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Forest Labs (FRX) Cuts FY13 Outlook Amid 'Evolving Conditions in the Lexapro/escitalopram Market

June 11, 2012 8:04 AM EDT Send to a Friend
Forest Labs (NYSE: FRX) announced following the expiration of Lexapro’s patent exclusivity in March 2012, rapidly evolving and unanticipated conditions in the Lexapro / escitalopram market necessitate revisions to the Company’s previous forecasts for both branded Lexapro sales and royalty income earned on sales of the escitalopram authorized generic, distributed by an independent third party. The combined impact is a reduction in projected fiscal 2013 earnings of approximately $0.25 per share for the full fiscal year.

Royalty income earned on sales of the Company’s authorized generic version of Lexapro is now expected to be $60 million, down from the previous forecast of $115 million. The reduction is driven by a significant variance in two principal assumptions: the brand price discount rate and the authorized generic distributor’s share of the market, particularly during the six-month period of Hatch-Waxman exclusivity.

In addition, sales of branded Lexapro are now expected to be approximately $215 million for the fiscal year compared to the previous estimate of $250 million. Based on current market data and given the greater than expected discounting, the Company estimates that the generic substitution rate is 88% versus the 84% originally anticipated, with lower than forecasted pharmacy demand and a higher proportion of units sold through government healthcare programs at lower prices.

The company is now expecting FY13 EPS of $0.95-$1.10, down from $1.25-$1.35 previously and compared to the Street estimate of $0.98.

Separately, Forest distributes Levothroid, a synthetic levothyroxine product for the treatment of hypothyroidism, pursuant to a distribution agreement with the product’s manufacturer and holder of the product’s NDA. The manufacturer has notified Forest that the FDA has indicated it has regulatory and quality concerns with respect to the facility where the product is manufactured. The manufacturer has stopped manufacturing and shipping product from its facility. At this time, Forest understands that the manufacturer is continuing to work with the FDA to address the FDA’s concerns.




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