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New CEO Named by Forest Labs

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Forest Laboratories, Inc. recently announced the appointment of a new Chief Executive Officer (CEO) and President. Brenton L. Saunders, 43, the former CEO of Bausch + Lomb, will take over from Howard Solomon on Oct 1, 2013.

Saunders has been a director at Forest Labs since Aug 2011. At present, he is the Chairman of the Board’s Compensation Committee and a member of its Compliance Committee – Saunders will step down from both positions once he becomes CEO and President. Meanwhile, Solomon will continue serving as non-executive Chairman of the Board through the Company’s 2014 Annual Meeting of Stockholders. Saunders will take up the position of Chairman at that time.

Apart from serving as the CEO of Bausch + Lomb prior to its acquisition by Valeant Pharmaceuticals (VRX - Free Report) , Saunders held senior leadership positions at Schering-Plough Corporation, which is now a part of Merck (MRK - Free Report) . During his tenure at Bausch + Lomb (2010 to Aug 2013), Saunders turned around the company and positioned it as a global competitor in more than 100 markets. The appointment of Saunders as the new CEO of Forest Labs met with the approval of Carl Icahn.

The biggest challenge that the new CEO will face is the patent cliff being faced by Forest Labs. While Lexapro started facing generics in Mar 2012, generic versions of Namenda should hit the market in early 2015. Although Forest Labs has been successful in gaining approval for several new products over the past few years, contributions from these products will not be enough to make up for the loss of revenues to generic competition. SG&A spend is also a matter of concern.

Investor focus will remain on how Saunders, who turned around Bausch + Lomb, will handle these issues. Forest Labs currently carries a Zacks Rank #2 (Buy) stock. At present, Questcor Pharmaceuticals looks well-positioned with a Zacks Rank #1 (Strong Buy) stock. 

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