UPDATE 2-Forest Labs to buy schizophrenia drug, cut costs

Mon Dec 2, 2013 2:47pm EST
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By Ransdell Pierson

Dec 2 (Reuters) - Forest Laboratories Inc, which is facing patent expirations on several of its biggest drugs, on Monday said it plans to buy rights to a new schizophrenia treatment from Merck & Co and cut annual operating costs by $500 million in fiscal 2016.

The specialty drugmaker said it will acquire rights to the oral drug, Saphris (asenapine), for an upfront payment of $240 million to Merck and additional payments on defined sales milestones. The product, which was approved in 2009, is also used to treat acute bipolar mania.

Saphris, with annual revenue of about $150 million, has been a commercial disappointment for Merck. Earlier this year, Merck took $330 million in write-offs on the drug due to reduced sales expectations for it. Merck acquired the product through its merger in 2009 with Schering-Plough Corp.

Forest Chief Executive Brent Saunders said his company plans to ramp up sales of Saphris, using 250 sales representatives dedicated to psychiatric products.

"We have almost double the number of reps that will focus on this, compared to Merck," Saunders said in an interview on Monday. But he declined to predict how greatly they could boost Saphris sales.

Forest, whose shares rose almost 7 percent, said it would issue $1 billion in new long-term debt through an offering of eight-year senior unsecured fixed-rate notes. Proceeds from the offering will also be used to fund share repurchases and for general corporate purposes, the company said.

Forest said its board authorized up to $1 billion in repurchases of its common stock, and the company would begin an initial $400 million accelerated buyback program before the end of the calendar year.   Continued...