FOREST LABORATORIES INC, 10-K, 1999-06-29

FOREST LABORATORIES INC
10-K, 1999-06-29
PHARMACEUTICAL PREPARATIONS

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SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D. C. 20549

-----------
Form 10-K

(Mark One)
____
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
---- THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended March 31, 1999

----
/ X / TRANSITION REPORT PURSUANT TO SECTION 13 OR
---- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ______________________

Commission File No. 1-5438

FOREST LABORATORIES, INC.
-------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 11-1798614
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

909 Third Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)

Registrant's telephone number including
area code: (212) 421-7850

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $.10 par value American Stock Exchange

Rights to purchase one American Stock Exchange
one-hundredth share of Series A
Junior Participating Preferred
Stock, par value $1.00 per share

Securities registered pursuant to Section 12(g) of the Act:

None

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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

---- ----
YES / X / NO / /
---- ----

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
---
and will not be contained, to the best of the registrant's
knowledge, in the Proxy Statement incorporated by reference in
Part III of this Form 10-K or any amendment to this
----
Form 10-K / /.
----
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of June 21, 1999 is
$3,733,530,980.

Number of shares outstanding of registrant's Common Stock as of
June 21, 1999: 83,301,658.

The following documents are incorporated by reference herein:

Portions of the definitive proxy statement to be filed
pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934 in connection with the 1999 Annual
Meeting of Stockholders of registrant.

Portions of the registrant's Annual Report to Stockholders
for the fiscal year ended March 31, 1999.

---------------
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PART I
ITEM 1. BUSINESS
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GENERAL

Forest Laboratories, Inc. and its subsidiaries
(collectively, "Forest" or the "Company") 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.
Forest's most important United States products consist of branded
ethical drug specialties marketed directly, or "detailed," to
physicians by the Company's Forest Pharmaceuticals, Forest
Therapeutics and Forest Speciality Sales salesforces and its
controlled release line of generic products sold to wholesalers,
chain drug stores and generic distributors. In recent years the
Company has emphasized increased detailing to physicians of those
branded ethical drugs it believes have the most potential for
growth, and the introduction of new products acquired from other
companies or developed by the Company.

Forest's products include those developed by Forest and
those acquired from other pharmaceutical companies and integrated
into Forest's marketing and distribution systems. See "Recent
Developments."

Forest is a Delaware corporation organized in 1956, and
its principal executive offices are located at 909 Third Avenue,
New York, New York 10022 (telephone number (212)-421-7850).

RECENT DEVELOPMENTS

CELEXA-TM-: On July 17, 1998 the United States Food and
Drug Administration ("FDA") approved Forest's New Drug
Application (an "NDA") for Celexa (citalopram HBr), Forest's
selective serotonin reuptake inhibitor ("SSRI") for the treatment
of depression. Forest, together with its co-promotion partner,
the Parke-Davis division of the Warner-Lambert Company, commenced
detailing of Celexa in September 1998. Sales of Celexa were
$91,910,000 for the fiscal year ended March 31, 1999. According
to data published by IMS, an independent prescription audit firm,
Celexa has already achieved a 7.8% share of new prescriptions for
antidepressants in the SSRI category. Citalopram is currently
marketed in most European countries and is the leading
antidepressant in several European markets. Forest licenses the
United States rights to Celexa from H. Lundbeck A/S, a privately
held pharmaceutical company based in Copenhagen and the drug's
originator.

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In March 1998, Forest entered into an agreement with the
Parke-Davis division of the Warner-Lambert Company providing for
the co-promotion of Celexa by Forest and the Parke-Davis
salesforces for the three year period following the launch of the
product. Parke-Davis will be paid a co-promotion fee during the
co-promotion period and will receive a reduced fee for a three
year period thereafter. Management believes that the additional
promotional support by Parke-Davis, together with the efforts of
Forest's salesforces (which were expanded during the 1998 fiscal
year), contributed to the successful launch of Celexa in the
United States and will continue to contribute to the successful
marketing of the product.

Pursuant to an agreement dated July 1, 1997 among Forest
and a private investor group, the investors have funded $60
million of the development, pre-launch and costs of expanding
Forest's salesforces to promote Celexa over an approximate two-
year period. Pursuant to the agreement, Forest is obligated to
pay the investors royalties on sales of Celexa commencing 15
months after FDA approval at varying rates from 25% to 5%,
depending on sales levels. Forest has the option to buy out all
but a limited one percent royalty for a lump sum payment of
$85,000,000. Forest has notified the investor group that it
intends to exercise this buy-out option and reached a further
agreement to terminate the residual royalty obligations for a one-
time payment of $10 million, which transactions are expected to
be completed in the second quarter of fiscal 2000. The investors
also received five year warrants to purchase 1,000,000 shares of
Forest's common stock at a price of $25.725 per share, all of
which have been exercised as of the date hereof.

STRATEGIC ALLIANCE WITH H. LUNDBECK A/S: On March 27,
1998, Forest entered into a strategic alliance with H. Lundbeck
A/S ("Lundbeck")covering United States marketing rights to
central nervous system ("CNS") products developed by Lundbeck.
Lundbeck, founded in 1915, is a privately held pharmaceutical
company based in Copenhagen specializing in the development of
pharmaceutical compounds for the treatment of central nervous
system disorders. Lundbeck is also the originator and Forest's
licensor of Celexa.

The strategic alliance specifically provides for the
license to Forest of marketing rights in the United States to
three products: (1) Lu26-054, the active enantiomer of Celexa,
which is expected to enter Phase III clinical trials in the
summer of 1999 and has patent protection in the United States
until the year 2009 and the potential to extend patent protection
beyond 2009; (2) Lu25-109, a selective muscarinic agonist and M3
antagonist; and (3) Lu28-179, a new anxiolytic compound presently

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in Phase I studies. In addition, the alliance sets forth the
terms for joint development of future products resulting from
Lundbeck's research programs for marketing in the United States
under the name of Forest-Lundbeck.
In August 1998, a Phase II/III clinical study of Lu 25-
109 indicated that the drug did not show effectiveness in the
treatment of Alzheimer's patients, the indication for which the
drug was being developed. Forest is currently exploring the use
of Lu 25-109 in other indications, such as urinary incontinence,
but there can be no assurance that the compound can be
successfully developed for any such indications.

Forest paid Lundbeck $32 million for the United States
rights to the compounds presently under development, which,
together with related expenses, was written off as special
research and development expenses in the fourth quarter of the
fiscal year ended March 31, 1998. Lundbeck will receive on-going
license fees and product payments from the marketing of the
strategic alliance products in the United States.

AEROBID-R-: Two supplemental NDA's relating to Aerobid,
Forest's metered dose inhaled steroid for the treatment of asthma
are currently pending with the FDA. One filing was for a once-
daily dosing of Aerobid and the second was for Aeropak, a
combination of Aerobid with Aerochamber-R-, Forest's aerosol
holding chamber for use with metered dose inhaled products.
Management believes that both supplemental NDA's address the
recognized problem of poor patient compliance with asthma
therapy, and by improving patient compliance with a once-daily
dosing regimen and optimizing the drug delivery system, should
enhance Aerobid's position in this market. The Company is
currently discussing these supplemental NDA's with the FDA and
hopes to receive marketing approval in fiscal 2000. However,
there can be no assurance that such approval can be attained.

CLIMARA-R-: In March 1999, the FDA approved a new low
dose (0.025 mg) version of Climara, a transdermal patch product
used in estrogen replacement therapy which Forest co-markets with
the drug's originator, Berlex Laboratories, Inc. The low dose
form was approved for the treatment of osteoporosis and provides
the lowest effective estrogen replacement dosage available in the
United States. The availability of the low-dosage form is
expected to enhance the attractiveness of the Climara line to
physicians seeking to commence patient therapy with the lowest
effective dose.

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SYNAPTON-TM-: In November 1997, Forest filed an NDA for
Synapton, an extended release acetylcholinesterase inhibitor for
the treatment of the dementia caused by Alzheimer's Disease. In
November 1998, Forest received a "non-approvable" letter from the
FDA. Forest is currently evaluating the FDA's interpretation of
data included in the NDA.

INFASURF-R-: In June 1991, the Company entered into a
licensing agreement with ONY, Inc. ("ONY") for the marketing by
the Company in the United States, the United Kingdom and Canada
of the product Infasurf for the treatment of respiratory distress
syndrome in premature infants. Such licensing arrangements were
expanded in May 1992 to include worldwide rights to the product.

The FDA has approved the NDA for Infasurf. Following
notification by Abbott Laboratories that it considers that
Infasurf infringes its Survanta-R- patents, the Company and ONY
commenced an action against Abbott Laboratories in the Federal
District Court for the Western District of New York seeking a
declaration that Infasurf does not infringe the Survanta patents
and that the Survanta patents are invalid. In September 1998,
the jury in that case determined that Infasurf did infringe on
the Abbott Laboratories' patents. On June 23, 1999 the trial
court granted Forest's motion to set aside the jury verdict,
ruling that Infasurf did not infringe the Survanta patents and
also that Forest had received an implied license to the Survanta
patents based upon conduct by Abbott. While there can be no
assurance that the trial court's decision will not be subject to
appeal by Abbott or that such decision will be sustained on
appeal, Forest believes the decision of the trial court is
correct and intends to commercially launch Infasurf in fiscal
2000.

STOCK SPLIT; SHARE REPURCHASE PROGRAM: On March 25,
1998, Forest's common stock was split on a two-for-one basis by
means of the payment of a 100% stock dividend. All share numbers
set forth in this Report or in any financial statement or other
document incorporated by reference herein have been restated to
give effect to such stock split.

In December 1997, Forest's Board of Directors authorized
an increase in Forest's share repurchase program of 4,000,000
shares, bringing such total authorization to 17,000,000 shares.
Pursuant to the program, Forest may repurchase shares on the open
market at prices prevailing from time to time. As of June 28,
1999, Forest has purchased 12,321,000 shares pursuant to this
program. No date for completing the share repurchase program has
been established.

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MANAGEMENT: Phillip M. Satow, Forest's Executive Vice
President, retired effective December 31, 1998. Mr. Satow
remains a member of Forest's Board of Directors.

Raymond Stafford, formerly Forest's Vice President-
Europe and based in Forest's Dublin, Ireland offices, has
relocated to the United States and has been elected Executive
Vice President-Global Marketing. In addition, effective December
1, 1998, Howard Solomon, President and Chief Executive Officer,
was elected Chairman and Chief Executive Officer, Kenneth E.
Goodman, Executive Vice President-Operations and Chief Financial
Officer, was elected President and Chief Operating Officer, Dr.
Lawrence Olanoff, Senior Vice President-Scientific Affairs, was
elected Executive Vice President-Scientific Affairs and John E.
Eggers, Vice President-Treasurer, was elected Vice President-
Finance and Chief Financial Officer.

PRINCIPLE PRODUCTS

The Company actively promotes in the United States those
of its branded products which the Company's management believes
have the most potential for growth and which enable its
salesforces to concentrate on groups of physicians who are high
prescribers of its products. Such products include Celexa,
Forest's SSRI for the treatment of depression; the respiratory
products Aerobid, Aerochamber and Tessalon-R-; Tiazac-R-, Forest's
once-daily diltiazem for the treatment of hypertension and
angina; the Climara estrodiol transdermal system (which Forest co-
markets with Berlex Laboratories,Inc.); Monurol-R-, a one dose
antibiotic for the treatment of uncomplicated urinary tract
infection; and Cervidil-R-, used for the initiation or continuation
of cervical ripening. (See "Recent Developments").

Sales of Celexa, launched in September 1998, accounted
for 16.8% of Forest's sales for the fiscal year ended March 31,
1999.

Aerobid is a metered dose inhaled steroid used in the
treatment of asthma. Sales of Aerobid accounted for 16.9% of
Forest's sales for the fiscal year ended March 31, 1999 as
compared to 24.5% and 20.6% for the fiscal years ended March 31,
1998 and 1997, respectively. Aerochamber is a spacer device
used to improve the delivery of products administered by aerosol
delivery, including Aerobid.

Sales of Tiazac, launched in 1996, accounted for 23.7%,
19.7% and 9.0% of sales for the fiscal years ended March 31,
1999,1998 and 1997, respectively.

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Forest's generic line, marketed by the Company's Inwood
Laboratories, Inc. subsidiary, includes generic equivalents to
certain of the Company=s branded products, as well as difficult
to formulate controlled release products.

The Company's United Kingdom and Ireland subsidiaries
sell both ethical products requiring a doctor's prescription and
over-the-counter preparations. Their most important products
include Sudocrem-R-, a topical preparation for the treatment of
diaper rash; Colomycin-R-, an antibiotic used in the treatment of
Cystic Fibrosis; and Suscard-R- and Sustac-R-, sustained action
nitroglycerin tablets in both buccal and oral form used in the
treatment of angina pectoris, an ailment characterized by
insufficient oxygenation of the heart muscle. In May 1998,
Pharmax launched Exorex-TM-, which is used in the treatment of
eczema. Syscor-R-, used for the treatment of angina, was launched
in February 1999.

MARKETING

In the United States, Forest directly markets its
products through its domestic salesforces, Forest Pharmaceuticals
and Forest Therapeutics, currently numbering 850 persons, which
detail products directly to physicians, pharmacies and managed
care organizations. Forest's salesforces were increased by
approximately 32% during the fiscal year ended March 31, 1998 in
anticipation of the launch of Celexa. The Company also employs a
contract salesforce of 230 representatives to promote its
products. In the United Kingdom, the Company's Pharmax
subsidiary's salesforce, currently 51 persons, markets its
products directly. Forest's products are sold elsewhere through
independent distributors.

COMPETITION

The pharmaceutical industry is highly competitive as to
the sale of products, research for new or improved products and
the development and application of competitive controlled release
and other drug formulation and delivery technologies. There are
numerous companies in the United States and abroad engaged in the
manufacture and sale of both proprietary and generic drugs of the
kind sold by Forest and drugs utilizing controlled release
technologies. Many of these companies have substantially greater
financial resources than Forest. The Company also faces
competition for the acquisition or licensing of new product
opportunities from other companies. In addition, the marketing
of pharmaceutical products is increasingly affected by the
growing role of managed care organizations, including
pharmaceutical benefit management companies, in the provision of

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health services. Such organizations negotiate with
pharmaceutical manufacturers for highly competitive prices for
pharmaceutical products in equivalent therapeutic categories,
including certain of the Company's principal promoted products.
Failure to be included or to have a preferred position in a
managed care organization's drug formulary could result in
decreased prescriptions of a manufacturer's products.

GOVERNMENT REGULATION

The pharmaceutical industry is subject to comprehensive
government regulation which substantially increases the
difficulty and cost incurred in obtaining the approval to market
newly proposed drug products and maintaining the approval to
market existing drugs. In the United States, products developed,
manufactured or sold by Forest are subject to regulation by the
FDA, principally under the Federal Food, Drug and Cosmetic Act,
as well as by other federal and state agencies. The FDA
regulates all aspects of the testing, manufacture, safety,
labeling, storage, record keeping, advertising and promotion of
new and old drugs, including the monitoring of compliance with
good manufacturing practice regulations. Non-compliance with
applicable requirements can result in fines and other sanctions,
including the initiation of product seizures, injunction actions
and criminal prosecutions based on practices that violate
statutory requirements. In addition, administrative remedies can
involve voluntary recall of products as well as the withdrawal of
approval of products in accordance with due process procedures.
Similar regulations exist in most foreign countries in which
Forest's products are manufactured or sold. In many foreign
countries, such as the United Kingdom, reimbursement under
national health insurance programs frequently require that
manufacturers and sellers of pharmaceutical products obtain
governmental approval of initial prices and increases if the
ultimate consumer is to be eligible for reimbursement for the
cost of such products.

During the past several years the FDA, in accordance
with its standard practice, has conducted a number of inspections
of the Company's manufacturing facilities. Following these
inspections the FDA called the Company's attention to certain
"Good Manufacturing Practices" compliance and record keeping
deficiencies. In March 1999, the FDA requested that the Company
review its practices used to analyze blood level concentrations
of volunteers who receive various drugs for purposes of
pharmacokinetics trials. Forest has responded to the FDA's
comments and has modified procedures to comply with the requests
made by the FDA. In addition, in April 1998 and April 1999, the
Company identified certain stability problems with its generic
propranolol and indomethacin products, respectively. The Company

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is not shipping either of such products pending resolution of
these problems.

In March 1997, the FDA announced a proposed rule which
could result in the withdrawal of approval to market metered dose
inhaler formulations of corticosteroids (such as the Company's
Aerobid product) containing chlorofluorocarbons ("CFC's") once
three distinct non-CFC products are available in that therapeutic
category. The Company is currently developing a non-CFC
formulation of Aerobid which is currently in Phase III clinical
trials and expects to complete its development and to file an NDA
in time to meet the proposed regulation.
The cost of human health care products continues to be a
subject of investigation and action by governmental agencies,
legislative bodies and private organizations in the United States
and other countries. In the United States, most states have
enacted generic substitution legislation requiring or permitting
a dispensing pharmacist to substitute a different manufacturer's
version of a drug for the one prescribed. Federal and state
governments continue to press efforts to reduce costs of Medicare
and Medicaid programs, including restrictions on amounts agencies
will reimburse for the use of products. Under the Omnibus Budget
Reconciliation Act of 1990 (OBRA), manufacturers must pay certain
statutorily-prescribed rebates on Medicaid purchases for
reimbursement on prescription drugs under state Medicaid plans.
Federal Medicaid reimbursement for drug products of original
NDA-holders is denied if less expensive generic versions are
available from other manufacturers. In addition, the Federal
government follows a diagnosis related group (DRG) payment system
for certain institutional services provided under Medicare or
Medicaid. The DRG system entitles a health care facility to a
fixed reimbursement based on discharge diagnoses rather than
actual costs incurred in patient treatment, thereby increasing
the incentive for the facility to limit or control expenditures
for many health care products.

