Forest Laboratories reported revenues and earnings for its fiscal fourth quarter and twelve months ended March 31, 2005.
Net sales for the quarter decreased 15% to $618,285,000 from $725,080,000 in the prior year’s fourth quarter as a result of the launch of generic equivalents of the Company’s antidepressant Celexa (citalopram HBr). Sales in the current quarter included $406,432,000 for Forest’s antidepressant franchise which was comprised of $399,381,000 of Lexapro (escitalopram oxalate), $6,197,000 of Celexa, and $854,000 of generic citalopram, all selective serotonin reuptake inhibitors (SSRIs). Antidepressant sales in last year’s fourth quarter were $597,493,000 consisting of $351,838,000 of Lexapro and $245,655,000 of Celexa. Sales of Namenda, a NMDA receptor antagonist for the treatment of moderate to severe Alzheimer’s disease, were $93,945,000 compared to $34,295,000 in the year ago quarter. Earnings from the co- promotion agreement with Sankyo Pharma for Benicar and Benicar HCT, antihypertensive therapies, totaled $21,329,000 in the current quarter.
Net income in the current quarter decreased 64% to $52,755,000, or $0.15 per share, as compared to net income of $145,482,000, or $0.38 per share, in the fourth quarter of the prior year. Net income in the quarter was reduced by a one-time special charge of $91 million, or $0.25 per diluted share outstanding, related to taxes associated with $1.239 billion of funds repatriated under the American Jobs Creation Act of 2004. Excluding the one- time charge, earnings per share would have equaled $0.40. Selling, general and administrative expenses decreased 11% from last year’s fourth quarter to $266,459,000. Research and development spending decreased 23% to $61,758,000 during the quarter. Research and development expense in the year ago quarter included upfront payments, including a payment of $25 million to Cypress Bioscience, Inc. for the signing of a development and marketing agreement for milnacipran.
During the quarter Forest repurchased an additional 7.8 million shares under its exiting share repurchase program increasing the program-to-date total to 23.9 million shares. The Company continues to have an additional 6.1 million shares available for repurchase under the existing 30 million share authorization.
Twelve Months Results
Net sales for the fiscal year ended March 31, 2005 increased by 15% to $3,052,408,000 from reported net sales of $2,650,432,000 in fiscal 2004. For the fiscal year, total antidepressant franchise sales were $2,263,310,000 which was comprised of $1,605,296,000 of Lexapro, $653,450,000 of Celexa and $4,564,000 of generic citalopram. Antidepressant franchise sales in fiscal 2004 were $2,176,238,000 which was comprised of $1,088,957,000 of Lexapro and $1,087,281,000 of Celexa. Net sales of Namenda were $332,707,000 for fiscal 2005 versus $45,472,000 for fiscal 2004.
Net income for the twelve months ended March 31, 2005 increased 14% to $838,805,000 from net income of $735,874,000 reported in the prior year. Excluding the one-time $91 million tax charge, net income increased 26% to $929,462,000 from net income of $735,874,000 in the prior year. Selling, general and administrative expenses increased 12% to $993,715,000, while research and development spending increased 19% to $293,659,000 during the year. Diluted earnings per share for fiscal 2005 equaled $2.25 compared to diluted earnings per share of $1.95 in fiscal 2004 and would have been $2.50 excluding the one-time tax charge.
Fiscal 2006 Guidance
Regarding the fiscal year ending March 31, 2006, the first full fiscal year with generic competition for Celexa, the Company expects that fully diluted earnings per share will be approximately $2.30. Forest projects that quarterly earnings per share in the fiscal first quarter of 2006 will be higher than reported earnings per share in the fiscal fourth quarter of 2005 and that quarterly earnings per share will show sequential growth through fiscal 2006. The Company anticipates that net sales for the year will be approximately $50 million lower than the $3,052,408,000 reported in fiscal 2005 but that net revenue, which includes the earnings contribution from Benicar, interest income and other income will increase slightly from reported net revenue in fiscal 2005 of $3,159,639,000.
Forest anticipates continued growth in revenue for its three principal marketed products, Lexapro, Namenda and Benicar, as well as revenue contribution from our two recently launched products, Campral for the maintenance of abstinence from alcohol in patients with alcohol dependence who are abstinent at treatment initiation and Combunox for the short-term management of acute moderate to severe pain. Campral and Combunox will reduce earnings in fiscal 2006 during their launch phase but should contribute to earnings in the future.
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