Forest Laboratories, Inc. (NYSE: FRX), an international
pharmaceutical manufacturer and marketer, today announced that
diluted earnings per share equaled $0.07 in the fourth quarter of
fiscal 2010. Reported earnings per share includes a one-time charge
of $229.0 million or $0.76 per share net of tax, related to the
previously announced agreement with AstraZeneca to acquire full,
royalty and milestone-free rights to NXL104 and royalty-free
commercialization rights to ceftazidime/104 in the U.S. and Canada
and royalty free worldwide rights in NXL104 combined with
ceftaroline. Reported diluted earnings per share in the fourth
quarter of fiscal 2009 were $0.31 and included a one-time charge of
$170.0 million, or $0.45 per share net of tax, related to ongoing
discussions with the United States Department of Justice (DOJ).
Net sales for the quarter increased 11.0% to $995.6 million,
from $896.7 million in the year-ago period. Sales of Lexapro®
(escitalopram oxalate), an SSRI for the initial and maintenance
treatment of major depressive disorder in adults and adolescents
and generalized anxiety disorder in adults were $556.3 million, an
increase of 1.4% from the year-ago period. Namenda®, an NMDA
receptor antagonist for the treatment of moderate and severe
Alzheimer’s disease, recorded sales of $297.9 million during the
quarter, an increase of 22.2% from last year’s fourth quarter.
Sales of Bystolic® (nebivolol), a beta-blocker for the treatment of
hypertension, were $53.1 million. Bystolic was launched in January
2008, and sales in last year’s fiscal fourth quarter were $29.7
million. The Company’s newest product, Savella® (milnacipran HCl),
a selective serotonin norepinephrine dual reuptake inhibitor (SNRI)
for the management of fibromyalgia, which was launched in late
April 2009, recorded sales of $17.4 million. Contract revenue
decreased 2.2% to $54.0 million, principally due to Benicar®
(olmesartan medoxomil) co-promotion income of $48.7 million, a
decrease of 3.6% compared to last year’s fourth quarter. Per the
agreement with Daiichi Sankyo, active co-promotion of Benicar by
Forest ended in the first quarter of fiscal 2009 and the Company
now receives a gradually reducing residual royalty until the end of
March 2014. Interest income of $6.6 million decreased from $12.7
million reported in the year-ago period, due to lower interest
rates earned on the Company’s short duration portfolio.
Cost of sales as a percentage of sales was 24.0% compared with
23.2% in last year’s fourth quarter. Selling, general and
administrative (SG&A) expense for the current quarter was
$320.6 million as compared to $515.1 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 most recently launched product Savella. SG&A
expense in the fourth quarter of fiscal 2009 included a charge of
$170.0 million related to the DOJ investigation. Excluding the DOJ
investigation charge, SG&A expense decreased 7.1% versus the
prior year. Research and development spending for the current
quarter was $409.7 million and includes a charge of $229.0 million
in connection with the acquisition of additional rights to NXL104
and U.S. and Canadian rights to ceftazidime/NXL104 from Novexel, in
the transaction with AstraZeneca. Excluding such payment, R&D
spending reported in the quarter increased 46.1% versus the prior
year. The current quarter also included product development
milestone payments of $3.0 million compared to $16.9 million of
milestones in the prior year’s quarter.
Income tax expense for the quarter was $64.4 million, reflecting
a quarterly effective tax rate of 74.0%. The higher quarterly rate
was the result of the licensing agreement completed during the
quarter. Excluding the effect of this transaction, the effective
tax rate would have been 20.4%. Reported net income for the quarter
ended March 31, 2010 was $22.6 million or $0.07 per share compared
to $92.8 million or $0.31 per share reported for last year’s fourth
quarter.
Diluted shares outstanding at March 31, 2010 were approximately
304,362,000, an increase of approximately 940 thousand shares
compared to the year-ago period.
