Forest Wins Board Battle Against Icahn as Investors Rally

Denner Says Preliminary Results Show Forest Win
Pedestrians walk outside 909 Third Avenue, home to the headquarters of Forest Laboratories Inc., in New York. Photographer: Daniel Acker/Bloomberg

Forest Laboratories Inc. won the support of shareholders today against billionaire investor Carl Icahn’s attempt to restructure the drugmaker’s board.

Shareholders elected the company’s entire slate of board candidates “by a significant margin” based on preliminary estimates at its annual meeting in New York today, Forest said in a statement. Forest’s 10-member slate includes three new directors.

Icahn is Forest’s second-biggest investor, with 9.2 percent of the stock, and had nominated four directors to the board. Icahn argued during the proxy fight that Forest’s average board tenure of 23 years was too long and cited a stock decline of more than 50 percent from the drugmaker’s 2004 high of $77.59.

“Congratulations on your victory!” Icahn said in a separate statement. “I look forward to our next meeting.”

Icahn also said that “activism, especially in bio-tech, usually takes longer than you believe it will.”

Icahn cited experience at ImClone Systems Inc., Genzyme Corp. and Biogen Idec Inc. as recent examples. Icahn was involved with the sales of ImClone to Eli Lilly & Co. in 2008 for $6.5 billion and Genzyme to Sanofi in February for $20.1 billion. At Biogen, Icahn gained three seats on the board after a three-year battle, oversaw the appointment of Chief Executive Officer George Scangos and helped narrow the company’s research.

Still Interested

Icahn is still interested in holding a stake in New York-based Forest, Alex Denner, senior managing director of Icahn Enterprises LP, said at the beginning of today’s meeting. Denner was one of the nominees.

Forest, in letters to shareholders over the last month, said the company has outperformed the Standard & Poor’s 500 Index, developed a diversified set of experimental medicines and has leadership “focused on continuing to build sustainable momentum and value for all shareholders.”

The company’s best-seller, the antidepressant Lexapro, will lose its patent protection next year. Forest also makes Alzheimer’s medicine Namenda.

Proxy adviser Institutional Shareholder Services, owned by MSCI Inc., last week recommended investors vote for Forest’s slate, writing in a report that Icahn’s case wasn’t compelling enough for change at the board level.

“Once ISS recommended for the company, we knew it was a real uphill battle,” Denner said in an interview after the meeting. “We do believe the company has made some positive governance changes because of our involvement.”

Denner was the first audience speaker at today’s meeting, congratulating Forest on its win and saying the Icahn group still has “things we’d like to see” change.

Forest Chief Executive Officer Howard Solomon responded that the company would “be in touch to set up a meeting.”

Forest fell $1.27, or 3.7 percent, to $33.18 at 4 p.m. in New York Stock Exchange composite trading, while the Standard & Poor’s 500 Index declined 4.5 percent.

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