Yes, the probability of Icahn losing money on FRX holding is very high. The transcript of SepQ Earnings Conference provided a lot of colors, but one have to read it with knowledges.
If someone told you, two years ago that FRX's EPS will be $1 (EPS was near $4 at that time), you would think "he is crazy." But FRX cut their guidance three times consecutively in a row in 2012. Now EPS $0.5 is a high expectation for FRX's FY ending Mar13. Actually, FRX's yearly EPS could be below $1 for a long time (note: Namenda Cliff in 2015).
Namenda revenue decrease is a significant concern. It is due to CMS's guidance of reducing 15% antipsychotics use in entire long-term care segment by the year end. This is a huge bad news for FRX's upcoming atypical antipsychotics pipeline Cariprazine.
Lexapro mode $45M in SepQ, but it will become dismal thereafter.
Bystolic is the best seller beside Laxepro and Namenda. It was approved in 2007. Now is near the peak with $400M yearly. The generic lawsuit will be in the court in 2014. The management talked about Diovan/Bystolic combination and put a heavy weight on it. Actually, the bad interaction of Valsartan/Beta-blocker is well known. FDA will seriously scrutiny any this kind of combination.
The management talked about the "new nine" frequently. Five of them were already marketed, and together they made about $200M for SepQ. Not bad, but SepQ EPS was $0.08 (almost be RED). Two of them approved, and another two could be approved in 2013. Everyone of the "new nine" (except Linzess, but SGYP has a better product to come out soon) is facing feirce competetion from cheap/similar genericized products in the same market. None of the "new nine" has the potential to be a blockbuster.
To have nine products been approved in seven years is not bad. But it is not so impressive for a pharma with near $10B MarketCap. FRX has $3B cash in hand. How do they use it? Previously, they spent $1.9B for Viibryd. Viibyrd made $40M in SepQ. And it peak sales would be around $400M.
Carl Icahn has had an impressive track record in investing to Gezyme and Amlyn. But both Genzyme and Amlyn are Biotech. They have very strong internal R&D and very strong IP. FRX is "the smallest big-pharma" --specilty in licensing and then marketing products from others. With today's macro-environment, almost all big-pharma are facing patent cliffs. They are hungry to bug any potential blockbuster. FRX has no way to compete with a real big-pharma in chasing a potential blockbuster. To have a takeover price above $40, a pharma needs yearly EPS $3. FRX's cannot achieve EPS $3 in a foreseeable future. Thus, Ichan can lose money with his FRX holding.