- Reports diluted GAAP Earnings Per
Share of $0.07; Non-GAAP Earnings Per Share of $0.27
- Company provides Fiscal Year 2014
Revised Non-GAAP EPS Guidance in the Range of $1.25 - $1.35 Per
Share
- Sales of Next Generation Products
Reach $375.4 million in the Quarter, Representing 59.4% Growth vs
Prior Year Quarter
- Project Rejuvenate to Yield $500
million in Cost Savings by End of 2016
- Company to Acquire Aptalis for $2.9
billion in Cash
- Acquisition of Saphris completed on
January 17th
Forest Laboratories, Inc. (NYSE:FRX), a leading, fully
integrated, specialty pharmaceutical company largely focused on the
United States market, today announced that reported diluted
earnings per share equaled $0.07 in the third quarter of fiscal
2014, compared to a reported loss per share of ($0.58) in the third
quarter of fiscal 2013. The third quarter of fiscal 2014 included a
$45 million charge ($28.2 million net of tax) related to Project
Rejuvenate. Excluding acquisition related amortization and
specified items, non-GAAP EPS for the third quarter of fiscal 2014
equaled $0.27 compared with a loss of ($0.21) per share in the
third quarter of fiscal 2013. In December 2013, the Company
announced Project Rejuvenate, a cost savings initiative with a goal
of streamlining operations and reducing $500 million in operating
expenses by fiscal 2016.
Chief Executive Officer and
President
"We just completed a highly productive quarter led by
significant growth in sales and earnings. In my first 100 days at
Forest we have accomplished a great deal, challenging the
conventional wisdom,” said Brent Saunders, CEO & President. "We
took very important strategic actions that have jump-started the
rejuvenation of Forest, including acquiring Saphris for $240
million, commencing Project Rejuvenate to reduce our cost base by
$500 million, raising $1.2 billion through a bond offering, and
announcing plans to acquire Aptalis for $2.9 billion. We
accomplished a lot but I am most proud of the way our teams
responded to the challenges set for them. This renewed sense of
enthusiasm and motivation on the part of our team is contributing
to the strong results we had this quarter."
Product Sales
Performance
Net sales for the quarter increased 24.9% to $846.8 million,
from $678.0 million in the prior year quarter. The increase in
sales was driven by sales of the Company’s next generation products
which totaled $375.4 million, an increase of 59.4% compared with
the third quarter of fiscal 2013.
Central Nervous System
Franchise
- Namenda® (memantine HCl), an
NMDA receptor antagonist for the treatment of moderate to severe
Alzheimer’s disease, recorded sales of $363.7 million during the
quarter, an increase of 5.2% from last year’s third quarter.
Namenda XR® (once-daily memantine HCl), recorded sales of
$37.8 million during the quarter. Namenda XR was launched in June
2013 and recorded sales of $11.5 million during the fiscal 2014
second quarter.
- Viibryd® (vilazodone HCl), a
selective serotonin reuptake inhibitor (SSRI) and a partial agonist
at serotonergic 5-HT1A receptors for the treatment of adults with
MDD, recorded sales of $52.7 million during the quarter, an
increase of 29.7% from last year’s third quarter.
- Fetzima™ (levomilnacipran
extended release capsules), a once-daily serotonin norepinephrine
reuptake inhibitor (SNRI) for the treatment of adults with major
depressive disorder (MDD), was commercially launched in December
2013 and recorded initial trade stocking of $8.0 million.
Respiratory Franchise
- Daliresp® (roflumilast), a PDE4
enzyme inhibitor for the treatment to reduce the risk of
exacerbations in patients with chronic obstructive pulmonary
disease (COPD), recorded sales of $26.8 million for the quarter, an
increase of 53.4% from last year’s third quarter.
- Tudorza® (aclidinium bromide
inhalation powder), an anticholinergic indicated for the long-term
maintenance treatment of bronchospasm associated with COPD,
recorded sales of $20.4 million during the quarter. Tudorza was
launched in December 2012 and recorded initial trade stocking of
$12.2 million during the fiscal 2013 third quarter.
