Forest Laboratories, Inc. (NYSE: FRX) (“Forest”) today announced
that its Board of Directors has sent a letter to all Forest
shareholders in connection with the Company’s Annual Meeting on
August 18, 2011. The letter highlights Forest’s strong financial
performance, robust and diversified product pipeline and
highly-qualified slate of director nominees, which includes seven
incumbent directors and three new candidates. Forest’s Board of
Directors recommends shareholders vote for Forest’s nominees on the
WHITE proxy card.
For information about Forest’s 2011 Annual Meeting of
Shareholders, please visit:www.FRX2011annualmeeting.com.
The text of the letter follows:
August 1, 2011
Dear Fellow Shareholders,
We write to ask for your support at our upcoming Annual Meeting.
Forest has nominated ten candidates for election to our Board,
including three highly regarded and accomplished new independent
nominees. As you may be aware, Carl Icahn, a 7% shareholder, has
nominated an alternative slate of four candidates. Your Board
recommends that you reject Icahn’s hand-picked designees and
support all ten of Forest’s candidates, who are committed to acting
in the best interests of all Forest
shareholders, not just Mr. Icahn’s.
PLEASE VOTE THE WHITE CARD TO SUPPORT
FOREST’S HIGHLY QUALIFIED NOMINEES
Forest is Performing Well and Positioned for
Long-Term Growth
The Forest Board and management team continue to drive positive
financial and operational results. The Company recently reported
strong fiscal 2012 first quarter results, highlighted by an 8.2%
increase in net sales and a 9.5% increase in adjusted non-GAAP
earnings per share. In addition, we recently have achieved
significant milestones in the advancement of our pipeline products,
including:
- the initiation of the scientific
launches to health care professionals for our newest products,
Daliresp and Viibryd, which both became available to patients in
June;
- the filing of a New Drug Application
(NDA) with the U.S. Food and Drug Administration (FDA) for
aclidinium, for the treatment of chronic obstructive pulmonary
disease (COPD);
- the imminent filing of another NDA for
linaclotide for the treatment of chronic constipation and irritable
bowel syndrome; and
- the announcement of very positive
preliminary top-line results from a Phase III study of
levomilnacipran for the treatment of adults with major depressive
disorder.
These recent milestones are just part of the excellent progress
Forest has made transitioning beyond its highly successful Lexapro
and Namenda franchises. All pharmaceutical companies face patent
expirations, and the more successful the drug, the steeper the
challenge. Forest successfully managed its last significant patent
cliff in 2004 with the launch of Lexapro and has been working
actively to address its upcoming patent cliff. In doing so, we have
outperformed even the world’s largest pharmaceutical companies in
developing and commercializing new products.
Forest Already Has Launched Five of its
“Next Nine” Products
The cornerstone of value creation at any pharmaceutical company
is the ability to bring new products to market successfully. Forest
has been recognized as having the “best late-stage pipeline in all
biopharma,”1 which is the result of continued business development
and successful R&D efforts for more than a decade. Between 2008
and 2013, we expect to have launched nine new products, all with
patents that do not begin to expire until 2020, with several
extending to 2027. These products address multiple areas of
significant unmet medical need and demonstrate management’s success
in creating a sustainable specialty pharmaceutical business.
[SEE CORRESPONDING GRAPHIC 1]
Photos/Multimedia Gallery Available:
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Icahn concedes that Forest is outpacing both specialty and large
pharmaceutical companies in terms of developing and launching new
products while keeping SG&A costs in line with those same
companies – maintaining a sales per employee ratio that is far
above the average for our peer group. We agree that this is an
enviable achievement.
New Products Create a Strategically
Diversified Pipeline and Foundation for Future Growth
In addition to the “Next Nine,” the Company has six additional
products in Phase II or later that are expected to launch in 2014
or later, and have even longer patent lives. We also expect to have
additional products resulting from negotiations and evaluations
that are currently under way. We are very excited about these new
products and expect them to drive growth and diversify revenue over
the long term. With these products coming to market, Forest expects
to exceed its fiscal 2011 revenues by fiscal 2016 and broaden
Forest’s product portfolio, resulting in greater revenue
diversification in the years ahead.
Specifically, from fiscal 2013 to 2017, these products are
expected to increase revenues and earnings per share by a compound
annual growth rate of 10% and 30%, respectively.
[SEE CORRESPONDING GRAPHIC 2]
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Ironically, Icahn would have you believe that diversification is
a weakness, but in our judgment it’s an important strategic and
financial asset. Forest’s Board and management have deliberately
pursued a portfolio of new, high-potential products in key
therapeutic areas with significant unmet medical needs. At the same
time, this therapeutic diversification creates tremendous synergy,
as most of these products are to be marketed by our primary care
sales forces to a common group of primary care physicians across
the country.
