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