Under the Prescription Drug User Fee Act of 1992, the
FDA has imposed fees on various aspects of the approval,
manufacture and sale of prescription drugs. In 1993, the Clinton
Administration presented to Congress a proposal for reforming the
United States healthcare system. Other healthcare reform
proposals were also introduced in Congress. These proposals were
highly regulatory and contain provisions which would affect the
marketing of prescription drug products. None of these proposals
were enacted; however, the debate as to reform of the health care
system is expected to be protracted and the Company cannot
predict the outcome or effect on the marketing of prescription
drug products of the legislative process.

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PRINCIPLE CUSTOMERS

McKesson Drug Company, Bergen Brunswig Corp. and
Cardinal Distributors, Inc., national drug wholesalers, accounted
for 17%, 12% and 14%, respectively, of Forest's consolidated net
sales for the fiscal year ended March 31, 1999, and 13%, 12% and
11%, respectively, of Forest's consolidated net sales for the
fiscal year ended March 31, 1998. For the year ended March 31,
1997, Bergen Brunswig Corp. and Cardinal Distributors, Inc.
accounted for 10.4% and 10.2% of Forest's consolidated net sales.
No other customer accounted for 10% or more of Forest's
consolidated net sales for those fiscal years.

ENVIRONMENTAL STANDARDS

Forest anticipates that the effects of compliance with
federal, state and local laws and regulations relating to the
discharge of materials into the environment will not have any
material effect on capital expenditures, earnings or the
competitive position of Forest.

RAW MATERIALS

The principal raw materials used by Forest for its
various products are purchased in the open market. Most of these
materials are obtainable and available from several sources in
the United States and elsewhere in the world, although certain of
Forest's products contain patented or other exclusively
manufactured materials available from only a single source.
Forest has not experienced any significant shortages in supplies
of such raw materials.

PRODUCT LIABILITY INSURANCE

Forest currently maintains $150 million of product
liability coverage per "occurrence" and in the aggregate.
Although in the past there have been claims asserted against
Forest, none for which Forest has been found liable, there can be
no assurance that all potential claims which may be asserted
against Forest in the future would be covered by Forest's present
insurance.

RESEARCH AND DEVELOPMENT

During the fiscal year ended March 31, 1999, Forest
spent $51,641,000 for research and development, as compared to
$79,150,000 and $40,689,000 in the fiscal years ended March 31,
1998 and 1997, respectively. Forest's research and development
expense in the 1998 fiscal year included $32,250,000 for the
license fee and related expenses of the license of the Lundbeck
CNS products (see "Recent Developments") and otherwise consisted
primarily of the conduct of clinical studies required to obtain
approval of new products and the development of additional
products.

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EMPLOYEES

At March 31, 1999, Forest had a total of 1,945
employees.

PATENTS AND TRADEMARKS

Forest owns or licenses certain U.S. and foreign patents
on many of its branded products and products in development,
including, but not limited to, Aerobid, Tiazac, Cervidil,
Monurol, Synapton, Flumadine-R-, and Forest's licensed oxycodone/
ibuprofen analgesic and those products under development pursuant
to the joint venture with Lundbeck (see "Recent Developments"),
which patents expire through 2010. While no longer subject to
patent protection, Celexa enjoys legal marketing exclusivity
under the Waxman-Hatch Act until 2003. Forest believes these
patents and other rights are or may become of significant benefit
to its business. Additionally, Forest owns and licenses certain
U.S. patents, and has pending U.S. and foreign patent
applications, relating to various aspects of its Synchron-R-
technology and to other controlled release technology, which
patents expire through 2008. Forest believes that these patents
are useful in its business, however, there are numerous patents
and unpatented technologies owned by others covering other
controlled release processes.

Forest owns various trademarks and trade names which it
believes are of significant benefit to its business.

BACKLOG -- SEASONALITY

Backlog of orders is not considered material to Forest's
business prospects. Forest's business is not seasonal in nature.

ITEM 2. PROPERTIES
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Forest owns a 150,000 square foot building on 28 acres
in Commack, New York. This facility is used for packaging,
warehousing, administration and sales training. Forest also owns
five buildings and leases two buildings in and around Inwood,
Long Island, New York, containing a total of approximately
145,000 square feet. The buildings are used for manufacturing,
research and development, warehousing and administration. In
addition, Forest leases approximately 32,000 square feet in
Farmingdale, New York for use as a clinical laboratory testing
facility.

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In March 1999, Forest entered into a lease for
approximately 23,000 square feet of office space in Jersey City,
New Jersey. Forest expects to use the new facility for certain
of its scientific and regulatory personnel and expects to occupy
this facility in June 1999.

Forest Pharmaceuticals, Inc. ("FPI"), a wholly owned
subsidiary of the Company, owns two facilities in Cincinnati,
Ohio aggregating approximately 108,000 square feet. In St.
Louis, Missouri, FPI recently purchased a 330,000 square foot
facility on 26 acres of land. This facility is being used for
warehousing, distribution and administration. FPI also recently
sold an 87,000 square foot building in St. Louis.

Pharmax owns an approximately 95,000 square foot complex
in the London suburb of Bexley, England, which houses its plant
and administrative and central marketing offices.

Forest's Tosara subsidiary owns an 18,000 square foot
manufacturing and distribution facility located in an industrial
park in Dublin, Ireland. Forest Ireland, a subsidiary of Forest,
owns an approximately 86,000 square foot manufacturing and
distribution facility located in Dublin, Ireland. The facility
is currently used principally for the manufacture of and
distribution to the United States of Celexa tablets. Forest
plans to expand this facility in fiscal 2000.

Forest presently leases approximately 90,000 square feet
of executive office space at 909 Third Avenue, New York, New
York. The lease is for a sixteen (16) year term, expiring in
2010, subject to 2 five year renewal options.

Management believes that the above-described properties
are sufficient for Forest's present and anticipated needs.

Net rentals for leased space for the fiscal year ended
March 31, 1999 aggregated approximately $3,155,000 and for the
fiscal year ended March 31, 1998 aggregated approximately
$2,977,000.

ITEM 3. LEGAL PROCEEDINGS
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The Company is a defendant in actions filed in various
federal district courts alleging certain violations of the
Federal anti-trust laws in the marketing of pharmaceutical
products. In each case, the actions were filed against many
pharmaceutical manufacturers and suppliers and allege price
discrimination and conspiracy to fix prices in the sale of
pharmaceutical products. The actions were brought by various

<PAGE>

pharmacies (both individually and, with respect to certain
claims, as a class action) and seek injunctive relief and
monetary damages. The Judicial Panel on Multi-District
Litigation has ordered these actions coordinated (and, with
respect to those actions brought as class actions, consolidated)
in the Federal District Court for the Northern District of
Illinois (Chicago) under the caption "In re Brand Name
Prescription Drugs Antitrust Litigation." On April 4, 1996,
motions for summary judgment filed by the manufacturer defendants
(including the Company) with respect to conspiracy claims alleged
in those actions were denied by the Court. Certain manufacturer
defendants (but not the Company) reached settlements of the
federal class action which received court approval in June 1996
and September 1998, pursuant to which they agreed to pay an
aggregate of approximately $720 million and make certain
commitments with regard to pricing practices.

On November 30, 1998, the defendants remaining in the
consolidated federal class action (which proceeded to trial
beginning in September 1998), including the Company, were granted
a directed verdict by the trial court after the plaintiffs had
concluded their case. In ruling in favor of the defendants, the
trial Judge held that no reasonable jury could reach a verdict in
favor of the plaintiffs and stated "the evidence of conspiracy is
meager, and the evidence as to individual defendants paltry or
non-existent." The class action plaintiffs have appealed the
Judge's ruling to the United States Court of Appeals for the
Seventh Circuit. Oral argument on this appeal was heard in June
1999. While the Company continues to believe plaintiffs' claims
are without merit, there can be no assurance that the decision of
the trial Judge will be upheld on appeal.

Following the granting of a directed verdict in favor of
the defendants, the Company moved for an award of sanctions from
the attorneys for the class action plaintiffs in light of certain
misrepresentations made with respect to Forest by such attorneys
during the course of the class action. On April 29, 1999, the
trial court granted Forest's motion, awarding Forest
approximately $2.1 million in attorneys' fees and expenses
incurred in this action. The attorneys for the class plaintiffs
have appealed this decision.

The Company remains a defendant in actions brought on
behalf of retail pharmacists who elected to "opt out" of the
federal class action asserting virtually identical claims. The
Company intends to continue to vigorously contest such claims and
seek their dismissal.

<PAGE>

Similar actions alleging price discrimination and
conspiracy claims under state law are pending against many
pharmaceutical manufacturers, including the Company, in various
state courts and the District of Columbia. Such actions include
actions purported to be brought on behalf of consumers, as well
as those brought by retail pharmacists. Settlements were reached
by many of the manufacturer defendants of actions purported to be
brought on behalf of consumers in 11 states, including the
District of Columbia, for an aggregate of approximately $65
million and in the State of California for an aggregate of $176
million (including approximately $148 million payable through the
distribution of free products). The Company has not participated
in such settlements, but has settled actions pending in four
states by making nominal settlement payments.

While the Company believes these actions are without
merit, there can be no assurance that these cases will not result
in the payment of damages or the entering into of injunctive
relief which could have an adverse effect upon the Company's
marketing or pricing policies.

The Company is a defendant in an action pending in
Federal District Court for the Northern District of Illinois
entitled G.D. Searle & Co. v. Forest Laboratories, Inc.
----------------------------------------------
Plaintiff G.D. Searle asserts claims for federal and common law
trademark infringement in respect of rights Searle alleges as to
the name "Celebra" and arising from the marketing of Celexa. The
action seeks injunctive relief and unspecified monetary damages.
The Company has filed a motion for summary judgment which motion
is pending as of the date hereof. The Company believes this
action is without merit.

See "Item 1, Business, Recent Developments" for a
description of an action commenced by the Company against Abbott
and a ruling that the Company's Infasurf lung surfactant does not
infringe certain of Abbott's patents.

The Company is not subject to any other material pending
legal proceedings, other than ordinary routine claims incidental
to its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE
- ------- OF SECURITY HOLDERS
-------------------------------
Not Applicable.

<PAGE>

PART II
-------

ITEM 5. MARKET FOR REGISTRANT'S COMMON
- ------- EQUITY AND RELATED STOCKHOLDER
MATTERS
------------------------------
The information required by this item is incorporated
by reference to page 28 of the Annual Report.

Forest has never paid cash dividends on its Common Stock
and does not expect to pay such dividends in the foreseeable
future. Management presently intends to retain all available
funds for the development of its business and for use as working
capital. Future dividend policy will depend upon Forest's
earnings, capital requirements, financial condition and other
relevant factors.

ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
The information required by this item is incorporated by
reference to page 14 of the Annual Report.

ITEM 7. MANAGEMENT'S DISCUSSION AND
- ------- ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-------------------------------
The information required by this item is incorporated by
reference to pages 12 and 13 of the Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE
- -------- DISCLOSURES ABOUT MARKET RISK
-----------------------------
The information required by this item is incorporated by
reference to page 13 of the Annual Report.

ITEM 8. FINANCIAL STATEMENTS AND
- ------- SUPPLEMENTARY DATA
------------------------
The information required by this item is incorporated by
reference to pages 15 through 27 of the Annual Report.

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS
- ------- WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
------------------------------
Not Applicable.

<PAGE>
PART III
--------

In accordance with General Instruction G(3), the
information called for by Part III (Items 10 through 13) is
incorporated by reference from Forest's definitive proxy statement
to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 in connection with Forest's 1999
Annual Meeting of Shareholders.

<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
- -------- AND REPORTS ON FORM 8-K
----------------------------------------

(a) 1. Financial statements. The following
consolidated financial statements of
Forest Laboratories, Inc. and subsidiaries
included in the Annual Report
are incorporated by reference herein in Item 8:

Report of Independent Certified Public
Accountants

Consolidated balance sheets -
March 31, 1999 and 1998

Consolidated statements of operations -
years ended March 31, 1999, 1998 and 1997

Consolidated statements of comprehensive
income (loss) - years ended March 31, 1999,
1998 and 1997

Consolidated statements of shareholders'
equity -
years ended March 31, 1999, 1998 and 1997

Consolidated statements of cash flows -
years ended March 31, 1999, 1998 and 1997

Notes to consolidated financial statements

2. Financial statement schedules. The following
consolidated financial statement schedule of
Forest Laboratories, Inc. and Subsidiaries is
included herein:

Report of Independent Certified Public
Accountants S-1

Schedule II Valuation and qualifying accounts S-2

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted.

<PAGE>

3. Exhibits:

(3)(a) Articles of Incorporation of Forest, as amended.
Incorporated by reference from the Current Report
on Form 8-K dated March 9, 1981 filed by Forest,
from Registration Statement on Form S-1
(Registration No. 2-97792) filed by Forest on May
16, 1985, from Forest's definitive proxy statement
filed pursuant to Regulation 14A with respect to
Forest's 1987, 1988 and 1993 Annual Meetings of
Shareholders and from the Current Report on Form
8-K dated March 15, 1988.

(3)(b) By-laws of Forest. Incorporated by reference to
Forest's Current Report on Form 8-K dated October
11, 1994.

(10) Material Contracts
------------------
10.1 Benefit Continuation Agreement dated
as of December 1, 1989 between Forest and
Howard Solomon. Incorporated by
reference to Forest's Annual Report on
Form 10-K for the fiscal year ended
March 31, 1990 (the "1990 l0-K").

10.2 Benefit Continuation Agreement dated
as of May 27, 1990 between Forest and
Kenneth E. Goodman. Incorporated by
reference to the 1990 10-K.

10.3 Benefit Continuation Agreement dated
as of April 1, 1995 between Forest and
Phillip M. Satow. Incorporated by
reference to Forest's Annual Report on
Form 10-K for the fiscal year ended March
31, 1995 (the "1995 10-K").

10.4 Option Agreement dated December 10,
1990 between Forest and Howard Solomon.
Incorporated by reference to Forest's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1991 (the "1991
10-K").

10.5 Option Agreement dated December 10,
1990 between Forest and Kenneth E.
Goodman. Incorporated by reference to
the 1991 10-K.

<PAGE>
10.6 Option Agreement dated December 10,
1990 between Forest and Phillip M.
Satow. Incorporated by reference
to the 1991 10-K.

10.7 Split Dollar Life Insurance
Agreement dated March 29, 1994 between
Forest and Howard Solomon. Incorporated
by reference to Forest's Annual Report on
Form 10-K for the fiscal year ended March
31, 1994 (the "1994 10-K").

10.8 Split Dollar Life Insurance
Agreement dated March 29, 1994 between
Forest and Phillip M. Satow.
Incorporated by reference to the 1994 10-
K.

10.9 Split Dollar Life Insurance
Agreement dated March 29, 1994 between
Forest and Kenneth E. Goodman.
Incorporated by reference to the 1994 10-K.

10.10 Employment Agreement dated as of
September 30, 1994 by and between Forest
and Howard Solomon. Incorporated by
reference to 1995 10-K.

10.11 Employment Agreement dated as of
September 30, 1994 by and between Forest
and Phillip M. Satow. Incorporated by
reference to the 1995 10-K.

10.12 Employment Agreement dated as of
September 30, 1994 by and between Forest
and Kenneth E. Goodman. Incorporated by
reference to the 1995 10-K.

10.13 Employment Agreement dated as of October
24, 1995 by and between Forest and Dr.
Lawrence S. Olanoff. Incorporated by
reference to Forest's Annual Report on
Form 10-K for the fiscal year ended March
31, 1996.

10.14 Employment Agreement dated June 24, 1998
between Forest and Elaine Hochberg.
Incorporated by reference to Forest's
Annual Report on Form 10-K for the fiscal
year ended March 31, 1998 (the "1998 10-
K").

<PAGE>
10.15 Employment Agreement dated June 21, 1999
between Forest and John E. Eggers.

10.16 Employment Agreement dated January 16,
1995 between Forest and Mary Prehn.
Incorporated by reference to the 1998 10-
K.

10.17 Employment Agreement dated February 23,
1998 between Forest and Raymond Stafford.
Incorporated by reference to the 1998 10-
K.

10.18 Development and Marketing Agreement dated
July 1, 1997 by and between Forest and
FRXC Company, Inc. Incorporated by
reference to Exhibit No. 10.17 to the
1998 10-K.

10.19 License Agreement dated September 11,
1995 between Biovail Corporation
International and Forest. Incorporated
by reference to Exhibit No. (C)(2) to
Schedule 14D-1 of Forest dated September
18, 1995.

10.20 License and Supply Agreement dated
October 3, 1995 between Forest
Laboratories (Ireland) Limited and H.
Lundbeck A/S.

13 Portions of the Registrant's Annual
Report to Stockholders.

22 List of Subsidiaries. Incorporated
by reference to Exhibit 22 to the 1988
10-K.

23 Consent of BDO Seidman, LLP

27 Financial Data Schedule.

<PAGE>
SIGNATURES
----------

Pursuant to the requirements of Section 13 and 15(d) of
the Securities Exchange Act of 1934, Forest has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.

Dated: June 29, 1999
FOREST LABORATORIES, INC.

By: /s/Howard Solomon
--------------------------
Howard Solomon,
Chairman of the Board,
Chief Executive Officer
and Director

Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of Forest and in the capacities and on the dates
indicated.

