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

February 08, 2013 | About:
10qk

10qk

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Forest Laboratories Inc. (FRX) filed Quarterly Report for the period ended 2012-12-31.

Forest Laboratories, Inc. has a market cap of $9.46 billion; its shares were traded at around $35.51 with a P/E ratio of 82.6446 and P/S ratio of 2.8249. Forest Laboratories, Inc. had an annual average earning growth of 7.4% over the past 10 years. GuruFocus rated Forest Laboratories, Inc. the business predictability rank of 4-star.
This is the annual revenues and earnings per share of FRX over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of FRX.


Highlight of Business Operations:

Total net revenues were $722.7 million and $2,304.5 million for the three and nine months ended December 31, 2012, respectively, as compared to $1,209.3 million and $3,530.3 million for the same periods last year. The decline was primarily due to a decrease in Lexapro® sales resulting from the expiration of its market exclusivity, partially offset by increases in sales of our currently promoted products. Lexapro s market exclusivity expired in March 2012 and in mid-September, the 180 day Hatch-Waxman period, available to the first filing generic manufacturer, ended, which opened the way for full generic competition. Excluding Lexapro sales, net sales increased $89.3 million or 15.7% and $325.9 million or 20.1% for the three and nine months ended December 31, 2012, respectively. Sales of our next generation products, Bystolic®, Savella®, Teflaro®, Daliresp® and Viibryd®, totaled $204.0 million for the current quarter, representing growth of 35.4% over the year ago period. We also launched two of our newest products during this quarter, TudorzaTM and LinzessTM and sales for these two products totaled $31.4 million for the quarter. For the three months ended December 31, 2012, the Company had a net loss of $153.6 million as compared to net income of $278.4 million for the same period last year. The decrease was primarily driven by the decrease in Lexapro sales, coupled with milestone and upfront payments totaling $120.5 million in the quarter, partially offset by increases in sales of our currently promoted products. For the nine-month period ended December 31, 2012, the Company recorded a net loss of $77.5 million compared to net income of $786.4 million for the same period last year. This decrease was driven by the expiration of Lexapro s market exclusivity, and upfront and pre-approval milestone payments totaling $120.5 million in the current year as compared to $94.6 million in the prior year period.

Net current assets decreased by $726.0 million from March 31, 2012, driven by a decrease in cash of $630.6 million, a decrease in short-term marketable securities of $76.6 million, a decrease in accounts receivable of $73.9 million, an increase in accounts payable and accruals of $16.7 million, offset by an increase in inventory of $83.7 million. Cash decreased due to net purchases of marketable securities of $455.8 million, payment of milestones for the approval of Linzess and Tudorza Pressair of $85 million and $40 million, respectively, capital expenditures of $50.6 million, and, funding provided to moksha8 and Nabriva of $108.1 million. These decreases were offset by cash generated from operating activities of $90.3 million. Cash, cash equivalents and investments collectively decreased by $179.5 million. Of our total cash and cash equivalents and marketable securities position at December 31, 2012 of $3.0 billion, approximately 5% or $146.1 million, was domiciled domestically with the remainder held by our international subsidiaries. Approximately $2.8 billion is held in low tax jurisdictions and is attributable to earnings that are expected to be indefinitely reinvested offshore. We invest funds in variable rate demand notes that have major bank liquidity agreements, municipal bonds and notes, government agency bonds, commercial paper, corporate bonds, certificates of deposit, auction rate securities and floating rate notes. Cash repatriations are subject to restrictions in certain jurisdictions and may be subject to withholding and other taxes. We continue to actively seek opportunities to further develop foreign operations through strategic alliances, business acquisitions, collaboration agreements, and other investing activities including working capital and capital expenditures. We expect cash generated by our U.S. operations, together with existing cash, cash equivalents, marketable securities, our $750 million revolving credit facility and access to capital markets to be sufficient to cover cash needs for our U.S. operations including common stock repurchases, strategic alliances and acquisitions, milestone payments, working capital and capital expenditures.

Net sales for the three and nine-month periods ended December 31, 2012 decreased 41.6% and 37.5% from the same periods last year to $678.0 million and $2,121.8 million, respectively. The decline was primarily due to a decrease in Lexapro sales of $572.7 million and $1,599.8 million, respectively, partially offset by increases in sales of our promoted products Namenda®, Bystolic, Teflaro, Viibryd, Daliresp, Linzess, and Tudorza. The decrease in Lexapro sales is due to the expiration of its market exclusivity in March 2012. Excluding Lexapro sales, net sales increased $89.3 million or 15.7% and $325.9 million or 20.1% for the three and nine months ended December 31, 2012, respectively.

