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Forest Laboratories (NYSE:FRX)

Q4 2011 Earnings Call

April 19, 2011 10:00 am ET

Executives

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

Frank Murdolo - Vice President of Investor Relations

Marco Taglietti - Senior Vice President of Research & Development, Member of Disclosure, Legal Compliance & Risk Management Committee and President of Forest Research Institute (NYSEARCA:FRI)

Analysts

Ronny Gal - Sanford C. Bernstein & Co., Inc.

David Risinger

Catherine Arnold - Crédit Suisse AG

Corey Davis - Jefferies & Company, Inc.

John Boris - Citigroup Inc

James Dawson - Buckingham Research Group

Ian Sanderson - Cowen and Company, LLC

Christopher Schott - JP Morgan Chase & Co

Gregory Gilbert - BofA Merrill Lynch

Louise Chen - Collins Stewart LLC

Frank Pinkerton - SunTrust Robinson Humphrey, Inc.

Operator

Good morning. My name is Ginger, and I will be your conference operator today. At this time, I would like to welcome everyone to the Forest Laboratories 4Q '12 (sic) ['11] Earnings Conference Call. [Operator Instructions] Thank you. Mr. Frank Murdolo, Vice President of Investor Relations, you may begin your conference.

Frank Murdolo

Thank you, Ginger. And good morning, everyone. Thank you for joining us today for this fourth quarter fiscal 2011 conference call. Joining me today is Frank Perier, our Executive Vice President of Finance and Administration and Chief Financial Officer; and Marco Taglietti, our Senior Vice President of Research and Development and President of the Forest Research Institute. By now, each of you should have seen the earnings release that we issued this morning at around 8 a.m. This release is also available at our website, www.frx.com. By way of Safe Harbor statement, let me add that various remarks that we may make about the future expectations, plans and prospects for the company constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and actual results may vary.

Let me now turn the call over to Frank, who will comment on the business during the quarter.

Francis Perier

Thanks, Frank. And good morning, everyone. I'll start today's call by reviewing the key company events for the quarter, as well as the financial results for the quarter, and then turn the call over to Marco Taglietti, who will review the R&D pipeline.

Reviewing operations. Our underlying business continued to perform very well during the quarter in our key marketed products. Lexapro sales were on target despite the expected modest decrease in market share, and we saw a continued solid prescription volume growth for Namenda, Bystolic and Savella. This has certainly been 1 of the busiest quarters that I can remember. With 2 important product announcements for Daliresp and Viibryd within a week of each other, and the Teflaro launch meeting with the institutional sales force. This has certainly been a quarter, and for that matter, a fiscal year to remember.

Let's turn to Daliresp, which the FDA approved on February 28 for the treatment to reduce the risk of COPD [chronic obstructive pulmonary disease] exacerbations in patients with severe COPD associated with chronic bronchitis and a history of exacerbations. Daliresp will participate in a very large COPD market that is currently valued at approximately $5.5 billion with some 29 million prescriptions written annually. The treated patient population is almost evenly split by severity of COPD across the categories of mild, moderate and severe and very severe patients. Our research indicates that mild COPD patients are primarily treated with rescue medications like albuterol. However, the moderate and severe, very severe patients account for the greater portion of the patients that are taking a LAMA and/or a combination ICS/LABA [inhaled corticosteroid/long-acting ß agonist] therapy. Based on Daliresp's indication for severe COPD patients, we will have access to 1/2 this patient population. Daliresp will be used as add-on therapy and we expect to fully participate in this major market opportunity.

With the acquisition of Clinical Data announced on February 22, Forest is once again well positioned to participate in the antidepressant category, with the launch of Viibryd, to treat adults with major depressive disorder. Viibryd is a combination of selective serotonin reuptake inhibitor and a 5HT1A receptor partial agonist that was developed by Clinical Data and approved by the FDA on January 21.

There are three aspects to think about as we position Viibryd in the market. The first, is that it does work differently. We would describe its mechanism of action as being novel, but familiar, combining the serotonin reuptake inhibition with 5HT1A agonist activity. Physicians describe the effect of the drug observed in the clinical trial as meaningful, consistent across multiple depression rating scale and similar to other SSRIs. And lastly, as you know, the tolerability profile is quite favorable, so we think there is a marketable concept. Considering our experience in the antidepressant market, the availability of Viibryd obviously fell right in our sweet spot. The market for the treatment of MDD [major depressive disorder] is over 200 million prescriptions annually, and the rate of churn in prescriptions provides us with a very attractive opportunity. And we think we may just know how to market antidepressant to make Viibryd another successful product for Forest.

With these 2 important new products in hand, we plan to launch both Daliresp and Viibryd essentially on parallel tracks from a timing standpoint, using the same 2-stage launch that we used for Teflaro. Our first introduction will be with a scientific launch later this quarter where our field sales representatives will utilize the package insert as their principle communication material coupled with product samples. During August, we plan to launch a complete set of marketing materials, which provides time to complete the DDMAC review process. So we will be launching both Viibryd and Daliresp in August and will be hosting a dual launch meeting for our entire field sales organization. To support these 2 important product launches, as well as our other actively marketed products, we are in process of expanding our field sales organization by about 300 sales reps, with the creation of a second specialty sales team largely drawn from our 4 primary care sales teams with those open positions being backfilled.

This morning, we announced that we entered into an asset purchase agreement with Blue Ash Therapeutics to acquire worldwide rights to azimilide, a novel Phase III antiarrhythmic agent originally developed by Proctor & Gamble Pharmaceuticals, for an undisclosed upfront payment and future milestone payments for the successful commercialization of azimilide. Forest will also make royalty payments to Warner Chilcott on net sales under the assigned license agreement.

Turning to our in-line products. Lexapro sales in the quarter totaled $594.8 million, an increase of 6.9% from the year-ago period. Modest total prescriptions shared declines continue to be offset by market growth and price increase. Overall, Lexapro finished the fiscal year in line with our total prescription market share expectations of around 13% with full year sales of $2.32 billion for fiscal 2011.

Namenda sales were $329 million, a growth of 10.5% year-over-year. Combination use with an acetylcholinesterase inhibitor remains the most widely applied dosing regimen and accounts for some 60% of total Namenda use. Full year sales of Namenda for fiscal 2011 reached $1.27 billion, a growth of 13.6% versus last year.

Bystolic sales in the quarter were $73.1 million, growth of 37.7% year-over-year and this compares to sales of $53.1 million last year. Full year sales were $264.3 million versus $178.9 million last year, growing 47.8%. Bystolic sales continue to perform strongly, and we continue to see an encouraging mix of patients, including significant portions of those switching from generic beta-blockers and those new to beta-blocker therapy.

Our approach to physicians has been to emphasize the use of Bystolic as the first add-on agent to standardize first-line agents. And this message appears to be increasingly well received, and represents a significant change in the beta-blocker treatment regimen for hypertensive patients. Bystolic has a growing base of approximately 182,000 prescribers with approximately 98% of these being repeat writers. Both primary care physicians and cardiologists are prescribing the product. While share among cardiologists continues to exceed that of national share for Bystolic, recent monthly prescription trends show that PCPs [primary care physicians] are now generating higher prescription volume than cardiologists.