Twelve-month
Results
Revenues for the fiscal year ended March 31, 2010 increased 6.9%
to $4,192.9 million from $3,922.8 million in the prior year.
Lexapro sales decreased 1.3% to $2,270.4 million from $2,300.9
million last fiscal year. Sales of Namenda increased 17.4% to
$1,114.9 million, from $949.3 million. Sales of Bystolic reached
$178.9 million in its second full year on the market and sales of
Savella reached $52.7 million, while the earnings contribution from
Benicar decreased 2.0% to $191.7 million from $195.6 million.
Selling, general and administrative expense decreased 14.2% to
$1,264.3 million and included one-time charges of $20.0 million
relating to the settlement with Caraco Pharmaceutical Laboratories
related to legal proceedings for Lexapro. This compares to last
fiscal year spending of $1,474.3 million including a charge of
$44.1 million related to the termination of the Azor co-promotion
agreement and $170.0 million related to the DOJ investigation.
Excluding the impact of the one-time charges in both years,
selling, general and administrative expense decreased 1.3%.
Research and development spending increased 59.3% to $1,053.6
million, including development milestone expenses of $60.9 million
and total licensing payments of $403.9 million related to the
Nycomed, Almirall and AstraZeneca collaboration agreements. This
compares to last fiscal year spending of $661.3 million, including
development milestone expenses of $59.4 million and total license
payments of $150.0 million related to collaboration agreements with
Phenomix and Pierre Fabre. Excluding the impact of the license
agreement payments in both years, research and development expense
increased 27.1%.
Income tax expense was $268.3 million, reflecting a full-year
effective tax rate of 28.2%. The higher annual rate was principally
the result of payments made pursuant to three licensing agreements
concluded during fiscal 2010. Excluding these payments and certain
other one-time items, the effective tax rate would have been
20.8%.
Reported net income for the fiscal year ended March 31, 2010
decreased 11.1% to $682.4 million from net income of $767.7 million
reported in the prior fiscal year. Reported diluted earnings per
share for the fiscal year totaled $2.25 per share as compared to
reported earnings per share of $2.52 in fiscal 2009. Excluding
one-time items in both periods presented, non-GAAP net income and
earnings per share would be $1,067.5 million or $3.51 per diluted
share in fiscal year 2010, compared to $1,052.4 million, or $3.45
per diluted share in fiscal year 2009.
Fiscal 2011
Guidance
Regarding the fiscal year ending March 31, 2011, the Company
expects that diluted earnings per share will be in a range of $3.50
to $3.60, including the estimated impact of health care reform,
planned research and development milestone payments related to
existing pipeline products but not including any licensing or
milestone payments which may be made for additional product
development transactions or acquisitions that may occur during the
fiscal year. This guidance reflects increased investments for
marketing to support two new product launches later in the year and
for research and development to support the continued progression
of our late stage new product development pipeline.
Key assumptions supporting the fiscal year 2011 forecast include
the following:
*Lexapro sales projection of just under $2.3 billion which is
unchanged from $2.3 billion in fiscal 2010. The Company projects an
increase in overall prescription volume for the underlying
SSRI/SNRI antidepressant market as a whole of approximately 2.5%
and a decrease in Lexapro’s total prescription market share of
approximately 1.7 share points. Also included in the projection is
a price increase which was realized in January 2010.
*Namenda sales growth of approximately 9.0% over the $1,114.9
million reported in fiscal 2010.
*Bystolic sales growth of approximately 60% over the $178.9
million reported in fiscal 2010.
*Savella sales of approximately $100 million as compared with
$52.7 million reported in fiscal 2010.
*Daxas® sales, subject to approval, of approximately $25
million.
*Ceftaroline sales, subject to approval, of approximately $6
million.
*Benicar earnings decline of approximately 15.1% from $191.7
million reported in fiscal 2010.
*Total net revenue (includes product sales as well as the
earnings contribution from Benicar, interest income and other
income) of approximately $4.4 billion, representing growth of
approximately 5% from the $4.2 billion reported in fiscal 2010 and
net sales growth of 7%.
