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Executives

Francis I. Perier - Chief Financial Officer, Executive Vice President of Finance & Administration and Member of Disclosure, Legal Compliance & Risk Management Committee

Analysts

Douglas D. Tsao - Barclays Capital, Research Division

Forest Laboratories, Inc. (FRX) Barclays Global Healthcare Conference March 13, 2013 10:15 AM ET

Douglas D. Tsao - Barclays Capital, Research Division

I'm Doug Tsao, heads over [ph] [indiscernible] at Barclays. Up next we have Forest Labs representative, Frank Perier. [indiscernible] the other Frank Murdolo in the audience as well. So Forest is obviously one of the largest big [ph] pharma companies, obviously has a lot going on. So -- better? Okay. So we'll -- much better. I don't need to repeat the introduction. So we'll sort of jump in.

Question-and-Answer Session

Douglas D. Tsao - Barclays Capital, Research Division

Frank perhaps provide sort of a little bit of an overview in terms of the multi-year plan that you guys have talked about for some time, where you exactly are in terms of that execution from a product development standpoint, as well as a commercialization standpoint.

Francis I. Perier

Sure, Doug. And good morning, everyone. A pleasure to be here. Just to keep the lawyers happy, the discussion this morning may contain some forward-looking information as defined by the Private Securities Reform Act, and actual future results may vary from the points that are given here today. So please see our full disclaimer at our website, www.frx.com. Going back to Doug's question, kind of where are we in this multi-year evolution of the transition from being the Lexapro company to being a much broader and much more diverse specialty pharmaceutical company, and it's been a multi-year project. And we would really largely come through the development phase around, we've characterized it as the next 9. And it's interesting we've, in the last 48 months, we've launched 5 drugs. There aren't too many companies I'm aware of, particularly for our size, who've accomplished that. So going back to March of 2011, go forward 48 months, we've put 5 new products in the market, and we also filed 2 more NDAs with the U.S. FDA just at the end of last year for levomilnacipran and cariprazine. So that was -- 7 of the next 9 are in the market and being commercialized as we speak, and the last 2 NDAs of the next 9 have been filed. And we'll be in the position to launch both of those drugs in addition to Namenda XR in the forward 12- to 15-month time frame. So there've been a lot of moving parts, and Lexapro is gone. Lexapro is fully generic, and we're still in business and driving products, and the world didn't come to an end. And as we look forward, we've gone from being a very CNS-concentrated company with Lexapro and Namenda to being a much more diverse organizational with products concentrated in 6 therapeutic categories. And that's really been the overall strategy is to not just go evolve from being a blockbuster-product-focused company being a blockbuster-franchise-focused company, largely focused on the specialty and primary care markets so that we can get the operating leverage having the -- of having our representatives calling on multiple specialists with multiple products and primary care physicians with a portfolio of products that are relevant to their practices. And so we're right in the midst of that transition. We've got a number of products that are very young in their growth and life cycle. And as we look at the future, it's definitely an exciting future for the organization.

Douglas D. Tsao - Barclays Capital, Research Division

And when you think about this idea of a portfolio of products or portfolio of franchises because I think in the investment community, we tend sort of focus on individual products and individual product performance. What do you think is the critical mass? When you think about your different categories, how many products you want to have the reps carrying in the bag so to speak?

