Forest Labs: Pay No Attention to That Icahn Behind the Curtain
Forest Labs' (FRX) strategy to fight Carl Icahn's attempt to install four of his own people on the company's nine-person board is to insist that its analysts and employees "pay no attention to the man behind the curtain!" (Icahn), while pointing furiously to the man behind the curtain.
The company had healthy Q1 2011 earnings, with sales up 8.2% to $1.1 billion and net income up 120 percent to $258 million, which buoys its case that there's no need to replace CEO Howard Solomon.
Solomon is Forest's own Wizard of Oz, of course, and as usual he declined to speak to Wall Street on the quarterly conference call even though his distaste for talking to the people who own his stock is becoming something of an issue. Gregory Gilbert of BofA/Merrill Lynch asked:
And then my second question, it may be a little tough to address without your chairman and CEO on the phone. But beyond seeking Board seats has Carl Icahn shared any views on what Forest should be doing to enhance value, or do you simply know the same things we know from filing?This is a key issue in the struggle. Icahn -- as usual -- is long on criticism and short on solutions, just as he was in the Genzyme proxy fight. His solutions tend to be all the same: Sell the company to someone else and let the shareholders pocket the buyout cash (which is what happened at Genzyme).
Yes, the answer is no
CFO Francis I. Perier gave a typical Forest Labs reply, contradictory and lacking useful information. He disclosed that Forest has had "no additional communications with Carl" other than those disclosed to the SEC, except for two meetings that were "substantive." So yes, the answer is no, then? He also insisted that no one talk about Icahn, even though that is what everyone wants to talk about:
I will make a couple of comments and I will address a couple of questions about Carl but we're not going to make this a Carl call.This was a refrain echoed in Solomon's recent letter to employees, in which he insisted that no one pay attention to the existential threat to their jobs and the company:
Between now and the Annual Meeting, you may continue to read about Mr. Icahn's attacks in the press. These criticisms are typical of someone who is looking to get media attention and investor support for his director nominees. I urge you not to be distracted by these criticisms and stay focused on your responsibilities.Forest also sharpened its attack on Icahn by suggesting that his board nominees Alexander Denner and Richard Mulligan are "hopelessly conflicted" because they also serve on the boards of Biogen (BIIB), Amylin (AMLN) and Pozen (POZN). Biogen makes Tysabri, an Alzheimer's treatment that could compete against Forest's Namenda therapy for the same condition.
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