On the eve of Forest Laboratories' proxy vote, activist investor Carl Icahn is still campaigning. After accusing Forest's board of cronyism and lethargy, after critiquing CEO Howard Solomon's performance--and his son's résumé--Icahn is taking the company to task for a recent FDA warning letter. Not only was the letter itself worrisome, Icahn said, but Forest didn't disclose it in a recent quarterly filing with the Securities and Exchange Commission.
On Aug. 1, FDA's advertising-and-promotional police warned Forest that its Daliresp marketing had stepped over the line. In meeting with a doctor, Forest sales reps minimized the respiratory drug's risks and stepped outside of its FDA-approved indication, the agency said.
That might seem like a minor infraction. But as the agency--and Icahn--pointed out, Forest is supposed to be on its best behavior. It signed a corporate integrity agreement back in 2010, as part of its $300 million off-label marketing settlement with the Justice Department. Particularly worrisome, the agency's letter stated, the Daliresp salesperson's missteps followed similar behavior by another rep last year. FDA issued an untitled letter in that case, too.
Icahn painted the repeat warning letter as another clue that Solomon and his board aren't running a tight ship. Forest is among the few companies "lax enough to receive multiple warning letters while subject to a corporate integrity agreement," Icahn wrote.
Forest Labs "has been very aggressive in its lack of disclosure with the SEC," Icahn said. And that lack of disclosure is "another example of the stark lack of corporate governance."
Obviously, Forest challenged that interpretation. "To suggest this is a pattern is patently absurd," the company said in a statement (as quoted by Dow Jones), adding that it is fully complying with its corporate integrity agreement.
- see the Daliresp letter (PDF)
- check out Forest's latest shareholder letter
- read the Dow Jones story
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