SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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Forest Laboratories, Inc.
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(Name of Registrant as Specified In Its Charter)
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Carl C. Icahn
Dr. Alexander J. Denner
Dr. Richard Mulligan
Professor Lucian A. Bebchuk
Dr. Eric J. Ende
Mayu Sris
Icahn Partners LP
Icahn Partners Master Fund LP
Icahn Partners Master Fund II
L.P.
Icahn Partners Master Fund III L.P.
High River Limited Partnership
Hopper Investments LLC
Barberry Corp.
Icahn Onshore LP
Icahn Offshore LP
Icahn Capital L.P.
IPH GP LLC
Icahn Enterprises Holdings L.P.
Icahn Enterprises G.P. Inc.
Beckton Corp.
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Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
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ON JULY 19, 2011, THE PARTICIPANTS (AS DEFINED BELOW) FILED A DEFINITIVE PROXY STATEMENT
WITH THE SECURITIES AND EXCHANGE COMMISSION. SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY CARL C. ICAHN, DR. ALEXANDER J. DENNER, DR. RICHARD MULLIGAN, PROFESSOR
LUCIAN A. BEBCHUK, DR. ERIC J. ENDE, MAYU SRIS, ICAHN PARTNERS LP, ICAHN PARTNERS MASTER FUND LP, ICAHN PARTNERS MASTER FUND II L.P., ICAHN PARTNERS MASTER FUND III L.P., HIGH RIVER LIMITED PARTNERHIP, HOPPER INVESTMENTS LLC, BARBERRY CORP., ICAHN
ENTERPRISES G.P. INC., ICAHN ENTERPRISES HOLDINGS L.P., IPH GP LLC, ICAHN CAPITAL L.P., ICAHN ONSHORE LP, ICAHN OFFSHORE LP, AND BECKTON CORP. (COLLECTIVELY, THE PARTICIPANTS) FROM THE STOCKHOLDERS OF FOREST LABORATORIES, INC. FOR USE AT
ITS 2011 ANNUAL MEETING OF STOCKHOLDERS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION RELATING TO THE PARTICIPANTS. THE DEFINITIVE PROXY STATEMENT AND A FORM OF PROXY IS AVAILABLE TO STOCKHOLDERS OF FOREST LABORATORIES, INC.
FROM THE PARTICIPANTS AT NO CHARGE AND IS ALSO AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE COMMISSIONS WEBSITE AT HTTP://WWW.SEC.GOV OR BY CONTACTING D.F. KING & CO., INC. BY TELEPHONE AT THE FOLLOWING NUMBERS: STOCKHOLDERS
CALL TOLLFREE: (800) 6976975 AND BANKS AND BROKERAGE FIRMS CALL: (212) 2695550.
Consent of the
author and publication has not been obtained to use the material filed herewith as proxy soliciting material.
Carl Icahns Challenge for Forest Labs Uses Same Plan That Shook Up Biogen
By Meg Tirrell - Aug 17, 2011 4:16 PM ET
Aug. 17 (Bloomberg) Carl Icahns effort to shake up drugmaker Forest Laboratories Inc. may look a lot like his three-year fight at Biogen Idec
Inc., the worlds biggest maker of multiple sclerosis medicines. The billionaire investor installed three directors at Weston, Massachusetts-based Biogen, oversaw the appointment of Chief Executive Officer George Scangos and helped narrow the
companys research focus. Shannon Pettypiece reports on Bloomberg Televisions In the Loop. (Source: Bloomberg)
Carl Icahn
s effort to shake up drugmaker
Forest
Laboratories Inc. (FRX)
may look a lot like his three-year fight at
Biogen Idec Inc. (BIIB)
, the worlds biggest maker of multiple sclerosis medicines.
The billionaire investor
installed three directors at Weston, Massachusetts-based Biogen, oversaw the appointment of Chief Executive Officer George Scangos and helped narrow the companys research focus. Biogens stock is up 76 percent since Icahn gained
representation in June 2009.
Thats a precedent for the investors plans for
New York-
based Forest, should his proxy fight succeed, said
David Maris
, an analyst with CLSA. Forest is developing new products to overcome the loss of patent protection next year to its
best- seller, the antidepressant Lexapro. Last year, the company pleaded guilty to illegal drug-marketing charges, paying $313 million to resolve civil and criminal claims.
Icahns approach is to find companies that might be undervalued but clearly have some governance issues, Maris, who recommends selling Forest stock, said in a telephone interview.
They believe that, like a mechanic, after they look under the hood theyll find lots of other things they can fix.
Icahn has
targeted at least six drug companies including Biogen in the last four years, shuffling management teams, driving restructurings and pushing for company sales. His task at Forest may be more difficult,
Corey Davis
, an analyst for Jefferies & Co., said in a telephone interview.
Share Gain
Forests stock is up 23
percent over the last 12 months, compared with a 9.3 percent return for the Standard & Poors 500 Index. The company won U.S. approval in October to sell an antibiotic to fight drug-resistant infections that may generate revenue of as
much as $274 million by 2016, the average estimate of seven analysts surveyed by Bloomberg.
Proxy adviser Institutional Shareholder Services, or ISS, owned by MSCI Inc., last week recommended
investors vote for Forests slate, writing in a report that Icahns case wasnt compelling enough for change at the board level.
The ISS recommendation definitely tips the balance in favor of Forest, Davis said. I dont know what Icahns motives are but
he sees this as a good stock, and regardless of whether he gets these guys on the board, its a stock that should probably work.