Daliresp (roflumilast), our selective phosphodiesterase 4 (PDE4) enzyme inhibitor indicated for the treatment to reduce the risk of exacerbations in patients with severe COPD associated with chronic bronchitis and a history of exacerbations, achieved sales of $17.5 million and $54.8 million for the current three and nine-month periods, respectively, as compared to $8.4 million and $18.1 million for the same periods last year. The increase year over year was driven by increased volume. Daliresp was launched in August 2011. Viibryd (vilazodone HCl), our selective serotonin reuptake inhibitor (SSRI) and a 5-HT1A receptor partial agonist for the treatment of adults with major depressive disorder (MDD) recorded sales of $40.6 million and $117.9 million for the three and nine-month periods ended December 31, 2012, respectively, as compared to $18.9 million and $31.6 million for the same periods last year. The increase year over year was driven by increased volume. Viibryd was launched in August 2011. In December 2012, we launched our two newest products, Linzess and Tudorza: Linzess (linaclotide), our guanylate cyclase (GC-C) agonist for the treatment of IBS-C and CIC in adults recorded sales of $19.2 million for the three and nine-month periods. Tudorza, an anticholinergic indicated for the long-term maintenance treatment of bronchospasm associated with COPD, recorded sales of $12.2 million for the three and nine-month periods. Sales of Lexapro (escitalopram oxalate), an SSRI indicated for the initial and maintenance treatment of MDD in adults and adolescents and generalized anxiety disorder in adults, decreased to $20.3 million and $175.0 million in the current three and nine-month periods, respectively, as compared to $593.0 million and $1.8 billion in the same periods last year due to the loss of market exclusivity in March 2012. Lexapro has since faced generic competition, which has significantly eroded sales. Contract revenue for the three and nine months ended December 31, 2012 totaled $38.3 million and $158.4 million, respectively, compared to $34.1 million and $108.4 million in the same periods last year. Benicar® (olmesartan medoxomil) co-promotion income totaled $36.0 million and $101.6 million, compared to $31.4 million and $99.7 million in the same periods last year. Contract revenue for the current nine-month period also included $51.3 million of income from a distribution agreement with Mylan, Inc. (Mylan) pursuant to which Mylan is authorized to sell a generic version of Lexapro and we receive a portion of the profits from those sales. Year-to-date income included a change in estimate of $13 million related to revenue from the distribution agreement with Mylan. In mid-September, the 180 day Hatch-Waxman period for Lexapro for the first filing generic manufacturer ended, opening the way for full generic competition. Cost of sales as a percentage of net sales was 22.6% for both the current and prior year quarter. For the nine-month periods ended December 31, 2012 and 2011, cost of sales as a percentage of net sales was 22.2% and 23.0%, respectively. Cost of sales includes royalties in respect of our products. In the case of our principal products subject to royalties, which includes Namenda, these royalties are in the range of 15 to 25%. Selling, general and administrative expense (SG&A) increased to $428.4 million for the current quarter as compared to $396.1 million for the same period last year. SG&A increased to $1,185.6 million for the nine-month period ended December 31, 2012 as compared to $1,142.8 million for the same period last year. The current level of spending reflects the resources and activities required to support our currently marketed products, particularly our newest products: Teflaro, Viibryd, Daliresp, Tudorza, and Linzess.

Contract revenue for the three and nine months ended December 31, 2012 totaled $38.3 million and $158.4 million, respectively, compared to $34.1 million and $108.4 million in the same periods last year. Benicar® (olmesartan medoxomil) co-promotion income totaled $36.0 million and $101.6 million, compared to $31.4 million and $99.7 million in the same periods last year. Contract revenue for the current nine-month period also included $51.3 million of income from a distribution agreement with Mylan, Inc. (Mylan) pursuant to which Mylan is authorized to sell a generic version of Lexapro and we receive a portion of the profits from those sales. Year-to-date income included a change in estimate of $13 million related to revenue from the distribution agreement with Mylan. In mid-September, the 180 day Hatch-Waxman period for Lexapro for the first filing generic manufacturer ended, opening the way for full generic competition.

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