* Full-year adjusted earnings forecast $0.95-$1.15/share vs.est $0.96
* Alzheimer's disease, depression drugs drive 2nd-quartersales
* Research and development costs fall 6 pct
* Shares rise 6 pct
By Zeba Siddiqui
Oct 22 (Reuters) - Forest Laboratories Inc's newchief executive signaled strategic changes that will help thedrugmaker focus on multiple new growth areas as it prepares tolose patent protection on another of its top-sellers.
Forest shares gained 6 percent to reach a more than six-yearhigh on Tuesday.
Forest relied heavily on its antidepressant Lexapro for muchof its sales until last year, when it lost protection on thedrug.
A subsequent hit to earnings invited criticism frombillionaire investor Carl Icahn, Forest's second-largestshareholder. CEO Brent Saunders' appointment was part of a dealthe company's board made with Icahn to avert a proxy fight thispast summer.
Over the past few months, Forest has launched several newproducts and its current development pipeline consists oftreatments for infectious disease, pain management and acuteheart failure, among others.
"There is pent-up demand for change at Forest," CEO Saunderstold analysts on Tuesday after the company reportedsecond-quarter earnings that were more than double what analystswere expecting, as sales of some recently launched products shotup.
Saunders, a former board member who started as Forest CEO inOctober, said he is evaluating Forest's international businessstrategy and would also look to reduce the company's coststructure, without providing additional details.
Share repurchases, dividends and "accretive acquisitions"are among some other areas where Saunders said the company willlook to deploy its cash as part of the strategic review. The CEOsaid he will elaborate on his plans by January 2014.
"Forest remains an outlier among its peers with over $3billion of cash on the balance sheet and better use of this cashappears to be a priority for the new CEO," J.P. MorganSecurities analyst Chris Scott said.
NEXT GENERATION DRIVES GROWTH
Forest said sales of its newly launched, or"next-generation" products, drove earnings growth in the secondquarter.
Sales of all such products, which include the chronicobstructive pulmonary disease drug Tudorza and extended-releaseversion of its Alzheimer's drug Namenda, rose about 50 percentto $303.0 million in the quarter.
Namenda, a long-time growth driver for Forest, is set tolose patent protection in 2015.
Forest launched the extended-release version, called NamendaXR, in June and is trying to transition all existing Namendapatients to the newer form of the drug. Sales across the Namendafranchise rose 11 percent in the quarter.
"Interestingly, management appeared more open to a hardswitch to Namenda XR (i.e., no longer shipping Namenda) at somepoint in the future," J.P. Morgan's Schott said in a note.
Tudorza, which Forest launched in December, brought in salesof about $16.7 million, up slightly from $15.9 million in thefirst quarter.
Forest said it expects full-year adjusted earnings of$0.95-$1.15 per share. This compares with analysts' expectationof $0.96, according to Thomson Reuters I/B/E/S.
Forest shares, which are up some 25 percent since thebeginning of this year, gained as much as 6 percent to $47.08 -a level the stock last hit in July 2007.
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