Icahn will take his effort to the companys annual shareholder
meeting
tomorrow in
New York
. The investor is Forests second-biggest shareholder, with 9.2 percent of the companys stock, and has nominated four directors to the 10- member board.
Poor Performance
Icahn has
told
shareholders during the proxy fight that Forests average board tenure of 23 years is too long and cites a stock decline
of more than 50 percent from the drugmakers 2004 high of $77.59. Chief Executive Officer Howard Solomon, at the helm since 1977, was targeted for exclusion from doing business with U.S. health-care programs because of the companys
improper drug marketing until regulators dropped their efforts this month.
Drug research at Forest is unfocused and may not produce medicines
that make up for revenue losses from patent expirations on Lexapro, with $2.3 billion in fiscal 2011 revenue, and the Alzheimers medicine Namenda, with $1.3 billion, Icahn has argued in regulatory filings. He also cites a lack of independence
among directors before he mounted his campaign. Forest proposed a slate with three new nominees after Icahn announced his challenge.
Operational Failures
There
were operational failures at Biogen and there are at Forest that are specific to the companies, Alex Denner, senior managing director at
Icahn Enterprises LP
(IEP)
and one of Icahns nominees for Forests board, said yesterday in a telephone interview. But theres a general issue of a company sort of stuck in the past.
Denner pointed to a reduction of $300 million in annual spending at Biogen during Icahns involvement.
You can probably do similar things with Forest, he said. Improve
cash flow
, and probably at the same time it will become a more efficient company.
Forest has countered in letters to shareholders over the last month, saying the company has outperformed the
S&P 500
, developed a diversified set of experimental medicines and has leadership focused on continuing to build
sustainable momentum and value for all shareholders.
The companys shares fell 86 cents, or 2.4 percent, to $34.45 at 4:01 p.m. on
the New York Stock Exchange.
Forest Chief Financial Officer Frank Perier said yesterday that Icahns nominees arent qualified for
the board and present conflicts of interest.
No Comparison
If you compare the skills, capabilities and experiences of our 10 members versus the four that were proposed, they dont have the same level, Perier said in a telephone interview.
And two of them, Alex Denner and Richard Mulligan, are conflicted because of their board seats at Biogen and
Amylin Pharmaceuticals Inc. (AMLN)
Icahns group has challenged the assertion, saying in a filing this month that
throughout the health-care industry, directors serve on multiple boards.
Denner cited his time running ImClone Systems Inc. as
evidence of his industry experience and challenged Forests nominees to a public debate with Icahns four.
Icahn is likely to push
for a restructuring rather than a sale if he gains representation on Forests board, said Ian Sanderson, a Boston-based analyst with Cowen & Co.
Very Knowledgeable
The folks hes proposing to put on the board are very
knowledgeable about Forest and the environment, Sanderson said in an interview. He probably sees a lot of opportunity to deploy the cash, maybe take on a bit more debt to either accelerate the share repurchase or make some more
significant acquisition, or pare back the spending a little bit.
Forest had $2.3 billion in cash and short-term investments as of June 30, according to Bloomberg data.
The company said in June it would buy back $500 million in shares under a program authorized in May 2010, and this week said it would buy back an additional $350 million under an accelerated repurchase program.
Theres a need to change the culture, said Maris of CLSA, drawing a similarity to Biogen before Icahn placed Denner and Mulligan on the
board in 2009. Icahn added a third representative, Eric Rowinsky, to Biogens board in March 2010, and pushed splitting the company into two business units of neurology and cancer.
Biogen started a reorganization in November that cut 13 percent of its workforce and honed its focus on neurology drugs instead of cancer and heart medicines, after appointing its current CEO in July
2010. Scangos replaced James Mullen, who had led the company for 10 years.
Biogen Data
In April, Biogen reported positive data on an experimental pill for multiple sclerosis, sending the shares up 15 percent, the most in three years.
Without Icahn, none of the activity and pressure on the company would have been brought to bear, Maris said.
Icahn wasnt immediately successful at Biogen. He expressed interest in buying the company in 2007 for $23 billion and staged proxy battles in 2008
and 2009. Biogen put itself up for sale in October 2007 and Icahn subsequently withdrew the bid before the company said in December 2007 it would remain independent. In a regulatory filing this week, Icahn didnt report any Biogen holdings,
after owning more than 3 million shares as of March 31, when the shares were trading at $73.47.
Drugmaker Sales
The investor has succeeded in selling other drugmakers. He and his team pushed the sales of Cambridge, Massachusetts-based Genzyme Corp. to Paris
Sanofi in February for $20.1 billion; ImClone, based in New York, to Indianapolis-based
Eli Lilly & Co.
(LLY)
in 2008 for $6.5 billion; and MedImmune Inc., based in Gaithersburg,
Maryland
, to
London
s AstraZeneca Plc in 2007 for $15 billion. He has
gained board representation at Amylin in
San Diego
and
Enzon Pharmaceuticals Inc. (ENZN)
in Piscataway,
New
Jersey
.
Looking back on Icahns recent history is probably a good judge on what he might do going
forward,
Les Funtleyder
, a health-care strategist and portfolio manager at Miller Tabak & Co. in New
York, said in a telephone interview. In the case of Biogen, they brought in new management and refocused a bit; Genzyme was an outright acquisition.
To contact the reporter on this story: Meg Tirrell in New York at
mtirrell@bloomberg.net
.
To contact the editor responsible for this story: Reg Gale at
rgale5@bloomberg.net
.
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