Cost of sales as a percentage of sales was 21.6% compared with 23.4% in last year’s second quarter. Selling, general and administrative expense for the current quarter was $374.9 million as compared to $388.7 million in the year-ago quarter. The current level of spending reflects the resources and activities we believe are required to support our currently marketed products, particularly our newest products: Teflaro, Daliresp and Viibryd and the pre-launch commercial costs associated with Tudorza™ (aclidinium bromide) for the long-term maintenance treatment of COPD, and Linzess™ (linaclotide) for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC).Research and development spending for the current quarter was $202.8 million compared with $197.3 million in last year’s second quarter. The current quarter had no product development milestone charges compared to $30.0 million of milestone payments in the prior year’s quarter. Income tax expense for the quarter was $12.4 million, reflecting a quarterly effective tax rate of 37.4%. The higher effective tax rate is due principally to the repeal of the R&D tax credit and the mix of earnings in different jurisdictions. The Company now expects the annual effective tax rate to be approximately 24% for fiscal 2013. Reported net income for the quarter ended September 30, 2012 was $20.8 million or $0.08 per share compared to $249.8 million or $0.91 per share reported for last year’s second quarter. Diluted shares outstanding for the three months ended September 30, 2012 were approximately 267,169,000, a reduction of approximately 6.6 million shares compared to the year-ago period primarily due to the Company’s accelerated share repurchase programs. Six Month Results Revenues for the six months ended September 30, 2012 decreased 31.9% to $1,581.8 million from $2,321.0 million in the prior year. Net income for the six months ended September 30, 2012 decreased 85.0% to $76.1 million from $508.0 million reported in the six months of the prior year. Reported diluted GAAP earnings per share decreased 84.5% to $0.28 per share in the current year’s six months as compared to diluted earnings per share of $1.81 per share in last year’s six months.
Fiscal 2013 GuidanceThe Company now expects that GAAP earnings per share for the fiscal year ending March 31, 2013 will be in the range of $0.15 to $0.30 including acquisition related amortization. Non-GAAP earnings per share will be in the range of $0.45 to $0.60. Total net revenue (includes product sales as well as the earnings contribution from Benicar, authorized generic sales of Lexapro, interest income and other income) is now expected to be $3.2 billion compared with previous guidance of $3.4 billion as a result of the following:
- As previously disclosed in June 2012, sales of Lexapro are now expected to be approximately $215 million compared to the previous estimate of $250 million and royalty income earned on sales of the Company’s authorized generic version of Lexapro is now expected to be $60 million compared with previous guidance of $115 million. Shipments of Levothroid have not resumed due to manufacturing issues affecting our third party licensor and supplier. Annual sales of Levothroid are approximately $17 million.
- Sales of Namenda are now expected to end the year 11% higher than last year compared with previous guidance of a 17% increase. New initiatives to improve dementia care in nursing homes, while primarily directed toward reducing antipsychotic use, appear to have also reduced demand for Alzheimer’s medications. The impact to Namenda is a projected reduction in sales of approximately $85 million.
- Sales of Linzess are now expected to be $25 million compared with previous guidance of $60 million due to a delay in launch resulting from the extended three month FDA review of our NDA.
- Teflaro sales are now expected to be $45 million compared with previous guidance of $65 million.
