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Forest Labs 2Q profit down, cuts year forecasts

NEW YORK -- Forest Laboratories Inc. again cut its annual net income guidance and lowered its sales estimates Tuesday, citing lower sales of its Alzheimer's disease drug Namenda and other products along with greater expenses and higher taxes.

For years Forest's top-selling drug was the antidepressant Lexapro, but competing generic versions reached the market at the end of February and brand-name sales have plunged. The company said Tuesday that it expects lower sales from Namenda, its current best-selling product, because of changes in nursing home care policies. Forest also expects lower sales of its anti-infection drug Teflaro and irritable bowel syndrome drug Linzess.

The company said its taxes have increased because of the repeal of the research and development tax credit, and it expects $50 million in additional research and development costs because it has sped up enrollment in late-stage and life cycle development programs.

Shares of Forest declined 91 cents, or 2.5 percent, to $35.69 in morning trading.

Forest said its net income sank more than 90 percent in the fiscal second quarter ended in September, to $20.8 million, or 8 cents per share, from $249.8 million, or 91 cents per share. Excluding one-time items the company said it earned 15 cents per share compared with 95 cents per share a year earlier. With Lexapro off-patent, its revenue fell 35 percent, to $760.6 million from $1.17 billion.

Analysts expected income of 2 cents per share on revenue of $771 million, according to FactSet.

Forest said Lexapro sales dropped 93 percent to $44.7 million from $596.1 million. Namenda revenue grew 9 percent to $367.6 million, but the company cut its annual sales forecast for Namenda by about $85 million. It now expects sales of the drug to rise about 11 percent for the year rather than 17 percent.

"New initiatives to improve dementia care in nursing homes, while primarily directed toward reducing antipsychotic use, appear to have also reduced demand for Alzheimer's medications," Forest said in a press release.

Forest is now projecting adjusted income of 45 to 60 cents per share, down from 65 to 80 cents per share. It lowered its revenue estimate to $3.2 billion from $3.4 billion. The company previously cut its income forecast in June, saying generic competition for Lexapro was tougher than it expected.

Analysts expected net income of 78 cents per share and $3.26 billion in revenue, on average.