The $10 Million Gamble on a Disgraced Sales Force

In the spring of 1984, Forest Laboratories was a $20 million company with a problem. It had spent the past seven years trying to reinvent itself from a contract lab into a drug marketer, first with generics and then with licensed brand-name pills. But it had no way to reach doctors. Its sales force numbered in the dozens. Howard Solomon, the chief executive who had engineered the strategic pivot, knew that without a national sales network the new strategy would stall.

Two hundred miles west, in St. Louis, a solution was imploding. O'Neal, Jones & Feldman Inc. had just pleaded guilty to federal crimes. Its president and another executive had been sentenced to prison. The company's flagship product, E-Ferol Aqueous Solution, an intravenous vitamin E preparation marketed to premature infants as a treatment for retrolental fibroplasia—a condition that causes blindness—had never been tested for safety. It had never been approved by the Food and Drug Administration. Yet O'Neal sales representatives had carried it into neonatal intensive care units across the country, labeling it "FDA Approved." Infants died. Others suffered liver and kidney damage. The drug was recalled in April 1984. By summer, the company was a hollow shell.

The asset nobody else wanted

Solomon saw something the rest of the industry missed. Beneath the scandal, O'Neal possessed a functioning sales and distribution apparatus: representatives with established doctor relationships, a logistics network, and territorial coverage that would take Forest years to build from scratch. The asking price for the assets was $10 million—roughly half of Forest's annual revenue at the time. The risk was reputational. Acquiring a company that had just killed babies with an unapproved drug invited scrutiny, lawsuits, and the contempt of physicians.

Solomon proceeded anyway. The deal closed in late 1984. Forest shed O'Neal's product line almost immediately, keeping only the sales infrastructure. The convicted executives were gone. The tainted inventory was destroyed. What remained was a field force of roughly 150 representatives who knew how to call on pediatricians, neonatologists, and hospital pharmacists—the very specialists Forest would need as it moved into respiratory and cardiovascular drugs.

Building the engine

The integration was brutal. Forest managers descended on St. Louis to retrain the inherited reps on Forest's products and compliance standards. Territory maps were redrawn. Quotas were imposed. Within eighteen months, the combined sales force had grown to nearly 300. In 1989, Forest doubled down, acquiring UAD Laboratories for $33 million in stock, adding another 200 representatives and a narcotic analgesic, Lorcet, that would soon generate $60 million a year.

By 1990, Forest fielded more than 500 salespeople. Revenues had climbed to $133 million, with $30 million in profit. The company that had been unprofitable for much of its first two decades was now a commercial machine. The O'Neal acquisition, once viewed as a desperate gamble, looked like the keystone of the entire transformation.

The payoff arrives

The real test came in July 1998, when the FDA approved Celexa, an antidepressant licensed from the Danish firm Lundbeck. Forest's sales force—now organized into specialized teams targeting psychiatrists, primary-care physicians, and managed-care formulary committees—launched the drug with a ferocity that larger rivals struggled to match. In its first full year, Celexa sold $91.9 million. By fiscal 2000, that figure hit $427.3 million. Four years after launch, a single pill accounted for nearly 70 percent of Forest's total revenue.

None of it would have been possible without the sales force that Solomon bought from a disgraced St. Louis firm in 1984. The representatives who once detailed E-Ferol to neonatologists were, by the late 1990s, detailing Celexa to psychiatrists and Lexapro to primary-care doctors. The same territorial knowledge, the same doctor relationships, the same logistical discipline—repurposed for drugs that actually worked.

A template for ruthless pragmatism

The O'Neal deal established a pattern that defined Forest for the next three decades. The company repeatedly acquired distressed or non-strategic assets—Cerexa for its antibiotic pipeline, Clinical Data for Viibryd, Aptalis and Furiex for gastrointestinal franchises—not for their science but for their commercial potential once plugged into Forest's selling engine. Each time, Solomon or his successor Brent Saunders stripped away the noise and kept the distribution muscle.

When Actavis acquired Forest for $28 billion in 2014, it was buying that engine: a sales organization that could launch a drug faster and cheaper than almost anyone else in the industry. The engine had been built on a $10 million bet that a sales force could be separated from the sins of its previous owner. The bet paid off. The infants who died from E-Ferol never got a second chance. Forest did.

This is one episode in a much longer story. For the full account of the rise of Forest Laboratories, read “Forest Laboratories” by Janet Bryant on MixCache.com.