Forest Laboratories, Inc. (NYSE: FRX), an international
pharmaceutical manufacturer and marketer, today announced that
diluted earnings per share equaled $1.00 in the second quarter of
fiscal 2011. Reported earnings per share in the second quarter of
fiscal 2010 were $0.61 and included total net of tax charges of
$0.24 per share related to the following: a new product license fee
of $100.0 million, related to a product collaboration agreement
with Nycomed for Daxas® (roflumilast); a charge of $20.0 million as
part of a settlement with Caraco Pharmaceutical Laboratories for
the legal proceedings related to Lexapro®; and the receipt of an
upfront licensing payment of $40.0 million related to a product
collaboration agreement with AstraZeneca for ceftaroline.
Net sales for the quarter increased 7.7% to $1,037.3 million,
from $962.7 million in the year-ago period. Sales of Lexapro
(escitalopram oxalate), a selective serotonin reuptake inhibitor
(SSRI) for the initial and maintenance treatment of major
depressive disorder in adults and adolescents and generalized
anxiety disorder in adults were $569.3 million during the quarter,
essentially unchanged from the second quarter of the prior fiscal
year. Namenda® (memantine HCl), an NMDA receptor antagonist for the
treatment of moderate and severe Alzheimer’s disease, recorded
sales of $310.1 million during the quarter, an increase of 12.7%
from $275.3 million reported in last year’s second quarter. Sales
of Bystolic® (nebivolol), a beta-blocker for the treatment of
hypertension, launched in January 2008, were $63.7 million, an
increase of 56.5% from the year-ago period. The Company’s newest
product Savella® (milnacipran HCl), a selective serotonin
norepinephrine reuptake inhibitor (SNRI) for the management of
fibromyalgia, recorded sales of $21.4 million. Savella was launched
in late April 2009 and sales in last year’s fiscal second quarter
were $10.2 million. Contract revenue decreased 16.2% to $42.4
million, principally due to a decrease of 14.5% in Benicar®
(olmesartan medoxomil) co-promotion income to $39.9 million,
compared to last year’s second 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.
Last year’s second quarter included other income of $41.2 million
resulting from a $40.0 million upfront licensing payment from
AstraZeneca. Interest income of $8.5 million decreased from $9.4
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 23.7% compared with
23.0% in last year’s second quarter. Selling, general and
administrative expense (SG&A) for the current quarter was
$316.4 million, down slightly from the $324.9 million reported in
the year-ago quarter, which included the $20 million payment to
Caraco. Excluding that charge, SG&A would have increased by
3.8%. The current level of spending reflects the resources and
activities required to support our currently marketed products,
particularly our newest products, Bystolic and Savella. Research
and development spending for the current quarter was $154.5 million
as compared to $263.1 million reported in the second quarter of the
prior fiscal year. Research and development spending in the prior
year quarter included a charge of $100 million for an upfront
license payment to Nycomed for the product collaboration agreement
for Daxas. Excluding such payment, R&D spending reported in the
quarter decreased 5.3% versus the prior year. The current quarter
also included product development milestone payments of $3.0
million compared to $29.9 million of milestones in the prior year’s
quarter.
Income tax expense for the quarter was $84.9 million, reflecting
a quarterly effective tax rate of 22.9%. Reported net income for
the quarter ended September 30, 2010 was $286.1 million or $1.00
per share compared to $186.7 million or $0.61 in last year’s second
quarter.
Diluted shares outstanding at September 30, 2010 were
287,491,000, a reduction of approximately 16.0 million shares
compared to the year-ago period due mainly to the Company’s
accelerated share repurchase program.
Six Month Results
Revenues for the six months ended September 30, 2010 increased
4.0% to $2.2 billion from $2.1 billion in the prior year.
Net income for the six months ended September 30, 2010 decreased
10.2% to $403.6 million from $449.6 million reported in the six
months of the prior year. Reported diluted earnings per share
decreased 7.4% to $1.37 in the current year’s six months as
compared to diluted earnings per share of $1.48 in last year’s six
months.
Fiscal 2011 Guidance
The Company now expects that diluted earnings per share for the
fiscal year ending March 31, 2011 will be in the range of $3.80 to
$3.90, excluding the charges in the June quarter related to the
settlement with the United States Department of Justice and the
upfront licensing payment to TransTech Pharma and including the
impact of the accelerated share repurchase transaction.
Howard Solomon, Chairman and Chief Executive Officer of Forest,
said: “We are pleased with the strong financial results of the
Company in the just completed quarter and with the continued
positive progress of our late-stage product development pipeline.
