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Article by DailyStocks_admin    (12-29-08 04:49 AM)

The Daily Magic Formula Stock for 12/27/2008 is Forest Laboratories Inc. According to the Magic Formula Investing Web Site, the ebit yield is 21% and the EBIT ROIC is >100%.

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Forest Laboratories, Inc. and its subsidiaries develop, manufacture and sell both branded and generic forms of ethical drug products which require a physician's prescription, as well as non-prescription pharmaceutical products sold over-the-counter. Our most important United States products consist of branded ethical drug specialties marketed directly, or "detailed," to physicians by our Forest Pharmaceuticals, Forest Therapeutics, Forest Healthcare, Forest Ethicare and Forest Specialty Sales salesforces. We emphasize detailing to physicians of those branded ethical drugs which we believe have the most potential for growth and benefit to patients, and the development and introduction of new products, including products developed in collaboration with licensing partners.

Our products include those developed by us and those acquired from other pharmaceutical companies and integrated into our marketing and distribution systems.

We are a Delaware corporation organized in 1956, and our principal executive offices are located at 909 Third Avenue, New York, New York 10022 (telephone number 212-421-7850). Our corporate website address is http://www.frx.com. We make all electronic filings with the Securities and Exchange Commission (or SEC), including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those Reports available on our corporate website free of charge as soon as practicable after filing with or furnishing to the SEC.

Recent Developments

Bystolic™: In December 2007 we received approval from the United States Food and Drug Administration (or FDA) for the marketing of Bystolic for the treatment of hypertension. We commenced the sale and marketing of Bystolic in January 2008. Bystolic is a novel beta-1 selective beta-blocker with vasodilating properties that we believe may provide certain advantages compared to other beta-blockers on the market. In its Phase III study program, Bystolic demonstrated significant reductions in sitting diastolic and systolic blood pressure in a general hypertension population. The studies also found that Bystolic was well tolerated, with a low incidence of side effects traditionally associated with beta-blockers. Bystolic has received five years of marketing exclusivity under the Hatch-Waxman legislation and is also covered by a U.S. pharmaceutical composition of matter patent set to expire in 2020 which may offer additional exclusivity. See " Business – Patents and Trademarks ." Hypertension affects approximately 72 million adults in the United States and a substantial number of patients diagnosed with hypertension have not reduced their blood pressure to an acceptable range.

We plan to file a New Drug Application (or NDA) in early calendar 2009 for a congestive heart failure indication based on a completed Phase III study.

We license exclusive U.S. and Canadian rights to Bystolic from Mylan Inc. (or Mylan). In February 2008, we amended our license agreement with Mylan to terminate Mylan’s further commercial rights for Bystolic in the U.S. and Canada and to reduce future payment obligations to Mylan. Pursuant to the amendment, we made a one-time cash payment of $370 million to Mylan. Following such payment, we remain obligated to pay Mylan its original contractual royalties for a period of three years, after which our royalty rate will be reduced.

Milnacipran: In January 2004, we entered into a license and collaboration agreement with Cypress Bioscience, Inc. (or Cypress) for the development and marketing in the United States of milnacipran. An NDA was submitted in December 2006 for the use of milnacipran for the treatment of fibromyalgia syndrome (or FMS). FDA action with respect to this NDA is expected in October 2008. FMS is a frequent cause of chronic, widespread pain and is estimated to affect six to twelve million people in the United States. There is currently only one product approved by the FDA for the treatment of this disorder. Pursuant to the collaboration agreement, we paid Cypress an upfront license fee, milestone payments on the achievement of specific product development milestones, and we will pay an additional milestone payment upon FDA approval of the product. We will also pay Cypress royalties based on net sales of the product following approval. We will be responsible for funding further development activities, which will be jointly managed by the two companies, and will have responsibility for sales and marketing activities, with Cypress having the option to perform up to 25% of physician details on a fee-for-service basis. The license agreement includes two patents covering the use of milnacipran for the treatment of FMS. In addition, we believe that, as a new chemical entity not previously approved by the FDA, milnacipran will qualify for five years of exclusivity under the Hatch-Waxman Act.

Cerexa, Inc.: Effective January 10, 2007, we acquired Cerexa, Inc. (or Cerexa), a biopharmaceutical company based in Alameda, California, in a cash merger pursuant to which Cerexa became a wholly-owned subsidiary of the Company.

Pursuant to the merger, we acquired worldwide development and marketing rights (excluding Japan) to ceftaroline acetate (or ceftaroline), a next generation, broad spectrum, hospital-based injectable cephalosporin antibiotic that exhibits bactericidal activity against the most resistant strains of gram-positive bacteria, including MRSA (methicillin resistant Staphylococcus aureus) as demonstrated by a completed Phase II comparative trial in patients with complicated skin and skin structure infections (or cSSSI). Ceftaroline has also demonstrated bactericidal activity against penicillin resistant Streptococcus pneumonia and common gram-negative bacteria. Ceftaroline is being developed initially for the cSSSI indication and for the treatment of community acquired pneumonia (or CAP). Two Phase III studies of ceftaroline for cSSSI have completed enrollment. Additionally, two Phase III studies in CAP have begun enrollment. We anticipate the cSSSI results in mid 2008 and the CAP results in calendar 2009. Based on positive results, we anticipate submitting an NDA to the FDA by the end of calendar 2009.

