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Forest Labs 3Q Profit Tumbles 25 Percent

Posted on: Tuesday, 17 January 2006, 18:01 CST

By THERESA AGOVINO

NEW YORK - Forest Laboratories Inc. said Tuesday its profit plunged 25 percent in the third quarter as it made an unexpected payment to a research partner and sales of one of its antidepressant drugs sank.

Net income fell to $195.2 million, or 57 cents per share, for the quarter ended Dec. 31 from $260.8 million, or 70 cents per share, last year. Revenue dropped 9 percent to $714.9 million from $795 million.

Analysts polled by Thomson Financial expected the company to earn 62 cents per share on $762.1 million in revenue.

Its shares fell 35 cents to close at $43.89 on the New York Stock Exchange, where they have traded between $32.46 and $45.21 in the past year.

During the quarter, Forest Labs made a payment equal to 5 cents a share to Hungarian drug company Gedeon Richter Ltd. as part of an expansion of their collaboration on drug development. The initial collaboration was announced in 2004 but was expanded last November to include medicines to treat various diseases of the central nervous system.

Without the payment, Forest Labs would have met analysts expectations.

Sales from the antidepressant franchise revenue sank 13.4 percent to $485.7 million from $560.6 million. Celexa revenues shriveled to $4.8 million from $129.8 million because of generic competition. However, sales of Lexapro, its best selling drug, rose 13 percent to $480.7 million.

Lexapro faces a patent challenge and the trial is scheduled to begin in March, according to Amy Stevens, an analyst at Susquehanna Financial Group. She said Teva Pharmaceutical Industries Ltd. and Ivax Corp., which are planning to combine operations, were each challenging the patent.

Sales of Alzheimer's drug Namenda rose 23 percent to $124 million. Forest said that the product sales didn't seem to be rising as fast as prescription growth and was investigating the discrepancy. However, Stevens doesn't see the difference as a major problem. Namenda's sales had been growing exponentially and Stevens believes the drug's sales are unlikely to increase as rapidly as before.

Forest Labs also said it will stop promoting Combunox, a pain drug, to physicians because of disappointing sales. Steven doesn't view the announcement as a major issue since Combunox was never considered a growth driver.

The company said it expects to earn $2.30 for the fiscal year ending March 31 excluding a one-time tax benefit recorded in the first quarter. Including the benefit, earnings are expected to come in at around $2.40 per share. Analysts expect the company to earn $2.31 per share.

Source: Associated Press/AP Online

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