Forest Laboratories, Inc. (FRX: 28.10 0.00 0.00%) reported earnings per share of 95 cents for the first quarter of fiscal 2011, well above the Zacks Consensus Estimate of 86 cents and the year-earlier earnings of 87 cents. Including the impact of a charge related to investigations being carried out by the US Department of Justice (DoJ) and a new product licensing fee, earnings came in at 39 cents per share.First quarter revenues increased 5.8% to $1.07 billion, with net sales increasing 7.6% to $1 billion. While contract revenues slipped 16.6% to $39.8 million, interest income declined 42.5% to $7 million.
The Quarter in Detail
First quarter product revenues increased 7.6% to $1,020.1 million. Although Lexapro revenues remained flat at $565.2 million, Namenda, which is approved for the treatment of moderate and severe Alzheimer’s disease, delivered sales of $307.8 million, recording a growth of 18.7% from the year-earlier period. Improved patient access and increased promotional efforts should help keep Namenda sales strong.
Moreover, Forest Labs gained US Food and Drug Administration (FDA) approval in June for Namenda XR, a 28 mg once-daily extended-release formulation of memantine. Namenda XR received approval for the treatment of moderate to severe dementia of the Alzheimer’s type.
Bystolic, Forest Labs’ beta-blocker for the treatment of hypertension, posted sales of $59.5 million, up 58%. Contract revenue declined 16.6% to $39.8 million due to a decline in Benicar co-promotion income. Under its agreement with Daiichi Sankyo, Forest Labs is now receiving a gradually declining royalty rate on Benicar until the end of March 2014. Interest income declined mainly due to lower interest rates on Forest Labs’ short duration portfolio.
Selling, general and administrative expense declined 3.8% to $300 million. The company continues to focus on promoting its currently marketed products, especially Savella and Bystolic. Research and development spend increased 15.3% during the quarter, including milestone payments of $20.1 million.
Share Repurchase
Forest Labs’ Board of Directors recently announced a new share repurchase program for up to 50 million shares. As part of the program, the company also signed an agreement with Morgan Stanley & Co. (MS: 25.22 0.00 0.00%) for the repurchase of shares worth $500 million under an accelerated share repurchase (ASR) transaction. Forest Labs said that Morgan Stanley repurchased about 16.9 million shares under this transaction.
Revised Guidance & Update on Daxas
Revised Guidance & Update on Daxas
Following the release of first quarter results, Forest Labs revised its earnings guidance for fiscal 2011. The company now expects earnings in the range of $3.67 - $3.77 per share, up from the earlier guidance of $3.50 to $3.60. The revised guidance is above the current Zacks Consensus Estimate of $3.63.
Meanwhile, Forest Labs said that it intends to submit a response to the complete response letter issued by the FDA on Daxas. As a reminder, Forest Labs failed to gain first-round approval for Daxas for the reduction of chronic obstructive pulmonary disease (COPD) exacerbations associated with chronic bronchitis in patients at risk for exacerbations. In its complete response letter, the FDA asked the company to submit additional information and analysis. Forest Labs expects to submit a response by Sep 2010.| Analysts' Targets | |
| Caris & Company | $36 |
| Buy | |
| Wednesday, June 09, 2010 | |
| Piper Jaffray | $26 |
| Buy | |
| Thursday, April 08, 2010 | |
| Wedbush Morgan Securities | $35 |
| Buy | |
| Tuesday, January 05, 2010 | |
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