The acquisition of Cerexa also included a second development stage hospital-based antibiotic, ME1036, which has shown activity against both aerobic and anaerobic gram-positive and gram-negative bacteria, including common drug-resistant pathogens, such as MRSA, in preclinical studies. ME1036, for which we have worldwide rights, is currently in Phase I testing and is expected to move into Phase II clinical studies in early calendar 2009.

The rights to ceftaroline and ME1036 are in-licensed by Cerexa on an exclusive basis from Takeda Pharmaceutical Company and Meiji Seika Kaisha, Ltd., respectively.

We paid cash consideration of approximately $494 million in connection with the merger and certain related expenses. We will be obligated to pay an additional $100 million in the event that annual United States sales of ceftaroline exceed $500 million during the five year period following product launch. The merger consideration paid at closing was expensed in fiscal 2007 as purchased in-process research and development.

NXL104: In January 2008, we entered into an agreement with Novexel, S.A. (or Novexel) for the development, manufacture and commercialization of Novexel’s novel intravenous beta lactamase inhibitor, NXL104 in combination with our ceftaroline compound. NXL104 is designed to be co-administered with select antibiotics to enhance their spectrum of activity. Under the terms of the license, we received the exclusive rights to administer NXL104 with ceftaroline as a combination product in North America. We intend to initiate Phase I studies of the ceftaroline/NXL104 combination during calendar 2009. We also received a first negotiation right in North America to an additional NXL104 combination with ceftazidime, a cephalosporin antibiotic having a different spectrum of activity compared to ceftaroline. This combination is currently being studied in Phase I clinical trials conducted by Novexel.

NXL104 inhibits bacterial enzymes called beta-lactamases that break down beta-lactam antibiotics (in particular penicillins and cephalosporins). Beta-lactamase inhibition represents a mechanism for counteracting resistance and enhancing broad-spectrum activity of beta-lactam antibiotics. A composition of matter patent which claims NXL104 would provide protection for the ceftaroline/NXL104 combination product until 2022, subject to possible patent term extension.

Under the terms of the agreement, we made an upfront license payment of approximately $110 million to Novexel. We will fund development and commercialization of the ceftaroline/NXL104 combination. Additional milestone payments to Novexel if the combination product is successfully developed could total a further $110 million. Following the product’s regulatory marketing approval, we will pay Novexel a low double digit royalty on product sales throughout North America.

Linaclotide: In September 2007, we entered into a 50/50 partnership in the United States with Ironwood Pharmaceuticals, Inc. (or Ironwood, formerly known as Microbia, Inc.) to co-develop and co-market Ironwood’s first-in-class compound linaclotide. Linaclotide is currently being investigated for the treatment of constipation-predominant irritable bowel syndrome (or IBS-C), chronic constipation (or CC) and other gastrointestinal disorders.

Under the terms of the agreement, we initially paid Ironwood $70 million in licensing fees. Ironwood and Forest will jointly and equally fund development and commercialization of linaclotide in the United States, sharing profits equally. Additionally, we will have exclusive rights in Canada and Mexico and will pay Ironwood a royalty on sales in these countries.

Linaclotide is an agonist of the guanylate cyclase type-C receptor found in the intestine and acts by a mechanism distinct from previously developed products for IBS-C and CC. Linaclotide is administered orally but acts locally in the intestine with no measurable systemic exposure.

One out of six adults in developed countries suffers from IBS, a chronic condition marked by abdominal pain and disturbed bowel function. IBS accounts for 12% of adult visits to primary care physicians and is the most common disorder diagnosed by gastroenterologists. Health care costs associated with IBS exceed $25 billion annually. IBS patients fall into three subgroups – constipation-predominant IBS-C, diarrhea-predominant (or IBS-D), and alternating (or IBS-A) – and 30% to 40% of these patients suffer from IBS-C. There are currently few available therapies to treat the nine million U.S. patients diagnosed with IBS-C.

As many as 26 million Americans suffer from CC. Patients with CC often experience hard and lumpy stools, straining during defecation, a sensation of incomplete evacuation and fewer than three bowel movements per week. The discomfort of CC significantly affects patient’s quality of life by impairing their ability to work and participate in typical daily activities.

In March 2008, we announced positive top-line results from two Phase II(b) randomized, double-blind, placebo-controlled studies assessing the safety, therapeutic effect and dose response of four different once-daily doses of linaclotide: 75 mcg, 150 mcg, 300 mcg, and 600 mcg. The first study examined the effects of linaclotide in patients with CC, while the second study examined its effects in patients with IBS-C. The analysis of the CC study data and the IBS-C study data indicate that each study met its primary endpoint. Linaclotide was well tolerated at all doses. Based on this data we anticipate initiating Phase III studies in both indications in the second half of calendar 2008.