Francis I. Perier

Sure. It's a great question. And as we -- look at respiratory as an example. We got back into the respiratory space after being out of it for many years with the launch of Daliresp last year, Daliresp being the first PDE4 inhibitor approved for the treatment of exacerbations associated with COPD. We followed that with the approval and launch in December of Tudorza, only the second long-acting muscarinic antagonist for the treatment of COPD launched into the U.S. market. It's Spiriva's first competitor. And the next product that -- and we'll get data on that right about midyear this year is our combination LABA/LAMA program. But so -- and we'll hopefully be in the position to file that very early in '14 and with a product approval in late '14 or early '15. But if you look at that respiratory franchise and you look at the treatment of COPD, we have Tudorza, the single-agent Tudorza as an entry point for the treatment of patients with their -- in the moderate stage of disease. You have the potential for the LABA/LAMA combination coming in, which as patients progress, the chronically -- disease state of chronic decline, as patients progress into -- from moderate to severe and very severe, we have products in the combination of Tudorza and formoterol and then Daliresp at that severe stage of disease state. So a representative from Forest can call on either a specialist or a primary care doctor that treats COPD patients, and they have a portfolio of drugs that treat every stage of that disease state. And that's really what e -- how we've tried to approach it. We look at CNS, you're kind of in much the same spot between the Alzheimer's side of CNS with Namenda and then Namenda XR and then the combination program that we have of Namenda XR and Aricept. So that's on the Alzheimer's dementia side. Then you go to depression, severe depression, schizophrenia side of the treatment of CNS. We've already launched Viibryd into the market last year. Product is doing very well, very well positioned in the SSRI category. Levomilnacipran was filed last year and last September, we expect the decision from the FDA this calendar year and we expect a decision to launch that product in our next fiscal -- in this next fiscal year, fiscal '14. And then you have cariprazine, which we filed for the treatment of schizophrenia and bipolar mania as the entry points for that product into the market with treatment-resistant depression and bipolar depression under -- in Phase II development. So as you look at the treatment of the range of disease from depression, severe depression to bipolar mania and schizophrenia, we have a portfolio of products that kind of hit every step along the way. So that's really how we've tried to align our business. And right now, the only therapeutic category that we don't have multiple products is GI and -- but we -- I think we all have very, very strong expectations for LINZESS. LINZESS is off to a very strong start. And it's too early to declare victory, but we really like to see this -- we really are very pleased with the script trends that we have already. And of course, we'd love to have another product in that category, but GI could be a category where it's a blockbuster category on the back of one product. But we're certainly looking for more products to kind of plug into that space.

Douglas D. Tsao - Barclays Capital, Research Division

And then just there's a lot of interest and sort of maybe help us about perspective and it's still obviously very early days in the launch of Tudorza, as well as LINZESS. And also I can just sort of answer the question in terms of -- so GI perhaps is a category because of the intensity at least in -- for the near term for promoting that isn't a need to have a second product in the bag.

Francis I. Perier

Not right now, but certainly, we'd love to have another 1 for 2 to 3 years down the road, yes. Yes, and I think both launches -- I mean both drugs, both Tudorza and LINZESS, they were launched within a week of each other in the beginning of December. And so effectively, they're like January 1 launches because if you launch in late -- mid to late December, you probably have about 40% of your field force actually calling on about 30% of the doctors who are actually in their practices with maybe 30% of their patients coming in. So they're effectively January 1 launches. And factoring that in, the launch curves for both products had been very strong. We've used Zelnorm as the launch analog for LINZESS, and we're tracking right, pretty much right on that Zelnorm launch curve line, which we're very pleased with. Now if you look at it weekly, just came in this week and both products, they've broken through the 5,100 weekly script trend, so they're off to a good start. We're not declaring victory yet, but we really like the early numbers.

Douglas D. Tsao - Barclays Capital, Research Division

And then in terms of you referenced over to your combination LABA/LAMA product, and obviously, I don't want to -- we don't want to get ahead of ourselves too much because that's not an approved product. But just when you think about launching that product, how would it be different than launching Tudorza since it would not be going up against a 8-year monopoly?

Francis I. Perier

Yes. Well, it's a -- in the whole combination, LAMA/LABA area. It was a number 6 programs under development right now. One's already been filed with the FDA. And we really like, as we kind of handicap all 6 of those programs, we really like kind of where we fit. From a regulatory approval risk standpoint, I mean, if you look at our program, we're the only program that's using 2 approved drugs, both formoterol, very old generic drug but very effective LABA; and Tudorza, which has been on the market -- has been approved and is now on the market, so 2 approved drugs at their approved doses in an approved device. If you look at the other 5 programs, they all have some combination of novel or different in those programs. Doesn't say they're not approvable, it just changes the kind of the regulatory risk profile with the U.S. FDA. So we believe that we will get the data on our combination program, as I said, mid-calendar year this year and be in the position to file that NDA in early calendar '14 with hopefully an approval in early '15. And we could -- we should be among the first 2 into the market, which is a good place to be. And you're really going into the market where -- with the product that the respiratory community has really been looking for. The normal progression for a COPD patient is they'll start on a LAMA like Spiriva or Tudorza. As doctors need to and get more bronchial dilution in their patients because they've become more severe. Then they'll add on Advair to get that LABA component and -- but it brings along the steroid, which most COPD patients doesn't have a big benefit for them. So to have an alternative where they can go from the straight LAMA to that LAMA/LABA combination is sort of the next stage, big opportunity stage in development. And you're really not cannibalizing your -- the LAMA side of the business. It's really stepping in between the LAMA and the ICS steroid or the LABA-steroid combination.

