Forest Laboratories saw sales in the third quarter of 2012 drop almost 40 per cent on the back of generic competition to its Lexapro antidepressant, which lost patent protection in the US in March this year.
Revenues came in at $692m, down from around $1.1bn a year ago as Lexapro (escitalopram) sales slumped 93 per cent to $45m. Meanwhile, net income came in at just $21m, down from nearly $250m in the same period of 2011.
While the fallout from Lexapro's patent expiry was widely anticipated, the impact has been felt a little harder than expected because of higher-than-anticipated discounting by generic competitors as well as lower-than-expected royalty income on sales of the company's authorised generic.
"The level of discounting that took place in the pursuit of market share by the generic entrants with Lexapro was beyond our expectations," commented Forest's chief financial officer Francis Perier.
Forest is revising its earnings guidance for the year downwards to 45-60 cents a share, while analysts had been predicting earnings of 66 cents a year for fiscal 2013 as a whole, ahead of the results announcement.
On the plus side, Alzheimer's drug Namenda (memantine) achieved a 9 per cent hike in sales to $368m, while antihypertensive Bystolic (nebivolol) was up almost 30 per cent to $106m.
Forest is banking on the success of a crop of newer products to get it back to growth. Daliresp (roflumilast) for chronic obstructive pulmonary disease (COPD) and antidepressant Viibryd (vilazodone HCl) were launched a little over a year ago and recorded sales of $20m and $40m in the second quarter, respectively.
Viibryd is targeted for mild to moderate depression, and Forest hopes to complement that in the coming months with the launch of levomilnacipran for patients with more severe symptoms. The company filed for approval of levomilnacipran in the US last month.
Meanwhile, Forest has extended its COPD portfolio with Tudorza (aclidinium bromide), which was approved a several weeks ago, and also recently received a green light for constipation drug Linzess (linaclotide). Both these drugs are due to be launched later this quarter.
"With Lexapro now completely genericised we have a bright future with our next generation of products combined with growth of Namenda," said the company's chief executive Howard Solomon.
"With the upcoming launches of Tudorza and Linzess we will have seven young and growing products in our commercial portfolio, an enviable achievement for our company," he added.