Forest Hit by Lexapro Generics - Analyst Blog
April 17 2012 - 11:47AM
Zacks
Forest
Laboratories, Inc . (FRX) reported
earnings per share of 72 cents in the fourth quarter of fiscal
2012, a penny above the Zacks Consensus Estimate. Fourth quarter
fiscal 2012 earnings, however, came in below the year-earlier
earnings of $1.12 per share. Results were hit by the loss of
exclusivity on Lexapro.
Fourth quarter revenues declined 7.3% to $1.01 billion, with net
sales falling 8.7% to $996 million. Total revenues, however, topped
the Zacks Consensus Estimate of $980 million.
Full-year earnings came in at $3.72 per share, a penny above the
Zacks Consensus Estimate. Earnings, however, declined 15.6% from
the year-ago period. Revenues, which topped the Zacks Consensus
Estimate of $4.5 billion, increased 3.8% to $4.6 billion.
The Quarter in Detail
Fourth quarter product revenues declined 8.7% to $996.9 million.
While Lexapro revenues fell 40.2% to $355.8 million, Namenda, which
is approved for the treatment of moderate and severe Alzheimer’s
disease, delivered revenues of $393.1 million, recording
year-over-year growth of 19.5%.
Namenda sales are expected to increase 17% in fiscal 2013.
Meanwhile, Lexapro sales will continue declining in fiscal 2013.
The company is guiding towards Lexapro sales of $250 million.
Bystolic, Forest Labs’ beta-blocker for the treatment of
hypertension, posted revenues of $96.9 million, up 32.6%. Savella,
which is approved for the management of fibromyalgia, posted
revenues of $25.3 million, up 6.5% from the year-ago period. While
Bystolic sales are expected to increase 29% in fiscal 2013, Savella
sales are expected to grow 5%.
Forest Labs’ new product, Teflaro, posted revenues of $7.9
million, up from $6.5 million in the third quarter of fiscal 2012.
The FDA granted approval to Teflaro for the treatment of patients
suffering from acute bacterial skin and skin structure infection
and community acquired bacterial pneumonia in October 2010. Forest
Labs launched the product in March 2011. Teflaro sales are expected
to come in at $65 million in fiscal 2013.
Two other new products, Daliresp and Viibryd, were launched in
August 2011. While Daliresp, which is approved for the treatment of
chronic obstructive pulmonary disease (COPD), recorded revenues of
$13.1 million (up from $8.4 million in the third quarter), Viibryd
(vilazodone HCl), approved for the treatment of major depressive
disorder (MDD) recorded revenues of $24.9 (up from $18.9 million in
the third quarter). Forest Labs expects Daliresp and Viibryd sales
of $85 million and $175 million in fiscal 2013.
Contract revenue came in at $46.8 million, up from $36.9 million
in the year-ago period. Contract revenue included $17 million
earned under the company’s agreement with Mylan
(MYL) for the authorized generic version of Lexapro. The company
expects to earn $115 million from authorized generic Lexapro sales
in fiscal 2013.
Benicar co-promotion income dropped 12.9% year-over-year to
$29.6 million. Under its agreement with Daiichi Sankyo, Forest Labs
is now receiving a gradually declining royalty rate on Benicar
until the end of March 2014. Benicar earnings will continue
declining in fiscal 2013 (guidance: 10% decline).
Adjusted SG&A expense increased 16.7% to $410.5 million in
the reported quarter. Forest Labs continues to focus on promoting
its new products. Adjusted R&D spend increased 48.3% during the
quarter. The company expects to spend $1.6 billion and $850 million
on SG&A and R&D, respectively, in fiscal 2013.
Fiscal 2013 Guidance
Forest Labs provided its earnings guidance for fiscal 2013. The
company expects earnings in the range of $0.90 - $1.05 per share
($1.20 - $1.35 excluding acquisition-related amortization) on total
net revenue of $3.4 billion. The Zacks Consensus Estimate for
fiscal 2013 currently stands at $1.09 per share.
Pipeline Update
The company provided an update on its pipeline and expects to
have two new products (linaclotide and aclidinium) in its marketed
product portfolio in calendar 2012. The company expects to launch
both products in the fourth quarter of calendar 2012. While Forest
Labs expects linaclotide sales of $60 million in fiscal 2013,
aclidinium sales are expected to be $35 million.
Forest Labs and its partner, Ironwood Pharmaceuticals,
Inc. (IRWD) are seeking approval for the use of
linaclotide for the treatment of irritable bowel syndrome with
constipation (IBS-C) and chronic constipation (CC). A response from
the FDA should be out in June 2012.
Meanwhile, Forest Labs and its partner Almirall are looking to
gain approval for aclidinium for the treatment of COPD. Aclidinum’s
approval would be a major boost for Forest Labs with the COPD
market representing huge commercial potential. A response on
aclidinium should be out in July 2012.
The company expects to file for approval of two more candidates
in calendar 2012.
Neutral on Forest Labs
We currently have a Neutral recommendation on Forest Labs, which
carries a Zacks #3 Rank (short-term Hold rating). Forest Labs is
going through a major patent cliff now that lead product, Lexapro,
has lost exclusivity. Namenda will face generic competition in
early 2015 putting another $1+ billion at risk. In such a scenario,
we are pleased to see the company delivering on the pipeline front.
We believe that Forest Labs will continue to seek in-licensing and
acquisition opportunities to grow its pipeline.
FOREST LABS A (FRX): Free Stock Analysis Report
IRONWOOD PHARMA (IRWD): Free Stock Analysis Report
MYLAN INC (MYL): Free Stock Analysis Report
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