    extended three month FDA review of our NDA.
  *Teflaro sales are now expected to be $45 million compared with previous
    guidance of $65 million.

Finally, the Company has accelerated the enrollment in certain Phase III and
life-cycle development programs. As a result, research and development
expense, including milestones, is now expected to be $900 million as compared
to previous guidance of $850 million.

Howard Solomon, Chairman and Chief Executive Officer of Forest, said: “With
Lexapro now completely genericized we have a bright future with our next
generation of products combined with growth of Namenda. We are pleased with
the continued successful progress of our most recent new product launches for
Teflaro, Daliresp and Viibryd. Collectively, our next generation products,
Bystolic, Savella, Teflaro, Daliresp and Viibryd had sales of $202 million in
the quarter, representing 69% growth in comparison to the comparable prior
year quarter. We are also pleased with the continued positive progress of our
late stage new product development pipeline. During the quarter, we received
FDA approval for two New Drug Applications (NDAs) (aclidinium and
linaclotide), and as planned, submitted an NDA for another product
(levomilnacipran).

During the quarter we and our partner Almirall were pleased to announce the
approval of Tudorza (aclidinium). As the first long-acting inhaled
anticholinergic agent approved in 8 years for COPD, Tudorza will be an
important treatment option available for the nearly 13 million patients in the
U.S. that have been diagnosed with this serious disease. Tudorza will be
launched and available to patients later this quarter. Also during the
quarter, we and our partner Ironwood Pharmaceuticals were delighted to
announce the approval of Linzess (linaclotide). Irritable bowel syndrome with
constipation and chronic idiopathic constipation affect as many as 13 million
and 35 million adult Americans, respectively. There are few treatment options
for these conditions and Linzess has the potential to improve the lives of
patients suffering from the symptoms associated with these two serious
conditions. Linzess will also be launched and available to patients later this
quarter.

We and our partner Pierre Fabre Laboratories were pleased to recently announce
that we have submitted an NDA to the FDA for levomilnacipran, a serotonin
norepinephrine reuptake inhibitor (SNRI) for the treatment of major depressive
disorder. MDD is a serious medical condition requiring treatment that affects
more than 15 million adults in the U.S. We are also on track to file the NDA
for cariprazine for the treatment of schizophrenia and acute mania associated
with bipolar 1 disorder, later this quarter. Assuming their respective
regulatory approvals in calendar 2013, we expect to launch levomilnacipran and
cariprazine during fiscal 2014.

During the quarter we also completed two business development transactions
with our partner Almirall. In Canada, where we have established a wholly owned
subsidiary, we entered into an agreement to co-promote the aclidinium
franchise with Almirall. In another agreement, we have granted Almirall
exclusive commercialization rights for linaclotide in Mexico.

We have achieved remarkable progress over the past few years. Today we have
one of the strongest and most diverse product portfolios and pipelines in the
industry, in large part due to our strong core competency in our key
therapeutic focus areas and our status as a partner of choice, as evidenced by
our numerous repeat collaborations. Commercially we have successfully launched
five new products in less than five years - Bystolic, Savella, Teflaro,
Daliresp and Viibryd. With the upcoming launches of Tudorza and Linzess we
will have seven young and growing products in our commercial portfolio, an
enviable achievement for our Company. With these seven launches in hand, plus
the completed NDA filing for levomilnacipran and the upcoming filing for
cariprazine, we are well on track to secure the sales and earnings to build
long-term growth well into the future.”

Use of Non-GAAP Financial Information

Non-GAAP earnings per share information adjusted to exclude certain costs,
expenses and other specified items as summarized in the table below. This
information is intended to enhance an investor’s overall understanding of the
Company’s past financial performance and prospects for the future. This
information is not intended to be considered in isolation or as a substitute
for earnings per share prepared in accordance with GAAP.