Icahn does not explain his argument against diversification, and
there is simply no merit to his suggestion that Forest should
narrow its focus on fewer therapeutic areas. Not only does Icahn
fail to identify the areas on which he would want the Company to
focus, he ignores the fact that Forest has been very successful
investing in promising new compounds across a wide spectrum of
therapeutic areas.
Forest Has Managed Patent Expirations
Successfully in the Past and Expects To Do So Again
The team at Forest has a proven track record of managing patent
expirations successfully and is confident it will do so again. As
the chart below demonstrates, Forest overcame its first loss of
exclusivity cycle by significantly surpassing Celexa sales with Lexapro sales
when Celexa went off patent in 2004.
[SEE CORRESPONDING GRAPHIC 3]
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http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6813464&lang=en
Forest’s Nominees Will Drive Continued
Growth of the Business
Forest’s 10 nominees have a combination of complementary skill
sets and experience that set them apart from Icahn’s nominees. Our
slate is composed of experienced, independent healthcare industry,
legal and financial experts.
Over the last 10 years, the Company’s incumbent directors have
guided Forest as revenues and earnings per share have increased at
compound annual growth rates of 12.1% and 16.5% respectively, and
the Board is determined to ensure that Forest is well positioned to
build on this track record, execute its strategy and deliver value
to shareholders in the future.
Our slate represents an appropriate balance of new perspectives
– including five new independent directors in the last five years –
and board members who have helped build value and execute the
Company’s strategy over the longer term. Forest added two new
independent directors to its Board in 2006 and 2009, respectively:
Dr. Nesli J. Basgoz, the Associate Chief for Clinical
Affairs, Division of Infectious Diseases at Massachusetts General
Hospital, and Dr. Peter J. Zimetbaum, a Director of Clinical
Cardiology at Beth Israel Deaconess Medical Center and an Associate
Professor of Medicine at Harvard Medical School.
Dr. Basgoz and Dr. Zimetbaum joined another independent medical
expert on Forest’s Board – Dr. Lester Salans, Clinical
Professor and member of the Clinical Attending Staff of Internal
Medicine at the Mount Sinai Medical School and a former Director of
the National Institutes of Arthritis, Diabetes, Digestive and
Kidney Diseases of the National Institutes of Health.
Incumbent director Dan L. Goldwasser also brings
important expertise in corporate governance and legal and
accounting matters, having served for several years on the Auditing
Standards Board of the American Institute of Certified Public
Accountants and as Chairman of the American Bar Association’s
Business Law Section’s Committee on Law and Accounting.
In addition to these impressive incumbent candidates, Forest has
nominated three outstanding new candidates for election at this
year’s Annual Meeting. Christopher J. Coughlin, Gerald M. Lieberman
and Brenton L. Saunders are highly accomplished professionals who,
along with Forest’s seven incumbent directors, bring the critical
insight, financial acumen, operational skills, investor
perspective, compliance expertise, and corporate governance
experience that will be instrumental to our future growth and
success. Specifically:
- Christopher J. Coughlin is the
former Chief Financial Officer of both Tyco International and
Pharmacia. His wide array of senior management positions in global
companies, pharmaceutical background, finance experience and
compliance and governance expertise, including in his role as lead
independent director of Dun & Bradstreet, will further equip
the Board in making strategic decisions for the long-term growth of
the Company.
- Gerald M. Lieberman is the
former President and Chief Operating Officer of AllianceBernstein,
Chief Financial Officer of Fidelity Investments and member of
Fidelity’s operating committee. His senior roles at premier
investment and asset management firms, and his breadth and depth of
experiences, including his finance and accounting expertise, and
career-long focus on risk management, enable him to provide
important and valuable perspectives to the Board.
- Brenton L. Saunders is the Chief
Executive Officer and a Director of Bausch + Lomb, a former
President of Schering-Plough’s Global Consumer Health Care division
and a former Partner and Head of the Compliance Business Advisory
Group at PricewaterhouseCoopers LLP. His leadership experience as
CEO of a global, branded healthcare company, and 15 years of senior
compliance experience make him an invaluable addition to the Forest
Board.
We are confident that our nominees will provide the leadership
and continuity necessary at this exciting and critical time for
Forest.
When It Comes to Icahn's Nominees, The
Question Is Not "What's the Harm?" But "Are They The Best?"
With the addition of our new nominees, we have carefully
assembled a world-class board. Our director candidates have a
diverse and specialized skill set that will help guide Forest
through the near-term commercialization of the Company’s next
generation of key products and set our strategy for well beyond the
launch of those products.
We believe corporate boards should be assembled based upon the
leadership qualities, experience and expertise of the directors –
not based on the obvious self-interest of a single, vocal
shareholder, who prior to the last minute submission of his
director slate NEVER once approached the Company or engaged in ANY
dialogue with Forest management or directors.
