FRX Forest Road Acquisition Corp

Forest Laboratories, Inc. (FRX) and partner Gedeon Richter recently presented positive top-line results on their antipsychotic candidate, cariprazine (RGH-188). 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 fifth 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 arms compared to placebo. Forest Labs intends to analyze the data further. Results from this study were similar to those reported by the company from two other studies conducted with cariprazine.

Cariprazine is being studied for other indications as well, including schizophrenia, bipolar depression, and as an adjunct treatment in major depressive disorder (MDD). Forest Labs plans to file for approval of cariprazine in the second half of 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.

We believe that combined sales of Bystolic, Savella and newly launched products 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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