Aclidinium (LAS 34273) : In April 2006, we entered into a collaboration and license agreement with Laboratorios Almirall, S.A. (or Almirall), a pharmaceutical company headquartered in Barcelona, Spain, for the development and exclusive United States marketing rights to aclidinium, Almirall’s novel long-acting muscarinic antagonist. Aclidinium is being developed as an inhaled therapy for chronic obstructive pulmonary disease (or COPD). Aclidinium has been evaluated in Phase II studies that demonstrate that it has a fast onset of action and provides 24 hours of bronchodilation when administered once-daily. An international Phase III program is currently being conducted by us and Almirall. Enrollment has been completed and we expect top-line results to be available in the second half of calendar 2008. Aclidinium is designed to have specific action in the lungs and is believed to be rapidly metabolized in the lungs with limited systemic exposure. Studies to date support a favorable side effects profile. The product is being developed in a Multi-Dose Dry Powder Inhaler (or MDPI) which we believe represents an improvement in drug delivery over currently available devices.

COPD is a debilitating respiratory condition that includes two related lung diseases: chronic bronchitis and emphysema. It affects approximately 24 million Americans, a population even larger than the 20 million who suffer from asthma. However, COPD frequently goes undiagnosed and untreated because it is difficult to identify in its early stages. The primary cause of COPD is prolonged cigarette smoking. It is the fourth leading cause of death in the United States after heart disease, cancer and stroke. According to the National Heart, Lung and Blood Institute, COPD’s prevalence and associated death rate are rising. In 2020, COPD is projected to become the third leading cause of death in the United States. Today, the economic burden of COPD on the U.S. healthcare system is substantial, estimated at over $30 billion annually.

Under the terms of the agreement, we made an upfront payment of $60 million to Almirall in May 2006, a development milestone payment in May 2007 and may be obligated to pay future milestone payments. In addition, Almirall will receive royalty payments based on aclidinium sales. Forest and Almirall will jointly oversee the development and regulatory approval of aclidinium and share all expenses for current and future development programs. Almirall has granted us certain rights of first negotiation for other Almirall respiratory products that could be combined with aclidinium. Pursuant to such rights, we have commenced the development of a fixed-dose combination of aclidinium and the beta-agonist formoterol, which is currently in Phase II testing.

We will be responsible for sales and marketing of aclidinium in the U.S. and Almirall has retained an option to co-promote the product in the U.S. in the future while retaining commercialization rights for the rest of the world . In addition to five years of Hatch-Waxman exclusivity granted upon approval, aclidinium is protected by an issued U.S. composition of matter patent expiring in September 2020. We expect a patent term extension under the Drug Price Competition and Patent Term Restoration Act.

Lexapro®: In September 2002, we launched Lexapro (escitalopram oxalate), a single isomer version of citalopram HBr for the treatment of major depression, following approval of the product by the FDA in August 2002. Citalopram is a racemic mixture with two mirror image molecules, the S- and R-isomers. The S-isomer of citalopram is the active isomer in terms of its contribution to citalopram's antidepressant effects, while the R-isomer does not contribute to the antidepressant activity. With Lexapro, the R-isomer has been removed, leaving only the active S-isomer. Clinical trials demonstrate that Lexapro is a more potent selective serotonin reuptake inhibitor (or SSRI) than its parent compound, and confirm the antidepressant activity of Lexapro in all major clinical measures of depression. During fiscal 2008, sales of Lexapro were $2,292,036,000. According to data published by IMS, an independent prescription audit firm, as of April 30, 2008, Lexapro achieved a 17.5% share of total prescriptions for antidepressants in the SSRI/SNRI category.

In December 2003, Lexapro received FDA approval for the treatment of generalized anxiety disorder (or GAD), a disorder characterized by excessive anxiety and worry about everyday events or activities for a period of six months or more. The approval was based upon three GAD studies involving Lexapro which demonstrated significantly greater improvement in anxiety symptoms relative to placebo. Forest began marketing Lexapro for the treatment of GAD in January 2004.

In May 2008, we announced results from a Phase III study of Lexapro in the treatment of adolescents, aged 12-17, with Major Depressive Disorder (or MDD). These results indicate that patients treated with Lexapro experienced statistically significant improvement in symptoms of depression, as measured by the study’s primary endpoint, the Children’s Depression Rating Scale-Revised (or CDRS-R), compared to placebo. The CDRS-R is a commonly used clinician-rated instrument that covers 17 symptom areas of depression relevant to adolescents, including impaired schoolwork, difficulty having fun, social withdrawal, physical complaints and low self-esteem. Based on these results, along with an earlier study conducted with the racemate, we submitted a supplemental NDA to the FDA in May 2008 for Lexapro, to expand the indication to include the treatment of MDD in adolescent patients.

