Forest Revs Down, Swings to Loss - Analyst Blog
January 15 2013 - 3:54AM
Zacks
Forest Laboratories, Inc. (FRX) reported a
third quarter fiscal 2013 loss of 29 cents per share, well below
the year-earlier earnings of $1.04 per share. Forest Labs’ results
were hit by the loss of exclusivity on Lexapro as well as the
disappointing performance of Namenda.
Excluding acquisition-related amortization costs, third quarter
fiscal 2013 loss came in at 21 cents, down from the year-ago
earnings of $1.08 per share. Third quarter fiscal 2013 loss was
wider than the Zacks Consensus Estimate of a loss of 13 cents per
share.
Third quarter revenues declined 40.2% to $722.7 million, with
net sales falling 41.6% to $678.0 million. Total revenues were well
below the Zacks Consensus Estimate of $764 million.
The Quarter in Detail
Third quarter product revenues declined 41.6% to $678.0 million.
While Lexapro revenues fell 97.0% to $20.3 million, Namenda, which
is approved for the treatment of moderate and severe Alzheimer’s
disease, delivered revenues of $345.8 million, recording
year-over-year growth of 1.6%.
However, Namenda revenues declined 5.9% on a sequential basis.
Forest Labs said that higher contract rebates, largely driven by
the Medicare Part D Coverage Gap liability, were responsible for
Namenda’s performance.
Lexapro sales were negatively impacted by the entry of
additional generics in the market following the expiry of the
Hatch-Waxman six-month exclusivity period on Sep 13.
Bystolic, Forest Labs’ beta-blocker for the treatment of
hypertension, posted revenues of $108.8 million, up 20.1% from the
year-ago period. Forest Labs is looking to drive Bystolic's growth
by providing additional data on the appropriate use of the
product.
Forest Labs is also working on extending the product’s lifecycle
and is conducting a phase III study with a fixed dose combination
of Bystolic and valsartan (the market leader) for hypertension. A
fixed dose combination product would expand the patient population
for Bystolic. Top-line data should be out this year. Approval as a
first-line treatment would also boost sales significantly.
Savella, which is approved for the management of fibromyalgia,
posted revenues of $25.6 million, down 2.7% from the year-ago
period. Savella’s performance remains disappointing.
Teflaro, launched in Mar 2011 for the treatment of patients
suffering from acute bacterial skin and skin structure infection
and community acquired bacterial pneumonia, posted revenues of
$11.5 million, slightly above $10.0 million posted in the second
quarter of fiscal 2013. Teflaro’s performance continues to
disappoint.
Two other new products, Daliresp and Viibryd, were launched in
Aug 2011. While Daliresp, which is approved for the treatment of
chronic obstructive pulmonary disease (COPD), recorded revenues of
$17.5 million (down from $19.5 million in the second quarter),
Viibryd (vilazodone HCl), approved for the treatment of major
depressive disorder (MDD) recorded revenues of $40.6 million (up
from $39.9 million in the second quarter).
Two more products were launched in Dec 2012 – Tudorza (COPD) and
Linzess (treatment of irritable bowel syndrome with constipation
and chronic idiopathic constipation in adults). While Tudorza’s
initial trade stocking was $12.2 million, Linzess’ initial trade
stocking was $19.2 million.
Contract revenues came in at $38.3 million, up from $34.1
million in the year-ago period. Benicar co-promotion income
increased 14.6% year-over-year to $36.0 million.
SG&A expense increased 8.2% to $428.4 million in the
reported quarter. Forest Labs continues to focus on promoting its
new products. R&D spend increased 22.9% during the quarter.
Fiscal 2013 Guidance Adjusted
Following the release of third quarter fiscal 2013 results,
Forest Labs adjusted its outlook again. The company now expects
earnings to come in towards the lower end of its previously issued
guidance range of 45 - 60 cents per share (excluding
acquisition-related amortization). The Zacks Consensus Estimate for
fiscal 2013 is currently 27 cents.
Forest Labs now expects revenues in the range of $3.1 - $3.2
billion (old guidance: $3.2 billion). The Zacks Consensus Estimate
for fiscal 2013 is currently $3.2 billion.
Forest Labs’ third quarter fiscal 2013 results were
disappointing with the company posting a wider-than-expected loss.
Results were mainly affected by the entry of additional generic
competition for Lexapro. Namenda’s performance was also
disappointing. We note that Forest Labs had cut its guidance for
Namenda in the second quarter of fiscal 2013. Moreover, the
performance of new products, especially Teflaro, has been below
expectations.
However, we remain encouraged by Forest Labs’ progress with its
pipeline candidates. The company has launched several new products
over the past couple of years and is looking to launch additional
products going forward. We have a Neutral recommendation on Forest
Labs, which carries a Zacks Rank #3 (Hold).
Stocks that currently look better-positioned include
Valeant Pharma (VRX), which carries a Zacks Rank
#1 (Strong Buy).
FOREST LABS A (FRX): Free Stock Analysis Report
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