Forest Laboratories, Inc. (FRX), an international pharmaceutical manufacturer and marketer, today announced that diluted earnings per share equaled $0.69 in the third quarter of fiscal 2010. Reported earnings per share included two one-time charges. The first was for a new product license fee of $75.0 million, or $0.25 per share net of tax, related to the previously announced product licensing agreement with Almirall, S.A. (Almirall) for LAS100977, an inhaled once-daily administered long-acting beta2 agonist for the treatment of both asthma and chronic obstructive pulmonary disease (COPD).
The second was for certain restructuring costs related to our Long Island packaging facility of $14.0 million, or $0.03 per share net of tax. Reported diluted earnings per share in the third quarter of fiscal 2009 were $0.62 and included new product licensing fees of $150.0 million, or $0.41 per share net of tax, related to licensing agreements with Phenomix Corporation (Phenomix) for dutogliptin for the treatment of diabetes and Pierre Fabre Médicament (Pierre Fabre) for F2695 for the treatment of depression.
Namenda, an NMDA receptor antagonist for the treatment of moderate and severe Alzheimer's disease, recorded sales of $282.5 million during the quarter, an increase of 17.3% from last year's third quarter.
The Company's newest product, Savella(R) (milnacipran HCl), a selective serotonin norepinephrine dual reuptake inhibitor (SNRI) for the management of fibromyalgia, which was launched in late April 2009, recorded sales of $15.4 million. Contract revenue increased 6.5% to $55.8 million, principally due to Benicar(R) (olmesartan medoxomil) co-promotion income of $51.6 million, an increase of 9.1% compared to last year's third quarter.
Per the agreement with Daiichi Sankyo, active co-promotion of Benicar by Forest ended in the first quarter of fiscal 2009 and the Company now receives a gradually reducing residual royalty until the end of March 2014. Interest income of $7.3 million decreased from $24.2 million reported in the year-ago period, due to lower interest rates earned on the Company's short duration portfolio.
Cost of sales as a percentage of sales was 24.8% compared with 22.5% in last year's third quarter due to the one-time restructuring charge of $14.0 million, or $0.03 per share net of tax. During the period, the Company commenced closing its packaging operations on Long Island resulting in a one-time charge. Excluding the one-time charge, cost of sales as a percentage of sales would have been 23.4% for the quarter.
Selling, general and administrative expense for the current quarter was $307.0 million as compared to $290.0 million in the year-ago quarter. The current level of spending reflects the resources and activities required to support our currently marketed products, particularly our most recently launched product Savella.
Research and development spending for the current quarter was $233.6 million and includes the upfront license payment of $75.0 million to Almirall in connection with the licensing agreement for LAS100977. R&D spending reported in the third quarter of the prior fiscal year totaled $279.1 million and included $150.0 million of upfront licensing payments to Phenomix and Pierre Fabre. Excluding such payments in both periods, R&D spending for the current fiscal quarter increased 22.9%. The current quarter also included product development milestone payments of $23.7 million compared to $5.9 million of milestones in the prior year's quarter.
Income tax expense for the quarter was $66.2 million, reflecting a quarterly effective tax rate of 24.0%. The higher quarterly rate was the result of the upfront fee for the product licensing agreement transaction during the quarter. Reported net income for the quarter ended December 31, 2009 was $210.2 million or $0.69 per share compared to $188.0 million or $0.62 per share reported for last year's third quarter.
Diluted shares outstanding at December 31, 2009 were 303,845,000, an increase of approximately 1.1 million shares compared to the year-ago period.
Revenues for the nine months ended December 31, 2009 increased 6.1% to $3.137 billion from $2.957 billion in the prior year.
Net income for the nine months ended December 31, 2009 decreased 2.3% to $659.8 million from net income of $675.0 million reported in the nine months of the prior year. Reported diluted earnings per share decreased 1.8% to $2.17 in the current year's nine months as compared to diluted earnings per share of $2.21 in last year's nine months.
Howard Solomon, Chairman and Chief Executive Officer of Forest, said: "We are pleased with the financial performance of the Company reported for the quarter, particularly with the growth of our newest products, Bystolic and Savella and also with our several pipeline developments in the quarter.
During the quarter we submitted a New Drug Application for ceftaroline, our novel cephalosporin for the treatment of patients suffering from complicated skin structure and skin infections (cSSSI), community acquired bacterial pneumonia (CABP) and for patients infected with methicillin-resistant Staphylococcus aureus (MRSA). In addition we reported positive top-line clinical trial results for three important products in development. We also broadened the depth of our product development pipeline through the addition of two new business development opportunities during the quarter.
With regard to clinical trial results we and our partner Ironwood Pharmaceuticals reported positive top-line clinical trial results for two Phase III studies of linaclotide in patients with chronic constipation (CC). These two trials are part of a larger Phase III program investigating the effects of linaclotide treatment on patients with either CC or with irritable bowel syndrome with constipation (IBS-C).
In addition we and our partner Gedeon Richter reported positive top-line Phase II results for cariprazine for the treatment of acute exacerbation of schizophrenia in a study of 732 patients. We have previously announced positive top-line Phase II results in patients suffering from acute mania associated with bipolar I disorder and plan to initiate Phase III trials for both indications early this year.
And earlier this month we and our partner Almirall announced positive top-line results from a new Phase III study of aclidinium in patients suffering from chronic obstructive pulmonary disease (COPD). This is the first of three new ongoing Phase III studies investigating a higher dose and twice-daily administration of aclidinium in COPD patients.
We announced two new business development collaborations during the quarter. The first is a collaboration that enabled us to add to our ongoing partnership with Almirall in the respiratory therapeutic area by entering into an agreement to develop, market and distribute LAS100977 in the United States. LAS100977 is Almirall's inhaled, once-daily administered long-acting beta2 agonist (LABA) that will be developed in combination with an undisclosed corticosteroid for the treatment of both asthma and chronic obstructive pulmonary disease.
We were also delighted to announce the expansion of our recently established relationship with AstraZeneca to collaborate with them in the anti-infective therapeutic area to help patients suffering from serious infections. This transaction broadens our partnership beyond just ceftaroline to now include ceftaroline/NXL104, and ceftazidime/NXL104. The transaction is expected to close in our fiscal fourth quarter following satisfaction of customary closing conditions, including the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Also in the quarter we hosted our first investor meeting to review our late-stage product development pipeline with the global investment community. This was a key event for our Company that enabled our leadership team to share their perspective in an in-depth review of our repertory of products in development.
We reviewed ten products either approved, at the FDA now, or to be submitted to the FDA in the next few years. This group of products should be available to replace currently marketed products whose patents will expire over the next two to five years, and will most assuredly be joined by other new product opportunities. As I have said many times before we continue to believe that we are well on our way to building a portfolio of new products that could ultimately generate levels of sales and earnings to secure long-term growth for our Company."
Bob DeMarco is the editor of the Alzheimer's Reading Room and an Alzheimer's caregiver. Bob has written more than 1,050 articles with more than 8,000 links on the Internet. Bob resides in Delray Beach, FL.