Lexapro was developed by us and H. Lundbeck A/S (or Lundbeck), a Danish pharmaceutical firm which licenses to us the exclusive United States marketing rights to this compound, as well as Celexa.

Lexapro is covered by a U.S. composition of matter patent which expires March 14, 2012, inclusive of additional exclusivity granted as a result of a pediatric study we performed. In September 2007, the United States Court of Appeals for the Federal Circuit affirmed a July 2006 decision by the United States District Court for the District of Delaware which determined that our composition of matter patent for Lexapro is valid and upheld our injunction against Teva Pharmaceuticals (or Teva) preventing Teva from launching a generic equivalent to Lexapro. During fiscal 2008, Caraco Pharmaceutical Laboratories (or Caraco), a generic manufacturer, filed an Abbreviated New Drug Application (or ANDA) seeking approval to market a generic version of Lexapro. We, together with Lundbeck, have commenced patent infringement litigation against Caraco which is pending in the United States District Court for the Eastern District of Michigan. See "Item 3. Legal Proceedings ".

Namenda®: In October 2003, Namenda (memantine HC1) was approved for marketing and distribution by the FDA for the treatment of moderate to severe Alzheimer's disease. Namenda is a moderate-affinity, uncompetitive NMDA receptor antagonist that modulates the effects of glutamate - a neurotransmitter found in the brain. Excessive levels of glutamate are hypothesized to contribute to the dysfunction and eventual death of brain cells observed in Alzheimer's disease. We believe that Namenda's mechanism of action is distinct from other drugs currently available to treat Alzheimer's disease. We obtained the exclusive rights to develop and market memantine in the United States by license agreement with Merz Pharma GmbH of Germany (or Merz), the originator of the product.

Namenda achieved sales of $829,657,000 during our 2008 fiscal year and, according to data published by IMS, an independent prescription audit firm, as of April 30, 2008, Namenda achieved a 33.4% share of total prescriptions in the Alzheimer’s market. Namenda is covered by a U.S. patent which expires in 2010 and should be subject to a patent term extension until September 2013. In January 2008, we and Merz commenced patent infringement litigation against several generic manufacturers who had filed ANDAs seeking FDA approval to market generic equivalents of Namenda. The actions are pending in the United States District Court for the District of Delaware. We intend to fully enforce our patent rights for Namenda.

In February 2008, we received preliminary results of a Phase III study of memantine HC1 in a novel once-daily formulation. The study evaluated the efficacy, safety and tolerability of an innovative, proprietary, 28 mg memantine extended-release, once-daily formulation compared to placebo in outpatients with moderate to severe Alzheimer’s disease currently treated with a cholinesterase inhibitor. The results indicate that patients treated with memantine 28 mg extended-release formulation experienced statistically significant benefits in cognition and clinical global status compared to placebo. Based on the results of this study, we intend to prepare and file an NDA for this new formulation.

Finally, during fiscal 2006 we completed a Phase II "proof of concept" study of neramexane, in moderate to severe Alzheimer’s disease. Neramexane is a second NMDA receptor antagonist which we licensed from Merz. Based on an analysis of the results of this study, we have determined to discontinue development of the product.

Benicar® Co-Promotion with Daiichi Sankyo: In December 2001, we entered into a co-promotion agreement with Daiichi Sankyo (or Sankyo) for the co-promotion in the United States of Benicar (olmesartan medoxomil) an angiotensin receptor blocker (or ARB) discovered and developed by Sankyo for the treatment of hypertension. The NDA for Benicar was approved by the FDA in April 2002. In August 2003, the FDA approved Benicar HCT®, a combination of Benicar and hydrochlorothiazide, which is also jointly promoted by Forest and Sankyo.

Pursuant to the co-promotion agreement with Sankyo, we shared with Sankyo in the detailing of the product to physicians, hospitals, managed care organizations and other institutional users of pharmaceutical products over a six-year period ended March 31, 2008 (we subsequently agreed to perform limited additional detailing through May 2008). We received co-promotion income based upon the relative contribution of the two companies to the co-promotion effort through fiscal year ended March 31, 2008, and will receive residual payments on a reduced basis following the end of the co-promotion period based on sales levels achieved through the fiscal year ending March 31, 2014. During fiscal 2008, we received co-promotion income of $212,100,000. According to market share data published by IMS, an independent prescription audit firm, as of April 30, 2008, Benicar and Benicar HCT achieved a combined 17.0% share of total prescriptions in the ARB market.

On May 12, 2008, we and Sankyo announced that effective July 1, 2008, we have terminated our co-promotion agreement for Azor™ (amlodipine and olmesartan medoxomil), Sankyo’s fixed-dose combination of two antihypertensives, the calcium channel blocker amlodipine besylate and the angiotensin receptor blocker olmesartan medoxomil. We will record a one-time charge of approximately $44,100,000 which is composed of a one-time payment to Sankyo of approximately $26,600,000 related to the termination of the agreement and $17,500,000 related to the unamortized portion of the initial upfront payment. We determined that the resources we had allocated to the Azor co-promotion will be better utilized in providing additional support for our other currently marketed products.

