Forest Inks Alzheimer's Drug Deal - Analyst Blog
November 15 2012 - 11:40AM
Zacks
Forest Laboratories, Inc. (FRX) is taking steps
to extend the lifecycle of its Alzheimer’s disease product, Namenda
(memantine HCl). The company recently signed a development and
commercialization agreement with Adamas Pharmaceuticals, Inc., an
international pharmaceutical company.
Terms of the Deal
The companies will work on the development of a fixed dosed
combination of Namenda XR and donepezil HCl for the once-daily
treatment of moderate to severe dementia of the Alzheimer’s type.
Namenda XR, which is scheduled to launch in mid-2013, is a
once-daily extended-release version of Forest Labs’ Alzheimer’s
drug, Namenda.
Forest Labs will be solely responsible for the commercialization
of the combination treatment in the US and will be responsible for
all development and commercialization activities. The combination
product will be protected by patents that extend to 2029.
Adamas is entitled to receive an upfront payment of $65 million
from Forest Labs and up to $95 million on the achievement of
development and FDA approval milestones. Adamas is also entitled to
receive royalties on net sales in the US starting from 5 years
after the launch of the combination product and any other memantine
products for which Adamas has patents listed in the FDA’s Orange
Book.
Our Take
The extension of the Namenda life cycle is extremely important
for Forest Labs. Namenda, which posted sales of $1.4 billion in
fiscal 2012, will be losing exclusivity in 2015. With the Adamas
deal, Forest Labs is looking to reduce the impact of the
genericization of Namenda. Timing will be of the utmost importance
as the company needs to switch patients to the new formulation
before Namenda generics enter the market.
Currently, Forest Labs and Adamas expect to be in a position to
file for approval in the US in 2014. This means that first-round
approval would allow the launch to take place in 2015.
With Namenda generics slated to enter the market in early 2015,
Forest Labs will be left with a very narrow time margin for
switching patients to the combination therapy. In fact, the company
may find it extremely challenging to switch patients to the
combination therapy if it is launched after the entry of generics.
In our view, the Namenda life-cycle extension plan would have been
more effective had it been planned a bit earlier.
We currently have a Neutral recommendation on Forest Labs. The
stock carries a Zacks #4 Rank (short-term Sell rating). Forest Labs
has been under a lot of pressure following the entry of generic
versions of its depression drug, Lexapro, earlier this year. While
Mylan (MYL) sells the authorized generic version
of Lexapro, companies like Teva (TEVA) have
launched their generic versions of the drug.
The company recently cut its guidance for fiscal 2013 again.
More than Lexapro’s genericization, the cut in Namenda’s guidance
was disappointing as Namenda is currently the main contributor to
the company’s top line. Moreover, the performance of new products
especially Teflaro, has been below expectations.
FOREST LABS A (FRX): Free Stock Analysis Report
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