Further Profits Warnings From Forest Labs

Following on from the profits warning the firm made in September (Marketletter September 16), Forest Laboratories has said that it is expecting to incur operating losses for the remaining two quarters of its fiscal year, which ends March 31, 1997, and for the year as a whole.

The company has decided to eliminate trade incentives for all of its branded products in order to reduce high trade inventory levels, principally of its antiasthma agent Aerobid (flunisolide). This action will result in quarterly losses and in reduced sales in the two remaining fiscal quarters, and possibly the first quarter of fiscal 1998.

Forest had previously decided to reduce its trade inventory gradually, but in the light of the decline in the growth rate of Aerobid due to increased competition, it says it has decided to "substantially reduce the high inventory levels that limit current sales and require continued and costly incentives." The company will also change its distribution policies for all its products in order to effect a reduction in trade inventory to the lowest possible levels so as to maximize profit margins on future sales.