RGH-188: In November 2004, we entered into a collaboration and license agreement with Gedeon Richter Ltd. (or Richter), based in Budapest, Hungary, for the development of and exclusive United States rights to Richter's RGH-188 and related compounds, being developed as an atypical antipsychotic for the treatment of schizophrenia, bipolar mania and other psychiatric conditions.

During fiscal 2008, we received top-line results of a Phase II study in schizophrenia that indicated that RGH-188 demonstrated a nominally statistically significant ( i.e. , not adjusted for multiple comparisons) therapeutic effect compared to placebo in a low-dose arm and a numerical improvement compared to placebo in a high-dose arm that did not reach nominal statistical significance. Based on the review of the results, we will be initiating a Phase II dose-ranging study in schizophrenic patients in the first half of fiscal 2009. An additional Phase II study of RGH-188 for the treatment of bipolar mania was commenced in 2007 and results are expected in calendar 2008. RGH-188 is currently claimed by a U.S. Patent application which, if issued, will expire in 2024.

Upon execution of the collaboration agreement, we paid Richter an upfront license fee and we will be obligated to pay further milestone payments if development and commercialization are successfully completed. We are also obligated to pay Richter a royalty based on net sales and to purchase our requirements of the active pharmaceutical ingredient from them. Our license grants us exclusive development and commercialization rights in the United States and Canada. We will collaborate with Richter in product development and will jointly fund such development activities.

RGH-896; mGLUR1/5 Compounds: In November 2005, we entered into two new collaboration agreements with Richter with whom we are currently developing RGH-188 for the treatment of schizophrenia and bipolar mania.

The first collaboration will focus upon a group of compounds that target the NR2B receptor that will be developed for the treatment of chronic pain and other central nervous system (or CNS) conditions. RGH-896 is the first of this group and is currently in early clinical development. We paid Richter an upfront payment and will become obligated to pay milestone payments based upon achievement of development objectives. The two companies will jointly fund the development program. Forest has exclusive marketing rights in the United States and Canada and will pay Richter a royalty on net sales. RGH-896 has patent applications that, if allowed, will provide us patent protection until at least 2022.

The second new collaboration will focus upon a series of novel compounds that target metabotropic glutamate receptors (or mGLUR1/5). mGLUR1/5 antagonists represent novel potential agents for the treatment of anxiety, depression and other CNS conditions. Richter and Forest intend to advance promising leads to clinical trials within the next two to three years. We paid Richter an upfront payment and will pay milestone payments based upon the achievement of development objectives in addition to royalties. We will have exclusive marketing rights in North America while Richter will retain exclusive rights in Europe and countries comprising the former Soviet Union. The two companies will share rights in other countries.

GRC 3886: In September 2004, we entered into a collaboration and license agreement with Glenmark Pharmaceuticals Ltd. (or Glenmark), of Mumbai, India, covering Glenmark's PDE4 inhibitor referred to as GRC 3886. GRC 3886 is a novel, orally available phosphodiesterase-IV (or PDE4) inhibitor in development for COPD and asthma, and may also have use in other conditions.

Bronchodilators and anticholinergics are the most commonly prescribed therapies in COPD, but do not address the underlying inflammation. PDE4 inhibitors represent a new class of drugs that are interesting because they have the potential to relax the smooth muscles of the airway resulting in bronchodilation, as well as inhibit inflammatory cell activity, thus providing both short-term relief and control over the progression of the disease.

We have commenced a Phase II study of this compound for the COPD indication with results expected in the second half of calendar 2009. GRC 3886 is currently claimed by U.S. patent applications which, if issued, will expire in 2024.

We will develop, register and commercialize GRC 3886 for the North American market, while Glenmark will retain commercialization rights for the rest of the world. We paid Glenmark an upfront payment upon initiation of the agreement and additional milestone payments upon the successful completion of the antigen challenge study in asthma patients and in connection with proceeding with the Phase II study program. We will be required to pay future milestones if the development and commercialization of the product is successfully completed in the North American market. Additionally, after commercial launch, Glenmark will earn a royalty from us on net sales of the product, and will supply all active pharmaceutical ingredient required by us.

Campral®: Campral (acamprosate calcium) was approved by the FDA in July 2004, for the maintenance of abstinence from alcohol in patients with alcohol dependence who are abstinent at treatment initiation. Sales of Campral were $30,921,000 in fiscal 2008.

The mechanism of action of Campral in maintenance of alcohol abstinence is not completely understood. Chronic alcohol exposure is hypothesized to alter the normal balance between neuronal excitation and inhibition. Campral interacts with neurotransmitter systems and is hypothesized to restore the normal balance. This mechanism of action is different from that ascribed to other currently available medications, which either block the "high" associated with alcohol consumption or induce vomiting if alcohol is ingested. Treatment with Campral should be part of a comprehensive management program that includes psychosocial support.