FOREST LABORATORIES, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL INFORMATION
                                                      
                                     THREE MONTHS            SIX MONTHS

                                     ENDED                   ENDED

                                     SEPTEMBER 30            SEPTEMBER 30
                                     2012     2011        2012     2011
Reported diluted earnings per        $0.08       $0.91       $0.28       $1.81
share:
Specified items, per share,
net of tax:
Amortization arising from
business combinations
and acquisitions of product
rights
Recorded in Cost of sales            0.03        0.02        0.07        0.03
Recorded in Selling, general         0.04        0.02        0.08        0.03
and administrative
Licensing payment to Blue Ash
Therapeutics, LLC                    -           -           -           0.14

for azimilide recorded in R&D
Rounding                             -           -           -           0.01
Adjusted Non-GAAP diluted                                             
earnings per
share:                               $0.15       $0.95       $0.43       $2.02
                                                                         

Forest will host a conference call at 10:00 AM EDT today to discuss the
results. The conference call will be webcast live on the Company’s website at
www.frx.com and also on the website www.streetevents.com. Please log on to
either website at least fifteen minutes prior to the conference call as it may
be necessary to download software to access the call. A replay of the
conference call will be available until November 16, 2012 at both websites and
also by dialing (855) 859-2056 (US and Canada) or +1 404 537-3406
(international), Conference ID: 33378270.

About Forest Laboratories and Its Products

Forest Laboratories’ (NYSE: FRX) longstanding global partnerships and track
record developing and marketing pharmaceutical products in the United States
have yielded its well-established central nervous system and cardiovascular
franchises and innovations in anti-infective, respiratory, gastrointestinal,
and pain management medicine. The Company’s pipeline, the most robust in its
history, includes product candidates in all stages of development across a
wide range of therapeutic areas. The Company is headquartered in New York, NY.
To learn more, visit www.FRX.com.

Except for the historical information contained herein, this release contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of risks and
uncertainties, including the difficulty of predicting FDA approvals, the
acceptance and demand for new pharmaceutical products, the impact of
competitive products and pricing, the timely development and launch of new
products, and the risk factors listed from time to time in Forest
Laboratories’ Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
any subsequent SEC filings. Forest assumes no obligation to update
forward-looking statements contained in this release to reflect new
information or future events or developments. Forest assumes no obligation to
update forward-looking statements contained in this rerelease to reflect new
information or future events or developments.


FOREST LABORATORIES, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF INCOME



(Unaudited)

                       THREE MONTHS                      SIX MONTHS
                                                 
                       ENDED                             ENDED

                       SEPTEMBER 30                      SEPTEMBER 30
                       (In thousands, except per share amounts)
                         2012         2011              2012          2011
Revenues:
  Net sales            $ 692,017       $ 1,130,250       $ 1,443,783     $ 2,234,385
  Contract               54,277          33,579            120,112         74,218
  revenue
  Other income          14,343         5,250            17,869         12,407
Net revenues            760,637        1,169,079        1,581,764      2,321,010
                                                                         
Costs and
expenses:
  Cost of goods          149,723         263,984           317,946         517,781
  sold
  Selling,
  general and            374,889         388,657           757,198         746,734
  administrative
  Research and          202,839        197,331          398,005        391,774
  development
                        727,451        849,972          1,473,149      1,656,289
                                                                         
Income before
income tax               33,186          319,107           108,615         664,721
expense
  Income tax            12,409         69,294           32,553         156,771
  expense
Net income             $ 20,777        $ 249,813         $ 76,062        $ 507,950
                                                                         
Net income per
share:
  Basic                $0.08           $0.91             $0.28           $1.82
  Diluted              $0.08           $0.91             $0.28           $1.81
                                                                         
Weighted average
number of
shares
outstanding:
  Basic                  266,503         273,196           267,447         279,449
  Diluted                267,169         273,753           268,092         280,015
                                                                           

Contact:

Forest Laboratories, Inc.
Frank J. Murdolo, 1-212-224-6714
Vice President - Investor Relations
media.relations@frx.com
 
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