Forest Laboratories' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Forest Laboratories (FRX)

Q2 2012 Earnings Call

October 18, 2011 10:00 am ET

Executives

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

Frank J. Murdolo - Vice President of Investor Relations

Howard Solomon - Chairman, Chief Executive Officer and President

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

Analysts

Gregory D. Fraser - BofA Merrill Lynch, Research Division

David Risinger - Morgan Stanley, Research Division

David Amsellem - Piper Jaffray Companies, Research Division

Gary Nachman - Susquehanna Financial Group, LLLP, Research Division

Seamus Fernandez - Leerink Swann LLC, Research Division

Alan Sonnenfeld

John T. Boris - Citigroup Inc, Research Division

Corey B. Davis - Jefferies & Company, Inc., Research Division

Catherine J. Arnold - Crédit Suisse AG, Research Division

Presentation

Operator

Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Forest Laboratories Second Quarter Fiscal Year 2012 Earnings Conference Call. [Operator Instructions] Thank you. Mr. Murdolo, you may begin your conference.

Frank J. Murdolo

Thank you, Sarah, and good morning, everyone. Thank you all for joining us today for this second quarter fiscal 2012 conference call. Joining me today is Frank Perier, our Executive Vice President of Finance and Administration and Chief Financial Officer; and Marco Taglietti, our Senior Vice President, 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 over the call to Frank, who will comment on the business during the quarter.

Francis I. Perier

Thanks, Frank, and good morning, everyone. I'll start today's call by reviewing key operating events as well as the financial results for the quarter. And then turn the call over to Marco, who will review the R&D pipeline achievements during the quarter.

Suffice it to say, we had a very busy first -- we had a busy quarter. In August, we and our partner, Ironwood Pharmaceuticals, announced that we have filed our NDA with the FDA as planned for the submission of linaclotide for the treatment of irritable bowel syndrome with constipation and poor chronic constipation. In addition, 2 weeks ago, we and our partner, Gedeon Richter, announced positive Phase III results for cariprazine for the treatment of acute mania associated with bipolar I disorder. Marco will provide you with more color in a few minutes. We also announced an additional accelerated share repurchase transaction in the amount of $350 million. This is in addition to a $500 million ASR that we announced in early June.

Turning to our in-line products, Lexapro sales in the quarter totaled $596.1 million, an increase of 4.7% from the year-ago period. Sales were on target despite the expected modest TRx share decline, which continue to be offset by market growth and price increases.

Sales in Namenda were $336.8 million, growth of 8.6% year-over-year. During the quarter, we saw an uncharacteristic dip in both the Alzheimer's market and for Namenda prescriptions. We are investigating this data as it is not consistent with the sales activity that we are seeing.

We received notification today that the USPTO has issued a second method of treating Alzheimer's disease patent for Namenda XR. This method uses a daily -- once daily 28 milligram modified release formulation of memantine. The patent will be listed in the Orange Book in the next 30 days.

Namenda XR is a next generation once-daily formulation of the currently available Namenda. The new formulation is a convenient, higher dose 28 milligram beaded capsule. The safety and efficacy of Namenda XR were established in a clinical trial of 677 moderate to severe Alzheimer's patients currently on any acetylcholinesterase inhibitor. The results indicate that patients treated with Namenda XR plus any acetylcholinesterase inhibitor experienced physically significant benefit in cognition and clinical global status, and have favorable side effect profile compared to acetylcholinesterase monotherapy. Combination used with acetylcholinesterase inhibitor remains the most widely applied dosing regimen and accounts for some 60% of total Namenda IR use. Pending a thorough review of the just-issued patent, we currently anticipate launching Namenda XR in later 2012 or early 2013.

Bystolic sales in the quarter were $82.3 million, growth of 29.2% year-over-year compared to sales of $63.7 million last year. Bystolic sales continued to perform very strongly with solid prescription volume growth. We continue to see an encouraging mix of patients, including significant proportions of those switching from generic beta blockers and those new to beta blocker therapy.

Our approach to physicians continue to emphasize the use of Bystolic as the first add-on agent to standardize first-line agents and this message appears to be increasingly well received. It represents a significant change in beta blocker treatment regimen for hypertensive patients.

This month, we will be launching the results of a new study that evaluate the effect of initiating therapy with Bystolic and an ace inhibitor in patients with stage 2 hypertension. This is the fourth study that we released in the past 2 years demonstrating the blood pressure lowering effect and tolerability of Bystolic.

Bystolic has a growing base of approximately 217,000 prescribers, which includes primary care physicians and cardiologists. Approximately 98% of physicians are repeat users of Bystolic. While cardiologists' share continue to exceed national share for Bystolic, primary care physicians continue to generate higher prescription volume than cardiologists. And nearly 4 years post-launch, Bystolic NRx volume has surpassed many antihypertensive agents when looking at launch in-line NRx volume.

The TRx launch in-line volume is outpacing Benicar, a first-line ARB. Since launch in 2008, approximately 1.38 million patients have filled Bystolic prescriptions. Importantly, younger patients continue to comprise a higher percentage of Bystolic patients than they do for other beta blockers and other antihypertensive agents in general. 57% of Bystolic patients are younger than 65, compared to 45% for other beta blockers and 51% for the general antihypertensive market.

Overall, in the managed care front, our access without any step added or prior raw prescription covers approximately 85% of total beta blocker lives.

Turning to Savella, which we launched in April 2009, the sales in the current quarter were $25.5 million, growth of 19.1% versus a year ago. Our promotional activities have succeeded in driving patient and physician experience with Savella, and we continue to be encouraged by the solid uptake and the positive response in Savella's profile and performance with specialists and general practitioners, as well as consistent improvement in patient adherence rates.

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