Campral was developed by Merck Sante s.a.s., a subsidiary of Merck KGaA of Darmstadt, Germany, and is licensed to us for exclusive marketing and distribution in the United States. Our license requires us to purchase our requirements of Campral's active pharmaceutical ingredient from Merck Sante. Campral’s five years of exclusivity under the Hatch-Waxman Act will expire in fiscal 2010.

Termination of Desmoteplase License: During fiscal 2008, we terminated our license agreement for Desmoteplase, being developed for the treatment of acute ischemic stroke. We terminated this license based upon the receipt of unfavorable data upon completion of a Phase II study.

Share Repurchase Program: On May 18, 2006 our Board of Directors (or the Board) authorized a share repurchase program for up to 25 million shares of our common stock (or the 2007 Repurchase Program). On August 13, 2007 the Board authorized the purchase of an additional 10 million shares of common stock. The authorizations became effective immediately and have no set expiration dates. We expect to make the repurchases from time to time on the open market, depending on market conditions. As of May 29, 2008, 25,843,600 shares have been repurchased and we continue to have authority to purchase up to an additional 9,156,400 shares under the 2007 Repurchase Program.

Forward Looking Statements: Except for the historical information contained herein, this report contains forward looking statements that involve a number of risks and uncertainties, including the difficulty of predicting FDA approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, the impact of legislative and regulatory developments on the manufacture and marketing of pharmaceutical products and the uncertainty and timing of the development and launch of new pharmaceutical products.

Principal Products

We actively promote in the United States those branded products which we believe have the most potential for growth and patient benefit, and which enable our salesforces to concentrate on groups of physicians who are high prescribers of our products. Such products include: Lexapro, our SSRI for the treatment of major depression and GAD; Namenda, our NMDA antagonist for the treatment of moderate to severe Alzheimer's disease; Bystolic, our novel beta-blocker for the treatment of hypertension; and Campral, for the maintenance of alcohol abstinence.


Howard Solomon 80 1964
Chairman of the Board and Chief Executive Officer. Mr. Solomon has served
as our Chief Executive Officer since 1977.

Lawrence S. Olanoff, M.D., Ph.D. 56 2006
President and Chief Operating Officer since October 2006. President and Chief
Executive Officer at Celsion Corporation from July 2005 to October 2006. For
the ten years prior to July 2005, Dr. Olanoff served as Executive Vice President
– Chief Science Officer at Forest.

Nesli Basgoz, M.D. 50 2006
Associate Chief for Clinical Affairs, Division of Infectious Diseases,
Massachusetts General Hospital (MGH). Dr. Basgoz previously served as Clinical
Director, Infectious Diseases Division of MGH and serves as Associate Professor
of Medicine, Harvard Medical School.

William J. Candee, III 81 1959
Co-Chairman of the Board of Directors and a principal of TXX Services,
LLC, a transportation company with operations in New York, New Jersey and
Connecticut. For more than 5 years prior to June 2004, Mr. Candee was a member of
or of counsel to the law firm of Rivkin Radler, LLP.

George S. Cohan 84 1977
President, The George Cohan Company, Inc., consultants, since June 1989.

Dan L. Goldwasser 68 1977
Shareholder, Vedder Price, P.C., Attorneys at Law, since May 1992.

Kenneth E. Goodman 60 1998
Former President and Chief Operating Officer of Forest (December 1998 to
September 2006). For eighteen years prior thereto, Mr. Goodman served as
Vice President – Finance and Chief Financial Officer and in addition served as
Executive Vice President – Operations since February 1998.

Lester B. Salans, M.D. 72 1998
Clinical Professor and member of the Clinical Attending Staff Internal Medicine,
Mount Sinai Medical School. Prior thereto Dr. Salans was Vice President –
Research at Sandoz Pharmaceutical Corporation.


Frank Murdolo

Good morning everyone. This is Frank Murdolo. Thanks for joining us today for the second quarter fiscal 2009 conference call. Joining me this morning is Larry Olanoff, our President and Chief Operating Officer, and Frank Perier, our Senior Vice President of Finance and Chief Financial Officer. By now, each of you should have seen the earnings release that we put on the wires around eight o'clock this morning, and the release is also available at our website, www.frx.com.

By way of Safe Harbor statement, let me add that various remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements and within the meaning of the Private Securities Litigation Reform Act of 1995 and actual results may be different

That being said, let me turn the call over to Larry, who will comment on the business during the quarter.

Larry Olanoff

Good morning, everyone. I will start today's call by reviewing key company events for the quarter and then turn the call to Frank Perier who will review the financial details of the quarter.

Our underlying business continued to perform well during the quarter, as we saw solid prescription volume for all of our key marketed products. Reporting earnings in the just completed quarter totaled $0.80 per share.

