FRX Forest Road Acquisition Corp

Forest Laboratories, Inc. (FRX) recently reported back-to-back positive news on the pipeline front. The company and partner Gedeon Richter Plc. announced that their late-stage antipsychotic candidate, cariprazine, met its primary endpoint in two phase III studies.

The studies were conducted to evaluate cariprazine for the treatment of acute exacerbation of schizophrenia. Results showed that patients in the cariprazine arm achieved a significant improvement in symptom compared to patients in the placebo arm. Statistically significant separation from placebo was observed in all doses from week 2 and at each subsequent time point. Forest Labs and Gedeon said that the higher dose showed separation as early as week 1 of treatment.  The results were similar to data presented earlier from a phase IIb fixed-dose placebo-controlled study.

Cariprazine is one of the candidates that Forest Labs intends to file for approval in 2012, the other candidate being levomilnacipran (treatment of major depressive disorder). Cariprazine is being studied for other indications as well including bipolar depression and as an adjunct treatment in major depressive disorder (MDD).

Earlier, in February 2012, Forest Labs and Gedeon had reported positive preliminary top-line results on cariprazine from a phase III study conducted in patients with acute mania associated with bipolar I disorder.

Forest Labs will most likely file for US approval of cariprazine in the second half of 2012. However, the antipsychotic market, while large, is pretty crowded with players like Bristol-Myers Squibb (BMY) and Eli Lilly (LLY) among others.

Panel Votes for Aclidinium

Meanwhile, another candidate in Forest Labs’ pipeline, aclidinium bromide, recently received a positive recommendation from the US Food and Drug Administration’s (FDA) Pulmonary-Allergy Drugs Advisory Committee (PADAC). The committee voted 12 to 2 in favor of approving aclidinium bromide for the maintenance treatment of chronic obstructive pulmonary disease (COPD). The committee voted unanimously in favor of the efficacy and 10-3 in favor of the safety of the 400 ug twice daily dose.

Although the FDA is not bound to follow the advice of its advisory committees, it usually does so. A response regarding aclidinium's approval status should be out in the second quarter of 2012.

Neutral on Forest Labs

We currently have a Neutral recommendation on Forest Labs, which carries a Zacks #3 Rank (short-term Hold rating). The company is facing a major patent cliff with lead product Lexapro losing exclusivity. Mylan (MYL) launched a generic version of Lexapro in late February. Moreover, Namenda will face generic competition in early 2015 putting another $1+ billion at risk.

In such a scenario, the company is dependent on new products to make up for a part of the loss of revenues that will take place with the genericization of Lexapro. We were pleased to see the positive developments on the pipeline front. We are also encouraged by Forest Labs’ efforts to grow its pipeline through in-licensing and acquisition activities.

 
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