Forest Labs' Metamorphosis Is Long-Term Safeguard
Forest Laboratories is turning itself from a generic company into a brand-name firm, which analysts feel will hurt its near-term earnings but could safeguard its future growth. Forest's share prices sold off after the company blamed generic competition for fiscal year 1997 earnings that would be "significantly below" those of fiscal 1996.
Even though the hit this year is harder than expected, analysts said Forest could start to see the fruits of its transition by fourth-quarter fiscal 1997, adding that the company was guiding them towards forecasts in a range of about $1.80-$1.90 per share for fiscal 1997. Forest earned $2.22 per share in fiscal 1996.
In a statement, Forest president Howard Solomon cited the "erosion" of its generic drug business and generic competition for its Lorcet 10 pain reliever. "There was a lot more competition to its generic products than everyone had anticipated," noted Merrill Lynch analyst Jennifer LaVin.
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