In addition to strong financial performance, we have also reported on several key milestone events, associated with advances in our late-stage product pipeline during the quarter, including positive Phase III study results for aclidinium for the treatment of chronic obstructive pulmonary disease and positive Phase II study results for cariprazine, also known as RGH-188 in the treatment of bipolar I disorder.

Yesterday, we and our partners Cypress Bioscience announced that the FDA advises that it was unable to take final action by the scheduled PDUFA date of October 18th on our new drug application for milnacipran for the treatment the fibromyalgia. Milnacipran was filed for the treatment of fibromyalgia in December 2007, on the basis of two positive Phase III trials conducted in the US.

The NDA included some 2,000 fibromyalgia patients in total, as well as the previous safety experience in clinical trials and in medical practice for milnacipran in indications other than fibromyalgia. The safety profile for the product was similar to that of other SNRIs in use in the US for various indications. Prior to the PDUFA date the NDA review had proceeded in a highly interactive fashion between the sponsor companies Forest and Cypress, and the agency, and accordingly the delay was quite unexpected.

The agency has not requested any additional information, but did indicate that a clinical data question related to the NDA submission required confirmation. They indicated that their assessment could be completed in a matter of weeks, but could not confirm specific timing and could not provide further information as to the reason for the delay. We continue to plan for a first quarter 2009 product launch meeting.

Regarding our in-line products, Lexapro sales in the quarter totaled $584 million, an increase of 4.4% year-over-year, while Namenda sales were $246 million during the quarter providing for growth of 28% year-over-year.

At the end of the quarter the key national wholesalers held about 2.2 weeks of Lexapro inventory, compared with two weeks at the end of last quarter, which equates to about $9 million in sales. They also held about 2.5 weeks of Namenda inventory, compared with 1.9 weeks at the end of the June quarter, which represents approximately $11 million in sales. Namenda sales increased sequentially by $27 million.

Regarding Benicar, projected end-user net sales, which are recorded by our partner Daiichi Sankyo were approximately $204.9 million in the quarter with our partnership pre-tax earnings for the quarter totaling $45.4 million.

Bystolic sales in the quarter were $14.2 million following the launch at the end of January this year. The launch continues to track with expectations and we continue to see an encouraging mix of patients including significant proportions of those switching from generic beta blockers, those new to beta blockers, and those being maintained on Bystolic therapy. Presently over two-thirds of patients maybe characterized as continuing patients, which is indicative of the early success with Bystolic therapy.

Another positive measure of performance is the sustained high number of new physicians writing their first prescriptions each week along with a growing base of repeat prescribers. Both primary care physicians and cardiologists are prescribing the product and share amongst cardiologists exceeds that of the national share for beta blockers as a class. This is particularly important because like in many categories primary care physicians will often rely on the opinions and recommendations of specialists.

We are seeing steady growth in prescription volume through the initial launch phase with a majority of prescriptions written for 5-milligram tablets. This indicates that most patients are achieving sufficient blood pressure reductions at our starting dose and that the product is performing as we expected. We continue to make substantial progress relative to Bystolic's managed care goals on the coverage basis.

Overall, our access without any step-edit or any prior authorization restrictions covers over 85% of total beta blocker volume and with several recent tier two additions Bystolic now has unrestricted tier two coverage on 11 major national health plans.

Overall, we are pleased with the strong performance during the quarter from our in-line products and are excited about the positive clinical trial results we have reported.

I’ll now turn the call over to Frank, who’ll provide more details on the financial results.

Frank Perier

Thank you, Larry. Fiscal second quarter total revenues, which are inclusive of sales, pre-tax earnings from Benicar, interest and other income totaled $992.5 million, an increase of 8% from the year ago period.

Revenues were comprised of $925.6 million of product sales which increased 9.9% compared to last year, and $45.4 million of contract revenue from the Benicar Agreement, down 8.5% versus last year because we are no longer actively promoting the product, as well as $19.2 million of interest income.

Other contract revenue and other income in the quarter totaled $2.4 million. Gross margin in the quarter came in at 77.9%, slightly ahead of our expectations for the current fiscal year and ahead of last year's second fiscal quarter.

SG&A spending during the quarter was $326.3 million, up 16.3% from last year. In addition to our ongoing spending levels and support of inline products, this quarter included significant investment behind spending to support the launch of Bystolic, as well as pre-launch activities for Milnacipran.

Research and development spending was $146.4 million in the quarter, a decrease of 14.3% from the year ago period. For comparison purposes I would highlight that last year included a $70 million licensing charge in connection with the Ironwood Pharmaceuticals Agreement.

This quarter included approximately $36.5 million in milestone development expenses, and we continue to anticipate approximately $100 million of milestone expenses for the year. Last year's second quarter did not include any such milestone expenses.

Our effective tax rate in the quarter was 22.5%, slightly higher than expected due to the mix of earnings from higher rate jurisdictions.