Since launch in 2008, approximately 1.3 million patients have filled a Bystolic prescription, and younger patients comprised a higher percentage of Bystolic patients than they do for other beta-blockers and other antihypertensive agents in general. 55% of Bystolic patients are younger than 65 compared to 43% for other beta-blockers and 50% for the general antihypertensive market.

Overall, on the managed care front, our access without any step added or prior authorization restrictions, covers approximately 84% of total beta-blocker lives. Bystolic has unrestricted Tier 2 coverage on major national health plans and is the preferred brand at many major national health plans.

We launched Savella in April of 2009, and sales in the current quarter were $23.7 million, growth of 36.4% compared to sales of $17.4 million in the year-ago period. Full year sales were $90.2 million versus $52.7 million last year, growth of 71.3%. Our promotional activities have succeeded in driving patient and physician experience with Savella, and we continue to be encouraged by the solid uptake and the positive response to Savella's profile and performance, with both specialists and general practitioners.

During March, Savella achieved 6.2% weekly total prescription share for the fibromyalgia market and continues to be the only branded drug in the category that is growing total prescription share. There have been approximately 76,000 cumulative prescribers since launch, and repeat prescribers continue to account for over 90% of Savella weekly prescribers. Over 83% of Savella's business is coming from continuing patients while the remainder is primarily coming from new starts as add-on therapy. We are also seeing switches to Savella from multiple other therapeutic categories, including opioids, NSAID and SSRIs. This is a strategic achievement, as around 75% of total fibromyalgia's prescriptions written are for those older categories of drugs. In total, about 85% of Savella-treated patients are on polytherapy for their fibromyalgia, which is similar to the current experience for Cymbalta and Lyrica.

We continue to see a steady growth in total weekly prescriptions for Savella, and the latest weekly total prescription volume running at over 17,000 scripts. Savella rapidly gained share in the fibromyalgia market driven by early adopter physicians, both specialists and primary care. Weekly total prescription data indicates that primary care physicians account for nearly 60% of all new prescribers, assuring further growth in the Primary Care segment is our long-term strategy. We have exceeded our original managed care launch goals and have achieved unrestricted formulary position, either Tier 2 or Tier 3 in commercial plans, covering around 80% of targeted prescribers.

Turning to our newest marketed product, Teflaro, for the treatment of community-acquired bacterial pneumonia and acute bacterial skin and skin structure infection, was shipped to wholesalers in early January. The WAC price for Teflaro is $82 per day of therapy with approximately 23 million annual days of therapy each for community-acquired bacterial pneumonia and skin infections. We will be competing in a market valued at brand prices worth well over $3 billion.

Sales in the quarter included trade stocking -- which included trade stocking were $2.7 million. We started detailing Teflaro with a scientific launch in December using the product label and officially launched Teflaro last month with approved marketing materials and are targeting approximately 2,200 key hospitals and hospital systems.

In preparation for the launch, we established an institutional sales force last year of about 240 sales representatives just about doubling the size of our former hospital sales force. This places us in a very competitive position in the hospital-based antibiotic market.

Teflaro at this stage is exceeding our launch expectations. Let me share some key performance statistics with you. In the 12 weeks since product availability in January, Teflaro has generated 13,885 days of therapy. 589 hospitals have purchased Teflaro. Teflaro is outperforming the 4 most recent anti-infective launches on the basis of the number of hospitals purchasing and days of therapy.

From launch to date, 268 target hospitals have added Teflaro to formulary and 146 hospitals have unrestricted access. So it looks like we're off to a nice start with Teflaro. Overall, we are pleased with the strong sales and earnings performance of our in-line products and their positioning with national managed care plans.

Let me now move to review the financial results for the quarter. Total revenues for the fiscal fourth quarter, which are inclusive of product sales, pretax earnings from Benicar, interest and other income, totaled $1.14 billion, an increase of 7.8% from the last fiscal year.

Fiscal fourth quarter revenues, which comprised -- were comprised of $1.1 billion of product sales versus $995.6 million last year, representing growth of 9.7%. $36.9 million of contract revenue, primarily from Benicar, down 30.3% versus last year, as well as $7 million of interest income and $2.5 million of other income.

For the full fiscal year, total revenues increased 5.4% to $4.4 billion while product sales increased 7.9% to $4.2 billion. Wholesaler inventories were essentially flat at just under 2.5 weeks as compared to last quarter with little impact on the current quarter sales.

Gross margin in the quarter came in at 78.2% compared to 76% in last year's fourth fiscal quarter, which were impacted by year-end adjustments to inventory. For the full fiscal year, gross margin was 77.1% compared to 76.3% last year.

SG&A spending during the quarter was $351.7 million, up 9.7% from $320.6 million in last year's fourth quarter. The current level of spending reflects the resources and activities required to support our currently marketed products, particularly Bystolic, Savella, Namenda, as well as spending for the launch of Teflaro.

For the full fiscal year, SG&A spending of $1.4 billion increased by 10.9% and included a one-time charge of $148.4 million related to the settlement of the U.S. Attorney's investigation. This compares to last year's fiscal spending of $1.3 billion, including a charge of $20 million related to the Caraco legal proceedings for Lexapro. Excluding the impact of the one-time charges in both years, SG&A expense increased 1%.

Research and development spending in the current quarter was $140.9 million as compared to $409.7 million reported in the fourth quarter last year. The prior year included a charge of $229 million in connection with the acquisition of additional rights to NXL 104 and U.S. and Canadian rights to ceftazidime/104 from Novexel, in the transaction with AstraZeneca. Excluding such payments, R&D spending reported in the current quarter decreased 22.1% versus the prior year, principally due to duplicative expenses in the prior year.

Research and development spending is primarily in support of an expanded late-stage development program spread out over multiple pipeline projects. There were no product development milestone payments in the quarter. For the full year, R&D spending of $715.9 million included total license and acquisition charges of $116.1 million related to the TransTech and Gruenenthal collaboration agreements and milestone expenses of $27.2 million. This compares to last fiscal year's spending of $1.054 billion, including license charges, totaling $403.9 million related to the Nycomed, Almirall and AstraZeneca Novexel collaboration agreements and milestone expenses of $60.9 million.

Excluding the impact of the license agreement payments in both years, R&D expense decreased 7.7%. As we have completed full year income allocation based on final financial results, the company's reported effective tax rate for the fiscal year was 21.8%, resulting in a reported effective tax rate of 21% for the fiscal fourth quarter. The annual effective tax rate excluding all one-time items was 19.8%.

There were no shares purchased during the current quarter and our ASR Contract with Morgan Stanley terminated at the end of March 2011. We have authorization to repurchase an additional 38.8 million shares. Actual shares outstanding as of March 31 were approximately 286,119,000, a decrease of 16.3 million shares from last year.

