Company Provides FY'07 Earnings Per Share Guidance
NEW YORK, April 25 /PRNewswire-FirstCall/ -- Forest Laboratories, Inc.
(NYSE: FRX), an international pharmaceutical manufacturer and marketer,
today reported financial results for its fiscal fourth quarter ended March
31, 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001011/FORESTLOGO )
Revenues for the quarter increased 16% to $756,322,000 from
$653,236,000 in the year-ago period. Revenues were comprised of net sales
of $712,761,000, an increase of 15% from $618,285,000 in the year-ago
period, contract revenue of $31,225,000, an increase of 40% from
$22,313,000 in the year-ago period and other income of $12,336,000, which
decreased 2% from $12,638,000 in the year- ago period.
Sales of Lexapro(R) (escitalopram oxalate), an SSRI indicated for the
initial and maintenance treatment of major depressive disorder and
generalized anxiety disorder in adults, increased 16% in the quarter to
$464,100,000 from $399,381,000 in the year ago quarter while sales of
Celexa(R) (citalopram HBr) including the generic version decreased 32% to
$4,805,000 from $7,051,000 in the year-ago quarter. Lexapro sales were
sequentially lower than our fiscal third quarter by approximately 3% while
total prescription volume, according to IMS monthly reports, increased
approximately 2% from the fiscal third to the fiscal fourth quarter. The
difference is partially due to an $11 million downward adjustment to
reported Lexapro sales recorded in the quarter in order to reflect fully
our estimated annual discount liabilities for the product and also due to
normal one to two day fluctuations in wholesaler buying patterns. Sales of
Namenda(R), an NMDA receptor antagonist for the treatment of moderate to
severe Alzheimer's disease, totaled $145,385,000 in the quarter, an
increase of 55% from sales of $93,945,000 in last year's fourth quarter.
Other income included earnings from the co-promotion agreement with
Sankyo Pharma for Benicar(R)* and Benicar HCT(R), antihypertensive
therapies, of $30,721,000 and interest income of $12,046,000.
Selling, general and administrative expenses decreased 3% to
$259,016,000. The year-ago period included initial launch spending in
support of Campral(R)*, a product to treat alcohol dependence and
Combunox(R), a product indicated for the treatment of acute moderate to
severe pain.
Research and development spending increased 215% to $194,377,000 during
the quarter and included license payments of $125,000,000, equal to $0.34
per diluted share, net of tax. The license payments were $75,000,000 to
Mylan Laboratories for the rights to nebivolol, a beta-blocker being
developed for the treatment of hypertension and congestive heart failure
and $50,000,000 to Replidyne for the rights to faropenem medoxomil, a novel
oral antibiotic being developed for upper respiratory and skin infections.
Also included was a $10,000,000 milestone payment, equal to $0.03 per
share, net of tax, paid to Replidyne for the U.S. Food and Drug
Administration's (FDA) acceptance for review of the faropenem new drug
application.
Income tax expense reflects an effective tax rate of 32%, resulting
from the mix of earnings reported by the U.S. and foreign jurisdictions
principally due to the significant license payments made by Forest
Laboratories Holdings Limited, an Irish affiliate of the Company. Excluding
the effect of the license payments, the effective tax rate would have been
21%.
Net income in the current quarter increased by 74% to $91,890,000 as
compared to $52,755,000 reported in the fourth quarter of the prior year.
Net income in the year-ago quarter was reduced by a one-time income tax
charge of $91 million, or $0.25 per diluted share outstanding, related to
taxes associated with $1.239 billion of funds repatriated in connection
with the American Jobs Creation Act of 2004.
Fully diluted shares outstanding for the fourth quarter were
329,969,000, a reduction of 27,020,000 shares due mainly to the Company's
share repurchase program. During the quarter the Company purchased
10,256,700 shares to complete its most recent 25 million share
authorization.
Reported diluted earnings per share increased 87% to $0.28 in the
current quarter, compared to diluted earnings per share of $0.15 in the
year-ago period. Excluding the impact of license and milestone payments,
net of tax, in the current and year-ago periods, as well as the income tax
charge related to the American Jobs Creation Act in the year-ago period,
adjusted diluted earnings per share would have been $0.65 in the current
quarter compared to diluted earnings per share of $0.43 in the year-ago
period.
Twelve-month results
Revenue for the fiscal year ended March 31, 2006 decreased 6% to
$2,962,390,000 from $3,159,639,000 in the prior year. Sales of Lexapro
increased 17% to $1,873,255,000 from $1,605,296,000 while sales of Celexa
including the generic version decreased 97% to $19,006,000 from
$658,014,000 due to the availability of generic versions of the product
during the entire fiscal year. Sales of Namenda increased 53% to
$508,043,000 from $332,707,000 while the earnings contribution from the
Benicar co-promotion increased 104% to $114,472,000 from $56,076,000.