Bystolic® (nebivolol), a
beta-blocker for the treatment of hypertension, recorded sales of
$130.7 million, an increase of 20.1% over the year-ago period.
Linzess®
(linaclotide), a guanylate cyclase agonist for the treatment of
both irritable bowel syndrome with constipation and chronic
idiopathic constipation in adults, recorded sales of $51.0 million
during the quarter. Linzess was launched in December 2012 and
recorded initial trade stocking of $19.2 million during the fiscal
2013 third quarter.
Savella® (milnacipran HCl),
a selective serotonin norepinephrine dual reuptake inhibitor for
the management of fibromyalgia, recorded sales of $25.6 million, an
increase of 0.2% from last year’s third quarter.
Teflaro® (ceftaroline
fosamil), a broad-spectrum bactericidal cephalosporin antibiotic
for the treatment of adults with community-acquired bacterial
pneumonia and with acute bacterial skin and skin structure
infections, recorded sales of $22.3 million, an increase of 93.2%
over last year’s third quarter.
Contract Revenue was $31.6
million in the current quarter compared to $38.3 million in the
prior year third quarter. Benicar® (olmesartan medoxomil)
co-promotion income totaled $30.2 million, a decrease of $5.8
million, compared to $36.0 million in last year’s third quarter.
Per the agreement with Daichi Sankyo, Forest’s active co-promotion
of Benicar ended in the first quarter of fiscal 2009 and the
Company receives a residual royalty until the end of March
2014.
Cost of Sales as a
percentage of revenue was 20.8% compared with 21.4% in last year’s
third quarter.
Selling, General and
Administrative expense for the current quarter was
$455.0 million as compared to $428.4 million in the year-ago
quarter. Selling, general and administrative (SG&A) expenses
for the three months ended December 31, 2013 included $18 million
of expenses related to Project Rejuvenate for post-employment
benefits. Excluding this expense, total SG&A was $437.0
million, an increase of 2.0% over last year’s third quarter. The
current level of spending reflects the resources and activities
required to support our currently marketed products, particularly
our newest products: Fetzima, Namenda XR, Linzess, Tudorza,
Viibryd, Daliresp and Teflaro.
Research and Development for
the current quarter was $219.5 million compared with $325.3 million
in last year’s third quarter. The current quarter included $40.0
million in development milestone expenses, no upfront payments, and
$27 million in expenses related to Project Rejuvenate for
post-employment benefits. The prior year quarter included $44.5
million of milestone payments and $76 million in upfront licensing
payments. Excluding the impact from milestone payments, Project
Rejuvenate, and upfront licensing payments, R&D expense
decreased 25.5% for the current quarter.
Income Tax Expense for the
quarter was $4.4 million, reflecting a quarterly effective tax rate
of 19.5%.
Reported Net Income for the
quarter ended December 31, 2013 was $18.0 million or $0.07 per
diluted share compared to a loss of $153.6 million or $0.58 per
diluted share reported for last year’s third quarter.
Diluted Weighted Average Shares
Outstanding at December 31, 2013 was approximately
272,901,000.
Nine Month Results
Revenues for the nine months ended December 31, 2013 increased
12.0% to $2,554.6 million compared to $2,280.2 million in the prior
year.
Net income for the nine months ended December 31, 2013 increased
$188.8 million to $111.2 million compared to a loss of $77.5
million in the prior year nine-month period. Reported diluted GAAP
earnings per share increased $0.70 to $0.41 per share in the
current year’s nine months as compared to a loss of $0.29 per share
in last year’s nine months.
Fiscal 2014 Guidance
The Company now expects that Non-GAAP earnings per share for the
fiscal year ending March 31, 2014 will be in the range of $1.25 to
$1.35.