*Selling, general and administrative expense of approximately
$1.3 billion. This expense includes funding continued competitive
levels of support behind currently promoted products including
Bystolic, our beta-blocker for the treatment of hypertension that
was launched in January 2008 and Savella, an SNRI indicated for the
management of fibromyalgia that was launched in April 2009. In
addition, the estimate includes spending for the launch of Daxas
and ceftaroline.
*Research and development spending of approximately $680 million
in support of a significant late-stage product pipeline. This
projection includes planned milestone payments of approximately $25
million and represents, in total, an increase of around 4.5% from
last year’s spend levels excluding initial licensing payments.
*An effective tax rate for fiscal 2011 of approximately
22.5%
*Diluted shares outstanding will average approximately
305,000,000 for the fiscal year ending March 31, 2011.
Howard Solomon, Chairman and Chief Executive Officer of Forest,
said: “Fiscal year 2010 was another strong year for the Company as
we reported solid financial performance and made significant
progress in advancing and expanding our new product development
pipeline. The year also marked continued growth for our key
promoted products with sales of Namenda exceeding $1 billion for
the first time in a fiscal year and solid growth for our two newest
products, Bystolic and Savella.
During the year we were pleased to announce the completion of
four new business development agreements. In August we partnered
with Nycomed in a collaboration and distribution agreement for
Daxas, for the treatment of chronic obstructive pulmonary disease
(COPD). A New Drug Application (NDA) for Daxas was submitted by
Nycomed to the FDA in July. We are working closely with the FDA,
following the recent mixed vote Advisory Committee meeting, and we
expect FDA’s decision possibly later next month. We entered into
two agreements with AstraZeneca to collaborate in the
anti-infective therapeutic area to help patients suffering from
serious infections. The first is a collaboration that we completed
in August to co-develop and commercialize ceftaroline for all
markets outside the United States, Canada and Japan (where Takeda
retains its rights). Ceftaroline is our novel, next-generation
cephalosporin for which we filed an NDA with the FDA in December,
for the treatment of patients suffering with complicated skin and
skin structure infections (cSSSI), community acquired bacterial
pneumonia (CABP), including patients infected with
methicillin-resistant Staphylococcus aureus (MRSA). In December, we
expanded our relationship with AstraZeneca in a transaction that
broadens our partnership beyond just ceftaroline to now include
ceftaroline/NXL104, and ceftazidime/NXL104. Lastly we partnered
with Almirall in December to develop, market and distribute
LAS100977 in the United States. LAS100977 is an inhaled long-acting
beta2 agonist (LABA) that will be developed for once-daily
administration in combination with an undisclosed corticosteroid
for the treatment of both asthma and COPD.
With regard to our late-stage new product development pipeline,
we reported significant progress during the year including the
announcement of positive results for two pivotal Phase III clinical
studies for ceftaroline for CABP and we also submitted the NDA for
ceftaroline to the FDA. For Daxas, positive clinical trial results
for two Phase III pivotal studies and two Phase III supportive
studies were published in a major medical journal and presented at
an important international medical meeting during the year. We were
disappointed with the outcome from the recent FDA Advisory
Committee meeting that reviewed Daxas; however we remain optimistic
that concerns expressed by the Committee and the FDA can be
satisfactorily resolved. We and our partner Ironwood
Pharmaceuticals reported positive Phase III clinical trial results
for linaclotide for the treatment of patients with chronic
constipation and later this year we anticipate the completion of
two pivotal Phase III clinical studies in patients with IBS-C.
Along with our partner Gedeon Richter we announced positive results
from a Phase IIb study of cariprazine for the treatment of
schizophrenia. Based on this data and the previously announced
Phase II results in acute mania associated with bipolar I disorder,
we initiated Phase III trials for both indications. We and our
partner Almirall reported positive results from the first of three
pivotal Phase III clinical trials investigating the twice-daily
administration of inhaled aclidinium in patients suffering from
COPD. After careful consideration of dutogliptin, a DPP-4 inhibitor
for the treatment of Type II diabetes, we have decided, for
business reasons, to terminate our participation in the development
program with Phenomix Corp.
