Forest Labs Q1: $170 Million Fee for DOJ; Its Numbers Are Written in "Invisible Ink"
Forest Labs is holding a $170 million contingency fee in case it needs to settle allegations by the Department of Justice that it bribed doctors --- with such things as $1,000 gift certificates to Alain Ducasse -- into prescribing Lexapro and Celexa for children even though it was not approved for that.
The news so hurt Forest's Q1 2009 results that in its web press release, the company appears to have published its financial tables in the smallest, grayest, least-visible typeface possible (click on image to enlarge -- although it won't help).
Using BNET's internet microscope, we find that revenues were flat at $896.7 million; and net income was $93 million, down from $173 million. Lexapro sales declined 5 percent to $548.5 million.
Here's the company's statement on the DOJ probe:
The Company has provided a $170 million pretax reserve, or $0.45 per share, in connection with ongoing discussions with the United States Department of Justice (DOJ) arising out of the investigations led by the U. S. Attorney's Office for the District of Massachusetts (USAO) into marketing, promotional and other activities primarily in connection with Lexapro(R), Celexa(R) and Levothroid(R).In addition to that profit-crushing expense, Forest didn't save money elsewhere, either. Sales and marketing expenses increased 57.3% to $515.1 million; excluding the DOJ charge SG&A expenses still rose 5.4 percent, the company said. On an annual basis, sales costs are rising 9 percent. Forest is ramping up for the launch of two drugs, a heart drug, Bystolic, and yet another fibromyalgia drug, Savella. Forest is in the worst of all worlds: In addition to the costs it is expecting on the DOJ investigation, Savella expands its presence in the CNS category, which is already riddled with competitors. The company should look -- through the cracks in its fingers -- at what is happening to GlaxoSmithKline, whose CNS portfolio has been battered by pro-generic CNS trends.... there can be no assurance that the amount reserved by the Company will be sufficient and that a larger material amount will not be required.