Forest Laboratories (NYSE:FRX) Looks Dismal After Lexapro

No spin can remove the impact of losing Lexapro's patent to expiration in March 2012.

Barclays says, "Outlook and investment thesis remain unchanged following Forest's 3Q11 report yesterday. Supporting our view, despite the sizable 3Q11 EPS beat - significantly lower-than-expected operating spend having driven most of the positive surprise and the long-term outlook for SG&A and R&D having changed only modestly versus previous expectations, suggesting unlikely change to trough EPS following Lexapro's patent expiry in March 2012. This is consistent with management's longstanding plan to maintain sales/marketing/promo spend post-Lexapro patent expiry, supporting new product pipeline launches.

"Nevertheless, magnitude of earnings required to fill the projected hole with Lexapro's patent expiry remains large. Even assuming successful commercialization of Forest's late-stage development pipeline, we estimate FY13 EPS at $1.09 -- a sharp drop from our revised FY12 estimate of $4.22. Revisiting our Equal Weight/Neutral rating may require more meaningful drivers beyond current expectations for pipeline opportunities."

Barclays maintains an "Equalweight" rating on Forest Laboratories (FRX), which closed Wednesday at $31.88, down $0.38 or 1.18 percent. Barclays did increase their price target on Forest from $37 to $38 for now.