It's not all that often that you see a large publicly traded company go from "survive" mode to "thrive" mode in the mere span of a few months. Yet that may be just what's on tap for Forest Labs
For better or for worse, Forest is a pretty simple company to follow right now. Revenue was up 15% on a 12% rise in product sales, as the company's triumvirate of Lexapro, Namenda, and Benicar grew revenue by 10%, 32%, and 72%, respectively. Gross margin ticked up a bit, and operating profits were up about 13%, even though the company spent much more on R&D (big chunks of that in the form of license payments). For those who like to track such things, Lexapro was more than 60% of total revenue this quarter.
As I just said, this company may soon transition from mere survival to the pursuit of growth. I don't pretend to know whether Teva
But simply keeping a hold on what you already have does not constitute growth. For Forest Labs, that will come in the form of new product launches, if and when the FDA gives the thumbs-up to new drugs like Faropenem (which has been filed with the FDA and has an action date of Oct. 20) and nebivolol. (Nebivolol is under FDA review for the treatment of hypertension, and the company hopes to file a separate NDA for congestive heart failure later this year.)
Forest is certainly a different kind of pharmaceutical company. Without in-house drug development efforts, it relies upon licensing agreements with smaller drug companies that lack marketing and distribution wherewithal. You could say that this makes the company less attractive to large drug suitors like Merck
Either way, Forest Labs remains a stock worth watching. Stay tuned to see whether patent challengers to Lexapro move on to other targets, and whether the FDA gives the nod on new products that will be key to ongoing growth.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).