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Icahn Wins One Seat on Forest Labs' Board


The activist billionaire investor notches a modest victory in the battle with the drug maker.

MINYANVILLE ORIGINAL Carl Icahn won one seat on the board of Forest Laboratories (FRX), giving the billionaire investor only a partial victory in his attempt to shake up the drug maker.

Icahn-backed candidate Pierre Legault won a seat on the company's 10-director board, according to an initial count of votes at Forest's annual meeting Wednesday. Legault is chief executive of Stone Management and is a former chief financial officer at biotech company OSI Pharmaceuticals.

Though it's a modest victory -- Icahn offered four candidates for the board -- the vote still sends a message to Forest's leadership, which has been under attack by Icahn for more than two years.

Shares of Forest rose almost 1% to $34.22 in morning trading Wednesday. The shares are up 13% this year. Some analysts predicted the shares would jump more if Icahn won at least two seats on the board as he may spark a sale of the company. Investors generally have benefitted when a company challenged by Icahn eventually sells, a case study released in late 2010 found. Icahn's fight against Biogen Idec (BIIB) didn't force a sale, but the company has fared well under CEO George Scangos, who joined the biotech giant after a protracted Icahn campaign.

The recent proxy contest was the second Forest board battle waged by Icahn. He nominated his own slate of board candidates last year but lost. (See Forest Labs Defeats Icahn in Proxy Battle.) Icahn has been critical of the company's preparation for future sales losses due to generic competition and he has been particularly critical of CEO Howard Solomon and the company's board's stewardship. Solomon has led the company since 1977.

The activist investor points to a more than $300 million settlement Forest entered into with the government over criminal fraud charges in 2010. He's also noted that Solomon was the target of a federal query that threatened to ban him from doing business with the government. (The case was dropped a year ago.)

This week, Icahn noted that the US Food and Drug Administration warned Forest again about promotional practices by company representatives selling the lung drug Daliresp.

"It is obviously worrisome that these practices would be ongoing at Forest given its chequered history in similar matters," Icahn said in a statement.

Despite Icahn's criticisms about the company not preparing for future revenue loss, Leerink Swann analyst Seamus Fernandez says he believes Forest has a number of promising drugs in development -- "products that should be highly attractive to several potential large pharmaceutical buyers."

In a note before the vote tallies Wednesday, Fernandez said Forest shares would respond positively to an Icahn win because the investor would likely seek a sale of the company.

"The election of only one of Mr. Icahn's four nominees reflects our shareholders' continued confidence in Forest's strategy, corporate governance practices and the strength of our pipeline and portfolio of products," Forest independent director Kenneth Goodman says in a statement. In addressing Legault's election, Goodman said, "We look forward to working with him in a constructive manner to build value for all Forest shareholders over the long term."

Twitter: @brettchase

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