Forest Laboratories, Incorporated (FRX) 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. Its products in the United States consist of branded ethical drug specialties marketed directly or detailed to physicians by its sales forces, Forest Pharmaceuticals, Forest Therapeutics, Forest Healthcare, Forest Ethicare and Forest Specialty Sales.
The company's products include Lexapro, the selective serotonin reuptake inhibitor for the treatment of major depression and generalized anxiety disorder; Namenda, its N-methyl-D-aspartate antagonist for the treatment of moderate to severe Alzheimer's disease; Benicar, an angiotensin receptor blocker for the treatment of hypertension, which it co-promotes with Sankyo, and Campral, for the maintenance of alcohol abstinence.
Forest Labs has well-established franchises in therapeutic areas of the central nervous, cardiovascular and respiratory systems, and they are always exploring new product opportunities that address a range of health conditions. The company has a unique approach to product development by licensing promising new products from innovative companies worldwide at virtually every stage of development.
The company looks very good fundamentally with attractive operating margins, a strong return on equity and superior earnings per share growth rates. The latest revenues for Forest Laboratories surged 18 percent to $893 million from $757 million in the year-ago period. Revenues were comprised of net sales of $830.4 million, an increase of 16 percent from $714.9 million in the year-ago period Based on the stronger-than-projected performance of their promoted products, the company has increased its expectations for fully diluted earning per share for the fiscal year ending March 31, 2007 to $2.79-$2.84 from prior guidance of $2.60-$2.65 per share.
Technically the stock is forming a nice Elliot Wave-4 buy pattern projecting gains into the $62 per share area as depicted in Figure 2 below. Forest Labs has a very liquid options market, making them a viable trading alternative for the options strategist. The stock does have LEAPS, allowing the trader to use longer-term strategies if desired to capture this potential bullish move.
Figure 1: 12-Month Price and Volume Chart for Forest Laboratories
Figure 2: Elliot Wave-4 Buy Pattern for Forest Laboratories Incorporated
Happy Trading.
Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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