Company Provides FY'07 Earnings Per Share Guidance NEW YORK, April
25 /PRNewswire-FirstCall/ -- Forest Laboratories, Inc. (NYSE:FRX),
an international pharmaceutical manufacturer and marketer, today
reported financial results for its fiscal fourth quarter ended
March 31, 2006. (Logo:
http://www.newscom.com/cgi-bin/prnh/20001011/FORESTLOGO ) Revenues
for the quarter increased 16% to $756,322,000 from $653,236,000 in
the year-ago period. Revenues were comprised of net sales of
$712,761,000, an increase of 15% from $618,285,000 in the year-ago
period, contract revenue of $31,225,000, an increase of 40% from
$22,313,000 in the year-ago period and other income of $12,336,000,
which decreased 2% from $12,638,000 in the year- ago period. Sales
of Lexapro(R) (escitalopram oxalate), an SSRI indicated for the
initial and maintenance treatment of major depressive disorder and
generalized anxiety disorder in adults, increased 16% in the
quarter to $464,100,000 from $399,381,000 in the year ago quarter
while sales of Celexa(R) (citalopram HBr) including the generic
version decreased 32% to $4,805,000 from $7,051,000 in the year-ago
quarter. Lexapro sales were sequentially lower than our fiscal
third quarter by approximately 3% while total prescription volume,
according to IMS monthly reports, increased approximately 2% from
the fiscal third to the fiscal fourth quarter. The difference is
partially due to an $11 million downward adjustment to reported
Lexapro sales recorded in the quarter in order to reflect fully our
estimated annual discount liabilities for the product and also due
to normal one to two day fluctuations in wholesaler buying
patterns. Sales of Namenda(R), an NMDA receptor antagonist for the
treatment of moderate to severe Alzheimer's disease, totaled
$145,385,000 in the quarter, an increase of 55% from sales of
$93,945,000 in last year's fourth quarter. Other income included
earnings from the co-promotion agreement with Sankyo Pharma for
Benicar(R)* and Benicar HCT(R), antihypertensive therapies, of
$30,721,000 and interest income of $12,046,000. Selling, general
and administrative expenses decreased 3% to $259,016,000. The
year-ago period included initial launch spending in support of
Campral(R)*, a product to treat alcohol dependence and Combunox(R),
a product indicated for the treatment of acute moderate to severe
pain. Research and development spending increased 215% to
$194,377,000 during the quarter and included license payments of
$125,000,000, equal to $0.34 per diluted share, net of tax. The
license payments were $75,000,000 to Mylan Laboratories for the
rights to nebivolol, a beta-blocker being developed for the
treatment of hypertension and congestive heart failure and
$50,000,000 to Replidyne for the rights to faropenem medoxomil, a
novel oral antibiotic being developed for upper respiratory and
skin infections. Also included was a $10,000,000 milestone payment,
equal to $0.03 per share, net of tax, paid to Replidyne for the
U.S. Food and Drug Administration's (FDA) acceptance for review of
the faropenem new drug application. Income tax expense reflects an
effective tax rate of 32%, resulting from the mix of earnings
reported by the U.S. and foreign jurisdictions principally due to
the significant license payments made by Forest Laboratories
Holdings Limited, an Irish affiliate of the Company. Excluding the
effect of the license payments, the effective tax rate would have
been 21%. Net income in the current quarter increased by 74% to
$91,890,000 as compared to $52,755,000 reported in the fourth
quarter of the prior year. Net income in the year-ago quarter was
reduced by a one-time income tax charge of $91 million, or $0.25
per diluted share outstanding, related to taxes associated with
$1.239 billion of funds repatriated in connection with the American
Jobs Creation Act of 2004. Fully diluted shares outstanding for the
fourth quarter were 329,969,000, a reduction of 27,020,000 shares
due mainly to the Company's share repurchase program. During the
quarter the Company purchased 10,256,700 shares to complete its
most recent 25 million share authorization. Reported diluted
earnings per share increased 87% to $0.28 in the current quarter,
compared to diluted earnings per share of $0.15 in the year-ago
period. Excluding the impact of license and milestone payments, net
of tax, in the current and year-ago periods, as well as the income
tax charge related to the American Jobs Creation Act in the
year-ago period, adjusted diluted earnings per share would have
been $0.65 in the current quarter compared to diluted earnings per
share of $0.43 in the year-ago period. Twelve-month results Revenue
for the fiscal year ended March 31, 2006 decreased 6% to
$2,962,390,000 from $3,159,639,000 in the prior year. Sales of
Lexapro increased 17% to $1,873,255,000 from $1,605,296,000 while
sales of Celexa including the generic version decreased 97% to
$19,006,000 from $658,014,000 due to the availability of generic
versions of the product during the entire fiscal year. Sales of