During the quarter we repurchased 3.5 million shares for $101 million and have an additional 5.7 million shares of common stock available under the existing $35 million share repurchase program. Actual shares outstanding as of September 30th were 301,380,000 shares.

Our cash and marketable securities balance as of September 30th was approximately $2.6 billion, an increase of $95 million from last quarter after share repurchase. Of this, $641 million or 25% of our cash and marketable securities balances are domiciled domestically with the remainder maintained by our international subsidiaries.

Moving to our fiscal guidance for 2009, we now expect a fully diluted earnings per share for the fiscal year ended March 31, excluding the one-time charge related to the termination of the AZOR co-promotion agreement in the first quarter, will be in the range of $3.30 to $3.40 per share.

We continue to expect to spend approximately $100 million in development milestones. However, the timing of certain programs has shifted. With the re-instatement of the R&D tax credit, we expect the annual effective rate for the full fiscal year to be approximately 21.5%.

I will now turn the call back to Larry for a pipeline update.

Larry Olanoff

Thank you, Frank. As we move into the second half of fiscal 2009, we continue to be in the midst of a busy period where we will be receiving additional clinical trial results for later stage compounds and expect to file two supplemental NDAs.

In addition, we have a supplemental NDA action date in March of 2009 for Lexapro for the treatment of major depressive disorder in adolescents. We also continue to work towards a regulatory submission for Bystolic for congestive heart failure based on data from the senior study done by Menarini, and we anticipate filing a supplemental NDA in early 2009.

We recently reported positive Phase III data for aclidinium in the treatment of chronic obstructive pulmonary disease. We are now developing our plans for a pathway forward. We expect to meet with the FDA in early 2009 to review the acclaimed I and II trial results, and discuss filing and development plans.

Pending FDA feedback; our plan is to file the NDA with the acclaimed data in late calendar 2009 or early 2010. In addition, we will continue monotherapy development at higher, once daily doses or at different dose frequencies. The adverse event experienced from the acclaimed studies, suggest that higher doses will be well tolerated.

Lastly, the acclaimed results facilitate and potentially accelerate our strategy to develop a twice daily aclidinium formoterol combination.

For Septaraline, we have initiated two Phase III studies for community acquired pneumonia and we anticipate those results by second quarter 2009. Data from both the community acquired pneumonia, and complicated skin and skin structure infection studies, if supportive will serve as our planned late 2009 submission package to the FDA for initial marketing approval.

Regarding Linaclotide, the positive Phase IIb study results from a clinical trial in patients with irritable bowel disease were presented two weeks ago at the American College of Gastroenterology meeting. Analysis of the data indicates that once daily dosing of Linaclotide across a range of doses significantly reduced abdominal pain and significantly improved constipation symptoms in patients with IBS-C throughout the 12 week study period. Working with our partner, Ironwood Pharmaceuticals, we have initiated a comprehensive Phase III clinical program to evaluate Linaclotide safety and efficacy in patients with either constipation predominant IBS or chronic constipation. The constipation studies have been initiated and the IBS trials should start by early next year.

Turning to cariprazine, last month we announced preliminary top line results from a Phase II clinical trial in patients with acute mania associated with bipolar 1 disorder. The data show that patients treated with cariprazine experienced significant symptom improvement compared to placebo within the first week of treatment and at each subsequent time point study.

This potential indication may represent a significant opportunity for this compound in addition to its indication for schizophrenia, which we are pursuing. As previously reported for the schizophrenia indication we have initiated a Phase IIb study with our partner Gideon Richter, which will examine in greater detail a range of lower doses based on the encouraging results of the first Phase II study. This study is being performed in order to better determine an optimal dose to take into the planned Phase III program.

The Phase II PDE4 inhibitor program partnered with Glenmark for Oglemilast has moved into a proof-of-concept study in COPD, which is in progress.

While we continue to believe that our late stage product pipeline could collectively represent several billion dollars of potential product sales in the long-term, sufficient to replace the revenues lost due to patent expiries for Lexapro and Namenda, we must operate with the assumption that not all of our late stage programs will ultimately result in approved products or approved products that will achieve our peak sales projections.

Given this assumption, we view it necessary to double the commercial potential of our late stage pipeline by 2012, through the advancement of either our earlier stage programs, as well as the addition of new development opportunities.

Frank Murdolo

Thank you, Larry. I will now read some of the sales figures for our smaller products. Sales of Aerobid were $3.8 million, AeroChamber $3.2 million, Camprel $7.2, Celexa brand $3.2 million, Cervidil $15.3 million, Combunox $0.1 million, $Esgic 0.8 million, Europe $18.8 million, Generic $1.0 million, Infasurf $3.2 million, Lorcet $2.3 million, Monurol $0.4, Tessalon including generic $0.7, Thyroid $15.6, Tiazac brand $1.8, Tiazac generic $3.6. And that is the last of them.

So with that we will turn back to our operator to start our Q&A questions.

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