Forest Laboratories Earnings Call Insights: Rebate Charges and Product Sales Trends

Forest Laboratories, Inc. (NYSE:FRX) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Rebate Charges

David Risinger – Morgan Stanley: I have a number of financial questions, but they should be pretty straightforward. First Frank, if you could just tell us the rebate charge for Namenda in the December quarter and how that compared to the year ago December quarter, so we can understand how much of an inflection there was. Second, I think that you had mentioned $8.3 million of Ironwood share of losses on Linzess. So, my question is, should we assume that if we double that, the quarterly operating loss on the Linzess product was $16.6 million on sales of $19.2 million or was that $8.3 million figure some sort of true up? Next on Linzess, should we assume that it can grow in the March quarter sequentially?

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Francis I. Perier, Jr. – EVP, Finance and Administration and CFO: Dave?

David Risinger – Morgan Stanley: Yes.

Francis I. Perier, Jr. – EVP, Finance and Administration and CFO: I’m going to limit you to three questions.

David Risinger – Morgan Stanley: Okay.

Francis I. Perier, Jr. – EVP, Finance and Administration and CFO: Choose number three, carefully.

David Risinger – Morgan Stanley: The third one is simply, should we expect Linzess to grow in the March quarter even though stocking was 19 million in the December quarter?

Francis I. Perier, Jr. – EVP, Finance and Administration and CFO: So, let me address the Namenda question first, and as we — I’ll address it with a slightly different answer. In the third quarter, our overall contract rebate percentage was about 23% for Namenda, which is very high. As we look at our fiscal fourth quarter, which again, is the beginning of the contract calendar year, that drops down to about 10%, so, you get about a 12.5 point move in the contract discount rate from quarter-to-quarter. That equates to just about, $75 million on the exact same volume quarter-over-quarter. So, again that’s one reason why again, we feel pretty confident about the Namenda numbers.

David Risinger – Morgan Stanley: Was that an inflection versus the year ago December, I just didn’t understand why December of ’12 would be dramatically different from December of ’11?

Francis I. Perier, Jr. – EVP, Finance and Administration and CFO: Well, you have…