FRX Forest Road Acquisition Corp

Forest Laboratories Inc. (FRX) recently signed a collaborative licensing option deal with Trevena, Inc. for the latter’s mid-stage candidate TRV027.

TRV027 is being developed for the treatment of acute decompensated heart failure (ADHF). Results on the candidate from a phase IIa study in patients with advanced heart failure with reduced ejection fraction showed that TRV027 was generally well-tolerated and demonstrated a beneficial set of hemodynamic effects.

TRV027 is slated to move into a multi-center phase IIb study in ADHF patients by year end. This study will be funded by Trevena. Once this study is completed, Forest Labs will have the option to exclusively license TRV027 on a global basis.

Additional Details

Although detailed financial information was not provided, Forest Labs will make a $30 million equity investment in Trevena. Once Forest Labs exercises its option, it may pay up to $430 million on the achievement of development and commercial milestones. Trevena will also be entitled to royalties. Forest Labs will also be responsible for the development and commercialization of TRV027. Trevena’s $60 million Series C financing round will be led by Forest Labs with an investment of $30 million.

Our Take

With this deal, Forest Labs is looking to strengthen its presence in the cardiovascular market and hospital segment. With currently available treatments not producing meaningful improvements in patient outcomes, the ADHF market represents significant commercial potential.

Forest Labs currently carries a Zacks Rank #3 (Hold). The company is facing tough times with Lexapro losing patent protection. Namenda will face generic competition in early 2015 putting another $1+ billion at risk. Meanwhile, the performance of new products, especially Teflaro, has been below expectations. We also remain concerned about rising expenses. However, we remain encouraged by the company’s progress with its pipeline candidates.

Companies that look better-positioned include Catalyst Pharmaceuticals Partners Inc. (CPRX), Santarus, Inc. (SNTS) and Jazz Pharmaceuticals (JAZZ). All three are Zacks Rank #1 (Strong Buy) stocks.
 

 
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