Forest Labs' Celexa Could Push Stock Higher After Gain in Year
Bloomberg News
July 6, 1998, 11:44 a.m. ET
Forest Labs' Celexa Could Push Stock Higher After Gain in Year
New York, July 6 (Bloomberg) -- Forest Laboratories Inc.
shares have risen 41 percent this year and could rise more if the
company gets the expected U.S. approval for its Celexa, a drug to
challenge Prozac, the world's best-selling antidepressant.
The stock of the New York-based company has risen 61 percent
in the past year, closing at 34 13/16 Thursday, in anticipation
of Forest Labs getting approval for Celexa. The stock hit a 52-
week high of 40 1/2 on April 1.
Warner-Lambert Co., one of the biggest U.S. drugmakers, will
help sell the drug in the U.S. The antidepressant, known
chemically as citalopram, is already sold in Europe by the Danish
drugmaker H. Lundbeck A/S, which developed it. Celexa, which may
get approval as early as this month, faces competition from other
drugs in its class, including Pfizer Inc.'s Zoloft and SmithKline
Beecham Plc's Paxil as well as Eli Lilly & Co.'s Prozac.
''If citalopram is half as successful in the U.S. as it is
in Europe, then the stock is going to go up a lot,'' said Charles
Engelberg, an analyst with AmeriCal Securities who has a ''buy''
rating on Forest Labs.
Citalopram is the best-selling drug in its class in Denmark,
where it was introduced eight years ago, and outsells Prozac more
than three to one. It is a top-seller in at least seven European
countries and has a 10 percent share of the antidepressant market
in Europe, said Ken Goodman, Forest Labs chief financial officer.
It is the No. 1 selling drug of any kind in Finland and Austria.
Sales of antidepressants in the U.S. are expected to rise to
$7 billion annually by 2002 from $5 billion today. Depression
affects almost 18 million people in the U.S., according to the
National Institute for Mental Health. Nearly two-thirds of those
affected don't seek treatment.
Side Effects
''This drug singlehandedly has the potential to double or
triple the revenue base of Forest Labs,'' said Ron Nordman, an
investor with Deerfield Management, which owned 1.2 million of
the company's shares in March, according to regulatory filings.
Nordman said one of the main benefits of Celexa is that
unlike many other antidepressants in its class, it doesn't react
negatively with a large number of drugs. This makes it an ideal
drug for elderly people who are often on several medications at
once.
The U.S. Food and Drug Administration in May found the drug,
known chemically as citalopram, to be ''approvable.'' Forest Labs
hopes to get final approval in July and begin selling the drug in
August, said company spokesman John Eggers.
Others are skeptical about Celexa's prospects in the U.S.
market, saying it's coming too late to the party.
''It's going to be in the group of also-rans, along with
Bristol-Myers Squibb's Serzone and American Home Products'
Effexor,'' said James Keeney, an analyst with ABN Amro Inc. ''I
don't see that Celexa has the horsepower to become a market-
leading product.''
Alex Zisson, analyst with Hambrecht & Quist, said
expectations are ratcheted very high.
''If Celexa gets off to a very strong start, the stock is
probably fine, but if anything short of a strong launch happens,
there's a fair amount of room for expectations to be lowered,''
said Zisson, who has a ''neutral'' rating on the stock's
forecasting earnings of 7 cents a share for the June quarter,
compared to the 13-cent average estimate.
Depression has been linked to low levels of the chemical
messenger, serotonin, in the brain. Like Prozac, Paxil and
Zoloft, Celexa works by preventing the brain's nerve cells from
reabsorbing serotonin and so bathing the brain in the chemical.
The group, known as selective serotonin reuptake inhibitors, or
SSRIs, make up 56 percent of the U.S. market for antidepressants.
Whatever the prospects for Celexa, Forest Labs has its share
of problems, too.
The company got a warning letter in April from the U.S. Food
and Drug Administration after its drug-manufacturing plant in
Cincinnati, Ohio, showed quality control problems.
The FDA's concerns included follow-up testing and
documentation over batches of a thyroid drug that had to be
recalled because they didn't meet consistency requirements. The
FDA also found that water used to manufacture the thyroid pill
may have been contaminated by microbacteria. The company has
taken corrective action in response to the FDA letter, said
spokesman Eggers.
Forest Labs is currently one of 22 defendants in a case
pending in federal court in Chicago by pharmacies alleging drug-
price fixing, the company said in a regulatory filing. The case
is scheduled for trial in September.
The company is also involved in lawsuits in 12 states and
the District of Columbia that includes cases brought by retail
pharmacists and consumers.
''Forest has taken a firm stand that we are not settling on
any of these suits,'' said CFO Goodman.
Forest Labs got the license to market citalopram in March
1996. Warner Lambert agreed this March to co-market the drug.
According to Lundbeck, Pfizer originally had the license to
market citalopram in the U.S. The New York company terminated the
accord, though, as it developed its own antidepressant, Zoloft,
said Kerstin Fredricson Overo, medical marketing director at
Lundbeck. Pfizer declined to comment.
Forest develops, makes and sells name-brand and generic
prescription and nonprescription drugs. The company sells its
products to wholesalers, chain drugstores and generic
distributors.
--Michelle Cortez in Ithaca, New York (607) 272-1174 and Evan |