PRINCIPAL EXECUTIVE
- -------------------
OFFICERS:
- --------

/s/ Howard Solomon Chairman of the June 29, 1999
- -------------------------- Board, Chief
Howard Solomon Executive Officer
and Director

/s/ Kenneth E. Goodman President, Chief June 29, 1999
- --------------------------- Operating Officer
Kenneth E. Goodman and Director

PRINCIPAL FINANCIAL
- -------------------
AND ACCOUNTING OFFICER:
- ----------------------

/s/ John E. Eggers Vice President- June 29, 1999
- --------------------------- Finance and Chief
John E. Eggers Financial Officer

DIRECTORS
- ---------

/s/ Phillip M. Satow Director June 29, 1999
- ---------------------------
Phillip M. Satow

<PAGE>

/s/ George S. Cohan Director June 29, 1999
- ---------------------------
George S. Cohan

/s/William J. Candee, III Director June 29, 1999
- ---------------------------
William J. Candee, III

/s/ Dan L. Goldwasser Director June 29, 1999
- ---------------------------
Dan L. Goldwasser

/s/ Lester B. Salans Director June 29, 1999
- ---------------------------
Lester B. Salans

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------

Board of Directors and Shareholders
Forest Laboratories, Inc.

The audits referred to in our report dated April 30, 1999,
relating to the consolidated financial statements of Forest
Laboratories, Inc. and Subsidiaries, which is referred to in
Item 8 of this Form 10-K, include the audits of the
accompanying financial statement schedule. This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion of
this financial statement schedule based upon our audits.

In our opinion, such financial statement schedule presents
fairly, in all material respects, the information set forth
therein.

/s/BDO SEIDMAN, LLP
- ---------------------------
BDO Seidman, LLP

New York, New York
April 30, 1999

S-1

<PAGE> SCHEDULE II
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

- -------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E

- -------------------------------------------------------------------------------------------------------------------------
Additions
- -------------------------------------------------------------------------------------------------------------------------
Balance at (1) (2) Balance at
beginning Charged to costs Charged to other Deductions- end of
Description of period and expenses accounts-describe(A) describe(B) period
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Year ended March 31, 1999:
Allowance for doubtful
accounts $12,416,000 $1,036,000 $5,350,000 $4,642,000 $14,160,000
=========== ========== ========== ========== ===========

Year ended March 31, 1998:
Allowance for doubtful
accounts $9,594,000 $3,237,000 $5,640,000 $6,055,000 $12,416,000
========== ========== ========== ========== ===========

Year ended March 31, 1997:
Allowance for doubtful
accounts $5,309,000 $4,371,000 $1,143,000 $1,229,000 $9,594,000
========== ========== ========== ========== ==========

(A) Includes allowances for wholesale chargebacks, medicaid rebates,
cash discounts and domestic returns.
(B) Includes adjustments for wholesale chargebacks, medicaid rebates, cash
discounts and bad debt write-offs.

S-2
</TABLE>

<PAGE>

EXHIBIT 13

<PAGE>

<TABLE>
QUARTERLY STOCK MARKET PRICES

High Low
---- ---
<S> <C> <C>

April - June 1997 22 9/16 16 1/16

July - September 1997 24 3/16 20 1/16

October - December 1997 24 11/16 20 15/16

January - March 1998 38 24 5/16

April - June 1998 40 1/2 32 1/8

July - September 1998 42 5/8 32

October - December 1998 53 1/4 32

January - March 1999 58 7/8 42 5/16

</TABLE>

<PAGE>

<TABLE>

SELECTED FINANCIAL DATA
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
March 31,(In thousands)
Financial Position:
Current Assets $502,361 $371,647 $359,630 $470,612 $348,969
Current Liabilities 129,960 129,889 73,544 89,571 57,649
Net Current Assets 372,401 241,758 286,086 381,041 291,320
Total Assets 875,097 744,323 700,281 899,361 757,205
Total Shareholders' Equity 743,512 614,161 626,399 809,517 699,334

Year Ended March 31, (In thousands,
except per share data) 1999 1998 1997 1996 1995
-------- ------- -------- -------- --------
Summary of Operations:
Net Sales $546,266 $427,086 $280,745 $446,883 $393,359
Other Revenue 77,722 47,618 28,316 13,061 11,470
Costs and Expenses 513,185 419,932 348,060 297,569 248,683
Income (Loss) Before Income Taxes (Benefit) 110,803 54,772 ( 38,999) 162,375 156,146
Income Taxes (Benefit) 33,630 18,075 ( 15,458) 58,130 55,997
Net Income (Loss) 77,173 36,697 ( 23,541) 104,245 100,149
Net Income (Loss) Per Share:
Basic $0.95 $0.45 ($0.27) $1.15 $1.13
Diluted $0.90 $0.44 ($0.27) $1.12 $1.09
Weighted Average Number of
Common and Common Equivalent Shares
Outstanding (Note A):
Basic 81,445 80,906 86,018 90,628 88,798
Diluted 85,956 83,425 86,018 92,872 91,702

No dividends were paid on common shares in any period.

A. Basic net income (loss) per share was computed by dividing net income (loss)
by the weighted average number of common shares outstanding during each year.
Diluted net income (loss) per share includes the potential dilution that could
occur if options and warrants outstanding were included in the weighted average
number of common shares outstanding for the period. All amounts give effect to
the March 1998 100% stock dividend (refer to Note 1 of the Company's notes to
consolidated financial statements).
</TABLE>

<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
-----------------------------------------

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------

Board of Directors and Shareholders
Forest Laboratories, Inc.
New York, New York

We have audited the accompanying consolidated balance sheets of
Forest Laboratories, Inc. and Subsidiaries as of March 31, 1999
and 1998, and the related consolidated statements of operations,
comprehensive income (loss), shareholders' equity and cash flows
for each of the three years in the period ended March 31, 1999.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Forest Laboratories, Inc. and Subsidiaries as of
March 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the three years in the period ended
March 31, 1999 in conformity with generally accepted accounting
principles.

BDO SEIDMAN, LLP

New York, New York
April 30, 1999

<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(IN THOUSANDS)

MARCH 31,
------------------------
1999 1998
--------- ---------
Assets
- ------
<S> <C> <C>

Current assets:
Cash (including cash equivalent investments of
$197,515 in 1999 and $143,423 in 1998) $ 200,968 $149,653
Marketable securities 40,780 32,199
Accounts receivable, less allowances of $14,160
in 1999 and $12,416 in 1998 57,294 41,464
Inventories 132,675 82,718
Deferred income taxes 52,059 47,675
Refundable income taxes 12,411 9,432
Other current assets 6,174 8,506
------- --------
Total current assets 502,361 371,647
------- --------
Marketable securities 37,215 47,748
------- --------
Property, plant and equipment:
Land and buildings 74,772 64,406
Machinery and equipment 48,060 43,282
Vehicles and other 6,979 8,577
-------- --------
129,811 116,265

Less accumulated depreciation 38,615 34,815
-------- --------
91,196 81,450
-------- --------
Other assets:
Excess of cost of investment in subsidiaries
over net assets acquired, less accumulated
amortization of $8,742 in 1999 and $8,117
in 1998 16,217 16,842
License agreements, product rights and other
intangible assets, net 195,203 197,095
Deferred income taxes 15,220 17,639
Other 17,685 11,902
-------- --------
244,325 243,478
-------- --------

$ 875,097 $744,323
========= ========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(IN THOUSANDS, EXCEPT FOR PAR VALUES)

MARCH 31,
----------------------
1999 1998
--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>

Current liabilities:
Accounts payable $ 66,673 $ 30,409
Accrued expenses 38,114 70,998
Income taxes payable 25,173 28,482
--------- --------
Total current liabilities 129,960 129,889
--------- --------
Deferred income taxes 1,625 273
--------- --------
Commitments and contingencies

Shareholders' equity:
Series A junior participating preferred stock,
$1.00 par; shares authorized 1,000;
no shares issued or outstanding
Common stock $.10 par; shares authorized
500,000; issued 100,854 shares in 1999 and
98,054 shares in 1998 10,085 9,805
Capital in excess of par 390,750 334,781
Retained earnings 632,334 555,161
Accumulated other comprehensive loss ( 7,175) ( 4,530)
---------- --------
1,025,994 895,217
Less common stock in treasury, at cost
(17,683 shares in 1999 and 17,651 shares
in 1998) 282,482 281,056
---------- --------
743,512 614,161
---------- --------
$ 875,097 $744,323
========== ========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEARS ENDED MARCH 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>

Net sales $546,266 $427,086 $280,745
Contract revenue (expense) 51,235 28,102 ( 1,904)
Other income 26,487 19,516 11,071
Non-recurring income, net 19,149
-------- -------- --------
623,988 474,704 309,061
-------- -------- --------
Costs and expenses:
Cost of sales 136,477 104,412 85,874
Selling, general and administrative 325,067 236,370 221,497
Research and development 51,641 46,900 40,689
Purchased research and development 32,250
-------- -------- --------
513,185 419,932 348,060
-------- -------- --------
Income (loss) before income tax
expense (benefit) 110,803 54,772 ( 38,999)

Income tax expense (benefit) 33,630 18,075 ( 15,458)
-------- -------- --------
Net income (loss) $ 77,173 $ 36,697 ($ 23,541)
======== ======== ========
Earnings (loss) per common and common
equivalent share:

Basic $0.95 $0.45 ($0.27)
===== ===== =====
Diluted $0.90 $0.44 ($0.27)
===== ===== =====
Weighted average number of common
and common equivalent shares outstanding:

Basic 81,445 80,906 86,018
====== ====== ======
Diluted 85,956 83,425 86,018
====== ====== ======

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
------------------------------------------------------
(IN THOUSANDS)

YEARS ENDED MARCH 31,
------------------------------
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>

Net income (loss) $77,173 $36,697 ($23,541)

Other comprehensive income (loss), net of tax:
Cumulative foreign currency translation
gains (losses) ( 2,682) ( 4,060) 1,370
Unrealized gains on securities:
Unrealized holding gain arising
during the period (available-for-sale) 37 163 982
------- ------- ------
Other comprehensive income (loss) ( 2,645) ( 3,897) 2,352
------- ------- ------
Comprehensive income (loss) $74,528 $32,800 ($21,189)
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
YEARS ENDED MARCH 31, 1999, 1998 AND 1997
-----------------------------------------

(IN THOUSANDS)

Accumulated
Common stock Capital in other Treasury stock
-------------- excess of Retained comprehensive --------------
Shares Amount par earnings income (loss) Shares Amount
------ ------ --------- -------- -------------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>

Balance, April 1, 1996 96,266 $ 9,626 $301,822 $542,005 ($2,985) 5,300 $ 40,951

Shares issued upon exercise of stock
options 406 42 5,844
Treasury stock acquired from
employees upon exercise of stock
options 14 243
Purchase of treasury stock 9,028 169,393
Tax benefit related to stock options
exercised by employees 1,821
Other comprehensive income 2,352
Net loss ( 23,541)
------ ------- ------- -------- ------ ------ -------
Balance, March 31, 1997 96,672 9,668 309,487 518,464 ( 633) 14,342 210,587

Shares issued upon exercise of
stock options 1,382 137 14,054
Treasury stock acquired from
employees upon exercise of stock
options 16 360
Purchase of tresury stock 3,293 70,109
Warrants issued, net of expenses 3,500
Tax benefit related to stock
options exercised by employees 7,740
Other comprehensive (loss) ( 3,897)
Net income 36,697
------- ------ -------- -------- ------ ------- --------
Balance, March 31, 1998 98,054 9,805 334,781 555,161 ( 4,530) 17,651 281,056

Shares issued upon exercise of
stock options and warrants 2,800 280 33,727
Treasury stock acquired from
employees upon exercise
of stock options 32 1,426
Tax benefit related to stock
options exercised by employees 22,242
Other comprehensive (loss) ( 2,645)
Net income 77,173
------- ------- -------- -------- ------ ------ --------
Balance, March 31, 1999 100,854 $10,085 $390,750 $632,334 ($7,175) 17,683 $282,482
======= ======= ======== ======== ====== ====== ========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(IN THOUSANDS)

YEARS ENDED MARCH 31,
--------------------------------
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 77,173 $ 36,697 ($ 23,541)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 7,309 6,660 6,017
Amortization 13,955 13,396 13,168
Gain on sale of investment in
unconsolidated affiliate ( 26,399)
Gain on sale of assets of
closed facilities ( 564)
Deferred income tax
expense (benefit) 4,834 ( 18,024) ( 13,077)
Foreign currency translation
(gain) loss ( 1,560) ( 1,036) 57
Net change in operating assets
and liabilities:
Decrease (increase) in:
Accounts receivable, net ( 15,830) ( 19,568) 232,812
Inventories ( 49,957) 8,646 ( 33,590)
Refundable income taxes ( 2,979) 20,204 ( 29,636)
Other current assets 2,332 ( 86) 4,417
Increase (decrease) in:
Accounts payable 36,264 8,098 8,317
Accrued expenses ( 32,884) 34,022 6,644
Income taxes payable ( 3,309) 14,225 ( 10,988)
Increase in other assets ( 5,783) ( 1,300) ( 851)
-------- -------- --------
Net cash provided by
operating activities 29,565 101,370 133,350
-------- -------- --------
Cash flows from investing activities:
Purchase of property, plant and
equipment, net ( 17,166) ( 6,899) ( 9,655)
Proceeds from sale of assets of closed
facilities 1,875
Proceeds from sale of investment in
unconsolidated affiliate 102,301
Purchase of marketable securities:
Available-for-sale ( 56,538) ( 75,010) ( 41,606)
Redemption of marketable securities:
Available-for-sale 58,490 19,674 75,118
Held-to-maturity 2,207 2,004
Purchase of license agreements, product
rights and other intangible assets, net ( 12,000) ( 1,352) ( 22,250)
-------- -------- --------
Net cash provided by (used in)
investing activities ( 27,214) ( 59,505) 105,902
-------- -------- -------
</TABLE>

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(IN THOUSANDS)

YEAR ENDED MARCH 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Cash flows from financing activities:
Net proceeds from common stock options
exercised by employees under stock
option plans 32,581 13,830 5,643
Tax benefit realized from the exercise
of stock options by employees 16,796 1,336 1,821
Purchase of treasury stock, net ( 70,109) ( 169,393)
------- -------- --------
Net cash provided by (used in)
financing activities 49,377 ( 54,943) ( 161,929)
-------
Effect of exchange rate changes on cash ( 413) ( 111) 1,966
------- -------- --------
Increase (decrease) in cash and cash
equivalents 51,315 ( 13,189) 79,299
Cash and cash equivalents, beginning
of year 149,653 162,842 83,543
-------- -------- -------
Cash and cash equivalents, end of year $200,968 $149,653 $162,842
======== ======== ========
Supplemental disclosures of cash flow
information: (In thousands)

</TABLE>

<TABLE>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $18,340 $20,538 $35,036
======= ======= =======
Supplemental schedule of noncash
financing activities:

Issuance of warrants in
connection with development
and marketing agreements $3,500
======
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF CONSOLIDATION: The consolidated financial statements include the
accounts of Forest Laboratories, Inc. (the "Company") and its subsidiaries,
all of which are wholly owned. All significant intercompany accounts and
transactions have been eliminated.

CASH EQUIVALENTS: Cash equivalents consist of short-term, highly liquid
investments (primarily municipal bonds with interest rates that are re-set
monthly) which are readily convertible into cash at par value (cost).

INVENTORIES: Inventories are stated at the lower of cost or market, with
cost determined on the first-in, first-out basis.

MARKETABLE SECURITIES: Marketable securities are stated at fair market
value or historical cost in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," and consist of investments in municipal bonds
maturing through 2001 and a bond of the Commonwealth of Puerto Rico
maturing in 2002.

PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION: Property, plant and
equipment are stated at cost. Depreciation is provided over the estimated
useful lives of the assets primarily by the straight-line method.

INTANGIBLE ASSETS: The excess of cost of investment over the fair value of
net assets of subsidiaries at the time of acquisition is being amortized
using the straight-line method over 25 to 40 years. The costs of obtaining
license agreements, product rights and other intangible assets are being
amortized using the straight-line method over the estimated lives of the
assets, 10 to 40 years.

REVENUE RECOGNITION: Sales are recorded in the period the merchandise is
shipped. Provisions for estimated sales allowances, returns and losses are
accrued at the time revenues are recognized.

RESEARCH AND DEVELOPMENT: Expenditures for research and development are
charged to expense as incurred.

SAVINGS AND PROFIT SHARING PLAN: Substantially all non-bargaining unit
employees of the Company's domestic subsidiaries may participate in the
savings and profit sharing plan after becoming eligible (as defined). Profit
sharing contributions are primarily at the discretion of the Company. The
savings plan contributions include a matching contribution made by the
Company. Savings and profit sharing contributions amounted to $6,300,000,
$5,600,000 and $4,100,000 for 1999, 1998 and 1997, respectively.

EARNINGS PER SHARE: Basic earnings per share includes no dilution and is
computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share reflect, in periods in which they have a
dilutive effect, the effect of common shares issuable upon exercise of
stock options and warrants.

<PAGE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Other comprehensive income
refers to revenues, expenses, gains and losses that under generally accepted
accounting principles are excluded from net income as these amounts are
recorded directly as an adjustment to shareholders' equity. Accumulated other
comprehensive income (loss) is comprised of the cumulative effects of foreign
currency translation and unrealized gains on securities, which amounted to
$6,912,000 and $263,000 in fiscal 1999 and $4,230,000 and $300,000 in fiscal
1998.

INCOME TAXES: The Company accounts for income taxes using the liability
method. Under the liability method, deferred income taxes are provided on the
differences in bases of assets and liabilities between financial reporting
and tax returns using enacted tax rates.

USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company reviews all significant estimates
affecting the financial statements on a recurring basis and records the
effect of any adjustments when necessary.

LONG-LIVED ASSETS: Long-lived assets, such as goodwill, intangible assets,
property and equipment and certain sundry assets, are evaluated for
impairment when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value.
No impairment losses have been necessary through March 31, 1999.

STOCK-BASED COMPENSATION: The Company accounts for its stock option awards
under the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the intrinsic value based method, compensation cost is
the excess, if any, of the quoted market price of the stock at grant date
or other measurement date over the amount an employee must pay to acquire
the stock. The Company makes pro forma disclosures of net income and
earnings per share as if the fair value based method of accounting had been
applied as required by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."

FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts of cash, accounts
receivable, accounts payable, accrued expenses and income taxes payable are
reasonable estimates of their fair value because of the short maturity of
these items.

<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)

RECLASSIFICATIONS: Certain amounts as previously reported have been
reclassified to conform to current year classifications.

RECENT ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133 is
effective for transactions entered into after April 1, 2000. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
fair value. Changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of the hedge transaction and the type of
hedge transaction. The ineffective portion of all hedges will be recognized
in earnings. Presently, the Company does not utilize any derivative
instruments or hedging activities.

2. EARNINGS PER SHARE:

A reconciliation of shares used in calculating basic and diluted earnings per
share follows (in thousands):
<TABLE>
1999 1998 1997
------ ------- ------
<S> <C> <C> <C>
Basic 81,445 80,906 86,018
Effect of assumed conversion
of employee stock options
and warrants 4,511 2,519
------ ------ ------
Diluted 85,956 83,425 86,018
====== ====== ======
</TABLE>

Options and warrants to purchase approximately 446,800 and 1,021,000 shares
of common stock at exercise prices ranging from $24.09 to $48.35 per share
were outstanding during a portion of fiscal 1999 and fiscal 1998, but were
not included in the computation of diluted earnings per share because they
were anti-dilutive. These options and warrants expire through 2008. For
fiscal year 1997, all options and warrants outstanding were anti-dilutive.

3. ACQUISITIONS:

A) PRODUCT LICENSE: On March 27, 1998, the Company entered into an
agreement with H. Lundbeck A/S ("Lundbeck"), obtaining the U.S. marketing
rights to certain products which are in the early stages of development by
Lundbeck. The cost to the Company was $32,250,000, which was charged
during the fourth quarter of fiscal 1998 to purchased research and
development expense. Royalties are payable to Lundbeck from the future
sales, if any, of the products.

B) BIOVAIL CORPORATION INTERNATIONAL ("BCI"): On November 1, 1995, the
Company purchased approximately 22% of the total outstanding common shares
of stock of BCI. This investment was accounted for under the equity method
of accounting. On May 22, 1996, the Company sold its entire investment in
BCI for net proceeds of $102,301,000, which resulted in a net non-
recurring gain of $26,399,000 or $17,019,000 after taxes.

<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

4. BUSINESS OPERATIONS:

The Company and its subsidiaries, which are located in the United States,
Ireland and the United Kingdom, manufacture and market ethical and other
pharmaceutical products. The Company operates in only one segment. Sales are
made primarily in the United States and European markets. The net sales and
long-lived assets for the years ended March 31, 1999, 1998 and 1997, are from
the Company's or one of its subsidiaries' country of origin, as follows (in
thousands):

<TABLE>
1999 1998 1997
--------------------- --------------------- ----------------------
Long-lived Long-lived Long-lived
Net sales assets Net sales assets Net sales assets
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States $509,222 $276,113 $391,126 $272,692 $249,258 $281,964
Ireland 4,076 39,997 5,256 28,930 3,427 29,459
United Kingdom 32,968 4,191 30,704 5,667 28,060 5,756
-------- -------- -------- -------- -------- --------
$546,266 $320,301 $427,086 $307,289 $280,745 $317,179
======== ======== ======== ======== ======== ========
</TABLE>

For the years ended March 31, 1999 and 1998, three customers accounted for
17%, 14% and 12%, and 13%, 12% and 11%, respectively, of the Company's
consolidated net sales. Two customers each accounted for 10% of the Company's
consolidated net sales for the year ended March 31, 1997.

<PAGE>

5. INVENTORIES:

Inventories consist of the following:

<TABLE>

March 31, (In thousands) 1999 1998
-------- -------
<S> <C> <C>
Raw materials $ 78,020 $34,723
Work in process 2,913 4,320
Finished goods 51,742 43,675
-------- -------
$132,675 $82,718
======== =======

</TABLE>

6. MARKETABLE SECURITIES:

The composition of the investment portfolio at March 31 was (in thousands):

<TABLE>
Gross Gross
unrealized unrealized Market
Cost gains losses value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>

1999
- ----
Available-for-sale:
- ------------------
State and local obligations $76,258 ($263) $75,995

Held-to-maturity:
- ----------------
Foreign government obligations 2,000 $101 2,101
------- ---- ---- -------
$78,258 $101 ($263) $78,096
======= ==== ==== =======

1998
- ----
Available-for-sale:
- ------------------
State and local obligations $78,247 ($300) $77,947

Held-to-maturity:
- ----------------
Foreign government obligations 2,000 $138 2,138
------- ---- ---- -------
$80,247 $138 ($300) $80,085
======= ==== ===== =======
</TABLE>
<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

6. MARKETABLE SECURITIES: (Continued)

The contractual maturities of debt securities at March 31, 1999, regardless
of their balance sheet classification, consist of the following (in
thousands):

<TABLE>
Amortized Fair
cost value
--------- -------
<S> <C> <C>
Available-for-sale:
- ------------------
Less than one year $40,987 $40,780
One to three years 35,271 35,215
------- -------
76,258 75,995
------- -------
Held-to-maturity:
- ----------------
Three to five years 2,000 2,101
------ ------
$78,258 $78,096
======= =======
</TABLE>

The net unrealized holding losses at March 31, 1999, 1998 and 1997 of $263,
$300 and $463, respectively, are from available-for-sale securities and
included in Shareholders' equity: Accumulated other comprehensive loss.

7. OTHER ASSETS:

License agreements, product rights and other intangible assets consist of the
following:

<TABLE>

(In thousands, except for estimated lives
which are stated in years) Estimated
March 31, lives 1999 1998
- ----------------------------------------- --------- -------- --------
<S> <C> <C> <C>

License agreements 10-40 $155,162 $143,162
Product rights 10-14 37,238 37,238
Trade names 20-40 34,190 34,190
Goodwill 25-40 29,412 29,412
Non-compete agreements 10-13 22,987 22,987
Customer lists 10 3,506 3,506
Other 10-40 2,227 2,790
-------- --------
284,722 273,285
Less accumulated amortization ( 89,519)( 76,190)
-------- --------
$195,203 $197,095
======== ========
</TABLE>

8. ACCRUED EXPENSES:

Accrued expenses consist of the following:

<TABLE>

March 31, (In thousands) 1999 1998
------- -------
<S> <C> <C>

Employee compensation and other benefits $15,776 $13,867
Clinical research 8,528 7,884
Royalties 4,944 5,933
Purchased research and development (refer to Note 3) 32,250
Other 8,866 11,064
------- -------
$38,114 $70,998
======= =======
</TABLE>
<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

9. COMMITMENTS:

Leases: The Company leases manufacturing, office and warehouse facilities,
equipment and automobiles under operating leases expiring through 2010. Rent
expense approximated $8,444,000, $7,196,000 and $7,115,000 for fiscal years
1999, 1998 and 1997, respectively. Aggregate minimum rentals under
noncancellable leases are as follows:

Year ending March 31, (In thousands)
2000 $ 8,442
2001 7,631
2002 6,182
2003 4,323
2004 4,016
Thereafter 26,294
-------
$56,888
=======
Royalty agreements: The Company has royalty agreements on certain of its
licensed products. Royalties are paid based on a percentage of sales, as
defined. For fiscal years ended 1999, 1998 and 1997, royalties amounted to
$16,240,000, $15,850,000 and $6,419,000, respectively.

10. SHAREHOLDERS' EQUITY:

PREFERRED STOCK PURCHASE RIGHTS: On September 30, 1994, the Company's Board
of Directors declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of the Company's common stock, par value
$.10 per share. Each Right will entitle the holder to buy one one-hundredth
of a share of authorized Series A Junior Participating Preferred Stock, par
value $1.00 per share ("Series A Preferred Stock") at an exercise price of
$250 per Right, subject to adjustment. Prior to becoming exercisable, the
Rights are evidenced by the certificates representing the common stock and
may not be traded apart from the common stock. The Rights become
exercisable on the tenth day after public announcements that a person or
group has acquired, or obtained the right to acquire, 20% or more of the
Company's outstanding common stock, or an announcement of a tender offer
that would result in a beneficial ownership by a person or group of 20% or
more of the Company's common stock.

If, after the Rights become exercisable, the Company is a party to certain
merger or business combination transactions, or transfers 50% or more of its
assets or earning power, or if an acquirer engages in certain self-dealing
transactions, each Right (except for those held by the acquirer) will
entitle its holder to buy a number of shares of the Company's Series A
Preferred Stock or, in certain circumstances, a number of shares of the
acquiring company's common stock, in either case having a value equal to two-
and-one-half times the exercise price of the Right. The Rights may be
redeemed by the Company at any time up to ten days after a person or group
acquires 20% or more of the Company's common stock at a redemption price of
$.001 per Right. The Rights will expire on September 30, 2004.

The Company has reserved 500,000 shares of Series A Preferred Stock for the
exercise of the Rights.

<PAGE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

10. SHAREHOLDERS EQUITY: (CONTINUED)

STOCK OPTIONS: The Company has various Employee Stock Option Plans whereby
options to purchase an aggregate of 19,000,000 shares of common stock have
been or remain to be issued to employees of the Company and its subsidiaries
at prices not less than the fair market value of the common stock at the date
of grant. Both incentive and non-qualified options may be issued under the
plans. The options are exercisable up to the tenth anniversary of the date
of issuance.

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the Company
to provide pro forma information regarding net income and earnings per share
as if compensation cost for the Company's stock option plans had been
determined in accordance with the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants: dividend yield of zero for all
three years; expected volatility of 39.26% in 1999, 29.61% in 1998 and 35.37%
in 1997; risk-free interest rates of 6.0% in fiscal 1999, between 5.75% and
6.5% in 1998 and 6.5% in 1997; and expected lives of four to seven years for
all three years.

Under the accounting provisions of SFAS No. 123, the Company's net income
(loss) and earnings (loss) per share would have been reduced to the pro forma
amounts indicated below:

(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>

Net income (loss):
As reported $77,173 $36,697 ($23,541)
Pro forma 64,083 24,953 ( 27,911)

Net income (loss) per common share:
Basic:
As reported $0.95 $0.45 ($0.27)
Pro forma 0.79 0.30 ( 0.32)

Diluted:
As reported $0.90 $0.44 ($0.27)
Pro forma 0.75 0.30 ( 0.32)

</TABLE>
<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

10. SHAREHOLDERS EQUITY: (CONTINUED)

The following table summarizes information about stock options outstanding at
March 31, 1999:

<TABLE>
Options outstanding Options exercisable
--------------------------------------------------- -----------------------------
Number Weighted average Number
Range of outstanding remaining Weighted average exercisable Weighted average
exercises prices at 3/31/99 contractual life exercise price at 3/31/99 exercise price
- ---------------- ---------- ---------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>

$10.84 to $15.00 3,229,860 1.6 $12.08 3,051,400 11.92
15.01 to 30.00 5,179,160 5.1 20.25 2,281,133 21.15
30.01 to 48.35 1,186,400 6.8 41.64 28,300 33.10
--------- --- ------ ---------
9,595,420 4.2 $20.15 5,360,833 $15.96

</TABLE>

Transactions under the stock option plans and individual non-qualified
options not under the plans are summarized as follows:

<TABLE>
Weighted average
Shares exercise price
----------- ----------------
<S> <C> <C>

Shares under option at March 31, 1996
(at $4.25 to $24.44 per share) 11,340,312 16.12
Granted (at $14.84 to $23.28 per share) 4,093,844 18.21
Exercised (at $9.98 to $21.41 per share) ( 405,452) 14.48
Cancelled ( 3,733,190) 21.93
----------
Shares under option at March 31, 1997
(at $4.25 to $24.09 per share) 11,295,514 15.02
Granted (at $21.25 to $30.75 per share) 1,763,500 22.20
Exercised (at $4.25 to $23.31 per share) ( 1,382,342) 10.27
Cancelled ( 548,258) 16.37
----------
Shares under option at March 31, 1998
(at $4.95 to $30.75 per share) 11,128,414 16.66
Granted (at $33.69 to $48.35 per share) 1,201,685 42.24
Exercised (at $4.95 to $30.75 per share) ( 2,390,808) 14.57
Cancelled ( 343,871) 20.80
----------
Shares under option at March 31, 1999
(at $10.84 to $48.35 per share) 9,595,420 20.15
---------
Options exercisable at March 31:
1997 6,730,316 12.89
1998 6,522,545 14.70
1999 5,360,883 15.96

Weighted average fair value
of options granted during:
1997 $ 8.94
1998 8.86
1999 20.66

</TABLE>

At March 31, 1999, 1998 and 1997, 3,571,910, 422,494 and 1,852,444 shares,
respectively, were available for grant.

<PAGE>
FOREST LABORATORIES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

10. SHAREHOLDERS' EQUITY: (CONTINUED)

In connection with the private investors group arrangement (refer to Note
12), the Company issued five-year warrants to the investors to purchase an
aggregate of 1,000,000 shares of the Company's common stock at $25.73 per
share. In fiscal 1999, 705,000 warrants were exercised.

In connection with the acquisition of product rights in fiscal 1995, the
Company issued 560,000 warrants, which expire on July 7, 2004, at an
exercise price of $22.86 per share which was equal to the then fair market
value of the Company's common stock. In fiscal 1999, 376,000 warrants were
exercised.

11. CONTINGENCIES:

The Company is a defendant in actions filed in various federal district
courts alleging certain violations of the Federal anti-trust laws in the
marketing of pharmaceutical products. In each case, the actions were filed
against many pharmaceutical manufacturers and suppliers and allege price
discrimination and conspiracy to fix prices in the sale of pharmaceutical
products. The actions were brought by various pharmacies (both individually
and, with respect to certain claims, as a class action) and seek injunctive
relief and monetary damages. The Judicial Panel on Multi-District
Litigations has ordered these actions coordinated (and, with respect to
those actions brought as class actions, consolidated) in the Federal
District Court for the Northern District of Illinois (Chicago) under the
caption "In re Brand Name Prescription Drug Antitrust Litigation." On April
4, 1996, motions for summary judgment filed by the manufacturer defendants
(including the Company) with respect to conspiracy claims alleged in those
actions were denied by the Court. Certain manufacturer defendants (but not
the Company) reached settlements of the federal class action which received
court approval in June 1996 and September 1998, pursuant to which they
agreed to pay an aggregate of approximately $720 million and make certain
commitments with regard to pricing practices.

On November 30, 1998, the defendants remaining in the consolidated federal
class action (which proceeded to trial beginning in September 1998),
including the Company, were granted a directed verdict by the trial court
after the plaintiffs had concluded their case. In ruling in favor of the
defendants, the trial Judge held that no reasonable jury could reach a
verdict in favor of the plaintiffs and stated "the evidence of conspiracy is
meager, and the evidence as to individual defendants paltry or non-
existent." The class action plaintiffs have appealed the Judge's ruling to
the United States Court of Appeals for the Seventh Circuit. Oral argument on
this appeal will be heard in June 1999. While the Company continues to
believe plaintiffs' claims are without merit, there can be no assurance that
the decision of the trial Judge will be upheld on appeal.

<PAGE>

FOREST LABORATORIES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

11. CONTINGENCIES: (CONTINUED)

Following the granting of a directed verdict in favor of the defendants, the
Company moved for an award of sanctions from the attorneys for the class
action plaintiffs in light of certain misrepresentations made with respect
to the Company by such attorneys during the course of the class action. On
April 29, 1999, the trial court granted the Company's motion, awarding the
Company approximately $2.1 million in attorneys' fees and expenses incurred
in this action. In May 1999, the attorneys for the class action plaintiffs
will file an appeal of this decision.

The Company remains a defendant in actions brought on behalf of retail
pharmacists who elected to "opt out" of the federal class actions asserting
virtually identical claims. The Company intends to continue to vigorously
contest such claims and seek their dismissal.

Similar actions alleging price discrimination and conspiracy claims under
state law are pending against many pharmaceutical manufacturers, including
the Company, in various state courts and the District of Columbia. Such
actions included actions purported to be brought on behalf of consumers, as
well as those brought by retail pharmacists. Settlements were reached by
many of the manufacturer defendants of actions purported to be brought on
behalf of consumers in 11 states, including the District of Columbia, for an
aggregate of approximately $65 million and in the State of California for an
aggregate of $176 million (including approximately $148 million payable
through the distribution of free products). The Company has not participated
in such settlements, but has settled actions pending in four states by
making nominal settlement payments.

While the Company believes these actions are without merit, there can be no
assurance that these cases will not result in the payment of damages or the
entering into of injunctive relief which could have an adverse effect upon
the Company's marketing pricing policies.

The Company is not subject to any other material pending legal proceedings,
other than ordinary routine claims incidental to its business.

12. DEVELOPMENT AND MARKETING AGREEMENTS:

On March 27, 1998, the Company entered into an agreement with the Parke-
Davis division of the Warner-Lambert Company to co-promote Celexa, a
selective serotonin reuptake inhibitor for the treatment of depression. The
term of the agreement is three years upon commencement of physician
detailing by the salesforces of Parke-Davis and the Company followed by a
residual period of an additional three years. The Company shall pay to
Parke-Davis each contract year a share of the profits (as defined) earned on
Celexa's sales. No co-promotion fee was earned for fiscal year ended 1999.

