Forest Labs pressured to pull trigger on M&A after patent expires on Lexapro

Stock analysts have called for Forest Laboratories to jump on the M&A bandwagon in biopharma as the drugmaker's top-selling Lexapro faces generic drug competition. Yet the company ($FRX) executives have endorsed a plan to rebuild sales with its own pipeline of drugs, and activist investor Carl Icahn told Bloomberg that he harbors concerns about management making "risky acquisitions."

As Bloomberg reports, Forest has an abundance of outside parties prescribing ways forward amid lackluster sales forecasts and wilting profits. Analysts from Robert W. Baird and Piper Jaffray have proposed that Forest make a meaningful acquisition to restock its mix of products, which includes the antidepressant Lexapro that lost U.S. patent exclusivity in March and the Alzheimer's drug Namenda, with patent life ending in 2015. Also, Forest is battling with its major investor Icahn over seats on the company's board, making it the second year in a row that the company has faced a proxy fight from the influential biotech investor.

In the meantime, analysts at Susquehanna International Group make the case, according to Bloomberg, that Forest's need for a new product and ample cash reserves lend themselves to a buyout of antibiotics maker Salix Pharmaceuticals ($SLXP). Forest told the news service that the company has confidence in the strength of its own pipeline, which relies in part on the FDA's upcoming decision in September on its experimental bowel drug linaclotide from partner Ironwood Pharmaceuticals ($IRWD). Yet some analysts lack confidence in that and other drugs such as its new antidepressant Viibryd coming to the rescue.   

"The pipeline, as currently constituted, is not nearly enough to replace the lost revenue from losing Lexapro and Namenda to generics," David Amsellem, an analyst with Piper Jaffray in New York, told Bloomberg. "I think that if they were to be more aggressive on M&A and not just look at one-off pipeline assets, but rather look at commercial-stage assets as well, and were more aggressive in using their balance sheet, that they can definitely get themselves out of the hole."

Forest, of course, faces a crowd of pharma groups jockeying for rights to the juiciest acquisition targets available. Before Bristol-Myers Squibb's ($BMY) $5.3 billion buyout of the company, Amylin Pharmaceuticals fielded interest from a bevy of drugmakers interested in its diabetes drugs.

- get more in Bloomberg's article