Forest Laboratories Q3 2011 Earnings Call Transcript

Forest Laboratories (FRX)

Q3 2011 Earnings Call

January 18, 2011 10:00 am ET

Executives

Francis Perier - Chief Financial Officer, Principal Accounting Officer, Executive Vice President of Finance & Administration and Member of Disclosure, Legal Compliance & Risk Management Committee

Frank Murdolo - Vice President of Investor Relations

Marco Taglietti - Senior Vice President of Research & Development, Member of Disclosure, Legal Compliance & Risk Management Committee and President of Forest Research Institute (FRI)

Analysts

John Boris - Citigroup Inc

Corey Davis - Jefferies & Company, Inc.

Richard Silver - Barclays Capital

Thomas Russo - Robert W. Baird & Co. Incorporated

Ian Sanderson - Cowen and Company, LLC

Timothy Chiang - CRT Capital Group LLC

Gregory Gilbert - BofA Merrill Lynch

Mario Corso - Caris & Company

Presentation

Operator

Good morning. My name is Alice, and I'll be your conference operator today. At this time, I would like to will come everyone to the Forest Laboratories Q3 '11 Earnings Call. [Operator Instructions] Mr. Frank Murdolo, you may begin.

Frank Murdolo

Thank you, Alice, and good morning, everyone. This is Frank Murdolo. Thank you for joining us today for this third quarter fiscal 2011 conference call. Joining me today is Frank Perier, our Executive Vice President of Finance and Administration and Chief Financial Officer; and Mark Taglietti, our Senior Vice President of Research and Development and President of the Forest Research Institute. By now, each of you should have seen the earnings release that we issued around 8:00 this morning. The release is also available at our website, www.frx.com.

By way of Safe Harbor statement, let me add that various remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and actual results may vary. Let me now turn the call over to Frank, who will comment on the business during the quarter.

Francis Perier

Thank you, Frank and good morning, everyone. I will start today's call by reviewing key company events for the quarter, as well as the financial results for the quarter, and then turn the call over to Mark Taglietti, who will review the R&D pipeline.

But before we begin, I would like to take a moment to wish Larry Olanoff, all the best in his retirement, and to thank him on behalf of everyone at Forest Laboratories for his outstanding leadership during his tenure. Larry began his career with Forest in 1995 as Chief Scientific Officer, and was our Chief Operating Officer since 2006. During his years with Forest, he created and built the Forest Research Institute which has produced our successful marketed product folio from Celexa to our most recently approved product Teflaro, as well as our robust development pipeline. We will certainly miss the day-to-day interactions with Larry, but we will still have the benefit of his expertise as a member of our Board of Directors and as Senior Scientific Advisor to the company.

Turning now to operations. Our underlying business continued to perform very well during the quarter for our key marketed products. Lexapro sales were essentially, unchanged from last year despite the expected modest decrease in market share, and we saw a continued solid prescription volume growth for Namenda, Bystolic and for our newest product launched, Savella.

We've had a very busy quarter including FDA approval of Teflaro, for the treatment of community-acquired bacterial pneumonia, and acute bacterial skin and skin structure infection. We launched Teflaro earlier this month, and are targeting approximately 2,000 key hospitals. In preparation for the launch, we doubled the size of our hospital sales force to around 240 sales representatives, and now have about 95% of that total onboard in place in a very competitive -- which places us in a very competitive position in the antibiotic market.

We started detailing with the scientific launch in December using the product label and we currently plan the full launch with DDMAC-approved marketing materials around the end of March. Teflaro began shipping in January. The wholesale average cost price for Teflaro is $82 per day of therapy. With approximately 23 million annual therapy days for each of the pneumonia and skin infections, we will be competing in a market valued at brand prices worth well over $3 billion. We also announced the completion of three business development agreements.

In November, we were pleased to announce that we entered into collaboration and distribution agreement with Janssen to commercialize Bystolic and Savella in Canada. Over the next few years, we plan to establish a wholly-owned Canadian affiliate that will exercise the co-promotion rights for Bystolic and Savella in Canada. And they will also take responsibility for the future regulatory filings and commercialization of our pipeline products in Canada which include: Teflaro, linaclotide, levomilnacipran and cariprazine. This collaboration is a significant and valuable first step towards establishing a Forest presence in Canada.

In December, we entered into two agreements with Gruenenthal. We acquired all rights currently held by Gruenenthal for colistin and all rights previously licensed by Forest to Gruenenthal for Colobreathe. Both products are for the treatment of cystic fibrosis. We currently market colistin in the U.K. and Ireland. With this transaction, we will expand our European cystic fibrosis franchise while expanding our commercial capabilities in Europe in addition to our existing presence in the U.K. and Ireland. This is a first step at expanding our commercial capabilities in Europe in addition to our existing presence in the U.K. and Ireland, and also strengthens our presence in the cystic fibrosis market in Europe.

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