Each new Forest candidate was nominated after an extensive
identification and vetting process driven by our Nominating
Committee, working in conjunction with Heidrick & Struggles,
our external board search firm. These nominees are independent,
experienced and bring important core competencies to Forest at a
crucial time in the Company’s development. With these new
directors, our board is exceptionally well qualified to ensure that
Forest is positioned to execute its strategy and to continue
delivering superior shareholder value.
Icahn’s Nominees Are Not Qualified
We do not believe that Icahn's nominees add the world-class
experience, operational skills, or financial acumen needed to guide
your Company over the next five to ten years. Simply put, Icahn’s
candidates have limited operational expertise, they are not
qualified financial experts and they lack experience as leaders of
public companies.
- Richard Mulligan and Eric Ende have no
previous corporate operating or management experience and have no
expertise in compliance or governance. During Richard Mulligan’s
six years of combined service as a director of ImClone, Biogen Idec
and Enzon, none of these companies had a new product approved in
the U.S.
- During Alex Denner’s involvement with
ImClone, Biogen Idec, Amylin and Enzon, none of these companies had
a new product approved in the U.S. Denner also was tasked with
finding a new CEO for Enzon and has failed for a year and a half to
find a permanent replacement.
- Lucian Bebchuk’s only experience is as
a recently elected director on the board of Norilsk Nickel, a
Russian mining company.
- None of Icahn’s four nominees have been on
the board of any company when it has received a New Chemical Entity
(NCE) or Biological License Application (BLA) approval.
In addition, each of these individuals previously served as an
Icahn nominee in a proxy contest, Alex Denner is an Icahn employee,
and both Alex Denner and Richard Mulligan are currently serving as
Icahn designees on the boards of two other public companies that we
believe will compete with Forest for product opportunities in the
future.
Denner and Mulligan are Conflicted and
Should Not Be on Your Board
Business development, product acquisition and licensing are the
life blood of our Company, and Forest’s directors are actively
engaged in this process. The same is true of Biogen Idec and
Amylin, where Alex Denner and Richard Mulligan both serve as
directors. All three companies rely on partnerships and licensing
arrangements as an integral part of their business model –
which means they will likely compete with Forest for the same
product opportunities in the market.
As reflected on their company websites, both Biogen Idec and
Amylin compete in therapeutic areas in which Forest currently has
products on the market, under development and where it will likely
be evaluating product opportunities in the future, such as
cardiovascular, neurology, infectious diseases and diabetes:
- Biogen Idec: “We are interested in
partnerships in our core therapeutic area of neurology and
other areas of high unmet need. In addition, we welcome products in
acute care, including cardiovascular, hemophilia,
infectious disease, and other products used in a hospital
environment.”2
- “As Amylin continues to expand
opportunities for its commercialized products in the near term, the
company's mid and long-term R&D programs support a robust
product development pipeline, primarily focused on innovative new
therapies for diabetes and obesity.”3
We believe Denner and Mulligan simply cannot effectively
represent the interests of Forest shareholders while they
simultaneously hold board seats on Biogen Idec and Amylin – two
companies with which Forest competes for product opportunities. In
addition to their lack of other qualifications, their candidacies
should be rejected on this basis alone.
The Potential Exclusion of Mr. Solomon Will
Not Affect Forest’s Ability to Do
Business with the Federal Government
Icahn, in plain desperation from his weak platform, is attacking
our CEO on an unfounded, unprecedented and unfair issue. We believe
this potential action is an arbitrary and unwarranted attempt to
force out a senior executive who has never been accused of any
wrongdoing whatsoever. Further, Mr. Solomon and the Forest
management team and Board have delivered a 23% annualized total
return during his 34-year tenure as CEO, a virtually unrivaled
achievement.4
The truth is that at no time during the government’s six year
investigation of Forest was Mr. Solomon ever accused of any
wrongdoing in connection with the matters settled in 2010. HHS-OIG
is contemplating using a statute that has never before been used
under these circumstances, simply based on Mr. Solomon’s role as
CEO of Forest. We believe HHS-OIG would exceed the bounds of its
authority in doing so. Furthermore, leading independent third-party
organizations have been highly critical of the HHS-OIG’s proposed
action.5
Forest stands by its decision to support Mr. Solomon in
challenging this potential action. However, should the exclusion
become effective, we will take the appropriate steps to ensure that
the Company is not precluded from doing business with the Federal
government. The Board is confident that the company has the right
team, structure and plan already in place to continue to drive the
strong shareholder returns that Forest has achieved for the past 20
years.