<PAGE>

FOREST LABORATORIES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

12. DEVELOPMENT AND MARKETING AGREEMENTS: (CONTINUED)

On July 1, 1997, the Company arranged for a private investor group to
reimburse the Company for up to $60,000,000 of expenses, in connection with
Celexa's development and marketing. At the date of the agreement, the
Company had only recently submitted the product for FDA approval and there
could be no assurance as to the approval and/or marketing success of the
product. In exchange for the investment, the investors will receive
royalties on Celexa's sales commencing fifteen months after FDA approval at
varying rates from twenty-five percent to five percent, depending on sales
levels.

The Company has an option to buy out all but a limited one percent royalty
for $85,000,000. The funded amounts which totaled approximately $38,387,000
and $21,613,000 in fiscal years 1999 and 1998, respectively were recorded
as contract revenue as they were earned, of which $6,375,000 is included in
accounts receivable at March 31, 1999.

In lieu of higher royalty rates, the Company also issued five-year warrants
to the investors to purchase an aggregate of 1,000,000 shares of the
Company's common stock at $25.73 per share (refer to Note 10).

On September 8, 1995, the Company entered into a Development and Co-
Promotion Agreement, with Berlex Laboratories, Inc., to co-promote the
Climara Patch Product. In connection with the acquisition of the Climara
Patch Product, the Company receives a co-promotion fee based on 50% of co-
promotion income, as defined. For fiscal years 1999 and 1998, co-promotion
income exceeded co-promotion expense resulting in income of $12,848,000 and
$6,489,000, respectively. For fiscal year 1997, co-promotion expenses
exceeded co-promotion income resulting in a loss of $1,904,000. These
amounts have been included in contract revenue (expense).

13. OTHER INCOME:

Other income consists of the following:

<TABLE>
Year ended March 31, (In thousands) 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>

Interest and dividends $ 9,898 $ 9,542 $ 9,698
Other income, net 16,589 9,974 1,373
------- ------- -------
$26,487 $19,516 $11,071
======= ======= =======
</TABLE>

The Company recorded income of $12,000,000 and $7,694,000 in fiscal years
1999 and 1998, respectively, from the settlement of its arbitration with
Pharmacia & Upjohn, Inc. with respect to the Company's claimed option to
negotiate for the rights to Detrol. The income recognized in fiscal 1998 was
net of related expenses of $2,306,000. The Company may receive an additional
$3,000,000 of the settlement, subject to the achievement of certain sales
objectives for Detrol.

<PAGE>
FOREST LABORATORIES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

14. INCOME TAXES:

The Company and its mainland U.S. subsidiaries file a consolidated federal
income tax return.

Income (loss) before income tax expense (benefit) includes income from
foreign operations of $20,576,000, $4,451,000 and $5,982,000 for the years
ended March 31, 1999, 1998 and 1997, respectively.

The Company has tax holidays in Ireland, which expire in 2010, and Puerto
Rico, which expired in 1997. The net impact of these tax holidays in 1999
and 1998 was to increase net income and net income per share (diluted) by
approximately $5,092,000 and $.06 and $2,343,000 and $.03, respectively. In
1997 the effect was to decrease the net loss and net loss per share
(diluted) by approximately $1,149,000 and $.01 per share.

The provision for income taxes (benefit) consists of the following:

<TABLE>

YEAR ENDED MARCH 31, (IN THOUSANDS) 1999 1998 1997
- ----------------------------------- ------- -------- --------
<S> <C> <C> <C>

Current:
U.S. federal $ 5,752 $28,455 ($ 3,352)
State and local 3,959 4,225 ( 2,572)
Foreign 2,289 2,083 1,722
-------- -------- --------
12,000 34,763 ( 4,202)
Deferred:
Domestic 2,612 ( 18,351) ( 12,521)
Foreign 2,222 327 ( 556)
------- ------- -------
4,834 ( 18,024) ( 13,077)
------- ------- -------

Charge in lieu of income taxes,
relating to the tax effect of
stock option tax deduction 16,796 1,336 1,821
------- -------- --------
$33,630 $18,075 ($15,458)
======= ======= =======
</TABLE>

No provision has been made for income taxes on the undistributed earnings of
the Company's foreign subsidiaries of approximately $83,000,000 at March 31,
1999 as the Company intends to indefinitely reinvest such earnings.

The reasons for the difference between the provision for income taxes
(benefit) and expected federal income taxes at statutory rates are as
follows:

<TABLE>

YEAR ENDED MARCH 31, (IN THOUSANDS) 1999 1998 1997
- ---------------------------------- ------- ------- --------
<S> <C> <C> <C>

Expected federal income taxes (tax
benefit) $38,781 $19,170 ($13,650)
State and local income taxes (tax benefit),
less federal income tax benefit 3,178 2,740 ( 2,120)
Net benefit of tax-exempt earnings ( 3,386) ( 2,316) ( 3,020)
Tax effect of permanent differences ( 2,931) ( 3,532) 2,118
Other ( 2,012) 2,013 1,214
------- ------- -------
$33,630 $18,075 ($15,458)
======= ======= =======

</TABLE>
<PAGE>
FOREST LABORATORIES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------

14. INCOME TAXES: (CONTINUED)

Net deferred income taxes consist of the following:

<TABLE>

March 31, (In thousands) 1999 1998
------- -------
<S> <C> <C>

Inventory valuation $ 9,926 $10,921
Receivable reserves and other allowances 25,945 25,934
State and local net operating loss
carryforwards 3,910 3,841
Depreciation ( 2,757) ( 2,430)
Amortization 2,232 3,226
Tax credits and other carryforwards 255 255
Accrued liabilities 3,614 4,434
Purchased research and development 11,817 12,917
Employee stock option tax benefits 11,850 6,404
Other ( 1,138) ( 461)
------- -------
$65,654 $65,041
======= =======
</TABLE>

15. QUARTERLY FINANCIAL DATA (UNAUDITED):
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
Diluted
earnings
Net sales Gross profit Net income per share
--------- ------------ ---------- ---------
<S> <C> <C> <C> <C>

1999
- ----
First quarter $107,065 $ 80,150 $ 6,423 $.08
Second quarter 127,395 95,005 10,308 .12
Third quarter 137,462 103,322 21,518 .25
Fourth quarter 174,344 131,312 38,924 .45

1998
- ----
First quarter $ 86,366 $64,062 $ 659 $.01
Second quarter 104,461 79,413 15,516 .19
Third quarter 115,942 88,226 19,484 .24
Fourth quarter 120,317 90,973 1,038 .01

</TABLE>

During the fourth quarter of fiscal 1998, the Company entered into an
agreement with Lundbeck, for the United States marketing rights to certain
products under development by Lundbeck. The Company recognized a
$32,250,000 charge for the agreement and recorded the charge as purchased
research and development expense in the last quarter of fiscal 1998 (refer
to Note 3).
<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------

Financial Condition and Liquidity
---------------------------------
Net current assets increased by $130,643,000 during
fiscal 1999 primarily from normal operating activities.
The increases to cash and accounts receivable resulted
primarily from increases in sales of the Company's
principal promoted products including Celexa-TM-
(citalopram HBr), the Company's selective serotonin
reuptake inhibitor ("SSRI") for the treatment of
depression, which was launched during the second
quarter of fiscal 1999. The increases in inventories
and accounts payable relate primarily to the buildup of
Celexa inventory. Accrued expenses declined primarily
as the result of a $32,250,000 payment made during the
first fiscal quarter for the marketing rights to
certain products under development by H. Lundbeck A/S
of Denmark. This expense had been accrued during the
1998 fiscal year. In addition, the Company paid
$12,000,000 in accordance with the licensing agreement
with H. Lundbeck A/S for the U.S. rights to Celexa,
upon FDA approval, which was received in the second
fiscal quarter.

Property, plant and equipment increased principally
from the expansion of the Company's St. Louis, Missouri
facilities to meet the anticipated demand for the
warehousing and distribution of Celexa. The Company is
also expanding its facilities in Dublin, Ireland to
meet the projected manufacturing demands of Celexa and,
on Long Island, New York and Jersey City, New Jersey to
facilitate increased activity for research and
development projects. The expansions will continue
through fiscal 2000, and when complete, should
adequately meet the Company's foreseeable needs for
manufacturing, warehousing and distribution and
research activities.

Management believes that current cash levels, coupled
with funds to be generated by ongoing operations, will
continue to provide adequate liquidity to facilitate
potential acquisitions of products, capital investments
and the probable $85,000,000 buy-out of a private
investor group's royalty arrangement, made in
connection with Celexa's development and marketing
(refer to Note 12 of the consolidated financial
statements).

<PAGE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------

Results of Operations
---------------------
Net sales for fiscal 1999 increased $119,180,000 from
fiscal 1998. During the September 1998 quarter the
Company, along with its co-promotion partner, the Parke-
Davis division of the Warner-Lambert Company, launched
Celexa. During the June 1998 quarter, Pharmax Limited,
the Company's United Kingdom subsidiary, launched
Exorex-TM-, used for the treatment of eczema. Sales of
Celexa and Exorex accounted for $91,910,000 and
$1,703,000 of the net sales increase, respectively.
Sales of Tiazac-R- were $45,521,000 higher than the prior
year, of which $37,950,000 was due to increased volume
and the remaining portion due to higher realized
average selling prices. Sales of Aerobid-R- declined
$12,429,000 primarily as a result of continuing
competition in the inhaled steroid market. During the
first quarter of fiscal 1999, the Company temporarily
discontinued shipments of propranolol, one of its
generic products, because of manufacturing
difficulties. The Company has not yet resumed
shipments, but hopes to do so in fiscal 2000. During
fiscal 1998, sales of propranolol amounted to
$16,704,000. Sales of the Company's other products were
$9,179,000 higher than last year due primarily to price
increases. Net sales for fiscal 1998 increased
$146,341,000 from fiscal 1997. In December 1996, the
Company announced that it had decided to eliminate
trade incentives for all of its branded products in
order to reduce high trade inventory levels,
principally of Aerobid, and thus improve profit margins
in future periods. Lower sales resulting from this
policy change were principally responsible for the
modest earnings reported in the first quarter of fiscal
1998 and the loss reported during fiscal 1997. Sales
returned to more normal levels during fiscal 1998. The
Company's principal promoted products, particularly
Aerobid and Tiazac, experienced higher unit sales and
accounted for most of the increase. Aerobid, which
returned to normal levels during the second quarter of
fiscal 1998, accounted for $47,142,000 of the increase,
despite a decline in prescriptions for the product as a
result of new competitive products in the inhaled
steroid market. Tiazac, Cervidil-R- and the Company's
other promoted products contributed $70,541,000,
principally all of which was due to volume increases.
The Company's older and less promoted products added
$41,152,000 to the net sales increase, also due
principally to volume increases following fiscal 1997's
reduced sales levels. These increases were offset by a
$12,494,000 decline in sales of the Company's generic
products as a result of continuing price and volume
competition.

<PAGE>

Contract revenue for fiscal 1999 and 1998 includes
$38,387,000 and $21,613,000, respectively, from the
Company's arrangement with a private investor group to
reimburse the Company for certain expenses incurred in
connection with Celexa (refer to Note 12 of the
consolidated financial statements). The remainder of
the increase was the result of Climara-R- co-promotion
income.

Other income for fiscal years 1999 and 1998 includes
$12,000,000 and $7,694,000 net of related expenses,
respectively, from the settlement with Pharmacia &
Upjohn, Inc. with respect to the Company's claimed
option to negotiate for the rights to Detrol-R-. The
Company may receive an additional $3,000,000 of the
settlement, subject to the achievement of certain sales
objectives for Detrol.

Non-recurring income in fiscal 1997 represents a net
non-recurring gain from the sale of the Company's
equity holding in Biovail Corporation International of
$26,399,000 partially offset by non-recurring charges
of $7,250,000 for expenses relating to the closing of
certain of the Company's facilities and for the
estimated cost of settlement of certain litigation.

Cost of sales as a percentage of sales was 25% in
fiscal 1999, 24% in fiscal 1998 and 31% in fiscal 1997.
The increase during fiscal 1999 from the prior fiscal
year was due principally to a change in product mix.
The decrease during fiscal 1998 from fiscal 1997 was a
result of sales returning to more normal levels
following the destocking of wholesaler inventories, as
discussed above. The proportion of high margin branded
products to total product sales increased and together
with improved overhead absorption from higher
production levels resulted in improved profit margins.

Selling, general and administrative expense increased
$88,697,000 during fiscal 1999. The increase was
principally due to the costs associated with the launch
of Celexa, including the full year's impact of the
expansion of the Company's U.S. salesforce by 200
representatives, which was begun in fiscal 1998. The
increase during fiscal 1998 was principally due to pre-
launch expenses for Celexa, including the salesforce
expansion. A portion of these expenses, together with
certain research and development expenses related to
Celexa, for both fiscal years 1999 and 1998, were
reimbursed by the private investor group, as discussed
above.

<PAGE>

The increases in research and development expense
during the periods presented were due to costs
associated with clinical trials conducted to obtain
approval for new products and from staff increases and
associated costs required to support currently marketed
products and products under development and in various
stages of submission. During the 1999 fiscal year,
particular emphasis was placed on clinical studies for
Celexa and new formulations for Aerobid.

Purchased research and development of $32,250,000 in
fiscal 1998 resulted from the Company's license of
certain products from H. Lundbeck A/S, which are in
early stages of development.

Income tax expense as a percentage of income before
taxes was 30% in fiscal 1999 as compared to 33% in
fiscal 1998. The decrease resulted principally from a
decrease in the proportion of operating profit derived
from fully taxable U.S. operations as compared to lower
taxed operations. Celexa is licensed and manufactured
in Ireland and a portion of its profits are subject to
a favorable tax rate. For fiscal 1998, the effective
tax rate decreased from 36%, which was the effective
tax rate prior to the reported loss in fiscal 1997, to
33%. The lower effective rate was due principally to a
decrease in the proportion of the Company's profit
derived from fully taxable operations, as compared to
tax exempt operations, and tax-free interest income and
from increases in the amounts of tax credits.

The Company expects to continue its profitability into
fiscal 2000 with continued growth in its principal
promoted products.

YEAR 2000 READINESS DISCLOSURE
------------------------------
Many older computer systems refer to years in terms of
their final two digits only. Such systems may
interpret the year 2000 to mean the year 1900, or
another year instead. If not corrected, those systems
could cause date-related or operational transaction
failures. In order to assure Year 2000 compliance, the
Company established a Year 2000 Steering Committee.
The Steering Committee has developed a compliance
assurance program that encompasses all internal
systems, including conventional information technology
("IT") business applications, IT infrastructure and
embedded systems. Embedded systems include process
control and manufacturing, and laboratory automation
systems, as well as facility management systems.

<PAGE>

The remediation process consists of three phases:
identification of the systems or components that need
to be replaced or fixed and an assessment of the work
required; evaluation of all critical suppliers, vendors
and customers; and successful completion and testing of
the required remediation activity.

At March 31, 1999, all of the principal systems of the
Company's U.S. operations are Year 2000 compliant.
Other less critical systems in the U.S. and in the
Company's European subsidiaries that are not Year 2000
compliant are being replaced or upgraded. The Company
has requested its critical vendors, major customers,
service suppliers, product alliance partners and banks
to verify their Year 2000 readiness. This evaluation
has been completed for all critical trading partners,
but continues for non-critical partners. The testing
phase attempts to verify that all systems function,
including interfaces with key business partners.
Testing begins as systems are remediated and will
continue throughout 1999. The Company anticipates that
all of its systems will be compliant by the end of 1999
and the cost of any modifications are not expected to
be material.

As part of the contingency plan being developed,
Business Continuity Plans (the "Plans") will address
critical areas of the Company's business. The Plans
will be designed to mitigate serious disruptions to
business flows beyond the end of 1999. The Plans will
likely provide for maintaining increased inventory of
raw materials and finished goods to meet customer
needs, protecting the integrity of ongoing activities,
identifying and securing alternate sources of critical
services, and establishing management teams to address
unexpected problems. The Company expects to complete
the final Plans by the end of the second quarter of
fiscal 2000.

Because the Company's Year 2000 compliance is dependant
upon key third parties also being Year 2000 compliant
on a timely basis, there can be no assurance that the
Company's efforts will prevent an adverse impact on its
results of operations. Management believes that its
ongoing efforts to address the Year 2000 issue will
minimize possible negative consequences to the Company.

FORWARD LOOKING STATEMENTS
--------------------------

Except for the historical information contained herein,
the Management Discussion and other portions of this
annual report contain forward looking statements that
involve a number or risks and uncertainties, including

<PAGE>

FOREST LABORATORIES, INC. AND SUBSIDIARIES
------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
the difficulty of predicting FDA approvals, acceptance
and demand for new pharmaceutical products, the impact
of competitive products and pricing, the timely
development and launch of new products and the risk
factors listed from time to time in the Company's SEC
reports, including the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1999.

Quantitative and Qualitative Disclosures About Market
-----------------------------------------------------
Risk
----

In the normal course of business, operations of the
Company may be exposed to fluctuations in currency
values and interest rates. These fluctuations can vary
the costs of financing, investing and operating
transactions. Because the Company had no debt and only
minimal foreign currency transactions, there is no
material impact on earnings of fluctuations in interest
and currency exchange rates.

<PAGE>

EXHIBIT 10.15

<PAGE>

EMPLOYMENT AGREEMENT
--------------------

AGREEMENT by and between FOREST LABORATORIES, INC. Company,
a Delaware corporation (the "Company") and John Eggers (the
"Executive"), dated as of the 9th day of the sixth month of
1999.

