Forest Laboratories, Inc. Revises Fiscal Year 2013 Earnings Guidance Primarily Due to Evolving Conditions in the Lexapro / escitalopram Market
Now Expects FY 2013 EPS Range of $0.65 to $0.80
June 11, 2012
NEW YORK--(BUSINESS WIRE)--Forest Laboratories, Inc. (NYSE:FRX), an international pharmaceutical manufacturer, today announced revised FY 2013 earnings guidance.
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 ("AGD") share of the market, particularly during the six-month period of Hatch-Waxman exclusivity. Based upon the Company's analysis of market dynamics for similar genericization of branded products involving six-month exclusivity periods, the Company's fiscal 2013 plan assumed that generic competitors would settle at a discount to the brand price of approximately 30% and that the AGD would achieve approximately a 44% market share through September 12, 2012. However, based upon market information the AGD has priced escitalopram at a 60% - 65% discount to the brand price and that the AGD's market share is approximately 40%.
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.
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.
Pending further details Forest has discontinued shipping Levothroid to its customers and does not know how long the product will be unavailable. Forest's annual sales of Levothroid are approximately $17 million. If the manufacturing disruption goes on for an extended period of time, or if the product is subject to a recall, the loss of Levothroid sales and associated costs could reduce earnings by approximately $0.03 per share for the full fiscal year.
The Company's actively promoted products are collectively on plan. The Company now expects reported fully diluted earnings per share for fiscal year 2013 to be in the range of $0.65 to $0.80 per share and non-GAAP fully diluted earnings per share (which excludes acquisition related amortization) of $0.95 to $1.10.
About Forest Laboratories
Forest Laboratories' (NYSE: FRX) longstanding global partnerships and track record developing and marketing pharmaceutical products in the United States have yielded its well-established central nervous system and cardiovascular franchises and innovations in anti-infective, respiratory, gastrointestinal, and pain management medicine. The Company's pipeline, the most robust in its history, includes product candidates in all stages of development across a wide range of therapeutic areas. The Company is headquartered in New York, NY. To learn more, visit www.FRX.com.
Except for the historical information contained herein, 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 Reports 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 rerelease to reflect new information or future events or developments.
Forest Laboratories, Inc.
Frank J. Murdolo, 1-212-224-6714
Vice President - Investor Relations