Our cash and marketable securities balance as of March 31 was approximately $4.4 billion, an increase of $110.4 million from last quarter. Regarding the Department of Justice settlement, the final payment was made in March 2011. Of the $4.4 billion total, approximately $1.4 billion or 32% of our cash and marketable securities are domiciled domestically with the remainder maintained by our international subsidiaries. The cash position does not reflect the impact of the acquisition of Clinical Data, which was completed just last week. It was entirely funded with capital from our international subsidiaries.

Before I turn the call over to Marco, in the spirit of moving into the spring baseball season, I would like to share some important stats for our R&D team. In just a little over three years, 38 months to be exact, the Forest Research Institute has achieved 5 NDA [New Drug Application] approvals from 5 different divisions of the FDA, plus the sNDA [Supplemental New Drug Application] approval for the adolescent indication for Lexapro. They are also on track to file 2 more NDAs with the FDA during calendar 2011 and plan to file 2 additional NDAs with the FDA during calendar 2012 and have continued to advance our earlier stage products in our development pipeline. I would say that the people of the Research Institute have certainly delivered in the last several years, and we certainly look forward to what they have yet to accomplish.

Marco Taglietti

Thank you very much, Frank, for the nice work. As we move into the fiscal year 2012, we continue to remain laser focused on R&D on moving forward, the significant product of our development pipeline. In the coming months, we would be reporting additional study results from our Phase III trials for levomilnacipran in MDD. We are on track to file aclidinium for COPD around midyear and to also file linaclotide for chronic constipation in IBS-C during the third calendar quarter. During the second half of 2011 and the first half of 2012, we would also be reporting Phase III study results for cariprazine in schizophrenia and acute bipolar mania. So as you can see, a very busy time for all of us in R&D.

You just heard Frank describe the commercial plans for Daliresp, but let me just add that from my perspective, how pleased I am with the excellent work of my team in SRI [ph] in shepherding the NDA with final approval. Following the Advisory Committee meeting last April, we received a complete response letter from the FDA and within three months, we submitted our response. We overcame concerns raised at the Advisory Committee meeting last April and in the end came away with a label that met our expectation for the product. This was a significant achievement.

Let's now start to review our anti-infective pipeline. With Teflaro approved our focus is now moving on the NXL 104 combination. NXL 104 is a beta-lactamase inhibitor. It inhibits several classes of bacterial enzymes called beta-lactamases that break down and then activate the beta-lactam antibiotics such as, cephalosporins, penicillins and carbapenems, making the pathogens producing these enzymes resistant to these antibiotics.

NXL 104 covers a broad range of beta-lactamases included extended-spectrum beta-lactamase, ESBL, which no other beta-lactamase inhibitor currently available in the market that can do that. NXL 104 is perhaps the broadest beta-lactamase inhibitor now in development in clinical trials. NXL 104 can potentially be combined with various beta-lactam antibiotics to enhance the spectrum of activity and counteract resistance, especially in gram-negative pathogens.

So our anti-infective product portfolio now includes antibiotics that are active against both gram-positive pathogens, ceftaroline and ceftaroline in combination with NXL 104 and gram-negative pathogens, ceftazidime in combination with NXL 104 to address virtually the entire spectrum of clinical relevant bacterial pathogens. In the coming months, we expect to report the top line results from 2 ongoing Phase II clinical trials for ceftazidime/104 in patients with complicated intra-abdominal infections and complicated urinary tract infections.

Moving now to linaclotide. In October, we and our partner, Ironwood Pharmaceuticals, announced positive top line clinical trial results from the second of 2 Phase III clinical trials in IBS-C, irritable bowel syndrome with constipation. Both studies showed a statistically and clinically significant improvement for linaclotide-treated patients compared to placebo on all 4 primary efficacy endpoints. These 4 efficacy endpoints included 2 composite responder endpoint encompassing abdominal pain and complete spontaneous bowel movement, as well as individual responder endpoint for both component.

Significant improvement were also achieved for linaclotide-treated patients compared to placebo for all pre-specified secondary endpoint, which included measures of abdominal pain, abdominal discomfort, bloating and bowel symptoms. The incidence of adverse event was similar to that observed in the first Phase III trial of linaclotide in patients with IBS-C with diarrhea being the most common of this event in linaclotide-treated patients. Further details from the Phase III IBS-C program will be presented at the DDW [Digestive Disease Week] conference in Chicago next month. Don't miss it.

The IBS-C clinical trials are also part of the broader Phase III program investigating the effect of linaclotide treatment on patients with IBS-C or with chronic constipation. But usually, I would report positive results of 2 Phase III trials in patients with chronic constipation. So we are now on track to submit NDA for both IBS-C and 6 [ph] indications in the third quarter of calendar 2011.

Let's talk about our respiratory pipeline. In January, we and our partner, Almirall, announced positive top line results for aclidinium from a Phase III trial in patients with COPD. This was the ATTAIN study, Aclidinium To Treat Airway obstruction in COPD patients. And it is the last of 3 Phase III clinical studies investigating the twice daily administration of aclidinium. In this study, aclidinium achieved statistically significant changes from baseline and throughout FEV1 versus placebo of 77 mL or the 200 microgram dose and 105 mL for the 400 microgram dose at 12 weeks, which was the final endpoint for the U.S. Throughout FEV1 at 24 weeks, which was the final endpoint for the European submission, raised a statistically significant 128 mL improvement in the 400 microgram dose. The results from this study confirmed the efficacy reported in the core, COPD I study that we reported last January. We are on track to submit today NDA for aclidinium BID monotherapy around mid-2011. Further details from the pain study will be presented at the IPS Conference in Denver next month. Again, don't miss that, too.

So these are our next 2 NDA filings that will both take place this calendar year, 1 for aclidinium and 1 for linaclotide. Going back to aclidinium, we view aclidinium as part of a broader respiratory franchise opportunity, which include aclidinium, aclidinium as a fixed dose combination with formoterol, the long-acting beta-2 agonist, LAS100977 and Daliresp. We began to a fixed- dose combination of aclidinium and formoterol, we reported 2 Phase IIb dose ranging studies comparing different fixed-dose combination of aclidinium and formoterol to aclidinium alone, formoterol alone and placebo administered twice a day in patients with moderate to severe COPD. Following the regulatory consultation, the Phase III studies with the fixed-dose combination will start in the second half of 2011.

In December 29, we announced an addition to our existing collaboration with Almirall to develop, market and distribute LAS100977 in the United States. LAS 977 [LAS100977] is a very potent inhaled once-daily long-acting beta-2 agonist. We, along with Almirall, plan to develop it in combination with an undisclosed corticosteroid for the dual indication of both asthma and COPD. Additional Phase II studies are planned to start during the first half of this year.

To further enhance the value of this respiratory franchise, we have access to a unique dry powder inhaler delivery device developed by Almirall. This device is convenient to use for the patient and easy to develop for higher or more frequent dosages, as well as for various combination agents. We do believe that this DPI [dry powder inhalers] device will add to the competitiveness of our respiratory franchise.