Other Developments
- In December the Company announced
Project Rejuvenate, a series of significant strategic actions to
streamline operations and reduce costs. The goals of Project
Rejuvenate are to make the Company more nimble in responding to a
changing environment and to reduce operating expenses by $500
million by the end of FY2016 relative to the FY2014 cost base.
- The Board of Directors authorized the
repurchase of up to $1 billion of common stock, and the Company
also announced that it issued $1.2 billion in new long-term debt
through an offering of 8-year senior unsecured 5% fixed rate
notes.
- The Company announced the acquisition
of exclusive rights in the United States for Saphris® (asenapine)
sublingual tablets, a treatment for adult patients with
schizophrenia or acute bipolar mania, for $240 million in cash,
from a of wholly owned subsidiary of Merck & Co., Inc. Saphris
is an atypical antipsychotic approved by the US Food and Drug
Administration (FDA) and launched in 2009. The agreement closed on
January 17th following regulatory review and satisfaction of all
closing conditions.
- On January 8th the Company announced
that it has entered into a definitive agreement to acquire Aptalis,
a privately held U.S. based specialty Gastrointestinal (GI) and
Cystic Fibrosis company, for $2.9 billion in cash from its
shareholders, including TPG, the global private investment firm.
The acquisition, which is under review by anti-trust authorities in
the US, is expected to add approximately $700 million in sales, and
be accretive to Non-GAAP EPS by approximately $0.78 in fiscal year
2015.
Use of Non-GAAP Financial
Information
Forest provides non-GAAP financial measures as alternative views
of the Company’s performance. These measures exclude certain items
(including costs, expenses, gains/(losses) and other specified
items) due to their significant and/or unusual individual nature
and the impact they have on the analysis of underlying business
performance and trends. Management reviews these items individually
and believes excluding these items provides information that
enhances investors’ understanding of the Company’s financial
performance. Non-GAAP financial measures should be considered in
addition to, but not in lieu of, net income and Earnings Per Share
(EPS) prepared in accordance with accounting principles generally
accepted in the United States (GAAP). Non-GAAP financial measures
have no standardized meaning prescribed by GAAP and therefore have
limits in their usefulness to investors. Because of the
non-standardized definitions, Non-GAAP adjusted income and its
components and non-GAAP EPS (unlike GAAP net income and its
components and EPS) may not be comparable to the calculation of
similar measures of other companies. Non-GAAP adjusted income and
its components and non-GAAP EPS are presented solely to permit
investors to more fully understand how management assesses
performance. A reconciliation between GAAP financial measures and
non-GAAP financial measures follows:
Forest Laboratories, Inc. Specified
Items For the Three and Nine Months Ended December 31, 2013
and 2012
Three
Months Ended Nine Months Ended December 31,
December 31,
(In thousands)
2013 2012
2013 2012
Amortization arising from business
combinations and acquisitions of product rights $ 11,912
$ 9,473 $ 35,659
$ 27,257
Impact of specified items on Cost
of goods sold 11,912 9,473 35,659 27,257 Amortization
arising from business combinations and acquisitions of product
rights 15,920 10,991 44,857 32,896 Project rejuvenate 18,000 --
18,000 -- Write-off of Nabriva note receivable --
-- 26,182
--
Impact of specified items
on Selling, general and administrative 33,920 10,991
89,039 32,896 Project rejuvenate 27,000 -- 27,000 -- Upfront
payment to Adamas -- 65,000 -- 65,000 Other licensing agreement
