NEW YORK (AP) -- Shares of Forest Laboratories Inc. rose to a year high Thursday after the drugmaker said Howard Solomon, its CEO for 36 years, will retire at the end of 2013.
THE SPARK: Solomon, 85, will step down as president and CEO on Dec. 31, and will resign as chairman at the time of the company's annual shareholder meeting in 2014. The New York company said it plans to name a successor before the end of the year.
THE BIG PICTURE: Solomon has worked for Forest for almost 50 years. He became CEO in 1977, chairman in 1998, and president in 2010. Solomon said he will continue to serve on the board of directors if shareholders re-elect him to the board.
Forest's sales fell 32 percent in 2012 after its anxiety and depression drug Lexapro lost patent protection in March. The company has launched several new drugs, including the depressive disorder treatment Viibryd and lung disease drug Daliresp, to help make up for those losses. However the patent on Forest's current top-seller, the Alzheimer's disease treatment Namenda, will expire in 2015.
The company took an annual loss in 2012, its first in 15 years.
In 2012, billionaire investor Carl Icahn demanded more information about the company's plans to replace Solomon and about Forest's plans for David Solomon, who became a senior executive in January 2011. David Solomon, Howard's son, is the pharmaceutical company's head of development and strategic planning.
Forest said at the time it was actively planning a CEO succession but did not disclose further details. Icahn started unsuccessful proxy fights with Forest in 2011 and 2012, and according to FactSet he remains the second-largest shareholder in the company.
THE ANALYSIS: Citi Investment Research analyst Liav Abraham said the company has a cash balance of about $3 billion, and a new CEO could put that cash to use. Abraham said the most likely choices to replace Solomon are the company's senior executives: David Solomon, Chief Financial Officer Frank Perier, Chief Commercial Officer Elaine Hochberg, and research and development head Marco Taglietti.
"We believe the news of Mr. Solomon's pending retirement as CEO and Chairman of FRX could be a catalyst for significant change in the company's strategy going forward," Abraham said in a report.
Abraham rates Forest shares at "Buy" with a price target of $44.
SHARE ACTION: Forest shares gained $1.99, or 5.3 percent, to $39.50 in afternoon trading and rose as high as $39.68. The stock has risen about 12 percent in 2013 and it lasted traded at its current levels in July 2011.
- Board & Management Changes
- Howard Solomon