And now, let me summarize the status of our NDA submissions planned for 2012, F2695 and cariprazine. Starting with F2695. We have a development collaboration with Pierre Fabre for F2695 or levomilnacipran, a once daily selected SNRI serotonin and norepinephrine reuptake inhibitor for the treatment of depression.

Development of 2695 [F2695] is on track. We initiated Phase III clinical trials during the summer of 2009 and reported top line results for the first Phase III clinical study in January. The primary endpoint in the study was the Montgomery-Åsberg Depression Rating Scale, clinician rated. Although the difference observed between the drug-treated and placebo-treated patients was not statistically significant, levomilnacipran consistently demonstrated improvement relative to placebo over the course of the trial. Levomilnacipran was well tolerated in this study overall 80% of the patients continued the study. 8% of the patients prematurely discontinued the study due to an adverse event in the levomilnacipran group compared to 2.2% in the placebo group. The most common adverse event in the levomilnacipran group were nausea and headache.

These top line results differ somewhat from previous findings in the 563 patient Phase II studies of levomilnacipran, which demonstrated statistically significant improvement compared to placebo, with p-value of less than 0.0001 on the primary endpoint, change from the baseline in total score of the markers [ph]. We expect additional Phase III clinical studies to be completed during the second half of 2011 and to file an NDA in 2012.

Turning to cariprazine. In February, we and our partner, Gedeon Richter, announced preliminary top line results from an eight-week Phase II clinical trial as attractive therapy in major depression disorders. And this is the [indiscernible] Phase II trial, a total of 231 patients were randomized, 21 of 2 active low dose or high dose treatment to us [ph] or placebo. The primary endpoint was a moderate score. Although the overall difference observed between drug-treated and placebo-treated groups was not statistically significant. Over the course of the trial that was evidence of a treatment affecting the high dose arm of the study compared to placebo. The outcomes [ph] from the studies support further investigation in this patient population. Approximately 3% of patients discontinued the study early due to adverse events in the high dose and 1% in the low dose arm compared to 3% in the placebo arm.

So based on these Phase II proof-of-concept study and the previous reported proof of concept in bipolar depression, we are currently actively implementing additional Phase II dose response trials in attractive MDD and bipolar depression patient examining a wider range of doses. In addition, as a reminder, cariprazine is undergoing Phase III clinical trials for separate indications of schizophrenia and acute mania. We expect to report top line results for both programs during the second half of calendar 2011.

As Frank mentioned earlier, we just announced a licensing agreement for the cardiovascular product, azimilide, which is a Class III antiarrhythmic agent. It was originally developed by Procter & Gamble and has been studied in over 5,300 patients to investigate the potential as an antiarrhythmic agent. Based on its mechanism of action and results of clinical trials, azimilide was determined to be best suited for use in patient with a history of life-threatening ventricular arrhythmias and who have implantable cardioverter defibrillator, ICD.

The transaction with Clinical Data brings to Forest also Stedivaze, a potent agonist of the adenosine A2A receptor subtype with improved selectivity for this receptor over other subtypes. Stedivaze is a coronary vasodilator in Phase III development as a pharmacological stress agent for radionuclide myocardial perfusion.

In 2006, the FDA, under its then operable review practices, issued an approval letter requesting an additional clinical trial for azimilide. So let me go back up to azimilide to finish on that product. In 2010, the FDA agreed to 1 additional Phase III study to support a regulatory submission for azimilide in the U.S. Agreement was reached with the FDA for the registration trial design under a Special Protocol Assessment, and we plan to start the study in the second half of this year. And this concludes our pipeline for the cardiovascular franchise.

So let me now go to our most recent addition, our R&D development pipeline includes 2 recently added earlier stage programs. Last June, we partnered with TransTech Pharma to license TTP399, a functionally liver selective glucokinase activator for the treatment of Type 2 diabetes. Early Phase I testing suggest that pharmacological enhancement of glucokinase activity may lower blood glucose in diabetic patients. We will be initiating the Phase II program during the first half of calendar 2011.

Finally, in December, we licensed GRT 6005 from Gruenenthal. GRT 6005 and its follow on, GRT 6006, are a novel first-in-class analgesic with potent activity on opioid receptor like, or ORL-1, and the new opioid receptor for the treatment of moderate to severe chronic pain. GRT 6005 has completed proof-of-concept studies in nociceptive and neuropathic pain. Further Phase II studies are planned prior to initiation of Phase III studies. This is all with regard to our development pipeline.

Frank, I'm now turning the call back to you.

Frank Murdolo

Thank you, Marco. So just to recap. This has been an exciting year for Forest. We will have five new drugs that we are actively marketing: Bystolic, Savella, Teflaro, Daliresp and Viibryd; 2 additional NDAs filed for aclidinium and linaclotide; and the potential for 2 additional NDAs next year for levomilnacipran and cariprazine. Collectively, our next 9 group of products. We believe that these products could collectively present several billion dollars of potential product sales in the long term, sufficient over time, to replace the revenues lost due to the patent expiration for both Lexapro in 2012 and Namenda in 2015 and provide growth.

Since late 2008, we have added 7 major active installments toward the 2012 pipeline expansion goal, including Daliresp, Viibryd, levomilnacipran, LAS 977 [LAS100977] and ceftazidime/104. And we have advanced aclidinium and linaclotide through Phase III and cariprazine through proof of concept to full Phase III development. In addition, we recently added the glucokinase activator program from TransTech and the Gruenenthal novel first-in-class analgesic program. Both are earlier stage programs and we partnered with AstraZeneca for the co-development and commercialization of ceftaroline and ceftaroline/104 outside of the U.S., Canada and Japan.

In parallel, we continue to advance the full development pipeline. Our business development team continues to see interesting and commercially attractive products in the market, and we have clearly demonstrated the ability to compete effectively to secure such important new products either through product licenses or direct acquisitions.

Moving to our financial guidance for 2012. This will be a significant investment year on the SG&A line, as well as on the R&D line, as we launch 2 primary care products, Daliresp and Viibryd. And continue to our launch of Teflaro and support our portfolio of late-stage product pipeline products, as well as our currently marketed products. We are projecting SG&A expense of approximately $1.5 billion, which include continued significant support for Bystolic, Savella and Teflaro. Projected SG&A expense also includes launch costs for Daliresp and Viibryd.

As we have been saying, our plans were to add a full primary care sales force later next year assuming the approval of aclidinium and linaclotide. However, now having Viibryd available to us accelerates the need to increase our field selling support. So as I said previously, we are currently adding the equivalent of about 1/2 the size of a full primary care sales force, and we will evaluate the need to increase that later next year.

We are projecting fiscal year 2012 R&D spend of $740 million, which includes approximately $35 million in potential milestones for existing products, an increase of about 28.6%, excluding upfront license payments made last year. We are projecting net sales of $4.4 billion, representing growth of approximately 4.5% and $4.5 billion for total revenues, growth of approximately 3%, which also includes income from the Benicar agreement, interest and other income.