Douglas D. Tsao - Barclays Capital, Research Division

And when you think about just throughout because I know a lot of the message in terms of the combination product has emphasized what you view as a attractive risk forward profile from a regulatory standpoint given the sort of known component or approved component individually, just in terms of your perspective and the company's perspective early on and the competitive differentiation against some of the other combination products in development.

Francis I. Perier

Yes. I think the Tudorza combination will be competitive from a bronchial dilution standpoint. They'll be a little bit different. Many of the competing programs are once-daily programs versus our program, which is a twice-daily program. But it's -- we're early into the launch, but being a "2 times a day" drug versus a once-a-day drug in this disease state does not appear to be any -- does appear to be a disadvantage. I mean most physicians are very comfortable with having a twice-a-day drug, and some believe, as I think many of the advisers on the -- at our Advisory Committee Meeting that there's maybe a benefit to this patient population with -- in the second 12 hours of the day with that additional nighttime dose, which is the most difficult time for COPD patients very often.

Douglas D. Tsao - Barclays Capital, Research Division

And then I want to talk a little bit about the CNS franchise and in particular Viibryd and the trends we've seen, which seem to suggest a little bit of a flattening of the curve in the last quarter that you reported after sort of really coming in, I think, ahead of expectations initially in the early stages of the launch. Where is that program right now and the sustainability and sort of sources of growth? And what is perhaps a change in sort of the tone and sort of how you're promoting the product and sort of as it moves into a next stage?

Francis I. Perier

Yes. I think with both Viibryd and Daliresp, you've seen a little bit of softness, particularly in the last almost 8 weeks of data. And I would -- I think I would attribute a portion of that to the fact that when you're launching 2 new products, the products that you already had in the market do pull back a little bit. And so our LINZESS sales force is also promoting Viibryd, and obviously, our Daliresp sales force is also promoting -- our Tudorza sales force is also promoting Daliresp. And it's kind of a natural tendency of field forces when you first get that new product in the market, all energy goes to that product. And then as several months go by, they start to pay attention to the other products in their bag as well. And I think we've got a little bit of that effect. To sustain Viibryd's growth, we really had just the registrational studies and the label to begin with when we acquired Clinical Data. We've put a pretty big post-approval commitment and Phase IV program behind that. We'll start to get some data midyear this year. So we'll have some new data for the reps to come out and then circle back with physicians. But again, the reception by the market to Viibryd has been very good. The drug's been well accepted and continues to be used interestingly as a first-line agent.

Douglas D. Tsao - Barclays Capital, Research Division

And so how do you think about your current sales force capacity given the fact it seems like Viibryd might need some -- a little more attention right now, but you're also launching LINZESS, as well as Tudorza and additional programs right in the CNS space. Hopefully, your expectation is in the very near future in the coming months. Should we be looking for expansion on the field force right now?

Francis I. Perier

Well, it's something we're in the throes of trying to complete the fiscal '14 plan. And we indicated in the past that -- we expanded the field force by about 300 last year, and just the potential to expand the field force by 200 or 300 this year, again, exists. And I think that we've got adequate resources right now for what we have. It's the pressure that comes later in the planning cycle from the levomilnacipran and cariprazine approvals that may put more pressure on us. And I think, again, it's a combination of you cycle, you cycle on, you cycle off and you have -- and the ability to have new data for the reps to work with. And yes. I mean, I think, when we launched, Savella, we saw the exact same kind of flattening for several months in Bystolic. And ultimately, the field force rolled back. We gave the field force some new data on Bystolic, and Bystolic contributed its March up to the 4-plus percent share of the beta blocker market than it has today.

