UPDATED: Icahn says CEO treating Forest like a dynasty

Because of who he is, a very rich and very successful activist investor, Carl Icahn can say what other investors only think. And of course, he does. And this time it is a very pointed remark about Forest Laboratories ($FRX) CEO Howard Solomon and his son David.

In a letter to the drugmaker's board filed today with the SEC, Reuters reports that Icahn has this to say about plans by the elder Solomon to promote the younger into his position as CEO:

"Howard Solomon and this board, who collectively own less than 2 percent of this great company, must be made to realize that Forest Labs is not a dynasty to be despotically handed down from father to son."

Given that Icahn controls nearly 10% of Forest's shares, he does have a leg to stand on. Of course he is in the midst of his second battle to take control of the board after shareholders did not buy into his attempt last year. He has sued to see the company's books and has nominated four new members to the board. He argues that the management and board need to be replaced with new blood that will be able to generate more value from the company. And he can point to the company's recent past as proof of his argument.

Forest recently lost patent protection on antidepressant Lexapro, which has delivered more than half its sales, and had to cut its forecast when generic competition began eating away revenue faster than anticipated. The company has some new products--including another antidepressant, Viibryd--and it acquired full rights to the blood pressure drug Bystolic, but Forest hasn't been able to make up the lost revenue. It also has several promising candidates, including cariprazine, an antipsychotic it's developing with Gedeon Richter.

Of course Forest takes issue with Icahn's depiction and in an emailed statement, responded: "We regret that Mr. Icahn has resorted once again to his tired playbook designed for maximum distortion, distraction and litigation rather than engaging constructively with the Company. Mr. Icahn continues to ignore the substantial progress Forest has made over the past year, including the launches of Teflaro, Daliresp and Viibryd in 2011 and the filing of NDAs for aclidinium and linaclotide, which we expect will be approved in the coming months."

It goes on to say that the company's independent director have consulted a governance expert about succession and that Forest is "engaged in ongoing succession planning...internal candidate evaluation and external candidate benchmarking." It says, "Howard Solomon is one of the most successful CEOs in the industry and it would be both inappropriate. and unusual to announce his successor at this time."s

With the company's annual meeting set for Aug. 15, it won't be long before it is known which side investors stand on.

- read the Reuters story
- here is the company's response