FRX Forest Road Acquisition Corp

Forest Laboratories, Inc. (FRX) and Pierre Fabre Medicament recently announced positive top-line data on their phase III candidate, levomilnacipran, which is being developed for the treatment of adults with major depressive disorder (MDD).

Results from the randomized, double-blind, placebo-controlled, flexible-dose study showed that patients in the levomilnacipran arm experienced a significant reduction in depression symptoms compared to patients on placebo. The reduction was experienced as early as week one and at each subsequent visit.

Forest Labs and Pierre Fabre are analyzing the data further. Last year, the companies had reported positive data from another placebo-controlled phase III study conducted in adults suffering from MDD.

Another placebo-controlled phase III fixed-dose study is currently ongoing with results expected in Spring 2012.

Levomilnacipran is one of the candidates that Forest Labs intends to file for approval in 2012, the other being antipsychotic candidate cariprazine. Forest Labs will most likely file for US approval of cariprazine in the second half 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 are pleased with 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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