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Forest Laboratories, Inc. Reports Fiscal Year 2013 Third Quarter Earnings



  Forest Laboratories, Inc. Reports Fiscal Year 2013 Third Quarter Earnings

Business Wire

NEW YORK -- January 15, 2013

Forest Laboratories, Inc. (NYSE: FRX), an international pharmaceutical
manufacturer and marketer, today reported a GAAP loss per share of $0.58 in
the third quarter of fiscal 2013 compared with income of $1.04 in the third
quarter of fiscal 2012. Included in the third quarter results were
upfront/licensing agreement payments totaling $76.0 million, or $0.29 per
share, net of tax. The non-GAAP loss per share was $0.21 in the third fiscal
quarter of 2013 compared with income of $1.08 in the third quarter of fiscal
2012.

Net sales for the quarter decreased 41.6% to $678.0 million, from $1.2 billion
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 $345.8 million during the quarter, an increase of 1.6% from last year’s
fiscal third quarter. Namenda sales were negatively impacted by higher
contract rebates, largely driven by the Medicare Part D Coverage Gap
liability, which peak in the fiscal third quarter and are expected to return
to normal levels in the fiscal fourth quarter.

Sales of Bystolic® (nebivolol), a beta-blocker for the treatment of
hypertension, were $108.8 million, an increase of 20.1% over the year-ago
period. Sales of Savella® (milnacipran HCl), a selective serotonin
norepinephrine dual reuptake inhibitor (SNRI) for the management of
fibromyalgia, were $25.6 million, a decrease of 2.7% from last year’s third
quarter.

In August 2011 the Company launched Daliresp® and Viibryd®. 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 $17.5 million. Sales of Daliresp in last year’s fiscal third
quarter were $8.4 million. Daliresp sales were similarly impacted by contract
rebates as described above. Viibryd (vilazodone HCl), an SSRI and a partial
agonist at serotonergic 5-HT[1A] receptors for the treatment of major
depressive disorder (MDD) recorded sales of $40.6 million. Sales of Viibryd in
last year’s fiscal third quarter were $18.9 million. 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 $11.5 million.
Teflaro was launched in March 2011 and recorded sales of $6.5 million in last
year’s third fiscal quarter.

The Company commercially launched two of its newest products, Tudorza®  and 
Linzess® in December 2012. Tudorza (aclidinium bromide inhalation powder), an
anticholinergic indicated for the long-term maintenance treatment of
bronchospasm associated with COPD recorded initial trade stocking of $12.2
million. Linzess  (linaclotide), a guanylate cyclase (GC-C) agonist for the
treatment of both irritable bowel syndrome with constipation (IBS-C) and
chronic idiopathic constipation (CIC) in adults recorded initial trade
stocking of $19.2 million.

Sales of Lexapro® (escitalopram oxalate), a selective serotonin reuptake
inhibitor (SSRI) for the initial and maintenance treatment of MDD in adults
and adolescents and generalized anxiety disorder in adults were $20.3 million
compared with $593.0 million in the year-ago period. The Lexapro patent
expired on March 14, 2012.

Contract revenue was $38.3 million in the current quarter compared to $34.1
million last year. Benicar® (olmesartan medoxomil) co-promotion income
increased to $36.0 million, compared to $31.4 million in last year’s third
quarter.

Cost of sales as a percentage of sales was 22.6% in both the current and prior
year third quarters. Selling, general and administrative expense for the
current quarter was $428.4 million as compared to $396.1 million in the
year-ago quarter. The current level of spending reflects the resources and
activities required to support our currently marketed products, particularly
our newest products: Teflaro, Daliresp, Viibryd, Tudorza and Linzess.

Research and development (R&D) spending for the current quarter was $325.3
million compared with $191.3 million in last year’s third quarter. The current
quarter includes upfront licensing/agreement payments of $76.0 million and
milestone payments of $44.5 million compared to $24.6 million of milestone
payments in the prior year’s quarter.

Income tax benefit for the quarter was $30.7 million, reflecting a quarterly
effective tax rate of -16.6%. For the quarter ended December 31, 2012 a net
loss of $153.6 million or loss of $0.58 per share was reported compared to net
income of $278.4 million or income of $1.04 per share reported for last year’s
third quarter.

Nine Month Results

Revenues for the nine months ended December 31, 2012 decreased 34.7% to $2.3
billion from $3.5 billion in the prior year.

Net income for the nine months ended December 31, 2012, the Company reported
decreased to a net loss of $77.5 million compared to net income of $786.4
million reported in the nine months of the prior year. Reported earnings per
share decreased to a loss of $0.29 per share in the current year’s nine months
as compared to earnings per share of $2.85 in last year’s nine months.

Fiscal 2013 Guidance

The Company now expects that non-GAAP earnings per share for the fiscal year
ending March 31, 2013 will be at the lower end of the previously guided 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 between $3.1 billion
and $3.2 billion.

Howard, Solomon, Chairman and Chief Executive Officer of Forest said: “In the
third quarter of fiscal 2013, as expected, we incurred a loss resulting
principally from sales lost following the expiration of Lexapro’s patent
exclusivity in March 2012. The third quarter had lower sales of branded and
generic Lexapro than the prior two quarters, as Lexapro declined in sales
closer to its ultimately anticipated levels.

“More importantly, in the month of December 2012, we launched two major new
products, Tudorza and Linzess. We believe sales of those products, and the
seven products already launched and two products, levomilnacipran and
cariprazine, which were filed with the FDA this year, and which we anticipate
will be launched in our next fiscal year, will ultimately equal and exceed the
sales lost following the expiration of Lexapro’s exclusivity and the potential
loss in subsequent years of Namenda’s exclusivity. And, of course, there is
always the potential for additional new products.

