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Forest Labs Defeats Icahn in Proxy Battle

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CEO Howard Solomon waged a counter war against the billionaire investor's proxy battle and won.

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Forest Laboratories (FRX) says its entire slate of 10 board nominees were elected by "a significant margin" at the company's annual meeting Thursday, defeating all four of Carl Icahn's candidates.

The vote is a blow to the billionaire investor, though he's lost battles before only to come back the following year. Icahn waged proxy fights with Biogen Idec (BIIB) for two years before successfully placing directors on that company's board. Icahn lost a proxy fight against Motorola in 2007 but gained board seats the following year. His stake in that company paid off with Google's (GOOG) announced buyout of successor company Motorola Mobility (MMI) this week.

For the moment, at least, Forest's longtime CEO Howard Solomon appears to have prevailed over the activist investor.

"Our company is strong and performing well, with one of the deepest most promising product portfolios in the industry," Solomon says in a statement. "This is a time of tremendous opportunity for Forest and we are confident in our future prospects."

Solomon's encouraging words aren't shared on Wall Street. Patent expirations for antidepressant Lexapro and dementia drug Namenda in 2012 and 2015 put 80% of Forest's fiscal 2010 sales at risk, Leerink Swann analyst Seamus Fernandez says in a recent note.

As for the company's drugs in development, "the late-stage pipeline has good revenue potential cumulatively but we are skeptical that it will replace revenue lost from (generic competition for) key franchises," Fernandez says. He has a hold rating on the stock.

Shares of Forest fell 3% to $33.36 in late-morning trading Thursday. The stock is up 4% this year. Icahn, who says the company is not prepared to replace lost sales from patent expirations, noted that the stock traded twice as high in 2004. He also is critical of a more than $300 million fraud settlement the company reached with the US government last year, pointing to that event as an example of lax oversight by the board.

Forest answered some of Icahn's criticisms in recent weeks and has been actively working to sway investors. (See Icahn's Board Battle With Forest Labs Comes to a Head)

At their annual meeting today, Forest shareholders re-elected Solomon, Nesli Basgoz, Dan Goldwasser, Kenneth Goodman, Lawrence Olanoff, Lester Salans and Peter Zimetbaum.

The shareholders elected new Forest-backed director candidates Christopher Coughlin, Gerald Lieberman and Brenton Saunders. (See Forest Labs Answers Icahn With Board Candidates)

The four Icahn candidates who were defeated are Alexander Denner, Richard Mulligan, Lucian Bebchuk and Eric Ende.

Twitter: @brettchase
No positions in stocks mentioned.
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