payments -- 11,000
-- 11,000
Impact of specified items on Research and development 27,000
76,000 27,000 76,000
Increase to
pre-tax income 72,832
96,464 151,698
136,153 Income tax impact of specified items
(16,821 ) --
(16,821 ) --
Increase to net earnings $ 56,011
$ 96,464 $ 134,877
$ 136,153
Forest
Laboratories, Inc. Reconciliation of Certain GAAP Line Items
to Non-GAAP Line Items For the Three and Nine Months Ended
December 31, 2013 and 2012
Three Months Ended December 31, 2013 (In
thousands)
GAAP Reported Specified Items Non-GAAP
Adjusted Gross profit $ 696,126 $ 11,912 $
708,038 Selling, general and administrative 454,981 33,920 421,061
Research and development 219,506 27,000 192,506 Operating income
21,639 72,832 94,471 Interest and other income (expense), net 683 –
683
Earnings before provision for taxes 22,322 72,832 95,154
Provision for taxes 4,361 16,821 21,182
Earnings after taxes
$ 17,961 $ 56,011 $ 73,972 Weighted average number of shares
outstanding (diluted): 272,901 – 272,901
Three Months Ended
December 31, 2012 (In thousands)
GAAP Reported
Specified Items Non-GAAP Adjusted Gross
profit $ 562,970 $ 9,473 $ 572,443 Selling, general and
administrative 428,380 10,991 417,389 Research and development
325,290 76,000 249,290 Operating loss (190,700 ) 96,464 (94,236 )
Interest and other income (expense), net 6,409 – 6,409
Losses
before provision for taxes (184,291 ) 96,464 (87,827 )
Provision for benefit (30,683 ) – (30,683 )
Losses after
provision for taxes $ (153,608 ) $ 96,464 $ (57,144 ) Weighted
average number of shares outstanding (diluted): 266,018 – 266,018
Nine Months Ended
December 31, 2013 (In thousands)
GAAP Reported
Specified Items Non-GAAP Adjusted Gross
profit $ 2,043,266 $ 35,659 $ 2,078,925 Selling, general and
administrative 1,307,408 89,039 1,218,369 Research and development
596,288 27,000 569,288 Operating income 139,570 151,698 291,268
Interest and other income (expense), net 12,648 – 12,648
Earnings before provision for taxes 152,218 151,698 303,916
Provision for taxes 40,992 16,821 57,813
Earnings after
taxes 111,226 134,877 246,103 Weighted average number of shares
outstanding (diluted): 270,832 – 270,832
Nine
Months Ended December 31, 2012 (In thousands)
GAAP
Reported Specified Items Non-GAAP Adjusted
Gross profit $ 1,808,919 $ 27,257 $ 1,836,176 Selling,
general and administrative 1,185,578 32,896 1,152,682 Research and
development 723,295 76,000 647,295 Operating income (loss) (99,954
) 136,153 36,199 Interest and other income (expense), net 24,278 –
24,278
Earnings (losses) before provision for taxes (75,676
) 136,153 60,477 Provision for benefit 1,870 – 1,870
Earnings
(losses) after provision for taxes $ (77,546 ) $ 136,153 $
58,607 Weighted average number of shares outstanding (diluted):
266,967 – 266,967
Forest
Laboratories, Inc. Reconciliation of GAAP EPS to Non-GAAP
EPS For the Three and Nine Months Ended December 31, 2013
and 2012
Three Months Ended Nine Months Ended December
31, December 31, (In thousands, except per share
amounts)
2013 2012 2013 2012
Reported Net income (loss): $ 17,961 $ (153,608 ) $ 111,226
$ (77,546 ) Specified items: Amortization arising from business
combinations and acquisitions of product rights Recorded in Cost of
sales 11,912 9,473 35,659 27,257 Recorded in Selling, general and
administrative 15,920 10,991 44,857 32,896 Project
rejuvenate 45,000 – 45,000 – Write-off of Nabriva note receivable –
– 26,182 – Upfront payment to Adamas – 65,000 – 65,000 Other
licensing agreement payments – 11,000 – 11,000 Impact of
specified items on provision for income taxes (16,821 )
– (16,821 ) –
Adjusted
Non-GAAP earnings (losses): $ 73,972 $ (57,144 ) $
246,103 $ 58,607
Reported Diluted earnings (loss) per share: $ 0.07 $ (0.58 )
$ 0.41 $ (0.29 ) Specified items: Amortization arising from