Howard Solomon, Chairman and Chief Executive Officer of Forest, said: “With Lexapro now completely genericized we have a bright future with our next generation of products combined with growth of Namenda. We are pleased with the continued successful progress of our most recent new product launches for Teflaro, Daliresp and Viibryd. Collectively, our next generation products, Bystolic, Savella, Teflaro, Daliresp and Viibryd had sales of $202 million in the quarter, representing 69% growth in comparison to the comparable prior year quarter. We are also pleased with the continued positive progress of our late stage new product development pipeline. During the quarter, we received FDA approval for two New Drug Applications (NDAs) (aclidinium and linaclotide), and as planned, submitted an NDA for another product (levomilnacipran).During the quarter we and our partner Almirall were pleased to announce the approval of Tudorza (aclidinium). As the first long-acting inhaled anticholinergic agent approved in 8 years for COPD, Tudorza will be an important treatment option available for the nearly 13 million patients in the U.S. that have been diagnosed with this serious disease. Tudorza will be launched and available to patients later this quarter. Also during the quarter, we and our partner Ironwood Pharmaceuticals were delighted to announce the approval of Linzess (linaclotide). Irritable bowel syndrome with constipation and chronic idiopathic constipation affect as many as 13 million and 35 million adult Americans, respectively. There are few treatment options for these conditions and Linzess has the potential to improve the lives of patients suffering from the symptoms associated with these two serious conditions. Linzess will also be launched and available to patients later this quarter. We and our partner Pierre Fabre Laboratories were pleased to recently announce that we have submitted an NDA to the FDA for levomilnacipran, a serotonin norepinephrine reuptake inhibitor (SNRI) for the treatment of major depressive disorder. MDD is a serious medical condition requiring treatment that affects more than 15 million adults in the U.S. We are also on track to file the NDA for cariprazine for the treatment of schizophrenia and acute mania associated with bipolar 1 disorder, later this quarter. Assuming their respective regulatory approvals in calendar 2013, we expect to launch levomilnacipran and cariprazine during fiscal 2014.
During the quarter we also completed two business development transactions with our partner Almirall. In Canada, where we have established a wholly owned subsidiary, we entered into an agreement to co-promote the aclidinium franchise with Almirall. In another agreement, we have granted Almirall exclusive commercialization rights for linaclotide in Mexico.We have achieved remarkable progress over the past few years. Today we have one of the strongest and most diverse product portfolios and pipelines in the industry, in large part due to our strong core competency in our key therapeutic focus areas and our status as a partner of choice, as evidenced by our numerous repeat collaborations. Commercially we have successfully launched five new products in less than five years - Bystolic, Savella, Teflaro, Daliresp and Viibryd. 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. With these seven launches in hand, plus the completed NDA filing for levomilnacipran and the upcoming filing for cariprazine, we are well on track to secure the sales and earnings to build long-term growth well into the future.” Use of Non-GAAP Financial Information Non-GAAP earnings per share information adjusted to exclude certain costs, expenses and other specified items as summarized in the table below. This information is intended to enhance an investor’s overall understanding of the Company’s past financial performance and prospects for the future. This information is not intended to be considered in isolation or as a substitute for earnings per share prepared in accordance with GAAP.
|FOREST LABORATORIES, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION|
|THREE MONTHS ENDED SEPTEMBER 30||SIX MONTHS ENDED SEPTEMBER 30|
|Reported diluted earnings per share:||$0.08||$0.91||$0.28||$1.81|
|Specified items, per share, net of tax:|
|Amortization arising from business combinations|
|and acquisitions of product rights|
|Recorded in Cost of sales||0.03||0.02||0.07||0.03|
|Recorded in Selling, general and administrative||0.04||0.02||0.08||0.03|
|Licensing payment to Blue Ash Therapeutics, LLC for azimilide recorded in R&D||-||-||-||0.14|
|Adjusted Non-GAAP diluted earnings per|
|FOREST LABORATORIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)|
|THREE MONTHS ENDED SEPTEMBER 30||SIX MONTHS ENDED SEPTEMBER 30|
|(In thousands, except per share amounts)|
|Costs and expenses:|
|Cost of goods sold||149,723||263,984||317,946||517,781|
|Selling, general and administrative||374,889||388,657||757,198||746,734|
|Research and development||202,839||197,331||398,005||391,774|
|Income before income tax expense||33,186||319,107||108,615||664,721|
|Income tax expense||12,409||69,294||32,553||156,771|
|Net income per share:|
|Weighted average number of|