Forest Labs slashes forecast on wilting Lexapro sales

Want to know what happens to a drugmaker after the patent cliff? Look no further than Forest Laboratories. The U.S. based drugmaker was particularly vulnerable to generic competition, because its Lexapro antidepressant accounted for such an enormous share of its revenues: 52% in 2010, according to FiercePharma research.

When Lexapro's exclusivity elapsed in March, Forest ($FRX) nevertheless sounded an upbeat note. It figured on keeping a big chunk of the market for that drug and its equivalents, with the help of antidepressant market growth and Lexapro price cuts.

But now, the company has cut its fiscal 2013 forecast by about one-quarter, saying that generic erosion has been more like a mudslide. Rather than expecting earnings of 95 cents to $1.05 per share--and adjusted EPS at $1.20 to $1.35--Forest is looking at an EPS of 65 cents to 80 cents, with adjusted EPS at 95 cents to $1.10.

Forest expects lower sales of its branded Lexapro and lower royalty income from the authorized generic sold by Mylan. Teva Pharmaceutical Industries ($TEVA), which has 180-day exclusivity for Lexapro generics, priced its version more aggressively than Forest anticipated, so the branded version is losing market share at a high rate. Forest says it's looking at generic subsitution rates of about 88%. Between lower brand sales and lower royalties, the Lexapro franchise is expected to bring in more than $90 million less than expected, or about $275 million.

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