Forest expects its Alzheimer's drug memantine to be approved for moderate to severe disease in the spring of 2004, Chief Operating Officer Kenneth Goodman said during a fiscal 2003 fourth quarter earnings call April 22.

"We hope to be in a position to have final approval by early next fiscal year. We would anticipate an "approvable" letter at our October user fee deadline, with standard follow-up labeling and DDMAC review thereafter," Goodman said.

Forest first submitted memantine for treatment of Alzheimer's July 31 but withdrew the NDA in September. The company resubmitted the memantine application Dec. 19 and described the regulatory setback as "quite minor" (¹ Also see "Forest Lercanidipine Options Include Reformulation, Confirmatory U.S. Trial" - Pink Sheet, 27 January, 2003., p. 28).

Goodman responded to analysts' concerns about Forest's projected approval timeline for its Alzheimer's therapy by maintaining that "there is nothing at all unusual about memantine....The FDA has accepted for review based on the current studies. We've discussed that with them and there's no reason at all for us to believe that there's anything else required."

"I don't think that there's anything unusual in projecting that the time frame between the review and final labeling and [advertising clearance] discussions would be other than what we normally would expect for any product. I suppose it's not impossible that they could decide to move more quickly but I don't think that it would be prudent for us to anticipate or budget for that," the COO added.

Forest has expanded the study of memantine to mild to moderate Alzheimer's patients. Data from a study of memantine in combination with acetylcholinesterase inhibitors in mild-to-moderate disease should be available as early as this summer. Results of a monotherapy memantine study in mild to moderate Alzheimer's will be available by year-end.

Positive results from one of these studies would support an sNDA for memantine in mild to moderate Alzheimer's, Goodman maintained. "We don't know yet whether or not, given the mechanism of action of the product,...we will have success in mild to moderate....We need one of those studies to come out positive in order to seek that as an additional indication."

Forest is also studying memantine in neuropathic pain. The company expects results from a second study "during the next few weeks." The study, "if positive, would constitute the second pivotal trial and allow us to prepare for a new drug application for that indication," Goodman added.

Memantine is one of the products that Forest is counting on to maintain long-term earnings growth in the company's post- Celexa life. Forest expects its first generation anti-depressant to lose exclusivity "no earlier than" late 2004 or early 2005; the company projects sales of Celexa (citalopram) to be down to $200 to $300 mil. at the time of a generic entrant (see ² Also see "Forest Expects Lexapro To Lead Market By ’05; Will Re-Launch In GAD In ’04" - Pink Sheet, 28 April, 2003.).

Goodman maintained that Forest will achieve its targeted long-term growth rate of 20% post-Celexa with the launch of new products and growth of existing products.

"When we project out into that period of time, we expect Lexapro to be the market leader by far, we expect its share to continue to be growing. We expect that Benicar is going to be contributing to the company during that period of time. We expect that memantine is going to be launched and out at that period of time."

Forest expects its antihypertensive product Benicar (olmesartan) to become profitable by fiscal 2005. The company currently incurs "only our sales force expenses against that product," Goodman said.

The company also expects earnings growth for the year of "at least 20%," despite plans to increase selling, general and administrative costs by 15% in preparation for product launches. "Clearly if we can grow 20% next year with some of the investments that we're making, there's no reason at all to believe that with memantine added...and Benicar beginning to show positive returns instead of expenses, that we can't continue a very successful long term growth rate."

Acknowledging that such high spending will affect the company's earnings, Goodman projected flat sequential quarterly earnings growth over the next year. "As we look ahead to next year and the quarterly progression, it's actually going to be kind of flat."

"If the street is looking for 20% next year, you're looking at something around $2 or a fraction over $2 and we're already at 48 cents this quarter. So what I see is next quarter, probably relatively flat, could be up a fraction, a penny or so. And then probably that continuing," Goodman added.

The exec also acknowledged that earnings for the quarter ending March 31 were flat on a sequential basis. The company reported diluted earnings per share of 48¢ for the quarter, up 84% on a year-over-year basis. However, earnings for the quarter ending Dec. 31, 2002 were 47¢.

Goodman attributed analyst "confusion" to estimates made by analysts "who decided not to accept that guidance and continued to believe that we would come in above those estimates without any real basis for that....We very carefully guided the street to what we thought the numbers should be, which is what we think is appropriate for companies to do...to give you the best guidance we can on earnings."

The COO responded to analysts' assertions that Forest "has always beaten" its guidance by ascribing the company's past overperformance to "evolving" factors. Such factors include the higher-than-expected performance by the antidepressant Lexapro, the delayed entrance of generic Tiazac (diltiazem), and the delayed launch of lercanidipine.

"Yes, there's no question that since all of that was evolving, we were beating expectations and we were even beating some of the increased expectations that were going out there. But over the course of the last quarter or so, certainly your earnings estimates and your expectations have risen to the level we were then achieving with those circumstances in place."

"Had I had my choice, I don't know that I would have chosen to have a year in which our earnings increase was 82%. I don't think that that is a sustainable earnings growth rate," he added.

"We're more interested in our long-term growth rate. I think that that is going to continue to be a very attractive growth rate. And I think we will continue to do the best we can to guide you to earnings numbers that we think are the real numbers and numbers that you can project and be confident will be approximately what they will be."

Goodman noted that Forest anticipates that its asthma therapy Aerospan , a non-CFC version of Aerobid (flunisolide), will be approved in 2003. "The fact that Tiazac has or will disappear as a second position detail for one of our sales forces gives us the opportunity to put a little bit more strength behind that launch."

Forest plans to tout Aerospan's smaller particle size in physician detailing. "We get to the lower airways better with the smaller particle size. We think that can potentially have some clinical benefit, which could make the product attractive. And we certainly continue to believe...that this will do more than replace Aerobid [and] should give us the opportunity to generate some growth in the respiratory franchise."

The company will submit additional clinical data on its oxycodone/ibuprofen combination Oxyprofen to the FDA "late this year, early next year." The pain product has been "approvable" since fall 2002.

"It's not that we couldn't get approval in that, and in fact have an 'approvable' for the product, but in order to give us the broadest possible pain indication that we're looking for, we think we should submit some additional clinical study work," Goodman maintained.

The COO acknowledged that Oxyprofen is not a "particularly important product" to the company, but noted that it "could have $100 mil. plus opportunities and certainly is a product that remains on our radar for the future."

Launch of the company's calcium channel blocker lercanidipine could be as late as 2006. Forest is creating a delayed-release formulation of the antihypertensive in response to FDA's August "approvable" letter. The company had predicted in January that the decision to reformulate the drug would "set the program back by at least six to 12 months."

"We do expect that that's going to result in a delay of the product and we are looking at several years before that product is going to be added to the portfolio. But the investment to do that is not all that extensive, it's relatively modest and certainly modest by the standards of what it costs to develop a product in general. Given the opportunity we see for the product, we certainly intend to pursue it," Goodman said.

The company expects to have Phase III results for its irritable bowel syndrome therapy dexloxiglumide "later this year." Forest net sales for the fiscal year were $2.2 bil., up 41% over the prior year. Sales for the quarter were up 42% to $621 mil.

Forest Counting On Memantine, Benicar, To Bolster Growth Post-Celexa&nbsp;&nbsp;

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