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Forest Labs slashes staff and bolsters product portfolio

New CEO Brenton Saunders makes his mark with restructure plans
Forest Labs Brenton Saunders

Forest CEO Brenton Saunders

Forest Laboratories has announced plans to cut 9 per cent of its workforce to cut costs as it recovers from the loss of patent protection to its biggest-selling drug.

Recently-appointed chief executive Brenton Saunders plans to jettison 500 of Forest's staff in order to reduce outgoings by $500m over the next two years and has also ordered a buyback of $400m-worth of stock - funded by a $1bn debt offering - to reduce volatility in the firm's share price.

Meanwhile, he has set aside $240m to license US rights to Saphris (asenapine), a schizophrenia and bipolar disorder therapy sold by Merck & Co that has been on the market since 2009 but so far has failed to make much headway in the marketplace with sales currently running at around $150m a year.

"We are undertaking a number of strategic actions to drive sustainable shareholder returns," said Saunders on a conference call, adding the restructuring is designed to "flatten and broaden the organisation, realign our cost base and streamline our operations."

The Saphris deal helps to plug a pipeline gap caused by last month's decision by the FDA not to approve cariprazine, a schizophrenia treatment Forest licenses from Hungary's Gedeon Richter, as well as delays to filing of a chronic obstructive pulmonary disorder (COPD) combination treatment based on aclidinium bromide and formoterol fumarate and partnered with Almirall.

Forest desperately needs a new generation of products to replace sales lost to generic competitors to antidepressant Lexapro (escitalopram), a former blockbuster that tanked after it lost US patent protection last year. There is symmetry with the Saphris deal as that product was originally developed by Danish drugmaker Lundbeck, which was also responsible for the development of Lexapro.

Most of the spending cuts will be made by the end of March 2016, with around $270m in savings coming from its R&D budget, $150m from marketing and the remainder from general and administrative expenses.

The remaining $600m not used to buy back shares is likely to be used for other licensing deals and potentially merger and acquisition (M&A) transactions to help boost Forest's pipeline further, said Saunders.

Investors responded positively to the restructuring drive and Forest's shares rose almost 10 per cent yesterday to reach $56.32, a 12-month high.

Article by
Phil Taylor

3rd December 2013

From: Sales

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