Selling, general and administrative expenses increased 4% to
$1,031,451,000 from $993,715,000 while research and development spending
increased 40% to $410,431,000 from $293,659,000. Included in the research
and development spending is $147,000,000 of license payments for four
development products as compared to $52 million of license payments for
three development products last fiscal year.
Income tax expense included the first quarter benefit of $36.4 million
related to the reversal of the prior year tax accrual in accordance with
the American Jobs Creation Act of 2004, as well as the impact of the
significant license payments incurred in the fourth quarter. Absent these
one-time items, the Company would have reported an effective tax rate of
21%.
Net income for the fiscal year ended March 31, 2006 decreased 16% to
$708,514,000 from net income of $838,805,000 reported in the prior fiscal
year. Diluted earnings per share for the fiscal year ended March 31, 2006
decreased 8% to $2.08 as compared to diluted earnings per share of $2.25
for the prior fiscal year. Excluding the impact of license and milestone
payments, net of tax, as well as the income tax impact from the American
Jobs Creation Act in the current and year-ago fiscal years, adjusted
earnings per share for the fiscal year ended March 31, 2006 would have been
$2.38 as compared to $2.65 per share for the fiscal year ended March 31,
2005. See supplemental financial table.
Fiscal 2007 Guidance
Regarding the fiscal year ending March 31, 2007, the Company expects
that adjusted fully diluted earnings per share will be approximately $2.74
to $2.79 not including product licensing and milestone payments or stock
option expense. Inclusion of a product licensing payment of $60 million
made in April 2006 and planned milestone payments of approximately $63
million would reduce projected earnings per share by approximately $0.29 to
a range of $2.45 to $2.50 per share. Projected stock option expense under
FAS-123R would reduce earnings by approximately $0.08 per share to
projected reported earnings of $2.37 to $2.42 per share. The fiscal 2007
projection of $2.74 to $2.79 earnings per share would be comparable to the
adjusted earnings per share for fiscal 2006 of $2.38. See supplemental
financial information.
Key assumptions supporting the fiscal year forecast include the
following:
The Company anticipates that total revenue in fiscal 2007, which
includes product sales as well as the earnings contribution from Benicar,
interest income and other income, will increase by approximately 11% to
slightly below $3.3 billion.
For Lexapro, we project an increase in overall prescription volume for
the underlying SSRI/SNRI antidepressant market as a whole of approximately
2% and an increase in Lexapro's total prescription market share of between
25 and 50 basis points. This increase in market growth as well as market
share, along with a price increase, is projected to generate Lexapro sales
of approximately $2,070,000,000, growth of 10-11% from the reported sales
in the just completed fiscal year.
Namenda is also expected to increase its total prescription volume and
benefit from a projected underlying prescription volume growth for the
Alzheimer's market in the 8% range. We anticipate that Namenda sales should
be approximately $615,000,000 for the fiscal year, growth of approximately
22%.
The Company expects that Benicar will continue to show strong market
share gains in fiscal 2007 in a market that will continue to show high
single-digit growth. Earnings from Benicar in fiscal 2007 are expected to
grow nearly 40% from $114,472,000 reported in Fiscal 2006.
The fiscal 2007 projection includes an approximate 7% increase in
selling, general and administrative expenses to about $1.1 billion. This
expense includes funding continued competitive levels of support behind
currently promoted products and stock options expense. This level of
spending includes pre-launch expenses to support nebivolol but does not
include the full cost of the product launch which is currently projected to
occur sometime during the first half of our next fiscal year, subject to
FDA approval.
Research and development spending is expected to be approximately
$480,000,000 in support of a dramatically increased late-stage product
pipeline. Included in this figure is $63,000,000 for planned product
milestone payments and $60,000,000 for a licensing payment made in April
2006. These figures do not include any licensing payments which may be made
for additional product development transactions that may occur during the
fiscal year.
The Company is projecting a slight increase in the effective tax rate
for fiscal 2007 to 22% primarily as a result of the current expiration of
the U.S. research credit as well as the mix of earnings forecast for U.S.
and foreign tax jurisdictions. The Company also forecasts that fully
diluted shares outstanding will be reduced by approximately 5.4 million
shares to an average of approximately 335,000,000, as the impact of the
completed share repurchase program will continue into fiscal 2007.
