FRX Forest Road Acquisition Corp

Forest Laboratories, Inc. (FRX) recently purchased all US patents and other US and Canadian intellectual property for hypertension treatment, Bystolic, from Janssen Pharmaceutica NV, a Johnson & Johnson (JNJ) company.

In order to acquire the Bystolic patents, Forest Labs made a one-time cash payment of $357 million to Janssen, which will be amortized by Forest Labs over the balance patent life of Bystolic. Forest Labs had licensed the US pharmaceutical composition of matter patent covering Bystolic from Mylan (MYL), which had licensed the patent from Janssen Pharmaceutica NV.

Besides acquiring Bystolic-related patents, Forest Labs terminated its licensing agreement with Janssen Pharmaceutica NV and Janssen Pharmaceutical for the commercialization of Bystolic and Savella (fibromyalgia), respectively, in Canada.

Forest Labs said that its Canadian subsidiary will be responsible for the registration and commercialization of Bystolic and Savella.

The Bystolic rights were acquired on March 30. With this move, Forest Labs will be doing away with the obligation to pay royalties on Bystolic.

Meanwhile, we note that several generic companies are currently seeking approval from the US Food and Drug Administration (FDA) for their generic versions of Bystolic. Forest Labs and Janssen Pharmaceutica NV have filed a joint lawsuit against companies like Amerigen Pharmaceuticals, Inc., Glenmark Generics, Inc., Hetero USA Inc., Torrent Pharmaceuticals Ltd., Watson Laboratories, Inc.

Another patent infringement lawsuit has been filed by Forest Labs and Janssen in the US District Court for the Northern District of Illinois against Alkem Laboratories Limited and Indchemie Health Specialties Pvt. Ltd. Bystolic sales came in at $250.9 million, up 31.2% from the year-ago period, in the first nine months of fiscal 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 Lexapro, its key revenue generator, losing patent exclusivity recently. While Teva (TEVA) launched its generic version of Lexapro recently, Mylan is marketing an authorized generic version of the product.

Another key product, Namenda, in Forest Labs’ portfolio could start facing generic competition in early 2015.

 
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