Namenda increased 53% to $508,043,000 from $332,707,000 while the
earnings contribution from the Benicar co-promotion increased 104%
to $114,472,000 from $56,076,000. Selling, general and
administrative expenses increased 4% to $1,031,451,000 from
$993,715,000 while research and development spending increased 40%
to $410,431,000 from $293,659,000. Included in the research and
development spending is $147,000,000 of license payments for four
development products as compared to $52 million of license payments
for three development products last fiscal year. Income tax expense
included the first quarter benefit of $36.4 million related to the
reversal of the prior year tax accrual in accordance with the
American Jobs Creation Act of 2004, as well as the impact of the
significant license payments incurred in the fourth quarter. Absent
these one-time items, the Company would have reported an effective
tax rate of 21%. Net income for the fiscal year ended March 31,
2006 decreased 16% to $708,514,000 from net income of $838,805,000
reported in the prior fiscal year. Diluted earnings per share for
the fiscal year ended March 31, 2006 decreased 8% to $2.08 as
compared to diluted earnings per share of $2.25 for the prior
fiscal year. Excluding the impact of license and milestone
payments, net of tax, as well as the income tax impact from the
American Jobs Creation Act in the current and year-ago fiscal
years, adjusted earnings per share for the fiscal year ended March
31, 2006 would have been $2.38 as compared to $2.65 per share for
the fiscal year ended March 31, 2005. See supplemental financial
table. Fiscal 2007 Guidance Regarding the fiscal year ending March
31, 2007, the Company expects that adjusted fully diluted earnings
per share will be approximately $2.74 to $2.79 not including
product licensing and milestone payments or stock option expense.
Inclusion of a product licensing payment of $60 million made in
April 2006 and planned milestone payments of approximately $63
million would reduce projected earnings per share by approximately
$0.29 to a range of $2.45 to $2.50 per share. Projected stock
option expense under FAS-123R would reduce earnings by
approximately $0.08 per share to projected reported earnings of
$2.37 to $2.42 per share. The fiscal 2007 projection of $2.74 to
$2.79 earnings per share would be comparable to the adjusted
earnings per share for fiscal 2006 of $2.38. See supplemental
financial information. Key assumptions supporting the fiscal year
forecast include the following: The Company anticipates that total
revenue in fiscal 2007, which includes product sales as well as the
earnings contribution from Benicar, interest income and other
income, will increase by approximately 11% to slightly below $3.3
billion. For Lexapro, we project an increase in overall
prescription volume for the underlying SSRI/SNRI antidepressant
market as a whole of approximately 2% and an increase in Lexapro's
total prescription market share of between 25 and 50 basis points.
This increase in market growth as well as market share, along with
a price increase, is projected to generate Lexapro sales of
approximately $2,070,000,000, growth of 10-11% from the reported
sales in the just completed fiscal year. Namenda is also expected
to increase its total prescription volume and benefit from a
projected underlying prescription volume growth for the Alzheimer's
market in the 8% range. We anticipate that Namenda sales should be
approximately $615,000,000 for the fiscal year, growth of
approximately 22%. The Company expects that Benicar will continue
to show strong market share gains in fiscal 2007 in a market that
will continue to show high single-digit growth. Earnings from
Benicar in fiscal 2007 are expected to grow nearly 40% from
$114,472,000 reported in Fiscal 2006. The fiscal 2007 projection
includes an approximate 7% increase in selling, general and
administrative expenses to about $1.1 billion. This expense
includes funding continued competitive levels of support behind
currently promoted products and stock options expense. This level
of spending includes pre-launch expenses to support nebivolol but
does not include the full cost of the product launch which is
currently projected to occur sometime during the first half of our
next fiscal year, subject to FDA approval. Research and development
spending is expected to be approximately $480,000,000 in support of
a dramatically increased late-stage product pipeline. Included in
this figure is $63,000,000 for planned product milestone payments
and $60,000,000 for a licensing payment made in April 2006. These
figures do not include any licensing payments which may be made for
additional product development transactions that may occur during
the fiscal year. The Company is projecting a slight increase in the
effective tax rate for fiscal 2007 to 22% primarily as a result of
the current expiration of the U.S. research credit as well as the
mix of earnings forecast for U.S. and foreign tax jurisdictions.
