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Licensing charge dips Forest's EPS

Forest Laboratories has reported a five per cent dip in its diluted EPS for Q2 FY08 due to a licensing charge from Microbia over IBS treatment, linaclotide

US-based pharmaceutical company Forest Laboratories has reported a five per cent dip in its diluted EPS for Q2 FY08, due to a licensing charge from Microbia over IBS treatment, linaclotide.

EPS in Q2 was USD 0.71, compared with an EPS in Q2 FY07 of USD 0.75.

Forest blamed the reduction on a USD 70m licensing charge paid to co-development and co-marketing partner Microbia for the rights to linaclotide, a treatment under investigation for chronic constipation and constipation predominant irritable bowel syndrome.

Q2 FY08 revenues increase 8.5 per cent to reach USD 919m, compared with USD 847m in Q2 FY07. Net sales in the quarter increased 8.2 per cent to reach USD 842.3m, compared with Q2 FY07 sales of USD 778.7. Sales included a seven per cent rise to USD 559.1m for Lexapro (escitalopram), a treatment for depression and anxiety in adults.

Forest's NMDA-receptor Namenda (memantine) for the treatment of moderate-to-severe Alzheimer's disease (AD) recorded sales of USD 192.9m during Q2 FY08, an increase of 24 per cent on Q2 FY07. Product wholesalers collectively held less inventory of both Lexapro and Namenda at the end of Q3 FY07, which negatively impacted combined sales of these products by approximately USD 18m, added Forest.

Also included in net sales was other income of USD 76.6m, which includes a 2.6 per cent increase to USD 49.6m in earnings contribution from the Benicar (olmesartan) co- promotion agreement with Japanese pharmaceutical company, Daiichi Sankyo. Q2 FY08 net income dropped seven per cent to USD 225.2 from USD 241.1m in Q2 FY07.

R&D spend at Forest increased 82 per cent to reach USD 170.7m, which included the licensing charge initiated by the Microbia agreement.

During Q2 FY08, Forest repurchased approximately five million shares, leaving an additional 17.9 million shares available for repurchase under the existing programme, which has no set expiration date.

H1 FY08 results
Revenues for H1 FY08 increased 11.1 per cent to reach USD 1.9bn, compared with USD 1.6m in H1 FY07. Net income in the half year for Benicar increased 12 per cent to reach USD 493.4m from net income of USD 441.7m for the same period in H1 FY07. Diluted EPS increased 13 per cent to USD 1.54, compared with USD 1.36 in H1 FY07.

FY08 EPS guidance increased
Forest says that EPS for FY08 will be in the range of USD 3.10 to USD 3.20, compared with the company's previous guidance in the range of USD 3.05 to $3.15. This excludes the licensing charge caused by the Microbia agreement. R&D spending was set at approximately USD 530m, less the licensing charge.

Forest's CEO, Howard Solomon, commented: "During the quarter we concluded arrangements with our co-partner Daiichi Sankyo for the launch of [blood pressure drug] Azor (amlodipine/ olmesartan). We expect nebivolol to be approved this quarter with a launch scheduled for Q4 FY07. We also expect to file the new drug application for milnacipran. We expect to see clinical data on five late-stage studies during the coming year.

30th September 2008

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