The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have
the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to
the Company currently and in the event of any threatened or
pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and which
are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1. Certain Definitions:
-------------------

(a) The "Effective Date" shall mean the
first date during the Change
of Control Period (as defined in Section
1(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in
this Agreement to the contrary
notwithstanding, if a Change of Control
occurs and if the Executive's employment with
the Company is terminated prior to the date
on which the Change of Control occurs, and if
it is reasonably demonstrated by the
Executive that such termination of employment
(i) was at the request of a third party who
has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise
arose in connection with or anticipation of a
Change of Control, then for all purposes of
this Agreement the "Effective Date" shall
mean the date immediately prior to the date
of such termination of employment.

(b) The "Change of Control Period" shall
mean the period commencing on the date
hereof and ending on the third anniversary of
the date hereof; provided, however, that
commencing on the date one year after the
date hereof, and on each annual anniversary of
such date (such date and each annual
anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), unless
previously terminated, the Change of Control
Period shall be automatically extended so as
to terminate three years from such Renewal
Date, unless at least 60 days prior to the
Renewal Date the Company shall give notice to
the Executive that the Change of Control
Period shall not be so extended.

<PAGE>

2. Change of Control. For the purpose of this
-----------------
Agreement, a "Change of Control" s shall mean:

(a) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either
(i) the then outstanding shares of common
stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined
voting power of the then outstanding voting
securities of the Company entitled to vote
generally in the election of directors (the
"Outstanding Company Voting Securities");
provided, however, that for purposes of this
subsection (a), the following acquisitions
shall not constitute a Change of Control: (i)
any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii)
any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by
the Company or any corporation controlled by
the Company or (iv) any acquisition by any
corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 2; or

(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least
a majority of the Board; provided, however,
that any individual becoming a director
subsequent to the date hereof whose election,
or nomination for election by the Company's
shareholders, was approved by a vote of at
least a majority of the directors then
comprising the Incumbent Board shall be
considered as though such individual were a
member of the Incumbent Board, but excluding
for this purpose, any such individual whose
initial assumption of office occurs as a
result of an actual or threatened election
contest with respect to the election or
removal of directors or other actual or
threatened solicitation of proxies or
consents by or on behalf of a Person other
than the Board; or

(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of
all or substantially all of the assets of the
Company (a "Business Consolidation"), in each
case, unless, following such Business
Combination, (i) all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Voting Securities immediately
prior to such Business Combination
beneficially own, directly or indirectly,
more than 50% of, respectively, the then
outstanding shares of common stock and the
combined voting power of the then outstanding
voting securities entitled to vote generally
in the election of directors, as the case may
be, of the corporation resulting from such
Business Combination (including, without
limitation, a corporation which as a result
of such transaction owns the Company or all
or substantially all of the Company's assets
either directly or through one or more
subsidiaries) in substantially the same
proportions as their ownership, immediately
prior to such Business Combination of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the
case may be, (ii) no Person (excluding any
corporation resulting from such Business
Combination or any employee benefit plan (or
related trust) of the Company or such
corporation resulting from such Business
Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of
the corporation resulting from such Business
<PAGE>

Combination or the combined voting power of
the then outstanding voting securities of
such corporation except to the extent that
such ownership existed prior to the Business
Combination and (iii) at least a majority of
the members of the board of directors of the
corporation resulting from such Business
Combination were members of the Incumbent
Board at the time of the execution of the
initial agreement, or of the action of the
Board, providing such Business Combination;
or

(d) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the
Company.

3. Employment Period. The Company hereby agrees to
-----------------
continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of
the Company subject to the terms and conditions of this
Agreement, for the period commencing on the Effective
Date and ending on the third anniversary of such date
(the "Employment Period").

4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the
Executive's position (including status,
offices, titles and reporting requirements),
authority, duties, and responsibilities shall
be at least commensurate in all material
respects with the most significant of those
held, exercised and assigned at any time
during the 120-day period immediately
preceding the Effective Date and (B) the
Executive's services shall be performed
at the location where the Executive was
employed immediately preceding the Effective
Date or any office or location less than
35 miles from such location.

(ii) During the Employment Period, and
excluding any periods of vacation and
sick leave to which the Executive is
entitled, the Executive agrees to devote
reasonable attention and time during
normal business hours to the business
and affairs of the Company and, to the
extent necessary to discharge the
responsibilities assigned to the
Executive thereunder, to use the
Executive's reasonable best efforts to
perform faithfully and efficiently such
responsibilities. During the Employment
Period it shall not be a violation of
this Agreement for the Executive to (A)
serve on corporate, civic or charitable
boards or committees, (B) deliver
lectures, fulfill speaking engagements
or teach at educational institutions and
(C) manage personal investments, so long
as such activities do not significantly
interfere with the performance of the
Executive's responsibilities as an
employee of the Company in accordance
with this Agreement. It is expressly
understood and agreed that to the
extent that any such activities have
been conducted by the Executive prior to
the Effective Date, the continued
conduct of such activities (or the
conduct of activities similar in nature
and scope thereto) subsequent to the
Effective Date shall not thereafter be
deemed to interfere with the performance
of the Executives responsibilities to
the Company.

(b) Compensation.
------------

<PAGE>
(i) Base Salary. During the Employment
-----------
Period, the Executive shall
receive an annual base salary
("Annual Base Salary"), which shall be paid
at a Monthly rate, at least equal to
twelve times the highest monthly base
salary paid or payable, including any base
salary which has been earned but
deferred, to the Executive by the Company
and its affiliated companies in respect of the
twelve-month period immediately preceding
the month in which the Effective Date occurs.
During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12
months after the last salary increase
awarded to the Executive prior to the
Effective Date and thereafter at least
annually. Any increase in Annual Base
Salary shall not serve to limit or
reduce any other obligation to the Executive
under this Agreement. Annual Base Salary
shall not be reduced after any such increase
and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual
Base Salary as so increased. As used in
this Agreement, the term, "affiliated
companies" shall include any company controlled
by, controlling or under common control with
the Company.

(ii) Annual Bonus. In addition to
------------
Annual Base Salary, the Executive
shall be awarded, for each fiscal year
ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash
at least equal to the highest aggregate
amount awarded to the Executive under all
annual bonus, incentive and other similar
plans of the Company with respect to any of
the last three full fiscal years prior to the
Effective Date (annualized in the event
that the Executive was not employed by the
Company for the whole of such fiscal year)
(the "Recent Annual Bonus"). Each such
Annual Bonus shall be paid no later than the
end of the third month of the fiscal year
next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of
such Annual Bonus.

(iii)Incentive, Savings and Retirement Plans.
---------------------------------------
During the Employment Period, the Executive
shall be entitled to participate in all
incentive, savings and retirement
plans, practices, policies and programs
applicable generally to other
peer executives of the Company
and its affiliated companies, but in no event
shall such plans, practices,
policies and programs provide
the Executive with incentive opportunities
(measured with respect to both
regular and special incentive
opportunities, to the extent, if any, that
such distinction is applicable), savings
opportunities and retirement benefit
opportunities, in each case, less favorable,
in the aggregate, than the most favorable
of those provided by the Company and its

<PAGE>

affiliated companies for the Executive under such
plans, practices and policies and programs as
in effect at any time during the 120-day period
immediately preceding the Effective Date or if
more favorable to the Executive, those
provided generally at any time after the
Effective Date to other peer executives of
the Company and its affiliated companies.

(iv) Welfare Benefit Plans. During the
---------------------
Employment Period, the Executive and/or the
Executive's family, as the case may be, shall
be eligible for participation in and shall
receive all benefits under welfare benefit
plans, practices, policies and programs
provided by the Company and its
affiliated companies (including,
without limitation, medical, prescription,
dental, disability, employee life, group life,
accidental death and travel accident insurance
plans and programs) to the extent
applicable generally to other peer
executives of the Company and its affiliated
companies, but in no event shall such plans,
practices, policies and programs provide the
Executive with benefits which are less
favorable in the aggregate, than the most
favorable of such plans, practices, policies
and programs in effect for the Executive at
any time during the 120-day period
immediately preceding the Effective Date or,
if more favorable to the Executive, those
provided generally at any time after the Effective
Date to other peer executives of the Company
and its affiliated companies.

(v) Expenses. During the Employment Period, the
--------
Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses
incurred by the Executive in accordance with
the most favorable policies, practices
and procedures of the Company and its
affiliated companies in effect for the
Executive at any time during the 120-day
period immediately preceding the
Effective Date or, if more favorable to the
Executive, as is effect generally at
any time thereafter with respect to other
peer executives of the Company and its
affiliated companies.

(vi) Fringe Benefits. During the
---------------
Employment Period, the Executive
shall be entitled to fringe benefits,
including, without limitation, tax and
financial planning services, payment of
club dues, and, if applicable, use of an
automobile and payment of related expenses,
in accordance with the most favorable
plans, practices, programs and
policies of the Company and its
affiliated companies in
effect for the Executive at any
time during the 120-day period
immediately preceding the Effective Date
or, if more favorable to the Executive, as in
effect generally at any time

<PAGE>
thereafter with respect to other
peer executives of the Company and its
affiliated companies.

(vii) Office and Support Staff. During the
------------------------
Employment Period, the Executive shall be
entitled to an office or offices of a size
and with furnishings and other appointments,
and to exclusive personal secretarial and other
assistance, at least equal to the most
favorable of the foregoing provided to the
Executive by the Company and its affiliated
companies at any time during the 120-day
period immediately preceding the Effective
Date or, if more favorable to the Executive,
as provided generally at any time
thereafter with respect to other peer
executives of the Company and its
affiliated companies.

(viii) Vacation. During the Employment Period, the
--------
Executive shall be entitled to paid vacation
in accordance with the most favorable plans,
policies, programs and practices of the
Company and its affiliated companies as in
effect for the Executive at any time during
the 120-day period immediately preceding the
Effective Date or, if more favorable to
the Executive, as in effect generally at any
time thereafter with respect to other peer
executives of the Company and its affiliated
companies.

5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's
-------------------
employment shall terminate automatically upon
the Executive's death during the Employment
Period. If the Company determines in good
faith that the Disability of the Executive
has occurred during the Employment Period
(pursuant to the definition of Disability set
forth below), it may give to the Executive
written notice in accordance with Section
12(b) of this Agreement of its intention to
terminate the Executive's employment. In
such event, the Executive's employment with
the Company shall terminate effective on the
30th day after receipt of such notice by the
Executive (the "Disability Effective Date"),
provided that, within 30 days after such
receipt, the Executive shall not have
returned to full-time performance of the
Executive's duties. For purposes of this
Agreement, "Disability" shall mean the
absence of the Executive from the Executive's
duties with the Company on a full-time basis
for 180 consecutive business days as a result
of incapacity due to mental or physical
illness which is determined to be total and
permanent by a physician selected by the
Company or its insurers and acceptable to the
Executive or the Executive's legal
representative.

(b) Cause. The Company may terminate the
-----
Executive's employment during the Employment
Period for Cause. For purposes of this
Agreement, "Cause" shall mean:

<PAGE>
(i) the willful and continues failure of the
Executive to perform substantially the
Executive's duties with the Company or one
of its affiliates (other than any such
failure resulting from incapacity due to
physical or mental illness), after a written
demand for substantial performance is
delivered to the Executive by the Board or
the Chief Executive Officer of the Company which
specifically identifies the manner in which
the Board or Chief Executive Officer believes
that the Executive has not substantially
performed the Executive's duties, or

(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct
which is naturally and demonstrably
injurious to the Company.

For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be considered
"willful, unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best
interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of
the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a
meeting of the Board called and held for the purpose
(after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.

(c) Good Reason. The Executive's employment may
-----------
be terminated by the Executive for Good
Reason. For purposes of this Agreement,
"Good Reason" shall mean:

(i) the assignment to the Executive of any
duties inconsistent in any respect with
the Executive's position (including
status, offices, titles and reporting
requirements), authority, duties or
responsibilities as contemplated by
Section 4(a) of this Agreement, or any
other action by the Company which
results in a diminution in such
position, authority, duties or
responsibilities, excluding for this
purpose an isolated, insubstantial and
inadvertent action not taken in bad
faith and which is remedied by the
Company promptly after receipt of notice
thereof given by the Executive;

(ii) any failure by the Company to comply
with any of the provisions of Section
4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent
failure not occurring in bad faith and
which is remedied by the Company promptly
after receipt of notice thereof given by the
Executive;

(iii) the Company's requiring the
Executive to be based at any office or
location other than as provided in Section
4(a)(i)(B)hereof or the Company's
requiring the Executive to travel on

<PAGE>
Company business to a substantially greater
extent than required immediately prior to
the Effective Date;

(iv) any purported termination by the Company
of the Executive's employment otherwise
than as expressly permitted by this
Agreement; or

(v) any failure by the Company to comply
with and satisfy Section 11(c) of this
Agreement.

For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive
shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the
Executive for any reason during the 30-day period
immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.

(d) Notice of Termination. Any termination by
---------------------
the Company for Cause, or by the Executive
for Good Reason, shall be communicated by
Notice of Termination to the other party
hereto given in accordance with Section 12(b)
of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written
notice which (i) indicates the specific
termination provision in this Agreement
relied upon, (ii) to the extent applicable,
sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for
termination of the Executive's employment under the
provision so indicated and (iii) if the
Date of Termination (as defined below) is
other than the date of receipt of such notice,
specifies the termination date (which
date shall be not more than thirty days after
the giving of such notice). The failure by the
Executive or the Company to set forth
in the Notice of Termination any fact or
circumstance which contributes to a showing
of Good Reason or Cause shall not waive any
right of the Executive or the Company,
respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting
such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.

(e) Date of Termination. "Date of Termination"
-------------------
means (i) if the Executive's employment is terminated
by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case
may be, (ii) if the Executive's employment is
terminated by the Company other than for
Cause or Disability, the Date of Termination
shall be the date on which the Company notifies the
Executive of such termination and (iii) if
the Executive's employment is terminated
by reason of death or Disability, the Date of
Termination shall be the date of death
of the Executive or the Disability Effective Date, as
the case may be.

6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason: Other Than for Cause, Death or
--------------------------------------------
Disability. If, during the Employment
----------
Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:

<PAGE>

(i) the Company shall pay to the Executive
in a lump sum in cash within 30 days after
the Date of Termination the aggregate of
the following amounts:

A. the sum of (1) the Executive's
Annual Base Salary through the Date
of Termination to the extent not
theretofore paid, (2) the product
of (x) the higher of (i) the
Recent Annual Bonus and (II) the
Annual Bonus paid or payable,
including any bonus or portion
thereof which has been earned but
deferred (and annualized for any
fiscal year consisting of less than
twelve full months or during which
the Executive was employed for less
than twelve full months), for the
most recently completed fiscal year
during the Employment Period, if
any (such higher amount being
referred to as the "Highest Annual
Bonus") and (y) a fraction, the
numerator of which is the number of
days in the current fiscal year
through the Date of Termination, and
the denominator of which is 365 and
(3) any compensation previously deferred by
the Executive (together with any
accrued interest of earnings
thereon) and any accrued vacation
pay, in each case to the extent not
theretofore paid (the sum of the
amounts described in clauses (1),
(2) and (3) shall be hereinafter
referred to as the "Accrued Obligations);
and

B. the amount equal to the product of
(1) three and (2) the sum of (x)
the Executive's Annual Base Salary
and (y) the Highest Annual Bonus; and

C. an amount equal to the excess of
(a) the actuarial equivalent of
the benefit under the Company's
qualified defined benefit retirement plan
(the "Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior
to the Effective Date), and any excess or
supplemental retirement plan in which the
Executive participates (together, the "SERP")
which the Executive would receive if the
Executive's employment continued for three
years after the Date of Termination assuming
for this purpose that all accrued benefits are
fully vested, and, assuming that the Executive's
compensation in each of the three
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the
actuarial equivalent of the
Executive's actual benefit (paid or payable),
if any, under the Retirement Plan
and the SERP as of the Date of
Termination.

(ii) for three years after the Executive's
Date of Termination, or such longer
period as may be provided by the terms
of the appropriate plan, program,
practice or policy, the Company shall
continue benefits to the Executive
and/or the Executive's family at least
equal to those which would have been
provided to them in accordance with the

<PAGE>

plans, programs, practices and policies
described in Section 4(b)(iv) of this
Agreement if the Executive's employment
had not been terminated or, if more
favorable to the Executive, as in effect
generally at any time thereafter with
respect to other peer executives of the
Company and its affiliated companies and
their families, provided, however, that
if the Executive becomes reemployed with
another employer provided plan, the
medical and other welfare benefits
described herein shall be secondary to
those provided under such other plan
during such applicable period of
eligibility. For purposes of
determining eligibility (but not the
time of commencement of benefits) of the
Executive for retiree benefits pursuant
to such plans, practices, programs and
policies, the Executive shall be
considered to have remained employed
until three years after the Date of
Termination and to have retired on the
last day of such period;

(iii) the Company shall, at its sole
expense as incurred, provide the
Executive with outplacement services the
scope and provider of which shall be
selected by the Executive in his sole
discretion; and

(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or
provide to the Executive any other
amounts or benefits required to be paid or
provided or which the Executive is eligible
to receive under any plan, program,
policy or practice or contract or agreement
of the Company and its affiliated
companies (such other amounts and benefits
shall be hereinafter referred to as the
"Other Benefits").

