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The entry of generic competition for key products always delivers a major blow to the branded company’s financials. Usually, the innovator company explores different avenues to reduce the impact of genericization of key products. These include the launch of authorized generic versions as well as the signing of deals targeted to boost the pipeline or product portfolio. Many companies often work on the extension of the product’s life-cycle which could involve the development of an improved version of the product so that patients can be switched to the same before generics enter the market.

Forest Laboratories, Inc. , which is expected to face generic competition for its Alzheimer’s drug, Namenda IR (memantine HCl), from early 2015, is looking at ways to stem the impact of generic competition.

Earlier this week, Forest Labs said that it intends to continue marketing Namenda IR till the fall of 2014. The company, which is switching patients from Namenda IR to Namenda XR (a higher dose, once-daily extended-release formulation of Namenda IR), has postponed the final phase of switching to late 2014.

We remind investors that in Feb 2014 Forest Labs had announced its intention to discontinue the production and sale of Namenda IR from Aug 15.

Forest Labs is exploring all avenues to extend the Namenda franchise’s life-cycle. Forest Labs is working with Adamas Pharmaceuticals (ADMS - Snapshot Report) on the development of a fixed dosed combination of Namenda XR and Aricept for the once-daily treatment of moderate to severe dementia of the Alzheimer’s type. The fixed dose combination is currently under review in the U.S. The plan is to launch this combination (provided FDA approval is gained) before the entry of generic versions of Namenda IR in 2015.

Additionally, data from a pediatric program on Namenda IR is under FDA review. Feedback should be out in the third quarter of calendar year 2014. Pediatric approval will extend Namenda IR’s exclusivity to Oct 11, 2015.

We note that Actavis plc (ACT - Analyst Report) will acquire Forest Labs in a cash and equity transaction worth about $25 billion. The deal is expected to close in the second half of 2014.

Forest Labs carries a Zacks Rank #3 (Hold). A better-ranked stock in the pharma sector is ANI Pharmaceuticals, Inc. (ANIP - Snapshot Report), carrying a Zacks Rank #1 (Strong Buy).

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