The Company also forecasts that fully diluted shares outstanding
will be reduced by approximately 5.4 million shares to an average
of approximately 335,000,000, as the impact of the completed share
repurchase program will continue into fiscal 2007. Howard Solomon,
Chairman and Chief Executive Officer of Forest, said: "During the
just completed fiscal year the Company made significant progress in
two important initiatives. First, our currently promoted products
all continued to show gains in both prescription volume and market
share in their respective categories. Also during the fiscal year
we made significant progress in expanding our development pipeline
by adding four new collaborations and adding a fifth product
earlier this month. Forest's ability to not only identify
interesting and important development compounds but to also be
viewed as a very desirable development and marketing partner, were
two important factors which led to our success in the business
development area during the year. I am pleased that three of our
most recent collaborations are for products that are in late stages
of development with nebivolol and faropenem both having new drug
applications currently under review by the FDA and LAS34273 about
to initiate Phase III clinical studies for chronic obstructive
pulmonary disease. Our financial projection for the coming fiscal
year reflects our view that currently marketed products will
continue to grow and generate increased profits as compared to last
year even after funding significant research and development
spending for a much larger product pipeline and supporting the
planned pre-launch launch activities behind nebivolol." Use of
Non-GAAP Financial Information This press release contains 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 fully diluted
earnings per share prepared in accordance with GAAP. FOREST
LABORATORIES, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL
INFORMATION TWELVE MONTHS ENDED MARCH 31 2005 2006 2007 (Guidance)
Reported Fully Diluted Earnings Per Share: $ 2.25 $ 2.08 $ 2.37-$
2.42 Specified items, per share, net of tax: American Job Creation
Act Dividend $ 0.25 ($ 0.11) - Research and Development License
payments $ 0.13 $ 0.39 $ 0.14 Milestone payments $ 0.02 $ 0.02 $
0.15 SFAS-123R - - $ 0.08 Adjusted Non-GAAP Fully Diluted Earnings
Per Share: $ 2.65 $ 2.38 $ 2.74-$ 2.79 About Forest Laboratories
Forest Laboratories (http://www.frx.com/) is a US-based
pharmaceutical company dedicated to identifying, developing and
delivering products that make a positive difference in peoples'
lives. Forest Laboratories' growing product line includes
Lexapro(R) (escitalopram oxalate), an SSRI indicated for adults for
the initial and maintenance treatment of major depressive disorder
and for generalized anxiety disorder; Namenda(R) (memantine HCl),
an N-methyl-D- aspartate (NMDA)-receptor antagonist indicated for
the treatment of moderate to severe Alzheimer's disease;
Benicar(R)* (olmesartan medoxomil), an angiotensin receptor
blocker, and Benicar* HCT(R) (olmesartan medoxomil-
hydrochlorothiazide), an angiotensin receptor blocker and diuretic
combination product, each indicated for the treatment of
hypertension; and Campral(R)* (acamprosate calcium), indicated in
combination with psychosocial support for the maintenance of
abstinence from alcohol in patients with alcohol dependence who are
abstinent at treatment initiation. *Benicar is a registered
trademark of Sankyo Pharma, Inc., and Campral is a registered
trademark of Merck Sante s.a.s., subsidiary of Merck KGaA,
Darmstadt, Germany. Except for the historical information contained
herein, this release contains "forward-looking statements" within
the meaning of the Private Securities 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 the
Forest Laboratories' SEC reports, including the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2005, and
on form 10-Q for the periods ended June 30 ,2005, September 30,
2005 and December 31, 2005. FOREST LABORATORIES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS TWELVE
MONTHS ENDED MARCH 31 ENDED MARCH 31 (In thousands, except per
share amounts) 2006 2005 2006 2005 Revenues: Net sales $712,761
$618,285 $2,793,934 $3,052,408 Contract revenue 31,225 22,313
118,170 61,369 Other income 12,336 12,638 50,286 45,862 Net
revenues 756,322 653,236 2,962,390 3,159,639 Costs and expenses:
Cost of goods sold 167,860 142,212 650,996 687,510 Selling, general
and administrative 259,016 266,459 1,031,451 993,715 Research and
development 194,377 61,758 410,431 293,659 621,253 470,429
2,092,878 1,974,884 Income before income tax expense 135,069
182,807 869,512 1,184,755 Income tax expense 43,179 130,052 160,998
345,950 Net income $91,890 $52,755 $708,514 $838,805 Net income per
share: Basic $0.28 $0.15 $2.11 $2.30 Diluted $0.28 $0.15 $2.08
$2.25 Weighted average number of shares outstanding: Basic 325,491
351,023 335,912 363,991 Diluted 329,969 356,989 340,321 372,090
http://www.newscom.com/cgi-bin/prnh/20001011/FORESTLOGODATASOURCE:
Forest Laboratories, Inc. CONTACT: Charles E. Triano, Vice
President - Investor Relations, Forest Laboratories, Inc.,
+1-212-224-6714, Web site: http://www.frx.com/
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