FRX Forest Road Acquisition Corp

Forest Laboratories, Inc. (FRX) and Gedeon Richter plc recently presented positive top-line results on their antipsychotic candidate, cariprazine. Preliminary top-line results were presented from a phase III study that was conducted in patients with acute mania associated with bipolar I disorder.

Results from the five-week multi-center, double-blind, placebo-controlled, parallel-group study showed that patients in the cariprazine arm experienced significant symptom improvement compared to patients in the placebo arm. The improvement was observed as early as the fourth day of treatment and at each subsequent time point studied.

Cariprazine, a novel, orally active D2/D3 antagonist, was generally well tolerated. However, discontinuations due to adverse events were higher in the cariprazine arm compared to placebo (10% versus 7%). Forest Labs expects to analyze the data further in the coming weeks.

Cariprazine is being studied for other indications as well including schizophrenia, bipolar depression, and as an adjunct treatment in major depressive disorder (MDD). Results from the schizophrenia and bipolar depression studies should be out in the first half of 2012. Forest Labs has plans to file for approval of cariprazine in 2012.

Cariprazine became a part of Forest Labs' pipeline with its 2004 collaboration and licensing agreement with Gedeon Richter. Forest Labs gained development and exclusive US rights to cariprazine and related compounds. Other players in the antipsychotic market include Bristol-Myers Squibb (BMY) and Eli Lilly (LLY) among others.

We are pleased to see Forest Labs' progress with its pipeline. The pipeline needs to deliver given the patent cliff being faced by the company. Depression product, Lexapro, is slated to lose patent protection in March 2012 - this will place roughly half the company's top-line at risk to generic competition. While Bystolic and Savella should be very meaningful contributors by that time, we believe that their combined sales will not be enough to compensate for the loss of Lexapro sales. Namenda will face generic competition in early 2015 -- this puts another $1+ billion at risk.

Given the situation, we believe that Forest Labs will continue to seek in-licensing and acquisition activities to grow its pipeline. We currently have a Neutral recommendation on Forest Labs, which carries a Zacks #3 Rank (short-term Hold rating).
 
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