October 18, 2011 / 12:35 PM / 8 years ago

UPDATE 4-Forest Labs FYQ2 profit falls short on R&D charge

* Forest Labs FY Q2 EPS 91 cents/share vs 99 cent/shr view

* Earnings shortfall result of one-time milestone payment

* Revenue $1.17 bln vs $1.16 bln view

* Company leaves full-year guidance at $3.60-$3.70/shr

* Shares fall as much as 5 pct; down 2.2 pct at midday

By Toni Clarke

Oct 18 (Reuters) - Forest Laboratories Inc reported fiscal second-quarter earnings on Tuesday that fell short of expectations, sending its shares down as much as 5 percent, though new product launches helped drive an increase in sales.

The company’s net profit fell to $249.8 million, or 91 cents a share in the second quarter ended Sept. 30, from $286.1 million or $1 a share a year ago. Revenue rose 7.3 percent to $1.17 billion. Product sales rose 9 percent to $1.13 billion.

Analysts on average were expecting earnings excluding one-time items of 99 cents a share, according to Thomson Reuters I/B/E/S. They were expecting revenue of $1.16 billion.

“The main source of the bottom-line miss was a $30 million research and development milestone during the quarter, which we estimate impacted quarterly earnings by $0.09,” said Chris Schott, an analyst at J.P. Morgan, in a research note.

Forest stands to lose roughly a quarter of its revenue after its antidepressant Lexapro loses patent protection early next year. The company’s Alzheimer’s disease drug, Namenda, loses patent protection in 2015.

The question for Forest now is whether new products, and those currently in development, can offset the expected losses from patent expirations.

The company launched two new drugs this summer: an antidepressant called Viibryd, and Daliresp, a drug to reduce the risk of exacerbations from chronic obstructive pulmonary disease.

Sales of Viibryd in the quarter were $5.3 million. Sales of Daliresp were $1.2 million.

Lexapro sales were $596.1 million in the latest quarter compared with $569.3 million a year ago. Sales of Namenda rose 8.6 percent to $336.8 million.

“Revenue for Lexapro and Namenda were better than expected in the quarter, while the remainder of the company’s portfolio posted in-line results,” said Schott. “While early, Viibryd sales were modestly above our expectations and Daliresp sales were modestly below.”

The company’s focus in its launch of Daliresp is educating physicians, the company’s chief financial officer, Frank Perier, told investors on a conference call.

Unlike most products to treat COPD, which are inhaled, Daliresp is a tablet.

“The educational process will take time,” Perier said, adding that the feedback from physicians on Daliresp and Viibryd has so far been positive.

Selling, general and administrative expenses for the quarter were $388.7 million compared with $316.4 million in the year-ago period, as the company spent to support its new products.

Sales of Teflaro, an intravenous antibiotic that was launched in March generated sales of $5.3 million. The drug is used to treat acute skin infections and community-acquired bacterial pneumonia.

During a recent proxy battle with activist investor Carl Icahn, which Forest won, the company told investors it is aiming for 10 percent compound annual sales growth between 2013 and 2017. It said it aims for adjusted earnings per share growth over the same period of 30 percent.

On Tuesday, Perier reiterated those goals, and noted the figures are based on the company’s products it has in-house today. They do not include any potential acquisitions or additional share repurchases.

Earlier this month Forest and its partner Gedeon Richter of Hungary, reported positive results from a late-stage clinical trial of their experimental drug to treat mania associated with bipolar disorder.

The company said it still expects earnings per share for the fiscal year ending March 31, 2012 will be in the range of $3.60-$3.70 a share.

Analysts are expecting full-year earnings of $3.76 a share excluding items, and full-year revenue of $4.49 billion.

Forest’s shares were down 2.2 percent at $31.42 at midday on the New York Stock Exchange, off an earlier low at $30.49.

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