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Forest gains after unveiling restructuring

December 3, 2013 1:45 AM UTC

Forest Laboratories Inc. (NYSE:FRX) gained $5.01 (10%) to $56.32 on a newsy Monday after announcing a restructuring, debt offering, new share repurchase program and a marketing deal. The company said the restructuring will reduce operating costs by $500 million annually by the end of its fiscal year ending March 31, 2016. The changes come about two months after Brenton Saunders took over as president and CEO. About $270 million in savings is expected to come from "streamlining and realigning" the company's R&D organization and about $150 million will come from reducing marketing expenses "by better aligning" the company's "promotional activities with the lifecycle of products." Forest said it also will reduce headcount by about 500 (10%) as part of the restructuring, with the "largest reduction" coming from R&D. The company's sales force and employees with "key responsibility for submission" of late-stage R&D programs are excluded. At March 31, Forest had 5,800 employees.

Forest said it also plans to raise $1 billion through the sale of senior unsecured notes due 2021 primarily for an accelerated share repurchase program and bolt-on acquisitions. The company's board authorized a new share repurchase program of up to $1 billion, including $400 million under an accelerated repurchase program with Morgan Stanley. ...