Forest Laboratories CEO Howard Solomon took aim at Carl Icahn in an SEC filing this week after the activist investor made critical comments about the company's management and recent performance.
Last week, Icahn submitted a filing with the SEC in which he castigated the Forest board for supporting Solomon, even though the CEO faces exclusion from doing business with the federal government. This exclusion would make Forest ineligible to sell products to Medicare and the Veterans Administration, among other programs. Furthermore, the company's stock performance has declined over the last seven years. "The price of the Common Stock peaked in February 2004 at almost $76 per share," Icahn's filing points out. "The current price is approximately $38 per share, which means that shareholder value has been essentially cut in half during the last seven years."
Icahn's filing also discusses what he calls "Solomon's Curious Board." The directors have invested little of their own money in the company and have served, on average, 23 years. "Given the directors' relatively small holdings of stock, extraordinary average length of tenure on the board and habit of rewarding Mr. Solomon while the stockholders suffered, the possibility obviously exists that many of the directors cannot view Mr. Solomon's performance objectively," Icahn insists.
In the face of these attacks, Solomon has fought back, saying his company always "constructive input" from shareholders, but respectfully disagrees with Icahn. He points out that the company has been innovative and will launch two products this summer. In addition, the company will file two more products for approval soon and anticipates launching them next year.
He also defends the company's track record, saying its share price has outperformed the S&P 500 index over the last year, last three years and last five years. Solomon wraps up by defending Forest's decision to stick by him and reiterating his commitment to challenge any potential legal action.
"Over the next several weeks, you may continue to read about Mr. Icahn's attacks in the press," Solomon says in a filing. "These criticisms are typical of someone who is looking to get media attention and investor support for director nominations, and I urge you not to be distracted by them. The best thing you can do is to stay focused on your responsibilities."
As Reuters notes, some analysts have indicated they are not surprised by Icahn's activism, saying that Solomon has failed to outline a good strategy to shore up Forest's business ahead of Lexapro falling off patent. The antidepressant is a big moneymaker for the company.
- see Forest's SEC filing
- read Icahn's filing
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