Lexapro sales are projected to be just over $2 billion, an approximately 10% decline from the $2.3 billion recorded in fiscal 2010. This is based upon a price increase already realized in October of 2010, approximately a 2.3 share point decline in market share and total prescription volume for the category of approximately 2.5% growth. The Lexapro patent will expire on March 14, 2012. As a reminder, the authorized generic will come into the market 2 weeks before the patent expires, so there will be 3 products in the market during the 180-day Hatch-Wax in the next exclusivity period.

Namenda sales are projected to grow approximately 10%. Bystolic sales are projected to grow approximately 35%. Savella sales growth of approximately 31%. Teflaro sales are expected to be approximately $40 million. Daliresp sales are expected to be approximately $60 million, and Viibryd sales are expected to be approximately $45 million. Our projected tax rate will be approximately 23% for the coming fiscal year and reflects the shift in the mix of earnings among jurisdictions and the expiration of the research credit. We are projecting fully diluted shares outstanding of approximately 274 million, assuming additional share repurchase activity in the upcoming fiscal year. Rolling this up leads to an earnings per share projection of between $3.60 and $3.70 per share including the impact of healthcare reform.

We view the increased SG&A and R&D spend levels as necessary strategic investments as we continue to manage the business with a long-term goal of ultimately developing and marketing a portfolio of new products that will collectively more than replace the earnings from Lexapro and Namenda after the marketing exclusivity for those products expires in 2012 and 2015, respectively.

Regarding the fiscal year ending March 31, 2013, the company expects that diluted earnings per share will not be below $1.20 per share. The estimate contemplates the impact of a loss of exclusivity for Lexapro being partially offset by the company's 6 growth products, Namenda, Bystolic, Savella, Teflaro, Daliresp and Viibryd, as well as the FDA approval and launches of aclidinium and linaclotide during the fiscal year.

SG&A and R&D expenses are both expected to grow in the 5% to 6% range, assuming the plan/mix of promoted products and the current mix of development programs. Our first priority remains to provide for the future growth of the company's revenues beyond this period. In addition to advancing our current pipeline and supporting our existing and future in-line products, we are also actively pursuing new product licenses and assessing potential acquisitions to add to our development pipeline and in-line products. These additions have the potential to feed our existing therapeutic areas, as well as allow us entry into new therapeutic areas, consistent with our opportunistic business model. This combined effort will continue to drive our decision making and allocation of resources as we look forward to the next decade.

Over the past few years, our dialogue with the investment community has been about building our R&D pipeline. Going forward as we continue to achieve success with our pipeline and launch these new products, you will hear more about the execution of our commercialization strategies. We remain confident in our ability to launch additional new products in parallel with advancing our established pipeline.

Frank Murdolo

Thank you, Frank. I will now read some of our fourth quarter sales figures for our smaller products. Campral, $5.2 million; Celexa, $3.6 million; Cervidil, $12.8 million; Esgic, $0.5 million; Europe, $27.9 million; Generics, $5.9 million; Lorcet, $1.1 million; Monurol, $0.5 million; Thyroid, $9.7 million; Tiazac, $1.1 million; and the Benicar third-party sales for the quarter were $198.2 million.

And operator, if you could just hold a second, and we'll get started with the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question is from the line of Ian Sanders (sic) [Ian Sanderson] from Cowen and Company.

Ian Sanderson - Cowen and Company, LLC

Good morning. Thanks for taking the question. First of all, can you address and maybe Marco can, the key factors that drive the large jump in the R&D spending in fiscal 2012, it would appear that you will actually be conducting fewer large clinical trials in fiscal '12 than you did in fiscal 2011, so I'm trying to figure out what the key driver is there. And secondly, on the 2012 guidance. The projections for Daliresp and Viibryd are both above where the consensus is. And can you give us any color as to feedback you've gotten from payers that may have given you some of that conviction?

Francis Perier

Sure, Ian. Let me focus on the increase in R&D spend between '11 and '12, and it really characterizes the advancement of our full pipeline program, not just the late-stage opportunities that we think, that focus a lot of attention on. And so we've got -- included in there is continued investment in the full Phase III program for both levomilnacipran or F2695, as well as cariprazine, the completion of those programs which requires significant investment, as well as the commitments that we have for Viibryd in the market, as well as continued investment behind Daliresp and Bystolic in the market. So we have a combination of investment behind our marketed products, our launch products, our late-stage products, as well as all the products in the earlier phase of development, including our anti-infective program.

Ian Sanderson - Cowen and Company, LLC

Thank you.

Operator

Your next question is from the line of John Boris from Citi.

John Boris - Citigroup Inc

Thanks for taking the questions. Just piggybacking on Ian's question, I would assume that you have a Phase IV budget or a budget for commercialization studies to support the brands that you're about to launch. Can you maybe give us some commentary on the size of that budget for Phase IV-type studies or commercialization studies? And then just on Daliresp, if you've done any product concept testing with the product, at least what has been physician and payer feedback so far on that product concept and on intent to prescribe most importantly? Thanks.

Francis Perier

Sure, John. I think the way to think about it is as the company has always done in the past, we do put significant investments behind our marketed products, as well in pursuit of additional indications or claims that we get into the label that may deal with these or efficacy or tolerability, as well as life cycle management for our products as well. So I think the way to think about it is that we do have a smart life cycle management program for both the products that we're marketing, as well as the products that we expect to launch. We don't really normally go into the details by specific programs, but I think it's consistent with our past history. And with regard to Daliresp, our market research again, indicates that physicians are very interested in this important new addition to the treatment possibilities for COPD. Again, it's the first and only in-class drug approved to treat exacerbations associated with COPD that is not in fact a bronchodilator, it is in fact an oral, solid dose tablet. So that -- this is the type of product that physicians have been looking for. In addition, we've already engaged in managed care discussions as well. And managed care as well is very interested in what the efficacy is that this product can deliver to the marketplace. So we remain pretty optimistic about the opportunity that we see in front of us for Daliresp in the treatment of COPD.

Marco Taglietti

Let me add also, Frank, that most recently, the organization, medical organization, thoracic organization, have reviewed and revised the goal of the guidelines. These are the guidelines on how to treat patients with COPD, and they have been revised to specifically include the [indiscernible]. So this is a -- just show of a type of interest, but using a product like this where we reduce exacerbation with -- let me say, it's one of the biggest problems for COPD patients in being an oral drug. So the goal guidelines I think just summarize the interest that is in the medical community for this product.

John Boris - Citigroup Inc

Thanks.

Operator

And your next question is from the line of Frank Pinkerton from SunTrust.

Frank Pinkerton - SunTrust Robinson Humphrey, Inc.

Great. First, a financial question, if I can. Can you speak to the difference in amortization or noncash expense maybe that was last year versus what's in guidance for next year? And then second as a follow-up, can you just talk to what products currently maybe on P2 positions in your sales force that once the launch comes around may not get as much attention going forward. Thank you.