Your Board Has the Right Plan to Build
Long-Term Value
Your Board and management team have been developing and
executing a strategic plan for more than a decade to ensure that
the Company has a solid path for future success. Forest has been
very efficient with its allocation of capital, maintaining a strong
balance sheet that has enabled the Company to support its future
growth while also returning $4.8 billion in capital to
shareholders through repurchases since fiscal 2005 – including
two $500 million accelerated share repurchases implemented in the
last 14 months. In fact, Forest has repurchased more shares in the
last two years than other Icahn biopharma holdings such as Biogen,
Amylin and Enzon, and as a percentage of total market
capitalization, Forest has returned more capital to shareholders in
the last two years than any of its peers.
Forest’s strong balance sheet also has enabled the Company to
build one of the deepest, diversified and most promising product
portfolios in the industry. Forest has a disciplined and measured
approach, including acquiring Clinical Data and Novexel in the last
two fiscal years – both of which have meaningfully strengthened
and diversified our late-stage pipeline. Importantly, our
ongoing flexibility provides the ability to pursue additional
promising opportunities as they arise in the marketplace.
Forest is currently at an important juncture as it transitions
beyond the successes of Lexapro and Namenda. The key to value
creation at Forest lies in the ability to successfully launch this
portfolio of new products and neither Icahn nor his hand-picked
nominees have the operational experience to get that job done. The
leadership team that identified and developed these products is
best suited to bring them to market successfully and build value
for you over the long term.
YOUR VOTE IS IMPORTANT – PLEASE SIGN AND
SEND THE WHITE PROXY CARD TODAY
Your Board unanimously recommends that you vote for our entire
slate of highly qualified, talented and experienced director
nominees. Your vote is very important, no matter how many shares
you own. Support your Board by voting the WHITE proxy card TODAY.
You may vote by telephone, internet or by signing, dating and
returning the enclosed WHITE proxy card in the postage-paid
envelope. We also urge you to DISCARD ANY GOLD PROXY CARD
sent to you by Mr. Icahn or his affiliates. If you have already
returned a gold proxy card, you can change your vote by signing,
dating and returning a WHITE proxy card. Only your latest dated
proxy card will be counted.
On behalf of the board of directors, we thank you for your
continued support of our Company.
Sincerely, /s/ Howard Solomon Chairman of the Board
and Chief Executive Officer /s/ Kenneth Goodman
Presiding Independent Director
1 “Best late stage pipeline in all of biopharma - 5 drugs launch
in next two years all with composition of matter patents. Will
drive >30% EPS growth post F2013 trough.” (Corey Davis, Ph.D.,
Jefferies & Company, Inc., May 16, 2011)
2 Biogen Idec website,
http://www.biogenidec.com/partnership_business_development.aspx?ID=5818
3 Amylin website, http://www.amylin.com/research/pipeline/
4 “The CEO 20-20 Club” by Scott DeCarlo, April 28, 2011,
available at
http://blogs.forbes.com/scottdecarlo/2011/04/28/the-ceo-20-20-club/
5 Third-party commentary is available at
http://www.frx2011annualmeeting.com/presentations-materials/
Forward Looking Information
Except for the historical information contained herein, this
document 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, changes in laws and regulations affecting the healthcare
industry and the risk factors listed from time to time in Forest
Laboratories’ Annual Reports on Form 10-K (including the Annual
Report on form 10-K for the fiscal year ended March 31, 2011),
Quarterly Reports on Form 10-Q, and any subsequent SEC filings.
Important Additional Information
Forest Laboratories, its directors, director nominees and
certain of its executive officers may be deemed to be participants
in the solicitation of proxies from Forest shareholders in
connection with the matters to be considered at Forest
Laboratories’ 2011 Annual Meeting. On July 18, 2011, Forest
Laboratories filed its definitive proxy statement (as it may be
amended, the “Proxy Statement”) with the U.S. Securities and
Exchange Commission (the “SEC”) in connection with such
solicitation of proxies from Forest shareholders. FOREST
SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PROXY STATEMENT
AND ACCOMPANYING PROXY CARD AS THEY CONTAIN IMPORTANT
INFORMATION. Detailed information regarding the identity of
participants, and their direct or indirect interests, by security
holdings or otherwise, is set forth in the Proxy Statement,
including Appendix B thereto. Shareholders can obtain the Proxy
Statement, any amendments or supplements to the Proxy Statement and
other documents filed by Forest Laboratories with the SEC for no
charge at the SEC’s website at www.sec.gov. Copies are also
available at no charge at Forest Laboratories’ website at
www.frx.com or by writing to Forest Laboratories at 909 Third
Avenue, New York, New York 10022.
This document contains quotes and excerpts from
certain previously published material. Consent of the author and
publication has not been obtained to use the material as proxy
soliciting material.
If you have any questions, require
assistance with voting your WHITE proxy card,
or need additional copies of the proxy
materials, please contact:
MacKenziePartners, Inc.
105 Madison Avenue
New York, NY 10016
frxproxy@mackenziepartners.com
(212) 929-5500 (Call Collect)
Or
TOLL-FREE (800) 322-2885
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