During the quarter the FDA Anti-Infective Drugs Advisory Committee
unanimously voted to recommend approval of ceftaroline for the
treatment of community acquired bacterial pneumonia (CABP) and for
the treatment of acute bacterial skin and skin structure infections
(ABSSSI). If ceftaroline is approved, we plan to make this
important new anti-infective therapy available to treat patients
with severe respiratory and skin infections during the early part
of calendar year 2011. We filed a response to the FDA during the
quarter addressing topics raised in the complete response letter
received from the Agency regarding our New Drug Application (NDA)
for Daxas. Daxas is a phosphodiesterase 4 (PDE 4) enzyme inhibitor
currently under review by the FDA as a potential treatment to
reduce chronic obstructive pulmonary disease (COPD) exacerbations
associated with chronic bronchitis in patients at risk for
exacerbations. If approved, Daxas would be the first new oral solid
dosage formulation for the treatment of COPD. We expect a response
from the FDA during the first quarter of calendar year 2011. Later
this quarter we expect to receive results from a second ongoing
Phase III clinical trial for aclidinium also for the treatment of
patients with COPD. Aclidinium is an inhaled long-acting muscarinic
antagonist under study for the improvement of lung function in
patients with COPD. If the results from the trial are positive, our
plan is to submit an NDA to the FDA for aclidinium during 2011.
Lastly, during the quarter we were pleased to announce, along
with our partner Ironwood Pharmaceuticals, positive top-line
results from the first of two Phase III clinical trials assessing
the efficacy and safety of the investigational drug, linaclotide,
as a potential treatment in patients with irritable bowel syndrome
with constipation (IBS-C). Later this quarter we expect to receive
the results from a second Phase III clinical trial for linaclotide
for the treatment of IBS-C. If the results from the trial are
positive, we plan to submit an NDA for linaclotide during 2011
based on the IBS-C trials, along with the two previously reported
positive Phase III clinical trials for linaclotide as a potential
treatment in patients with chronic constipation (CC).
We have worked diligently for a number of years to build a solid
product development pipeline that will more than replace those
currently marketed products that will decline following expiration
of their marketing exclusivity over the next four years. We
successfully launched Bystolic in 2008 and Savella in 2009; we
received approval from the FDA in June for Namenda XR® and have two
NDA’s currently under review at the FDA for ceftaroline and Daxas.
We plan to file two additional NDA’s during 2011 for aclidinium and
linaclotide and two more NDA’s during 2012 for cariprazine and
F2695. We are continually reviewing new compounds to add to our
portfolio of product development opportunities and we expect to
enter into additional development agreements during this and
subsequent years. We believe that our business strategy will
deliver the sales and earnings necessary to replace and exceed the
revenues lost due to the expiry of marketing exclusivity for
Lexapro and Namenda.”
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
SUBSIDIARIESSUPPLEMENTAL FINANCIAL INFORMATION
THREE MONTHS
SIX MONTHS
ENDED ENDED SEPTEMBER 30 SEPTEMBER 30
2010
2009 2010
2009 Reported diluted
earnings per share: $ 1.00 $ 0.61 $ 1.37 $ 1.48 DOJ Investigations
- - 0.39 - Licensing payment to TransTech Pharma for
glucose-lowering agents - - 0.17 - Licensing payment to Nycomed for
Daxas - 0.33 - 0.33 Payment to Caraco related to Lexapro settlement
- 0.04 - 0.04 Licensing payment received from AstraZeneca for
ceftaroline - (0.13 ) - (0.13 ) Rounding - - 0.03 -
Adjusted
Non-GAAP diluted earnings per share: $
1.00 $
0.85 $
1.96 $
1.72
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
November 9, 2010 at both websites and also by dialing (800)
642-1687 (US or Canada) or +1 706 645-9291 (International),
Conference ID: 13010461.
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 Reports on Form 10-K, Quarterly Reports on
Form 10-Q and any subsequent SEC filings.
FOREST LABORATORIES, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHSENDED
SEPTEMBER 30
SIX MONTHSENDED
SEPTEMBER 30
(In thousands, except per share amounts)
2010 2009
2010
2009 Revenues: Net sales $ 1,037,264 $
962,714 $ 2,057,390 $ 1,910,956 Contract revenue 42,402 50,590
82,206 98,299 Interest income 8,493 9,411 15,506 21,611 Other
income
41,219
41,219 Net revenues
1,088,159 1,063,934
2,155,102 2,072,085
Costs and expenses: Cost of goods sold 246,240 221,161
477,944 437,905 Selling, general and administrative 316,386 324,924
764,755 636,731 Research and development
154,511 263,079
374,168 410,205
717,137 809,164
1,616,867 1,484,841
Income before income tax expense 371,022 254,770 538,235
587,244 Income tax expense
84,912
68,108 134,648
137,684 Net income $
286,110 $ 186,662
$ 403,587 $
449,560 Net income per share: Basic
$ 1.00 $ 0.62
$ 1.37 $ 1.48
Diluted
$ 1.00 $
0.61 $ 1.37 $
1.48 Weighted average number of shares
outstanding: Basic
287,401
302,983 294,139
302,952 Diluted
287,491
303,530 294,222
303,443
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