Francis Perier

Sure, Frank. I mean, all the guidance that we have given has been GAAP reported guidance. The impact of amortization particularly from the clinical data acquisition is really not that significant as we're amortizing all the intangibles over the forecast revenue stream of the product. So we don't -- it's not that significant, and we're not breaking that out separately at this time.

Frank Pinkerton - SunTrust Robinson Humphrey, Inc.

I'm sorry. My second question, if my line is still open, is can you talk about the products right now that currently maybe in a P1 or P2 position in your sales force that would be shifted downstream as the sales force focuses on the launches of Daliresp and Viibryd? Thank you.

Francis Perier

Sure. Frank, that's a great question and that we are in full launch mode with 2 important primary care products, Viibryd and Daliresp. And in order to do that without a significant expansion of our field force, we've obviously been shifting sales allocations around for the other products. And suffice it to say that Bystolic, which has now been on the market for about 3 years; Savella, which is now been on the market 2 years; as well as Namenda, all three products will get about the same number of calls and attention but the mix between P1, P2 and P3 will shift for those products principally. As I said, we also have expanded -- we have added a second specialty sales force. And that's really the way we've handled the sales force expansion. So traditionally, we had 1 specialty sales force and 4 primary care sales forces. Now we will have 2 specialty sales forces and 4 primary care sales forces. As I indicated, we will be building a specialty sales force by really drawing personnel from the 4 primary care sales forces and then backfilling those open positions. So no 1 product or group of products will really be impacted by the expansion.

Frank Pinkerton - SunTrust Robinson Humphrey, Inc.

Thank you.

Operator

And your next question is from the line of Greg Gilbert from Bank of America.

Gregory Gilbert - BofA Merrill Lynch

Thank, thanks, guys, and thanks for the new color on EPS. Post the Lexapro [indiscernible], I think that's very helpful. So on fiscal '13, can we assume that the $1.20-plus would still hold at either aclidinium or linaclotide or both for some reason are not launched in that year since launch costs in year 1 would probably exceed sales? And also in fiscal '13, Frank, will there be a noticeable change in gross margin and/or tax rate with Lexapro largely out of the picture? Thanks.

Francis Perier

Sure. Greg, thanks for the questions, both very good questions. Since we're giving floor guidance, yes, your assumption about fiscal '13 in the instance where aclidinium and/or linaclotide weren't launched, yes, the floor guidance would still hold. Again, those would really be investment years so if, for any reason, 1 or the other or both don't get launched, you actually have a benefit in that time frame. Looking at gross margin. Our gross margins stay relatively static over the planning period. And with regard to the tax rate, you may see a little upward creep in the tax rate but not significant maybe 1 point or 2.

Gregory Gilbert - BofA Merrill Lynch

And if I could ask 1 quick follow up. Do you care to shed any light on how you're able to use x U.S. cash to buy Clinical Data, and to what extent that set up is possible for future U.S. deals?

Francis Perier

I think that once we file our 10-K for the year, it will be pretty well described in the 10-K what the structure is that we've used to do that. It's not unique to us. There have been other major pharmaceutical players who have executed similar transactions. And I think given the right fact pattern, we can certainly utilize this strategy in the future.

Gregory Gilbert - BofA Merrill Lynch

Thanks a lot.

Operator

And your next question is from the line of Corey Davis from Jefferies.

Corey Davis - Jefferies & Company, Inc.

Thanks very much. 2 questions. First, on Daliresp, it sounds like you're primarily focusing on general practitioners for the launch, but can you describe what role you'd expect pulmonologists to play out of the gates versus say, 5 years from now? And then second -- well, why don't you answer that first.

Francis Perier

That's assuming I will give you a second question, Corey. Yes, that's a good question because while we've talked about the primary care commitment because it's a big commitment to do the launch of both Viibryd and Daliresp, both products will have significant specialty call. The pulmonologists will play a key role in the uptick of this product in the marketplace and that's again, become 1 of the key focus areas for 1 of our specialty field forces. The other specialty field force will focus more on the CNS space with Viibryd. And as we've done in the past, we will focus a lot of attention on the specialists who are prescribing in each category, as well as the high prescribing primary care doctors in those categories. So we always target the high potential physicians first before we expand out more broadly into primary care. And you had a second question, Corey?

Corey Davis - Jefferies & Company, Inc.

Yes, thanks. I was hoping to get to ask it. In levomilnacipran, if you don't get 2 positive Phase III trials under the remaining ongoing stuff, would you kill the program at that point in time, or is there a chance that you'd continue to fund further development?

Marco Taglietti

Well, we will assess the program. This is Marco. We will assess the program base on the result. As I've mentioned, the first study, we've not reached statistical significant but clearly show the benefit of the drug, which just didn't achieve the type of level that we were expecting. So I think it depends really what we will see in the next 2 programs. Based on the Phase II, I'm still very confident that, that this growth will be effective. So we remain optimistic and we will assess when we get the results of the remaining 2 studies.

Corey Davis - Jefferies & Company, Inc.

All right, thanks. I want to add my thanks for giving fiscal '13 guidance, it's really helpful.

Francis Perier

Very good, Corey, our pleasure.

Operator

And your next question is from the line of Catherine Arnold with Crédit Suisse.

Catherine Arnold - Crédit Suisse AG

Thanks, and good morning. And again, thanks for giving guidance for 2013. I wanted to ask you about that guidance and also ask you about Daliresp. On guidance, could you just clarify whether or not you are assuming that you're going to further expand the sales force in FY 2013 and if you have incorporated the Blue Ash investments to support that product in your guidance. And then on Daliresp, I guess the silver lining of the drug’s history is that pulmonologists have been aware of it for some time, and the research we did suggested that they have been and that they're very much aware of it and maybe a little further along and ready to use it. Is that your impression as well?

Francis Perier

Great. Further clarify -- Cat, I'm sorry, you said further clarify the guidance?

Catherine Arnold - Crédit Suisse AG

Yes, and tell us is sales force expansion and other sales force expansion...

Francis Perier

Sorry about that, Catherine. I mean, these multi-part questions, I got to keep track of all, the multiple parts. Yes, our guidance does contemplate some expansion in the field force in 2013. In the order to support, as I said, the launch of both aclidinium and linaclotide. And we will assess that as we get further down the road very carefully. We're very excited about the opportunity to expand the field force in fiscal '12 with the addition of the specialty field force. And we'll see what kind of traction we can get in the markets with that. Blue Ash is not specifically included in the guidance, but it's a nice smaller transaction, kind of a smaller opportunity and we'll have to update as we move forward with that.

Catherine Arnold - Crédit Suisse AG

What about on the expense side in terms of drug development?

Francis Perier

From a drug development standpoint, it's not specifically included but I think we'll have room to manage it.

Marco Taglietti

Yes, considering also that the studies being implemented late during the year, so the second half of this year, so I think we can manage.

Francis Perier

And then with regard to Daliresp, I mean the market research that we have done I think has indicated that there is a very high level of interest, a very high level of knowledge, particularly with pulmonologists and/or doctors who do prescribe and treat patients with COPD. So we're optimistic about getting off to a good start with this product as we get it going later this quarter with the scientific launch and then we go to the full launch with all our marketing materials in August.

