Forest Laboratories, Inc. : Icahn Lands Seat on Forest Labs Board
08/15/2012| 11:46am US/Eastern
--Icahn wins one board seat after presenting shareholders a slate of four nominees
--Leerink Swann believes Icahn may continue to push for greater representation unless changes he touted are put in place
--Preliminary results also showed Forest shareholders voted in favor of other proposals submitted by the company
NEW YORK--Forest Laboratories Inc. (FRX) shareholders reelected nine of the 10 board members nominated by the drug maker, but gave the final slot to a nominee by activist investor Carl Icahn.
Mr. Icahn had presented shareholders a slate of four nominees to join the board, saying he wanted more outside representation at Forest to address his gripes about alleged weak corporate governance and the company's poor stock performance in recent years.
The pharmaceutical company at an annual shareholder meeting said preliminary results showed that Mr. Icahn's nominee Pierre Legault earned a spot on the board, edging out Forest's Dan Goldwasser, who had been chair of the compensation committee and had been a board member for 35 years. Mr. Legault had previously served as chief financial officer at OSI Pharmaceuticals, and also held executive positions as several drug maker and drug retail firms.
Daniel Ninivaggi, president of Icahn Enterprises Inc., told Dow Jones Newswires that his nomination to win a spot on the board was narrowly defeated.
Despite only winning one board seat, Mr. Ninivaggi said the vote was a "great victory for corporate governance." He said Icahn's win for a board seat would create a more independent board.
Leerink Swann analyst Seamus Fernandez said he believed it was likely Mr. Icahn would push for greater representation unless changes he has touted are put in place. Mr. Fernandez said it appeared unlikely Forest would completely align with Mr. Icahn's views in the short term with just one activist board member, likely resulting in Icahn's continued effort to pursue change.
A long-running spat between the parties was revived in June when Mr. Icahn, whose investment affiliates own almost 10% of Forest's shares, nominated four candidates to Forest's 10-member board and said he was seeking records of the company's actions. In response, Forest said Mr. Icahn's nominees have "significant and obvious conflicts and entanglements that compromise their independence and ability to represent all Forest shareholders."
One of the main concerns Mr. Icahn has raised is Forest's lack of a disclosure for a succession plan. Mr. Solomon, who is 84 years old and has led the company as CEO since 1977, and Forest have contended that few companies disclose succession plans.
Mr. Icahn also complained Forest was inadequately prepared for the authorized generic version of the antidepressant drug Lexapro that hit the market following the March loss of the drug's patent exclusivity.
Lower-than-expected branded Lexapro sales led Forest to trim its fiscal-year earnings guidance and, in July, the company reported Lexapro sales were down 81% to $110 million in the fiscal first quarter ended June 30.
Though Lexapro is facing a huge challenge by the generic offering, Forest has lauded its drug pipeline as loaded with potential. Analysts, meanwhile, have said investors have anticipated income from Lexapro will effectively disappear next year.
Preliminary results from the annual meeting also showed Forest shareholders voted in favor of other proposals submitted by the company, including an advisory vote on executive compensation.
Shareholders rejected the "proxy access" shareholder proposal submitted by Kenneth Steiner, who holds 1,000 Forest shares. Mr. Steiner, who spoke at the annual meeting, had hoped the proposal would give individual shareholders the ability to make board nominations.
Forest's shares were up 0.2% to $34.05 in recent trading. The stock has gained 13% in 2012, but is far off the all time high of over $78 in 2004.
- David Benoit contributed to this article
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