Forest Laboratories Comments on ISS Report
August 01 2012 - 1:26PM
Business Wire
Forest Laboratories, Inc. (NYSE: FRX) (“Forest”) today commented
on a report by proxy advisory service Institutional Shareholder
Services (ISS) regarding the election of director nominees at the
Company’s Annual Meeting of Shareholders, which will be held on
August 15, 2012.
The Company stated, “ISS’s recommendation rejects two of Icahn’s
four nominees, including Eric Ende, whom Icahn chose to lead his
proxy contest. We believe ISS’s recommendation for Icahn’s two
other nominees is based on a flawed analysis that adopts Icahn’s
fundamental misunderstandings of the Company’s business model and
strategic focus in support of a reckless, cost-cutting strategy
with the potential to destroy value for shareholders. We are
confident that our ten highly qualified nominees possess the right
combination of skills, experience and expertise to ensure that our
products reach their maximum potential.”
“Compared to last year, Forest is in a stronger position to
deliver value for shareholders on every front. Our pipeline is more
robust – we recently received FDA approval for Tudorza and we
expect FDA approval for one of our largest potential new drugs,
linaclotide, in September. We are continuing to make great progress
with our “Next Nine” and four strong lifecycle products and believe
we are extremely well positioned to more than offset the impact of
our patent expirations over time. We believe both the market and
our shareholders understand the value of our pipeline and look
forward to communicating directly with our shareholders in advance
of our Annual Meeting.”
In its analysis, ISS:
- Undervalues future sales
potential: ISS excludes certain lifecycle programs and other
products in arriving at sales estimates for 2016 that are
meaningfully lower than total sales expected by the Company. The
Company expects to exceed its historical peak sales, which were
achieved in fiscal 2012, by fiscal 2015 and to achieve $6 billion
in total sales by fiscal 2018.
- Ignores strategic primary care
focus: ISS fails to appreciate the Company’s strategic focus on
marketing products to Primary Care Physicians (PCPs), the
efficiencies created by developing products in six of the eight
areas for which PCPs frequently prescribe medicine, and the
increasingly important role PCPs will play in the future under the
Affordable Care Act. Eight out of Forest’s “Next Nine” products are
promoted to PCPs, which creates significant operating leverage by
enabling sales representatives to cross-promote multiple products
during a single sales call.
- Endorses a completely unrealistic,
risky and ill-considered cost-cutting approach: Icahn initially
suggested that he would cut SG&A by $500M at a time when the
company would be launching important new products. After realizing
how much value that could destroy, he changed his story to say he
is actually focused on G&A. However, in the aggregate, the
cost-cutting figures that Icahn has proposed exceed our entire
G&A budget, making such radical cost-cutting not only
ill-advised but impossible. Forest always manages its SG&A
budget prudently, and the cutbacks Icahn proposes at this critical
time are far more likely to destroy shareholder value than build
it.
- Undervalues pipeline and
underappreciates one of the best late-stage pipelines in the
industry: Over the last ten years, Forest has developed an
extremely robust and diverse pipeline, including nine promising new
products that have recently been launched or will soon reach the
marketplace. The Company believes that its pipeline and portfolio
of growing commercialized products – which offer patent protections
ranging from 2020 to 2029 – demonstrates the successful execution
of our long-term planning efforts. The Company believes it is
positioned extremely well for the future and that its pipeline and
product portfolio will more than offset the impact of patent
expirations over time.
The Company continued, “We respectfully disagree with ISS’s
recommendation to vote for two of Icahn’s director nominees who
have little relevant experience. Mr. Ninivaggi has never served on
a healthcare board – even as an Icahn nominee – and we believe he
is over-boarded due to his role as the chief executive and
President of Icahn Enterprises and service as an Icahn nominee on
five public company boards, compromising his ability to serve in
the best interest of all shareholders. Further, we believe Mr.
Legault’s operational track record is questionable and he has no
experience related to launching multiple products in a short time
frame.
“In contrast, our nominees have greater experience and a proven
track record of working to launch multiple new products in rapid
succession – the key to building value for our shareholders at this
critical juncture for the Company. Forest already has added
significant independence to its Board with three new independent
nominees added last year and five new independent directors added
over the last six years. Furthermore, the quality of board members
is paramount, and we simply do not believe that by any reasonable
measure Icahn’s nominees are as qualified to serve on the Forest
Board.”
Forest urges all shareholders to vote the WHITE card they have
received from Forest and to vote “FOR ALL” ten of Forest’s nominees
to its Board of Directors. Shareholders can vote by telephone,
Internet or by signing, dating and returning the Company’s WHITE
proxy card. Forest urges shareholders NOT to sign and to discard
any gold proxy card sent to them by Icahn or his affiliates. Even a
withhold vote for Icahn’s nominees on a gold proxy card will cancel
any previous proxy submitted by shareholders that voted “FOR ALL”
the Company’s nominees. Shareholders can find additional
information about the Forest Annual meeting at
http://www.frx2012annualmeeting.com.
Forward-Looking Information
Except for the historical information contained herein, this
document contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These
statements involve a number of risks and uncertainties, including
the difficulty of predicting FDA approvals, the acceptance and
demand for new pharmaceutical products, the impact of competitive
products and pricing, the timely development and launch of new
products, and the risk factors listed from time to time in Forest
Laboratories’ Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and any subsequent SEC filings.
Important Additional Information
Forest Laboratories, its directors, director nominees and
certain of its executive officers may be deemed to be participants
in the solicitation of proxies from Forest shareholders in
connection with the matters to be considered at Forest
Laboratories’ 2012 Annual Meeting. Forest Laboratories has filed
its definitive proxy statement (as it may be amended, the “Proxy
Statement”) with the U.S. Securities and Exchange Commission (the
“SEC”) in connection with such solicitation of proxies from Forest
shareholders. FOREST SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ
THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AS THEY CONTAIN
IMPORTANT INFORMATION. Information regarding the ownership of
Forest's directors and executive officers in Forest stock,
restricted stock and options is included in their SEC filings on
Forms 3, 4 and 5, which can be found at the Company's website
(www.frx.com) in the section "Investors." More detailed information
regarding the identity of potential participants, and their direct
or indirect interests, by security holdings or otherwise, is set
forth in the Proxy Statement and other materials to be filed with
the SEC in connection with Forest Laboratories' 2012 Annual
Meeting. Information can also be found in Forest's Annual Report on
Form 10-K for the year ended March 31, 2012, filed with the SEC on
May 25, 2012. Shareholders can obtain the Proxy Statement, any
amendments or supplements to the Proxy Statement and other
documents filed by Forest Laboratories with the SEC for no charge
at the SEC's website at www.sec.gov. Copies are also available at
no charge at Forest Laboratories' website at www.frx.com or by
writing to Forest Laboratories at 909 Third Avenue, New York, New
York 10022.
If you have any questions, require assistance with voting
your WHITE proxy card, or need additional copies of the proxy
materials, please contact: MACKENZIE PARTNERS, INC.
105 Madison Avenue New York, NY 10016
frxproxy@mackenziepartners.com
(212) 929-5500 (Call Collect) Or TOLL-FREE (800) 322-2885
About Forest Laboratories
Forest Laboratories' (NYSE: FRX) longstanding global
partnerships and track record developing and marketing
pharmaceutical products in the United States have yielded its
well-established central nervous system and cardiovascular
franchises and innovations in anti-infective, respiratory,
gastrointestinal and pain management medicine. Forest’s pipeline,
the most robust in its history, includes product candidates in all
stages of development across a wide range of therapeutic areas. The
Company is headquartered in New York, NY. To learn more, visit
www.FRX.com.
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