Operator

Your next question is from the line of Chris Schott from JPMorgan.

Christopher Schott - JP Morgan Chase & Co

Great, thanks. Just a couple additional questions on SG&A. Could you just talk a little bit about the progression of SG&A in fiscal 2012? And also any color you could give us on the kind of underlying SG&A trends here excluding some of the launch costs that might be incurred this year for the new introductions? And then final question, which is talking about any comments you may have about pricing assumptions we should be thinking about for Viibryd that went into that $45 million estimate. It's a product we should think about on the kind of higher end of the price range for branded depression drugs.

Francis Perier

Sure. Chris, thank you. Great question. To start with the Viibryd pricing first. I think we haven't really announced what our prices going to be as yet. But as we look at the mechanism and the way the product kind of fits probably into the treatment regimen of the marketplace, I would expect that it will probably land somewhere between the pricing for the branded SSRIs in the market and the higher-priced dual mechanism agents or the SNRIs. I think that's logically where it will fit in doctor's treatment regimen and that probably where we'll end up pricing the drug. But we'll give you further guidance on that as we get closer to the scientific launch and the sales launch of the product. With regard to SG&A, SG&A is fairly evenly spread quarter-over-quarter. However, given all the launch activities that we're going to have in the second fiscal quarter, that's probably going to be the heaviest quarter from an SG&A spend standpoint. And R&D kind of spreads out almost on the same pattern.

Christopher Schott - JP Morgan Chase & Co

Right. Is there any color you could provide on just -- in terms of those launch costs? I mean, when we look at that R&D of the SG&A bunch as a whole, I mean what percent of that roughly speaking is -- are launch costs that may be less recurring as we kind of look out a couple of years and you get past this kind of heavy launch cycle in your portfolio?

Francis Perier

Well, I think as you're launching a primary care product in addition to the sales effort that you put behind it from a direct marketing investment, it's not outside the realm of possibility that you can be spending between $80 million, $90 million, $100 million in support in those first couple of years and depending upon the reach that you're looking for on the product. And we've been in launch mode now for a couple of years starting with Bystolic back in 2008, then Savella in 2009. And now, we have 2 primary care products that we're going to launch in fiscal '12 in Daliresp and Viibryd, as well as the specialty launch of Teflaro, which has a much smaller field force as we indicated about 240 institutional reps, which doesn't require the same level of investment, particularly since you're not doing any product sampling in that space.

Christopher Schott - JP Morgan Chase & Co

Thanks very much.

Operator

And your next question is from the line of David Buck from Buckingham Research.

James Dawson - Buckingham Research Group

It's Jim Dawson for Dave Buck. I may have to dig a little deeper on Viibryd, you talked about this earlier in the call. But can you give a little more details on formulary acceptance and step therapy that you've used before and any changes there, just on the positioning?

Francis Perier

Yes, it's a little early to be talking about formulary positioning for the product. But I think that there will actually be interest with managed care formularies for a new product in the antidepressant category. As you're looking at what is currently probably the largest single agent in the category going off patent, that being Lexapro. And I think that, again, as we look at the combination of efficacy and tolerability of this product, you're not going to see any -- it will fit into a treatment regimen where probably similar to the way Lexapro is on most formularies today, you have to step through 1 or maybe 2 generics before you get put on Lexapro. And Lexapro is kind of there in between the generic SSRIs and the higher priced combination agents. So we see that Viibryd could likely fit into again, sort of that middle ground between the SSRIs given its unique mechanism and the dual mechanism agents of the SNRIs. So as we get a little bit more intelligence from our managed care team, we'll give you some more color as we get closer to the full launch.

James Dawson - Buckingham Research Group

Okay, thanks. And then just on the IP position of the new product that you talked about today in that separate release?

Marco Taglietti

Yes, the Blue [ph] -- azalimide?

James Dawson - Buckingham Research Group

Yes, and then just the IP position and the differentiation on that product versus other products in the category?

Francis Perier

Yes, I think the way to think about it is that, this product has been under development for a long time, it ended up being a 5-year product here in the U.S. But interestingly, we do acquire global rights to it and as we look at European opportunities, you'll get 10 years exclusivity in Europe on a product like this. So it makes it a very, kind of unique tuck-in opportunity for us. It fits in with our cardiovascular call patterns and it's something that we can develop at a relatively modest cost. And we believe it will deliver some nice incremental sales opportunities in a profitable way.

Marco Taglietti

And if I can add, Frank, this is -- actually, definitely an unmet medical need. The indication we would pursue is specifically a reduction of hospitalization and cardiovascular deaths in patients with ICD. So I think this is actually a quite an interesting opportunity, but are really not too many opportunities out there yet. There are old products but with several issues, so we think of it that it is a -- from a development perspective very straightforward to develop.

James Dawson - Buckingham Research Group

Okay, thanks. And then just lastly, could you give a market share for Viibryd in fiscal 2013 to keep that EPS number above the $1.20 that you gave for guidance?

Francis Perier

I'm sorry, we haven't disclosed -- we haven't talked about any of the underlying revenue assumptions in 2013. I mean, all we've given you is the floor.

James Dawson - Buckingham Research Group

Okay. And then just lastly, for fiscal 2013, should we just assume SG&A spending going up versus fiscal 2012?

Francis Perier

Yes, I think we guided and the fact that we expect both SG&A spend, as well as R&D spend to increase in the range of 5% to 6%. And that those assumptions are predicated on promoting, actually promoting the expected pipeline of products, which at that point would include the assumption that we'll be in a position to launch both aclidinium and linaclotide and the current makeup of the development portfolio. If we license in some other product that has a major impact on our R&D pipeline, we'd have to take a hard look at how that impacts upon that guidance.

Operator

And your next question is from the line of David Risinger from Morgan Stanley.

David Risinger

Thanks very much. I just was hoping to get a little bit more clarity on the clinical data key product side effect differentiation. So if you could just help me understand the specific differentiation in terms of side effects? And then, with respect to the financial outlook for fiscal 2013, I don't know if I caught it, but I believe that you said tax rate would rise 1 to 2 percentage points. I don't know if that was for fiscal 2013 or a different time frame. And my other question with respect to fiscal 2013 is just the gross margin trend, should we think about the gross margin being flat, up or down versus fiscal '12?

Francis Perier

Sure, Dave. With regard to the adverse event profile for Viibryd, the product has an excellent label. And if you look at the incidence of adverse events versus placebo, it's a very well-tolerated drug. And especially across the important areas that really differentiate between the SSRIs and the SNRIs. And it really does fit right in kind of in between that space and importantly, a very low incidence of sexual dysfunction, which kind of makes it almost unique in the antidepressant category. So that's part of the overall package of why we think that this is a very attractive opportunity to enter into the antidepressant category.