business combinations and acquisitions of product rights Recorded
in Cost of sales 0.04 0.04 0.13 0.10 Recorded in Selling, general
and administrative 0.06 0.04 0.17 0.12 Project rejuvenate
0.16 – 0.17 – Write-off of Nabriva note receivable – – 0.10 –
Upfront payment to Adamas – 0.24 – 0.24 Other licensing agreement
payments – 0.04 – 0.04 Impact of specified items on
provision for income taxes (0.06 ) – (0.06 ) – Rounding –
0.01 (0.01 ) 0.01
Adjusted Non-GAAP earnings (losses) per share: $ 0.27
$ (0.21 ) $ 0.91 $ 0.22
FOREST LABORATORIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended (In thousands, except
per share amounts) December 31, December 31, 2013
2012 2013 2012 Net revenue Net
sales $ 846,784 $ 677,967 $ 2,455,066 $ 2,121,750 Contract revenue
31,612 38,314 99,555 158,426
Total revenue 878,396 716,281
2,554,621 2,280,176 Cost of goods sold 182,270
153,311 511,355 471,257
Gross profit 696,126 562,970
2,043,266 1,808,919 Operating expenses
Selling, general and administrative 454,981 428,380 1,307,408
1,185,578 Research and development 219,506 325,290
596,288 723,295 Total operating
expenses 674,487 753,670 1,903,696
1,908,873 Operating income (loss) 21,639
(190,700 ) 139,570 (99,954 ) Interest and other income (expense),
net 683 6,409 12,648 24,278
Income (loss) before income taxes 22,322 (184,291 ) 152,218
(75,676 )
Income tax expense (benefit)
4,361 (30,683 ) 40,992 1,870 Net
income (loss) $ 17,961 $ (153,608 ) $ 111,226 $ (77,546 )
Net income (loss) per common share: Basic $ 0.07 $ (0.58 ) $
0.41 $ (0.29 ) Diluted $ 0.07 $ (0.58 ) $ 0.41 $ (0.29 )
Weighted average number of common shares outstanding: Basic
269,481 266,018 268,385 266,967 Diluted 272,901 266,018 270,832
266,967 *The Company modified
its presentation of its Consolidated Statements of Operations
effective for all periods presented. Interest income, interest
expense and other miscellaneous income/expense is now presented in
the Interest and other income (expense) caption below Operating
income (loss).
Forest will host a conference call at 10:00 AM EST today to
discuss the results. The conference call will be webcast live
beginning at 10:00 AM EST on the Company’s website at www.frx.com.
Please log on to the website at least fifteen minutes prior to the
conference call as it may be necessary to download software to
access the call. A replay of the conference call will be available
until February 21, 2014 and also by dialing (800) 677-7320 (US or
Canada) or +1 (402) 220-0666 (international), Conference ID:
FRXQ314.
About Forest Laboratories and Its
Products
Forest Laboratories (NYSE: FRX) is a leading, fully integrated,
specialty pharmaceutical company largely focused on the United
States market. The Company markets a portfolio of branded drug
products and develops new medicines to treat patients suffering
from diseases principally in five therapeutic areas: central
nervous system, cardiovascular, gastrointestinal, respiratory, and
anti-infective. Our strategy of acquiring product rights for
development and commercialization through licensing, collaborative
partnerships and targeted mergers and acquisitions allows us to
take advantage of attractive late-stage development and commercial
opportunities, thereby managing the risks inherent in drug
development. The Company is headquartered in New York, NY. To learn
more, visit www.FRX.com.
This release 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. Forest assumes
no obligation to update forward-looking statements contained in
this release to reflect new information or future events or
developments.
Forest Laboratories, Inc.Frank J. Murdolo, 1-212-224-6714Vice
President - Investor Relationsmedia.relations@frx.comorAmanda
KaufmanSenior Manager Corporate Communications and Media
Relationsamanda.kaufman@frx.com
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