(b) Death. If the Executive's employment is
-----
terminated by reason of the Executive's death
during the Employment Period, this Agreement
shall terminate without further obligations to the
Executive's legal representatives under this
Agreement other than for payment of Accrued
Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30
days of the Date of Termination. With respect
to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the
Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to
the most favorable benefits provided by the
Company and affiliated companies to the estates
and beneficiaries of peer executives of the
Company and such affiliated companies under such
plans, programs, practices and policies
relating to death benefits, if any, as in effect
with respect to other peer executives and their
beneficiaries at any time during the 120-day
period immediately preceding the Effective Date
or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries as in
effect on the date of the Executive's death with
respect to other peer executives of the Company
and its affiliated companies and their
beneficiaries.

(c) Disability. If the Executive's employment is
----------
terminated by reason of the Executive's
Disability during the Employment Period, this
Agreement shall terminate without further obligations
to the Executive, other than for payment of Accrued

<PAGE>
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision
of other Benefits, the term Other Benefits
as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and
other benefits at least equal to the most favorable of
those generally provided by the Company and its affiliated
companies to disabled executives and/or their
families in accordance with such plans, programs,
practices and policies relating to
disability, if any, as in effect generally with
respect to other peer executives and their families at
any time during the 120-day period immediately preceding
Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect
at any time thereafter generally with respect to other
peer executives of the Company and its affiliated
companies and their families.

(d) Cause: Other than for Good Reason. If the
---------------------------------
Executive's employment shall be terminated for
Cause during the Employment Period, this
Agreement shall terminate without further
obligations to the Executive other than the
obligation to pay to the Executive (x) his
Annual Base Salary through the Date of
Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z)

Other Benefits, in each case to the extent
theretofore unpaid. If the Executive
voluntarily terminates employment during the
Employment Period, excluding a termination
for Good Reason, this Agreement shall
terminate without further obligations to the
Executive, other than for Accrued Obligations
and the timely payment of provision of Other
Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date
of Termination.

7. Non-exclusivity of Rights. Nothing in this
-------------------------
Agreement shall prevent or limit the Executive's
continuing or future participation in any plan,
program, policy or practice provided by the
Company or any of its affiliated companies and for
which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or
otherwise affect such rights as the Executive may
have under any contract or agreement with the
Company or any of its affiliated companies.
Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any
contract or agreement with the Company or any of
its affiliated companies at or subsequent to the
Date of Termination shall be payable in accordance
with such plan, policy, practice or program or
contract or agreement except as explicitly
modified by this Agreement.

8. Full Settlement. The Company's obligation to make
---------------
the payments provided for in this Agreement and
otherwise to perform its obligations hereunder
shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim,
right or action which the Company may have against
the Executive or others. In no event shall the
Executive be obligated to seek other employment or
take any other action by way of mitigation of the
amounts payable to the Executive under any of the
provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive
obtains other employment. The Company agrees to
pay as incurred, to the full extent permitted by

<PAGE>
law, all legal fees and expenses which the
Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity
or enforceability of, or liability under, any
provision of this Agreement or any guarantee of
performance thereof (including as a result of any
contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each
case interest on any delayed payment at the
applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").

9. Certain Reductions of Payments.
------------------------------

(a) Anything in this Agreement to the contrary
not-withstanding, in the event it shall
be determined that any payment or distribution
by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible by
the Company for Federal income tax purposes because of
Section 280G of the Code, then the aggregate present
value of amounts payable or distributable to or for
the benefit of the Executive pursuant to this
Agreement (such payments or distributions pursuant
to this Agreement are hereinafter referred to as
"Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall
be an amount expressed in present value which maximizes
the aggregate present value of Agreement Payments without
causing any Payment to be nondeductible by the Company
because of Section 280G of the Code. For purposes of
this Section 9 present value shall be determined
in accordance with Section 280G(d)(4) of the Code.

(b) All determinations required to be made under
this Section 9 shall be made by BDO Seidman
(the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company
and the Company shall elect which and how much of
the Agreement Payments shall be eliminated or reduced
consistent with the requirements of this Section 9 and
shall notify the Executive promptly of such election.
Within five business days thereafter, the Company shall
pay to or distribute to or for the benefit of the
Executive such amounts as are then due to the Executive
under this Agreement.

(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial
determination by the Accounting Firm hereunder, it
is possible that Agreement Payments will have
been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments
which will have not been made by the Company could have
been made ("Underpayment"), in each case, consistent with
the calculations required to be made hereunder. In the
event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be
treated for all purposes as a loan to the Executive
which the Executive shall repay to the Company together
with interest at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code; provided, however,
that no amount shall be payable by the Executive to the
Company (or if paid by the Executive to the Company shall
be returned to the Executive) if and to the extent such
payment would not reduce the amount which is subject

<PAGE>

to taxation under Section 4999 of the Code. In the event
that the Accounting Firm determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive
together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code.

10. Confidential Information. The Executive shall
------------------------
hold in a fiduciary capacity for the benefit of
the Company all secret or confidential
information, knowledge or data relating to the
Company or any of its affiliated companies, and
their respective businesses, which shall have been
obtained by the Executive during the Executive's
employment by the Company or any of its affiliated
companies and which shall not be or become public
knowledge (other than by acts by the Executive or
representatives of the Executive in violation of
this Agreement). After termination of the
Executive's employment with the Company, the
Executive shall not, without prior written consent
of the Company or as may otherwise be required by
law or legal process, communicate or divulge any
such information, knowledge or data to anyone
other than the Company and those designated by it.
In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis
for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.

11. Successors.
----------
(a) This Agreement is personal to the Executive
and without the prior written consent of
the Company shall not be assigned by the
Executive otherwise than by will or the
laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the
Executive's legal representative.

(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its
successors and assigns.

(c) The Company will require any successor
(whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or
substantially all of the business and/or assets
of the Company to assume expressly and agree to
perform this Agreement in the same manner and
to the same extent that the Company would be
required to perform it if no such succession
had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or
otherwise.

12. Miscellaneous.
-------------
(a) This Agreement shall be governed by and
construed in accordance with the laws of the
State of New York, without reference to
principles of conflict of laws. The captions of
this Agreement are not part of the provisions
hereof and shall have no force or effect.
This Agreement may not be amended or modified
otherwise than by a written agreement executed
by the parties hereto or their respective
successors and legal representatives.

(b) All notices and other communications
hereunder shall be in writing and shall

<PAGE>
be given by hand delivery to the other party or by
registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:

If to the Executive:
-------------------
John Eggers
220 E. 72nd Street
New York, New York 10021

If to the Company:
-----------------
Forest Laboratories, Inc.
Attention: Kenneth E. Goodman
909 Third Avenue
New York, New York 10022

or to such other address as either party
shall have furnished to the other in
writing in accordance herewith. Notice and
communications shall be effective when
actually received by addressee.

(c) The invalidity or unenforceability of any
provision of this Agreement shall not
affect the validity or enforceability of any other
provision of this Agreement.

i. The Company may withhold from any
amounts payable under this Agreement
such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any
applicable law or regulation.

ii. The Executive's or the Company's failure
to insist upon strict compliance with
any provision of this Agreement or the
failure to assert any right the Executive or the
Company may have hereunder,
including, without limitation, the right of the
Executive to terminate employment for
Good Reason pursuant to Section
5(c)(i)(v) of this Agreement, shall not be
deemed to be a waiver of such provision or
right or any other provision or right of this
Agreement.

iii. The Executive and the Company acknowledge that,
except as may otherwise be provided under any
written agreement between the Executive and
the Company, the employment of the Executive by the
Company is "at will" and, subject to
Section i(a) hereof, prior to the Effective Date,
the Executive's employment and/or this Agreement
may be terminated by either the Executive or the
Company at any time prior to the Effective Date, in
which case the Executive shall have
no further rights under this Agreement. From and
after the Effective Date this Agreement shall
supersede any other agreement between
the parties with respect to the subject matter
hereof.

<PAGE>

IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to
be executed in its name on its behalf, all as of the day and
year first above written.

For the Employee:

/s/ JOHN EGGERS
-------------------------------
JOHN EGGERS

FOREST LABORATORIES, INC.
By:

/s/ KENNETH E GOODMAN
-------------------------------
KENNETH E GOODMAN
President and Chief
Operating Officer

<PAGE>
EXHIBIT 10.20
<PAGE>

LICENCE & SUPPLY AGREEMENT
--------------------------

between

Forest Laboratories (Ireland) Limited
c/o Forest Laboratories
909 Third Avenue
New York NY 100222, USA
(hereinafter referred to as "Forest")

and

H. Lundbeck A/S
9, Ottiliavej
DK-2500 Copenhagen-Valby
Denmark
(hereinafter referred to as "Lundbeck")

(Forest and Lundbeck may hereinafter be referred to individually
as a "Party" or collectively as "Parties".)
<PAGE>

PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . 3

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 4

GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ADDITIONAL PATENTS . . . . . . . . . . . . . . . . . . . . 10

DOWNPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . 10

ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . 11

COMPETITION CLAUSE . . . . . . . . . . . . . . . . . . . . 13

CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . 14

DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . 15

REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . 19

MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . 20

MINIMUM NET SALES . . . . . . . . . . . . . . . . . . . . . 22

FORECASTS/ESTIMATES . . . . . . . . . . . . . . . . . . . . 23

SUPPLY OF COMPOUND . . . . . . . . . . . . . . . . . . . . 24

CONDITIONS OF DELIVERY . . . . . . . . . . . . . . . . . . 26

TRADEMARK . . . . . . . . . . . . . . . . . . . . . . . . . 27

INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 29

TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . 30

TERMINATION FOR CAUSE . . . . . . . . . . . . . . . . . . . 31

RIGHTS UPON AND PROCEDURE OF TERMINATION . . . . . . . . . 32

FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . 34

ASSIGNABILITY AND SUB-LICENCES . . . . . . . . . . . . . . 35

<PAGE>

WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . 35

PUBLICATION AND PUBLIC ANNOUNCEMENTS . . . . . . . . . . . 36

NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 36

ENTIRE AGREEMENT AND MODIFICATIONS . . . . . . . . . . . . 38

SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . 38

GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 38

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . 39

APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . 40

<PAGE>
PREAMBLE
--------

WHEREAS, Lundbeck has invented and is developing the chemical
compound 1 - [3-(dimethylamino)propyl]-1 -(p-fluorophenyl)- 1,
3-dihydro-isobenzofuran-5-carbonitrile (racemate), hydrobromide
(HBr), known under the International Nonproprietary Name (INN)
Citalopram Racemate;

WHEREAS, Lundbeck is the owner of certain patent rights in, among
other countries, the United States of America (hereinafter "USA")
covering Citalopram;

WHEREAS, Lundbeck has developed certain know how concerning the
formulation and use of pharmaceutical forms of Citalopram for
human therapeutical use;

WHEREAS, Forest wishes to obtain from Lundbeck for USA the right
to formulate Citalopram supplied to Forest by Lundbeck under this
Agreement into finished products and to use, market and sell such
finished products in pharmaceutical packaged forms under Lundbeck
trademarks, and Lundbeck is willing to accommodate said wishes of
Forest;

WHEREAS, the Parties have agreed to undertake the development of
Citalopram in cooperation for governmental approval, marketing
and selling in the USA;

WHEREAS, Lundbeck wishes to use outside the USA all data
developed by Forest with respect to Citalopram, and Forest is
willing to accommodate said wishes of Lundbeck;

WHEREAS, Forest is aware that Lundbeck has granted a licence to
Du Pont De Nernours & Co. (Inc.), 549, Albany Street, Boston,
Massachusetts 02118, United States of America, according to which
licence Du Pont De Nemours & Co. (Inc.) is entitled to
synthesize, market and sell IH-Citalopram for non-human use in
the USA;

WHEREAS, Forest in exploiting its rights granted under this
Agreement will act as an independent trader in its own name and
for its own account.

<PAGE>

NOW, THEREFORE, intending to be legally bound and in
consideration of the mutual promises hereinafter set forth, the
Parties hereto hereby agree as follows:

1. DEFINITIONS.
-----------
For the purposes of this Agreement the following definitions
shall apply:

"Additional Patents" shall mean any and all present and future
patent rights, specifically relating to the improvements of the
formulation, use and/or sale of Compound and/or Citalopram and/or
Bulk Tablets in Finished Product form, such patent rights not
being granted hereunder to a Party on the date of Execution.

"Affiliate" shall mean corporations in which a Party, now or
during the term of this Agreement, on a permanent basis owns or
controls fifty one per cent (51 %) or more of the voting stock.

"Bulk Tablets" shall mean the bulk form of Compound delivered as
tablets containing 20 mg. Citalopram base (Approx. 24,8 mg.
Compound) manufactured in batches of 80,000 tablets and/or as 40
mg. tablets manufactured in batches of 40.000 tablets, in
accordance with Appendix B (Quality Specifications for Bulk
Tablets) to this Agreement.

"Calender Quarter" shall mean the three (3) month period
commencing on the first day of the first, fourth, seventh, and
tenth month of each Marketing Year.

"Clinical Phase I - III trials" shall mean clinical trials
carried out on humans in order to obtain Registration.

"Clinical Phase IV trials" shall mean post marketing clinical
trials within the FDA approved indication and dosages.

"Citalopram" shall mean 1-[3-(dimethylamino)propyl~l-(p-fluorophenyl)-1,
3-dihydro-isobenzofuran-5-carbonitrile (racemate), i.e. Citalopram base.

"Compound" shall mean 1-[3-(dimethylamino)propel]-1-(p-fluorophenyl)-1,
3--dihydro-isobenzofuran-5-carbonitrile (racemate), hydrobromide (HBr),

<PAGE>

including other salts, derivatives and esters hereof, known under
the International Non-proprietary Name (INN) citalopram racemate.

"Date of Execution" shall mean the date of signature of this
Agreement by the Party last to sign.

"DMF" shall mean a Drug Master File document containing detailed
information, e.g., but not limited to, information describing the
manufacturing site, the manufacturing facility, the operating
procedures, the personnel, the manufacture and control of
Compound/Citalopram and the Compound/Citalopram intermediates as
filed with the FDA.

"FDA" shall mean the Food and Drug Administration in the
Territory as hereinafter defined.

"Finished Products" shall mean finished pharmaceutically
formulated products manufactured on basis of and containing
Citalopram as their only active ingredient.

"Forest" and "Lundbeck" shall have the meaning first stated
above.

"Formulate" shall mean to produce Finished Products from
Compound.

"Independent Third Party" shall mean an organization or a person
that does not fall under the definition of Forest, Lundbeck
and/or an Affiliate.

"Indication" shall mean depression, panic disorder, anxiety and
obsessive compulsive disorder and any other therapeutical use in
humans, but specifically excluding cerebrovascular disorders and
inhibition of platelet aggregation as from August 6, 2005.

"Information" shall mean any confidential material other than
Know How and Synthesis Data that is communicated by one Party in
writing or is otherwise available, as a result of this Agreement.

"Know, How" shall mean all present and future data and
information concerning Compound, Citalopram, Bulk Tablets and/or
Finished Products including, but not limited to, data and
information related to manufacture, use, formulation, dosage

<PAGE>

form, and non-clinical and clinical data, but specifically
excluding Synthesis Data and Information.

"Licensed Patents" shall mean :

- - United States Patent No. 4,136,193, filed January 07, 1977
(Product Patent), which expires January 07, 1997, (Possible
extension to January 23, 2001 (Waxmann Hatch) and, Patent
no 4,650,884, filed August 02, 1985 (Method of Manufacture),
which expires August 02, 2005.

- - United States Use Patent No. 5,296,507, filed January 6,
1993 (Continuation Application 08/001,571), expiry date
August 09, 2011. This use patent (cerebrovascular disorders
and inhibition of platelet aggregation) has been taken out
in the name of Lundbeck, who has inlicensed the rights for,
among other countries, the USA from Zeria Pharmaceutical Co.
Ltd., 10-11, Nihonbashikobunacho, Chuoku, Tokyo 103, Japan.
The use patent will be excluded from the Licensed Patents as
from August 6, 2005, cf. Article 3 b, from which date Zeria
Pharmaceutical Co. Ltd. regains all licensed rights from
Lundbeck, unless otherwise agreed.

"Marketing Year" shall mean successive twelve (12) months
periods. The first Marketing Year shall commence after
Registration and on the first day of the month in which Forest
invoices its first sale of a Finished Product to an Independent
Third Party. The date on which the first Marketing Year commences
shall be immediately confirmed by Forest to Lundbeck in writing.

"NDA" shall mean an investigational New Drug Application.

"Net Sales" shall mean the invoice price billed by Forest to
Independent Third Parties for the sale of Finished Products less
value added taxes and less:

(i) Trade and/or quantity discounts actually allowed and
taken;

(ii) Amounts repaid or credited by reason of purchase,
charge backs, rebates, rejections, defects or returns;
and

<PAGE>

(iii) charges for freight, insurance, handling and
transportation.

Deductions in respect of items mentioned under (i) through
(iii) above shall be calculated according to Forest's
standard method of accounting consistently applied.

"Non-Clinic" shall mean investigational and/or development
activities carried out in non-human models in order to obtain
Registration.

"Quality Specifications" shall mean the Quality Specifications
for Compound and Bulk Tablets set forth in Appendix B to this
Agreement.

"Registration" shall mean all governmental approvals required for
the legal marketing of Finished Product in the USA, e.g. approval
by the U.S. Food and Drug Administration of a New Drug
Application (NDA).

Semi-Exclusive" shall mean sole and entire operating to exclude
all others, except for a retained right by Lundbeck to Formulate,
market, use, distribute and/or sell Finished Product in the
Territory under a registered trademark different from Trademark.
Such right may be exercised through one channel, which may be
either Lundbeck, an Affiliate hereof or an Independent Third
Party.

"Synthesis Data" shall mean all present and future data related
to the manufacture of Compound.

