Forest Labs Unveils Restructuring

Forest Laboratories Inc. (FRX) outlined plans to trim $500 million in costs by 2016, while scaling back its research and development efforts and reducing its work force.

The company said about $270 million of the savings will come from streamlining and realigning its research and development arm, while $150 million will result from cutting marketing expenses, with the remaining from reducing general, administrative and other expenses.

The moves comes as new Chief Executive Brenton Saunders puts his stamp on the company and follows similar plans by the others in the pharmaceutical industry to scale back R&D spending as the companies put less emphasis on in-house efforts to develop potential blockbuster drugs.

Like its peers, Forest Labs has lost market exclusivity on major drugs, including its antidepressant Lexapro, but has managed to drive up sales with the development of new drugs and licensing opportunities. It named Mr. Saunders -- formerly head of Bausch & Lomb Holdings Inc. -- as CEO in September.

Forest said about $110 million in cost cutting will come from "headcount savings," although sales staff and employees involved in late-stage R&D won't be subject to those cuts. The company didn't outline how many jobs it intends to eliminate.

Forest said it hopes to achieve 60% to 75% of the cost savings by 2015.

The company also unveiled plans Monday to launch a $1 billion debt offering and a share buyback of the same amount.

Separately, Forest Labs agreed to acquire exclusive U.S. rights to Merck & Co.'s (MRK) sublingual tablets for adults with schizophrenia and bipolar disorder for $240 million upfront, plus potential milestone payments.

Forest's shares were up 3.3% to $52.99 in premarket trading. Shares are up 45% year-to-date from Friday's close of $51.31.

Write to Everdeen Mason at [e-mail]

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