Howard Solomon, Chairman and Chief Executive Officer of Forest, said:
"During the just completed fiscal year the Company made significant
progress in two important initiatives. First, our currently promoted
products all continued to show gains in both prescription volume and market
share in their respective categories. Also during the fiscal year we made
significant progress in expanding our development pipeline by adding four
new collaborations and adding a fifth product earlier this month. Forest's
ability to not only identify interesting and important development
compounds but to also be viewed as a very desirable development and
marketing partner, were two important factors which led to our success in
the business development area during the year. I am pleased that three of
our most recent collaborations are for products that are in late stages of
development with nebivolol and faropenem both having new drug applications
currently under review by the FDA and LAS34273 about to initiate Phase III
clinical studies for chronic obstructive pulmonary disease. Our financial
projection for the coming fiscal year reflects our view that currently
marketed products will continue to grow and generate increased profits as
compared to last year even after funding significant research and
development spending for a much larger product pipeline and supporting the
planned pre-launch launch activities behind nebivolol."
Use of Non-GAAP Financial Information
This press release contains 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 fully diluted earnings
per share prepared in accordance with GAAP.
FOREST LABORATORIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
TWELVE MONTHS ENDED MARCH 31
2005 2006 2007 (Guidance)
Reported Fully Diluted Earnings
Per Share: $ 2.25 $ 2.08 $ 2.37-$ 2.42
Specified items, per share,
net of tax:
American Job Creation Act
Dividend $ 0.25 ($ 0.11) -
Research and Development
License payments $ 0.13 $ 0.39 $ 0.14
Milestone payments $ 0.02 $ 0.02 $ 0.15
SFAS-123R - - $ 0.08
Adjusted Non-GAAP Fully Diluted
Earnings Per Share: $ 2.65 $ 2.38 $ 2.74-$ 2.79
About Forest Laboratories
Forest Laboratories (http://www.frx.com) is a US-based pharmaceutical company
dedicated to identifying, developing and delivering products that make a
positive difference in peoples' lives. Forest Laboratories' growing product
line includes Lexapro(R) (escitalopram oxalate), an SSRI indicated for
adults for the initial and maintenance treatment of major depressive
disorder and for generalized anxiety disorder; Namenda(R) (memantine HCl),
an N-methyl-D- aspartate (NMDA)-receptor antagonist indicated for the
treatment of moderate to severe Alzheimer's disease; Benicar(R)*
(olmesartan medoxomil), an angiotensin receptor blocker, and Benicar*
HCT(R) (olmesartan medoxomil- hydrochlorothiazide), an angiotensin receptor
blocker and diuretic combination product, each indicated for the treatment
of hypertension; and Campral(R)* (acamprosate calcium), indicated in
combination with psychosocial support for the maintenance of abstinence
from alcohol in patients with alcohol dependence who are abstinent at
treatment initiation.
*Benicar is a registered trademark of Sankyo Pharma, Inc., and Campral
is a registered trademark of Merck Sante s.a.s., subsidiary of Merck KGaA,
Darmstadt, Germany.
Except for the historical information contained herein, this release
contains "forward-looking statements" within the meaning of the Private
Securities Reform Act of 1995. These statements involve a number of risks
and uncertainties, including the difficulty of predicting FDA approvals,
the acceptance and demand for new pharmaceutical products, the impact of
competitive products and pricing, the timely development and launch of new
products, and the risk factors listed from time to time in the Forest
Laboratories' SEC reports, including the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 2005, and on form 10-Q for the
periods ended June 30 ,2005, September 30, 2005 and December 31, 2005.
FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31 ENDED MARCH 31
(In thousands, except per share amounts)
2006 2005 2006 2005
Revenues:
Net sales $712,761 $618,285 $2,793,934 $3,052,408
Contract revenue 31,225 22,313 118,170 61,369
Other income 12,336 12,638 50,286 45,862
Net revenues 756,322 653,236 2,962,390 3,159,639
Costs and expenses:
Cost of goods sold 167,860 142,212 650,996 687,510
Selling, general and
administrative 259,016 266,459 1,031,451 993,715
Research and
development 194,377 61,758 410,431 293,659
621,253 470,429 2,092,878 1,974,884
Income before income
tax expense 135,069 182,807 869,512 1,184,755
Income tax expense 43,179 130,052 160,998 345,950
Net income $91,890 $52,755 $708,514 $838,805
Net income per share:
Basic $0.28 $0.15 $2.11 $2.30
Diluted $0.28 $0.15 $2.08 $2.25
Weighted average number of
shares outstanding:
Basic 325,491 351,023 335,912 363,991
Diluted 329,969 356,989 340,321 372,090
SOURCE Forest Laboratories, Inc.
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Related links:
http://www.frx.com/
Photo Notes:http://www.newscom.com/cgi-bin/prnh/20001011/FORESTLOGO
CONTACT:
Charles E. Triano, Vice President - Investor
Relations, Forest Laboratories, Inc., +1-212-224-6714,
charles.triano@frx.com
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