Forest Labs Declines 12% After Negative FDA Panel Vote
April 08 2010 - 12:52PM
Dow Jones News
Forest Laboratories Inc. (FRX) shares dropped nearly 12%
Thursday after a U.S. regulatory advisory panel gave a thumbs-down
to Forest's proposed lung-disease drug, in what some analysts
viewed as a bizarre sequence of events.
The setback adds to the challenges the New York-based drug maker
faces as it nears the March 2012 expiration of the U.S. patent for
its best-selling product, the antidepressant Lexapro, which
generates nearly 60% of the company's revenue. Lexapro had $2.3
billion in sales for its last full fiscal year, but that's expected
to shrink dramatically when generic copies enter the market.
Forest shares recently traded at $28.63, down $3.84, or 12%.
The proposed new drug is roflumilast, which Forest proposes to
sell under the brand name Daxas, and would treat chronic
obstructive pulmonary disease, or COPD, which is informally known
as "smoker's cough." Some analysts had predicted the drug could
generate peak annual sales of about $500 million, which would have
at least partly offset the expected decline in Lexapro revenue.
"Unfortunately, Forest is in a position where they have
significant exposure to generics for their largest franchise in the
not-too-distant future," said BMO Capital Markets analyst Robert
Hazlett. "This drug had an outside chance to materially offset
that, and it doesn't have that chance in our view anymore."
Hazlett has removed Daxas sales estimates from his forecast
model for Forest.
A U.S. Food and Drug Administration advisory committee voted
Wednesday afternoon that the clinical-trial data for Daxas didn't
provide substantial evidence to support FDA approval of the drug.
The FDA usually follows its committees' advice but isn't required
to do so.
The vote caught many observers off guard because the same
advisory panel had voted minutes earlier in favor of the drug's
efficacy and safety, in separate votes. Jefferies analyst Corey
Davis wrote in a note to clients that the advisory meeting "was the
most bizarre we've ever seen."
Some panel members expressed concern about the safety of the
drug, and how it compares to other treatments for COPD. FDA staff
had concluded the drug's effectiveness was "quite modest." Also,
the agency noted that in clinical trials, there were three suicides
and two suicide attempts in Daxas users, versus none among those
taking a fake drug. Davis said the suicide data weren't previously
disclosed before the FDA staff posted briefing documents online
earlier this week.
A Forest executive said Wednesday that the door may still be
open for approval of Daxas, given the positive votes on efficacy
and safety. A Forest spokesman couldn't be reached Thursday to
discuss the company's next steps.
Lazard Capital Markets said there's still modest hope the FDA
could approve Daxas, but it might require additional testing.
The Daxas setback--coupled with the looming generic competition
for Lexapro--translates into increased urgency surrounding another
drug in Forest's pipeline, the constipation treatment linaclotide.
New clinical data on the drug is due later in 2010.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
(Jennifer Corbett Dooren in Washington contributed to this
article.)
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