Douglas D. Tsao - Barclays Capital, Research Division

And the sort of probably switching gears a little bit, you've spoken about the sort of x U.S. opportunity and sort of forgotten to sort of execute there. Just curious in terms of where you are, what interests you in terms of those kinds of opportunities.

Francis I. Perier

Yes. I think we are -- we've expanded into Canada, which that's new and novel for us. And Bystolic has been approved. It's going to be launched very shortly. As well as later in this fiscal year, we will be -- we expect to be promoting Tudorza in combination with Almirall up in the Canadian market as well. And then we have the CNS products that we hope to get -- gain approval for in the Canadian market. And, also, we've got a portfolio of drugs that are here in the U.S. that we can leverage to the Canadian market and through the relationship that we've established with Moksha8 and the Mexican and Brazilian markets as well. So that's been kind of the strategy to cover the Americas with Canada, it's a very direct model, and Latin America, it's more of an indirect model through a relationship with Moksha8. And then in Europe, again we've started building out about business a couple of years ago and focused around the cystic fibrosis space. We have a new DPI inhaler that's been approved in the European market. We'll be launching that across that same portfolio. And then so we're looking for -- in Europe, more -- we're looking more for kind of specialty kind of products that we can acquire and spread across the existing kind of infrastructure that we have today, as well what we're slowly building out.

Douglas D. Tsao - Barclays Capital, Research Division

And should we look at -- with your balance sheet, you have a significant amount of cash. A lot of it is outside the United States. How do you think about that? Does that sort of encourage you to sort of book it, weigh a lot of the opportunities in terms of sort of deployment of -- deploying capital a little more aggressively x U.S.?

Francis I. Perier

I think that we'd try to strike that balance. We've been able to, I think, effectively structure most all of our business development using offshore resources, and we hope to be able to continue to do that. And the fact that, again, we're trying to expand our non-U.S. business and we have a lot of non-U.S. resources does say that you have a lot of investment opportunity kind of in that non-U.S. area but they're still good investment opportunities that I think we can leverage that back into the U.S. market.

Douglas D. Tsao - Barclays Capital, Research Division

And then just sort of a curiosity of mine. There's a lot of noise obviously from back to the shareholder who did sort of win representation on the board, just curious, does that sort of change the dialogue subsequent to August, or has that sort of quieted down?

Francis I. Perier

Well, I think that we have one active investor in our stock, and that's Carl Icahn, who's not known for being quiet. One of the directors from his slate was elected to our board, and that was Pierre Legault. Pierre's been on the board now since August. And he has really been a great director. He's been a great addition to our board and has integrated into the board very effectively. He's on the compliance committee. He's on the audit committee. I mean, he's a real member of the board, and he really contributes. So he's been a great addition to our board. And I think one thing that's different, we -- for those of you who may not be familiar with, and I'm not sure how that can be possible, but the minute you've all, I mean, followed the story, the difference between the first round of proxy battle that we had 2 years ago versus last summer was that in the intervening period, there was really no dialogue between the 2 organizations. And I think that what we have done is we've tried to maintain a fairly regular dialogue since last August with Carl's Organization. We indicated that Howard and David have met with Carl and Brett on more than one occasion. And so -- but we've try to maintain an ongoing dialogue to see if we can productively get to a resolution with Carl short of going to round 3.

Douglas D. Tsao - Barclays Capital, Research Division

And this is separate from, obviously, if you have a growth election to the board, so there's a separate independent dialogue between Carl Icahn directly and [indiscernible] ...

Francis I. Perier

Yes, yes.

Douglas D. Tsao - Barclays Capital, Research Division

Okay. Well, I think that actually brings us to the end of this session. We've got a breakout.

Francis I. Perier

Breakout, I think right across the hall.

Douglas D. Tsao - Barclays Capital, Research Division

Right across the hall.

Francis I. Perier

So great. Thank you, everyone.

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