August 1, 2011 / 2:00 PM / 8 years ago

UPDATE 1-Forest urges investors to reject Icahn nominees

* Forest says its own slate best qualified to lead company

* Says diversity of products is key asset

* Shares down 0.8 percent

BOSTON, Aug 1 (Reuters) - Forest Laboratories Inc FRX.N, which is fighting to prevent activist investor Carl Icahn from winning seats on its board, urged investors to vote against Icahn’s nominees at the annual meeting Aug. 18.

In a letter to shareholders on Monday, Forest, which makes the antidepressant Lexapro and Alzheimer’s drug Namenda, urged support for the 10 board candidates put forth by the company and argued that it is well positioned for long-term growth.

Lexapro loses patent exclusivity in March 2012, and investors are focused on how the company will offset the expected decline in sales once generic competitors reach the market.

Forest has launched five new products since 2008 and said it expects to launch four more by 2013. In addition, it said it has six products in mid-stage or later trials that are expected to launch in 2014 or later.

The company said it expects these products to increase revenue and earnings per share by compound annual growth rates of 10 percent and 30 percent, respectively.

“Ironically, Icahn would have you believe that diversification is a weakness, but in our judgment, it’s an important strategic and financial asset,” the company said in its letter, filed with the U.S. Securities and Exchange Commission. “Icahn does not explain his argument against diversification, and there is simply no merit to his suggestion that Forest should narrow its focus on fewer therapeutic areas.”

Icahn, who owns about 7 percent of Forest, has nominated four representatives to the Board. He was not immediately available for comment on Monday but has argued in the past that Forest is poorly positioned for future success, that the expiration of patents on Lexapro and Namenda will hamper growth in the future, that spending is high relative to its peers, and that the Forest board lacks independence.

Forest said it has managed patent expirations successfully in the past and expects to do so again. And the company accuses Icahn of ignoring the potential of its pipeline of experimental new products.

“Not only does Icahn fail to identify the areas on which he would want the company to focus, he ignores the fact that Forest has been very successful investing in promising new compounds across a wide spectrum of therapeutic areas,” the company said in its letter.

Forest shares were down 0.8 percent to $36.77 in early trade. (Reporting by Toni Clarke; editing by John Wallace)

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