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Forest Laboratories Inc. Reports Operating Results (10-Q)

February 09, 2012 | About:
10qk

10qk

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Forest Laboratories Inc. (FRX) filed Quarterly Report for the period ended 2011-12-31.

Forest Laboratories Inc. has a market cap of $8.5 billion; its shares were traded at around $31.57 with a P/E ratio of 7.8 and P/S ratio of 1.9. Forest Laboratories Inc. had an annual average earning growth of 9.6% over the past 10 years. GuruFocus rated Forest Laboratories Inc. the business predictability rank of 3-star.

Highlight of Business Operations:

Total net revenues increased to $1.2 billion and $3.5 billion for the quarter and nine months ended December 31, 2011 as compared to $1.1 billion and $3.3 billion for the same periods last year due to strong sales of our key marketed products which include Namenda®, Bystolic®, Savella® and our newest products, Teflaro®, Daliresp® and Viibryd®. Net income decreased 13.2% in the current quarter as compared to the same period last year primarily due to increased spending to support three new product launches. Excluding the impact, in the December 2010 quarter, of an upfront license payment of $66.1 million to Grünenthal GmbH (Grünenthal) for GRT 6005 and GRT 6006, net income would have decreased 28.0% in the current quarter as compared to the same period last year. For the nine-month period ended December 31, 2011 net income increased 8.6%. The June 2010 quarter included a charge of $148.4 million related to a settlement with the United States Department of Justice (DOJ). Excluding this one time charge, net income would have decreased 16.2% in the nine-month period, as compared to the same period last year primarily due to product launch costs for Teflaro, Daliresp and Viibryd.

Net sales for the three and nine-month periods ended December 31, 2011 increased $97.4 million or 9.2% and $274.4 million or 8.8%, respectively, from the same periods last year to $1.2 billion and $3.4 billion, respectively, primarily due to strong sales of Lexapro and continued growth of our principal promoted products.

Bystolic (nebivolol), our beta-blocker indicated for the treatment of hypertension, grew 33.0% to $90.6 million and 31.2% to $250.9 million in the current three and nine-month periods, respectively, as compared to $68.1 million and $191.3 million for the same periods last year primarily due to increased sales volume.

Contract revenue for the three and nine months ended December 31, 2011 totaled $34.1 million and $108.4 million, respectively, compared to $46.8 million and $128.4 million in the same periods last year. The decreases of $12.6 million and $20.1 million year over year were primarily due to a gradually reducing residual royalty rate from Daiichi Sankyo, Inc. for Benicar®.

Provisions for Medicaid and contract rebates during a period are recorded based upon the actual historical experience ratio of rebates paid and actual prescriptions written. The experience ratio is applied to the period s sales to determine the rebate accrual and related expense. This experience ratio is evaluated regularly to ensure that the historical trends are as current as practicable. As appropriate, we will adjust the ratio to more closely match the current experience or expected future experience. In assessing this ratio, we consider current contract terms, such as the effect of changes in formulary status, discount rate and utilization trends. Periodically, the accrual is adjusted based upon actual payments made for rebates. If the ratio is not indicative of future experience, results could be affected. Rebate accruals for Medicaid were $69.5 million at December 31, 2011 and $56.7 million at March 31, 2011. Commercial discounts and other rebate accruals were $289.6 million at December 31, 2011 and $215.3 million at March 31, 2011. Accruals for chargebacks, discounts and returns were $70.4 million and $59.0 million at December 31, 2011 and March 31, 2011, respectively. These and other rebate accruals are established in the period the related revenue was recognized, resulting in a reduction to sales and the establishment of a liability, which is included in accrued expenses.

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