Warning Letter Forms Partial Basis for Corporate Takeover Attempt
A warning letter sent to Forest Laboratories by the US Food and Drug Administration (FDA) is fueling the latest salvo in a long-running proxy battle between activist investor Carl Icahn and the company.
Icahn has for months been trying to take control of the company through its board of directors, saying the company has been underperforming to the detriment of its shareholders.
On 13 August, Icahn blasted the company, saying it had failed to disclose a warning letter sent to the company on 1 August and later released by FDA. The letter regarded its marketing of Darilesp (roflumilast) tablets for the treatment of chronic obstructive pulmonary disease (COPD). Forest allegedly used sales staff to pitch off-label promotional statements to physicians, which were then reported to FDA through its "Bad Ad" program.
Forest investors are scheduled to vote on a slate of board of directors for the company on 15 August, and Icahn's latest charges are part of a series of accusations against the company seemingly designed to undermine its credibility with investors.
A Unique Case
Such a letter would not ordinarily draw much concern from investors, but Icahn noted it comes just two years after the company entered into a five-year corporate integrity agreement (CIA) after settling similar charges with the US Department of Justice.
"It is obviously worrisome that these practices would be ongoing at Forest given its checkered history in similar matters," Icahn charged. "In fact, Forest has received 2 of the last 43, or about 5%, of all warning letters of this type issued by the FDA in the last 18 months despite thousands of products being promoted by hundreds of companies."
FDA, too, was uncharacteristically frank in its 1 August warning letter. "False and misleading statements from Forest sales representatives are particularly troubling considering OPDP expressed concerns regarding similar violative promotional activities as recently as April 2011," FDA remarked. "OPDP is concerned that Forest is continuing to promote its prescription products in a violative manner despite clear direction from OPDP."
Forest did not have a statement available to the press regarding Icahn's latest charge, though it has responded to several similar charges in the last week as "false and misleading."