“Our strategy for acquiring products has repeatedly been confirmed, in concept
and in execution. Of course, the sales potential of each varies. A few, like
Savella and Teflaro, will achieve more modest sales. But, for example,
Bystolic, launched several years ago, with sales of $108 million this last
quarter, an increase of 20.1% over the previous year, with its growth to be
significantly augmented by the combination with valsartan, presently in Phase
III, is likely to be another one of our largest products in coming years.

“The launch of every product requires major effort. It is costly financially
and in human effort, and two in one quarter is especially demanding. Each
involves sales force training and each involves a costly launch meeting with
additional training and motivational presentations involving nearly two
thousand sales and marketing personnel at each meeting. Most of those expenses
were incurred in the last quarter for both products, including increased
production costs for launch quantities, which were not compensated by initial
stocking sales. Our marketing department and sales force membership and
management exceeded even their usual impressive performance. It always takes a
little while for the expense dust to clear, and to see the sales and profits
generated by each new product.

“During the quarter we and our partner Gedeon Richter were pleased to announce
that we have submitted the NDA to the FDA for cariprazine, a potent D3/D2
receptor partial agonist with preferred binding to D3 receptors, for the
treatment of schizophrenia and Bipolar I Disorder. Schizophrenia and Bipolar I
Disorder are serious medical conditions requiring treatment that affects
millions of adult patients in the U.S. We are also studying cariprazine for
the treatment of bipolar depression, and for treatment resistant depression.
In addition, earlier this year we announced submission of our NDA for
levomilnacipran for the treatment of major depressive disorder.

“In addition, we announced two important business development transactions
during the quarter. In October we were pleased to announce that we entered
into a broad strategic alliance with Moksha8 in Latin America. Moksha8 is a
leader in the commercialization of CNS medicines in Latin America. Our
alliance includes an exclusive license from Forest to Moksha8 to commercialize
Viibryd, and potentially other Forest products and also provides us with an
opportunity to acquire Moksha8 in two years under certain conditions. In
November we were pleased to announce that we entered into an agreement with
Adamas Pharmaceuticals for the development and commercialization of a fixed
dose combination of Namenda XR and donepezil as a once-daily therapy for the
treatment of moderate and severe dementia of the Alzheimer’s type.

“The portfolio of our nine new products will cover six major therapeutic areas
– anti-infective, cardiovascular, central nervous system, gastrointestinal,
respiratory and pain. Several of these products are already being developed in
logical combination with other drugs, i.e. Bystolic and valsartan, Namenda XR
and donepezil, Tudorza and formoterol, and Teflaro with avibactam. And there
will be more to come as we continue to execute our business development
strategy to find new product opportunities.

“We believe that we are well on our way to realizing the fruits of success
from our new product portfolio that could ultimately generate significant
levels of sales and earnings to more than replace the expiring products and
secure long-term growth for our Company.”

Use of Non-GAAP Financial Information

Non-GAAP earnings per share information adjusted to exclude certain costs,
expenses and other specified items are 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         NINE MONTHS
                                       ENDED                ENDED
                                       DECEMBER 31,         DECEMBER 31,
                                         2012        2011     2012        2011
Reported Diluted earnings/(loss)       $ (0.58 )   $ 1.04   $ (0.29 )   $ 2.85
per share:
Per share impact of specified
items net of tax:
Amortization arising from
business combinations and
acquisitions of product rights
Recorded in Cost of sales                0.04        0.02     0.10        0.05
Recorded in Selling, general and         0.04        0.02     0.12        0.06
administrative
Upfront licensing/agreement              0.28        --       0.28        0.14
payments
Rounding                                 0.01        --       0.01        --
Adjusted Non-GAAP                      $ (0.21 )   $ 1.08   $ 0.22      $ 3.10
earnings/(loss) per share:
                                                                         

Forest will host a conference call at 10:00 AM EST today to discuss the
results. The conference call will be webcast live beginning at 10:00 AM EST 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
February 14, 2013 at both websites and also by dialing (855) 859-2056 (US or
Canada) or +1 (404) 537-3406 (international), Conference ID: 78714269.

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 LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                                                    
                     THREE MONTHS                  NINE MONTHS
                     ENDED                         ENDED

                     DECEMBER 31,                  DECEMBER 31,
                     (In thousands, except per share amounts)
                       2012            2011          2012            2011
Revenues:
Net sales            $ 677,967       $ 1,161,254   $ 2,121,750     $ 3,395,639
Contract               38,314          34,149        158,426         108,367
revenue
Other income           6,409           13,918        24,278          26,325
Net revenues           722,690         1,209,321     2,304,454       3,530,331
                                                                    
Costs and
expenses:
Cost of goods          153,311         262,732       471,257         780,513
sold
Selling,
general and            428,380         396,054       1,185,578       1,142,788
administrative
Research and           325,290         191,269       723,295         583,043
development
                       906,981         850,055       2,380,130       2,506,344
                                                                    
Income (loss)
before income          (184,291  )     359,266       (75,676   )     1,023,987
tax expense
Income tax
expense                (30,683   )     80,830        1,870           237,601
(benefit)
Net income             ($153,608 )   $ 278,436       ($ 77,546 )   $ 786,386
(loss)
                                                                    
Net income
(loss) per
share:
Basic                  ($0.58    )   $ 1.04          ($0.29    )   $ 2.86
Diluted                ($0.58    )   $ 1.04          ($0.29    )   $ 2.85
                                                                    
Weighted
average number
of shares
outstanding:
Basic                  266,018         267,397       266,967         275,400
Diluted                266,018         267,604       266,967         275,867
                                                                      

Contact:

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