Marco Taglietti

And as you would know with this event, common of this event, that's really -- the most common of this event has been actually relatively mild diarrhea, nausea. And what we have seen other adverse event that was commonly observed with SNRIs, which on the cardiovascular side there is no problems at all with this product. So the additional benefit that we were describing that is observed lower rate of sexual dysfunctions is something that certainly we believe it's worth being further explore to try to characterize it.

David Risinger

And with respect to Stedivaze?

Marco Taglietti

Yes, in which sense? Stedivaze in terms of the product? Well, if the product is providing a couple of interesting advantages, both in terms of tolerability. We have seen in the original programs less incidence of cardiovascular event and that is naturally something that we believe will help us to differentiate it with Dynascan and Lexiscan, which are the two major products currently on the market. And this is due to the very high selectivity of the product on the A2A adenosine receptors. So we believe that the product will have advantages in terms of tolerability compared to the available product that is actually have to have comparisons in the Phase II studies with Adenoscan. So based on these data, we do believe that these products has a significant potential.

Francis Perier

Thanks, Marco. Dave, let me loop back to your other two questions. The 2013 tax rate is when Greg asked about it, that's what I was referring to, was that you'd probably see some rate creep of 1 to 2 points in 2013. And the gross margins remain, as I said, relatively stable over the planning period.

David Risinger

Great. Thank you.

Francis Perier

Thank you, Dave.

Operator

And your next question from the line of Louise Chen from Collins Stewart.

Louise Chen - Collins Stewart LLC

Just a few questions here. First question is, can you please summarize your strategic vision for Forest now that you've got 3 new product launches, a robust pipeline, you're starting to spend outside the U.S. I mean, where do you see the company today and where will it be over the next few years?

Francis Perier

It's a great question, Louise. And I think the way to think about it is, I think, we have pretty clearly communicated what the corporate strategy has been here and it goes back for several years now. We're all about growing both sales and earnings and importantly, earnings for our shareholders over the long haul. And in order to do that, we have recognized that we are going to lose Lexapro in under 1 year. This has been -- the products that we're launching today, the products we've launched over the last couple of years have been the culmination of about 6 years worth of effort and work by a lot of people and identifying what that strategy is and then consistently executing against the strategy. Our business development team is going out and finding unique and high value opportunities in the marketplace, bringing those in-house. The Forest Research Institute, as I indicated earlier, has done a stellar job in delivering on the opportunities in getting products through the FDA. And importantly, getting 5 product approvals from 5 different divisions of the FDA is no small feat. And I think that people sometimes lose sight of how valuable that whole team is within the Forest family. So as we move forward, it's all now about execution. You think about the company a year ago, we were really a pipeline story. If you think about the company today, 1 year later, we're really a commercialization story with some more pipeline assets yet to be delivered to the market. And as we have looked around the world, we have seen some opportunities in Europe. We've taken advantage of a couple of those smaller opportunities but we continue to look. And if we see other opportunities, you could probably expect us to be more active in that marketplace as well. So as you look at Forest, we're an evolving company and it's all about growing sales and earnings and increasing shareholder value over the longer term and getting Lexapro behind us once and for all.

Louise Chen - Collins Stewart LLC

Okay, thanks. And second question I had was just with respect to the fiscal 2013 trough guidance. What are you assuming for sales trajectory on your 3 new key product launches? Are they fast ramps, moderate, how are you thinking about that?

Francis Perier

Louise, we declined to give any guidance on the sales trajectory. I think we've given plenty of guidance on the spending side, and we'll let people use their imaginations to get to what we think are the trajectories for our products. Suffice it to say that, there are no upward to the right, dramatically for the right launch objectives for products in the primary care space these days. So you have enough natural pressures in the market that they tend to slow down your product launches. But the key is to get them off to a good start, get them accepted in the marketplace and then grow from there. And importantly, all of our products have very good patent estates around them, so we have a solid base of product to grow from.

Louise Chen - Collins Stewart LLC

And then just last question is just on azimilide, can you provide any timelines on U.S. commercialization and the o U.S. expansion piece?

Francis Perier

It's too early to say right now. We need to complete the Phase III program and pending the outcome of that Phase III program, we would then, like we do, move to full commercialization of the product. And we'll need to do some consultation with European regulators as to what type of additional development work, if any, we may need to do to get the product approved there. So we'll let you know as it develops.

Louise Chen - Collins Stewart LLC

Thank you.

Operator

Your next question is from Ronny Gal from Bernstein.

Ronny Gal - Sanford C. Bernstein & Co., Inc.

Good morning. And thank you for taking my questions. Actually, 2 questions. The first one, can you help us, Frank, with the trajectory of Lexapro over the next year? Should we think about fiscal 2012 potentially as 3 equal quarters and fourth quarter kind of gets truncated 1/2 before the AD comes in? How should we think about 2012? And regarding 2013, obviously, we're going to make our own assumptions about marketing and pricing, but can you help us understand the, I guess, percentage of the authorized generic sales that goes back to you. Is it 80%, is it 90%? Is it higher than that?

Francis Perier

Sure, Ronny. I think the way you're thinking about 2012 is probably the right way to think about it, where it's relatively consistent growth for Lexapro and then the fourth fiscal quarter gets truncated by the patent expiry and both the authorized generic and the first to file coming into the market. And with 2013, we haven't really discussed what's coming back to us but I think the way to think about it there is a profit split between the authorized generic and ourselves.

Ronny Gal - Sanford C. Bernstein & Co., Inc.

So typically, in this situation, we arrive to different situation about for generics. 1 of them is simply across for authorized generics, but the vast majority of the profit is going to the originator. And then there is second set of choices where essentially have been part of a broader settlement in which case the profits would be more even? Do we have to understand that this is closer to the first comp agreements?

Francis Perier

Ronny, I think the way to think about it is that in this instance, the split of the profit is a little bit more heavily weighted towards the originator, towards Forest.

Ronny Gal - Sanford C. Bernstein & Co., Inc.

Right. And the second question has to do a little bit more with the economics of the product in the primary care market. I'm struggling a little in figuring out that the profitability of product that are under $500 million, and do you think it's a valid example? If you think about this product selling in primary care beyond the launch period, roughly what kind of revenue do you need for something like this to break even for you?

Francis Perier

For Savella, Savella, it all depends upon -- we can make the product breakeven and pretty much from where it is now to any level. It's all a matter of what we expect the market opportunity to be and how much investment we want to put behind getting to that market opportunity. So Savella has done very, very well, getting over 6% share of the fibromyalgia market in the 2 years on the market. It's the only branded product in the category that has grown over the last 12 months. It's taken pretty much all of its share from old off-label generic products that doctors still prescribe, so we still see upward opportunity for Savella in that market. And we'll evaluate it as we go along as far as exactly how big that product could be.

Ronny Gal - Sanford C. Bernstein & Co., Inc.

Okay, thank you very much, Frank.

Ronny Gal - Sanford C. Bernstein & Co., Inc.

Take care, Ronny.

Frank Murdolo

Thank you, everyone, and thank you, operator. That will end our conference call.

Operator

Ladies and gentlemen, thank you for participating in today's conference call. This concludes the call. At this time, you may now disconnect.

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