In January we took the opportunity to host our first investor
meeting to review our late-stage new product development pipeline
with the global investment community. We reviewed the late-stage
products we already have in hand, either approved, at the FDA now,
or to be submitted to the FDA in the next few years. In fiscal
2011, we will continue to advance these as well as the
earlier-stage products in our development pipeline and we also
expect to enter into additional development agreements for product
opportunities during the year as well as in subsequent years. This
group of products should be available to replace currently marketed
products whose patents will expire over the next two to five years,
and will most assuredly be joined by other new product
opportunities. We believe the licensing or purchase of product
opportunities is the best way to create shareholder value for our
Company. As I have said before, we believe there is going to be a
very healthy life after Lexapro for our Company.”
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 diluted earnings per share prepared in
accordance with GAAP.
FOREST LABORATORIES, INC. AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL
INFORMATION
THREE MONTHS TWELVE MONTHS ENDED
ENDED MARCH 31 MARCH 31
2010
2009
2010
2009
Reported diluted earnings per share: $0.07 $0.31 $2.25 $2.52
Specified items, per share, net of tax: Termination of Azor®
co-promotion 0.08 USAO Investigation 0.45 0.45 Licensing payments
to Phenomix for dutogliptin and to Pierre Fabre for F2695 0.40
Licensing payment to Nycomed for Daxas 0.33 Licensing payment
received from AstraZeneca for ceftaroline (0.13 ) Payment to Caraco
related to Lexapro settlement 0.04 Business restructuring costs
0.03 Payments to Almirall for LAS100977 0.25 Licensing payment to
AstraZeneca for NXL-104 and ceftazidime 104 0.76 0.76 Rounding
(0.02 )
Adjusted Non-GAAP diluted
earnings per share:
$0.83 $0.76
$3.51 $3.45
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 May
4, 2010 at both websites and also by dialing (800) 642-1687 (US or
Canada) or +1 706 645-9291 (International), Conference ID:
66177364.
About Forest Laboratories and
Its Products
Forest Laboratories (NYSE: FRX) is a U.S.-based pharmaceutical
company with a long track record of building partnerships and
developing and marketing products that make a positive difference
in people’s lives. In addition to its well-established franchises
in therapeutic areas of the central nervous and cardiovascular
systems, Forest’s current pipeline includes product candidates in
all stages of development and across a wide range of therapeutic
areas. The Company is headquartered in New York, NY. To learn more
about Forest Laboratories, 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 LABORATORIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31 ENDED MARCH 31 (In thousands,
except per share amounts)
2010
2009
2010
2009
Revenues: Net sales $995,566 $896,726 $3,903,524 $3,636,055
Contract revenue 53,972 55,203 208,474 209,000 Interest income
6,559 12,751 35,472 74,409 Other income
797
45,392 3,318 Net revenues
1,056,097 965,477 4,192,862
3,922,782 Costs and expenses: Cost of
goods sold 238,793 207,684 924,346 816,680 Selling, general and
administrative 320,576 515,090 1,264,269 1,474,274 Research and
development
409,747 123,774
1,053,561 661,294 969,116
846,548 3,242,176 2,952,248
Income before income tax expense 86,981 118,929
950,686 970,534 Income tax expense
64,390
26,166 268,303 202,791
Net income $ 22,591 $ 92,763
$ 682,383
$ 767,743
Net income per share: Basic
$0.07
$0.31 $2.25 $2.52 Diluted
$0.07 $0.31 $2.25
$2.52 Weighted average number of shares
outstanding: Basic
304,262 302,976
303,386 304,363 Diluted
304,362 303,422 303,781
305,121
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