"Territory" shall mean the United States of America including
Puerto Rico, Guam, and the US Virgin Islands and all other
permanent territorial possessions of the United States of America
at the Date of Execution.

"Trademark" shall mean a trademark registered in the name of
Lundbeck in the Territory and used in conjunction with Finished
Products in the Territory, e.g. CipramO, Cipramil@ or
Seropram'91, subject to the provisions of Article 15 of this
Agreement.

"Zeria" shall mean Zeria Pharmaceutical Co. Ltd., 10-11,
Nihonbashikobunacho, Chuoku, Tokyo 103, Japan.

<PAGE>

2. GRANT
-----
(a) Lundbeck hereby grants to Forest, and Forest hereby accepts,
a licence under Licensed Patents, Additional Patents and
Lundbeck owned or controlled Know How and. Information, to
Formulate, market, use, distribute and sell Finished Product
as a drug for human therapy within the Indication in the
Territory, for the term of this Agreement cf. Article 17.
Additional Patents developed or acquired by Lundbeck shall
be subsumed under Licensed Patents.

(b) Lundbeck hereby grants to.Forest, and Forest accepts, the
exclusiveright and obligation to use and apply the
Trademark, or Trademarks if applicable, of Article 15 (a),
on and to Finished Products. Trademark(s) must not be used
in any other conjunctions.

(c) The license granted to Forest hereunder shall be exclusive
for the term of this Agreement, unless the license becomes
Semi-Exclusive under Article 11 (b) hereof.

(d) For the term of this Agreement Forest hereby grants free of
charge, to Lundbeck, and Lundbeck accepts, the exclusive
licence for the whole world outside the Territory, with the
power to grant sub-licences, to use any and all Forest owned
or controlled Know How, Information and Additional Patents
for the manufacture, Formulation, development use and sale
of Compound/Citalopram and/or Finished Products, and Forest
developed Additional Patents to the extent that such Know
How, Information and Additional Patents is/are directly
related to Citaloprarn or Compound. If, however, the said
Know How, Information and/or Additional Patents, by proof of
Forest, can be exploited independently from Licensed Patents
and/or Lundbeck Know How, Information and/or Additional
Patents, the license granted to Lundbeck shall be non-exclusive.
In any sub-license agreement entered into between
Lundbeck and an Independent Third Party, Forest shall be
granted reciprocal rights, meaning that Forest for the Territory
shall be granted a license to Know How, Information and Additional
Patents for the manufacture, Formulation, development use and sale of
Compound, Citalopram and/or Finished Products as produced by
Lundbeck's sub-licensee, on a royalty free basis as

<PAGE>
applicable between Forest and Lundbeck pursuant to this
Article 2 (d). The expression "shall be granted" shall in
this context mean that Lundbeck to the best of its abilities
shall impose the corresponding obligation on the Independent
Third Party in question during the negotiations with said
Independent Third Party.

(e) Within the Territory Forest shall retain all proprietary
rights to Know How, Information and Additional Patents
developed by Forest, however it being understood that a
license under such Know How, Information and Additional
Patents shall be granted by Forest to Lundbeck, if the
license hereunder becomes Semi-Exclusive, cf Article 11 (b).
Any licence granted by Forest under Article 2 (d) shall be
royalty free.

(f) Information, Know How and/or Synthesis Data supplied by
either Party under this Agreement is the property of the
supplying Party in whatever shape Information, Know How
and/or Synthesis Data, cf Article 13 (c), is available, both
original and copy, including data on computer discs and/or
any other electronic devices. The Parties shall provide each
other with all Know How, Information and/or Synthesis Data,
when applicable, within a reasonable time after such is
available. The Parties undertake to establish a database
containing all development and pharmacovigilant data
procured under the development work, cf Article 8, and/or
marketing of Finished Product, cf Article 10. Both Parties
shall have equal access to said database.

(g) The right to make, have made, sell and/or distribute
Compound, Citalopram and/or Bulk Tablets in other form than
Finished Product is excluded from the licence granted to
Forest hereunder.

(h) Lundbeck's US Product Patent No. 4,943,590, (Reissued as per
August 30, 1994, US Re34,712), filed June 08, 1989, expiry
date June 08, 2009, covering the S-(+)-Citalopram is neither
included in the Licensed Patents, nor in the Additional
Patents. However, Lundbeck may decide to subsume the S-(+)-Citalopram
under Licensed Patents in order to have the
enantiomer form developed and marketed in * the Territory by
Forest hereunder. If such decision is taken, the Parties
shall agree on a development plan in accordance with the

<PAGE>

principles stated in Article 8 of this Agreement. If the
Parties can not agree on a development plan or if Forest is
not interested in having the enantiomer form subsumed under
Licensed Patents, Lundbeck shall not continue the
development of the enantiomer form in the Territory for the
term of this Agreement.

(j) Lundbeck a right to co-market Finished Product in Canada,
under a separate co-marketing agreement to be negotiated and
entered into, provided that Lundbeck decides to have
Finished Product co-marketed in Canada and provided that
Forest can fulfil Lundbeck's requirements with regard to
Forest's sales force, sales organization, budgets, etc. "Co
marketing" shall mean the marketing, use, distribution and
sale of Finished Product by the Parties applying different
trademarks registered and owned by Lundbeck. In so far
Forest is granted co-marketing rights for Canada, Forest is
entitled to have Finished Product co-promoted in Canada,
standing surety in any respect towards Lundbeck for any and
all acts and/or omissions committed or omitted by its
co-promotion partner.)

(k) Forest's parent company Forest Laboratories Inc., 909 Third
Avenue, New York, New York 10022, USA, hereby irrevocably
declares to stand surety for any performance undertaken by
Forest hereunder.

3. ADDITIONAL PATENTS
------------------
(a) Licenses under Additional Patents owned, controlled and/or
registered by a Party or a sub-licensee hereof shall
automatically be granted to the other Party for its
Territory and for the term of this Agreement. If the
Additional Patents are taken out by Forest, Lundbeck shall
be granted a license under said Additional Patents under
terms and conditions as provided for in Article 2 (d). If
the Additional Patents in question are taken out by Lundbeck
or its sub-licensee, they shall be deemed subsumed under
Licensed Patents, cf Article 5 (a).

(b) Any patent covering the S-(+)-Citalopram is specifically
excluded from the Additional Patents, cf. Article 2 N. As
far as the Licensed Patent for the indication of

<PAGE>

cerebrovascular disorders and inhibition of platelet ag-
gregation (hereinafter the "Use-Patent"), as taken out in
the name of Lundbeck is concerned, this patent will be a
part of the Licensed Patents until and including August 5,
2005 from which date Zeria regains all rights licensed to
Lundbeck and sub-licensed to Forest hereunder. If Forest
wishes to continue utilization of the Use Patent Forest
shall inform Lundbeck hereof not later than January 1, 1999,
whereafter Lundbeck undertakes to negotiate a prolongation
of the agreement entered into with Zeria in order for Forest
to continue as Lundbeck's sublicensee with respect to the
Use Patent for the term of this Agreement. However, Lundbeck
does not warrant that Lundbeck will be granted the necessary
licence by Zeria. In case Lundbeck has not succeeded in
having the agreement with Zeria prolonged prior to August 6,
2004, Forest is entitled to negotiate such rights directly
with Zeria.

4. DOWNPAYMENT
-----------
Forest will pay to Lundbeck downpayments in accordance with the
following schedule:

(a) The Parties intend to annex the Plan, as defined in Section
8 (c) as Appendix A to this Agreement on a mutually agreed
date, within a period not to exceed ninety (90) days from
the date hereof (Such 90th day being referred to as the "Due
Diligence Date"). Forest shall submit a draft Plan for
review, comment and reasonable agreement by Lundbeck. The
Parties agree that the Plan shall be designed with the
primary objective of meeting requirement for FDA approval of
the Registration. Forest shall have the right to perform
additional due diligence investigations during this period.
Upon the date the Plan is so. annexed Forest shall pay to
Lundbeck [Confidential Treatment]. In the event the Parties
do not agree upon the Plan or the Facilities Plan by the Due
Diligence Date, or Forest based on the additional due
diligence investigations determines not to proceed with the
development work contemplated hereby by the Due Diligence
Date, Forest may terminate this Agreement effectively upon
written notice to Lundbeck and shall have no further
obligation hereunder;

<PAGE>

(b) Within seven (7) days of the filing for Registration of any
form of Finished Product in the Territory, [Confidential
Treatment]; and

(c) Within seven (7) days of the date when Registration has been
granted for the first form of Finished Product in the
Territory, [Confidential Treatment].

(d) At the milestones identified in the Development Plan, an
aggregate of [Confidential Treatment].

(e) Lundbeck is not obliged to pay back the downpayments
presented under Articles 4 (a), (b) or (c) wholly or in part
for any reason unless Lundbeck is in material breach of its
obligations under this Agreement.

5. ROYALTIES
---------
(a) In consideration of the rights and licences granted under
Article 2 Forest shall effect to Lundbeck the following
royalty payments:

Following the first commercial sale of a Finished Product
and for the term of this Agreement, Forest shall pay to
Lundbeck a Trademark royalty of [Confidential Treatment] of
Net Sales, a Know How royalty of [Confidential Treatment] of
Net Sales, and a supply payment, cf. Article 13, of
[Confidential Treatment] of Net Sales, in total a royalty
and supply payment equal to [Confidential Treatment] of Net
Sales. The Know How royalty includes payment for the use of
Know How and Formulation Know How transferred hereunder, cf.
Article 2 (a). Acknowledging that the term of Licensed
Patents is short, Lundbeck has refrained from receiving
royalties on Licensed Patents.

(b) Within thirty (30) days after the end of each Calender
Quarter and during the term of this Agreement Forest shall
furnish Lundbeck with a complete and accurate sales report
stating the total quantity of Finished Product-units sold by
Forest during the preceding Calender Quarter, the gross
invoice price and the Net Sales thereof and the amount of
royalties and supply payments due thereon, and at the same
date Forest shall in United States Dollars pay to Lundbeck

<PAGE>

the sum accrued according to the provisions of this Article
5, less the Minimum Supply Price as already paid under
Article 13 (a). When deducting the Minimum Supply Price paid
in DKK, the rate of exchange as published by Wall Street
Journal (Purchase of Danish Crowns) on the day payment was
effected, shall apply. If the balance, including the
royalties provided by Article 5 (a), after such deduction is
in the favour of Forest, as a result of a reduction in the
price of Finished Product, such balance shall not be
reimbursed by Lundbeck whose compensation, including
royalties, for the supplies made to Forest never shall be
less than the Minimum Supply Price.

(c) All payments to be made hereunder shall be made net in
Unites States Dollars by bank transfer remittance to
Lundbeck's account [Confidential Treatment] held at Den
Danske Bank A/S, Holmens Kanal 12, Copenhagen, Denmark, or
any other account designated by Lundbeck.

(d) Forest is entitled to withhold from the royalties payable to
Lundbeck under this Agreement all income related taxes
levied or assessed thereon. As Lundbeck may receive for such
tax-payments a ciedit on the taxes payable by it in the
Kingdom of Denmark or elsewhere, Forest shall without undue
delay provide Lundbeck with certified tax receipts required
by the relevant tax authorities for the taxes legally
deducted from the royalty-payments hereunder.

(e) Forest shall keep true books of account containing an
accurate record of all data necessary for computation of
royalties as set forth in this Article, including data
recording the amount of free samples distributed. At the
request and at the expense of Lundbeck, Forest shall permit
an independent licensed public accountant, to whom Forest
has no reasonable objections, appointed by Lundbeck, to have
access during ordinary business hours to such books and
records of Forest as may be necessary to determine the
correctness of any statement and/or payment made under this
Agreement in respect of any calender year ending not more
than three (3) years prior to the date of such request. Such
inspection may take place no more than once per calender
year. If the independent public accountant determines any
incorrectness, which at least has influenced the royalty
payments to the disadvantage of Lundbeck with five percent

<PAGE>

(5%) or more, the expenses of the accountant shall be borne
by Forest.

6. COMPETITION CLAUSE
------------------
(a) No rights are granted to Forest by this Agreement except for
the Territory. Consequently Forest is not entitled to market
Finished Product actively outside the Territory for a period
of ten (10) years from launch of Finished Product in the
Territory. For a period of 5 (five) years after launch in
the Territory, Forest shall refer all orders received for
delivery of Finished Product outside the Territory to
Lundbeck. Lundbeck is not entitled to market Compound,
Citalopram or Finished Product within the Territory and
shall refer all orders received for delivery of Finished
Product within the Territory to Forest. This clause has been
phrased and shall be interpreted in accordance with the
draft Commission (EC) regulation concerning the application
of Art. 85 (3) of the Treaty to categories of Technology
Transfer Agreements, anticipated to take effect as from
November 1, 1995.

(b) Forest shall with all due diligence pursue the Registration
procedure of the Finished Product as if the Finished Product
was developed by Forest itself. "All due diligence" shall
with respect to the development and marketing of Finished
Product mean that Forest is obliged to allocate the same
resources in development and marketing as if the Compound
was from Forest's own research and Forest had reached a
decision to develop and market such compound. (c)
Before the elapse of the third full Marketing Year, Forest
shall not be entitled to market, distribute and/or sell
pharmaceutical products classified as ATC N6A drugs of the
"Selective Serotonin Re-Uptake Inhibitor (SSR0, and/or the
"Selective Serotonin and Noradrenaline Re Uptake Inhibitor
(SNRI)" generations, including, but not limited to
Nefazodone (SerzoneO) and/or Venlafaxine (EffexorO) for use
in claims directly competing with approved claims for
citalopram.

<PAGE>

7. CONFIDENTIALITY
---------------
(a) Know How, Information and/or Synthesis Data supplied by one
Party to the other as a result of the existence of this
Agreement or generated under this Agreement by any Party
shall be held in confidence by the receiving Party until
December 31st, 2009 or seven (7) years after effective date
of termination of this Agreement, whichever period is the
longer. However, this secrecy obligation shall only apply to
Know How, Information, and/or Synthesis Data (if applicable,
cf. Article 13 (c)) communicated in writing or
electronically. If communicated orally, the communication
must be confirmed in writing or electronically at the latest
thirty (30) days after the oral communication took place.
This Article shall survive expiration or termination of this
Agreement, but shall not apply to Know How, Information
and/or Synthesis Data:

(i) Which was in the public domain at the time it was disclosed
to the receiving Party;

(ii) Which has entered the public domain, through
publication or otherwise, after disclosure to the
receiving Party; provided such Know How,
Information and/or Synthesis Data, has not entered
the public domain as the result of a breach by the
receiving Party of its obligations under this
Agreement;

(iii) Which the receiving Party can establish was known
to it prior to any disclosure to the receiving
Party under the Secrecy Agreement between the
Parties dated April 20th, 1995; or

(iv) Which was received by the receiving Party from any
Independent Third Party who had the right to
supply such Know How, Information and/or Synthesis
Data to the receiving Party without breaching an
obligation of confidentiality. to the Party that
disclosed such Know How, Information and/or
Synthesis Data to the receiving Party under the
terms of this Agreement.
<PAGE>

(b) This secrecy obligation should not be considered violated,
if and to the extent that Know How, Information and/or
Synthesis Data,

(i) are disclosed to government agencies for the
purpose of obtaining Registration;

(ii) must be disclosed to persons, directly employed by
a Party, its Affiliate, licensee or sub-licensee,
which persons have a need to know in order to
effectuate the development of Finished Product
provided that such persons are bound by the same
secrecy obligations as the Parties hereunder; or

(iii) are disclosed pursuant to an order or requirement
of a court, administrative agency or other
government body.

(c) A Party asserting that its obligation of confidentiality
under this Article does not apply to Know How, Information
and/or Synthesis Data (when applicable) supplied to it by
the other Party, because of an exception to that obligation
set out in paragraphs (a) and (b) of this Article, shall
have the burden of proving the exception it asserts.

8. DEVELOPMENT
-----------
(a) Forest acknowledges that Forest has been informed by
Lundbeck that the production sites of Lundbeck, on which
Compound is being manufactured, have not yet been approved
by the FDA. However, Forest will inspect Lundbeck's
production sites in LumsAs, Denmark, and Seals Sands, UK,
before the Due Diligence Date, cf Article 4 (a). If the
production facilities are not found acceptable, Forest may
terminate this Agreement effectively upon written notice to
Lundbeck and shall have no further obligation hereunder. If
the production facilities are found acceptable, Forest
hereby accepts that the deliveries to be made under Article
8 (g), originate from the said production sites as approved
by Forest, being agreed that Lundbeck neither warrants nor
represents that Bulk Tablets so supplied comply with FDA
requirements. Notwithstanding Forest's approval of the
production facilities, Lundbeck agrees that it shall adapt

<PAGE>

its production facilities in accordance with a program (the
"Facilities Program") to be agreed upon between Lundbeck and
Forest prior to the Due Diligence Date, cf Article 4 (a).
The Facilities Program shall be developed and agreed upon
with the objective of bringing the said Lundbeck facilities
into compliance with all applicable FDA regulations,
including current Good Manufacturing Practice regulations.
Upon completion of the Facilities Program Lundbeck
undertakes to submit a DMF for such facilities to the FDA
without undue delay. Forest undertakes to assist Lundbeck in
achieving the standards set forth in the Facilities Program
by providing reasonable advice and consultation. In the
event the FDA does not approve the Lundbeck production
facilities after completion of the Facilities Program
Lundbeck shall remain obligated to use its best efforts on a
continuing basis to resolve all issues raised by the FDA
(including the taking of corrective actions and the filing
of appropriate amendments or supplements to the DMF) and
Forest shall continue to provide consultation and advice in
this regard and may offer pre-payment of royalties or other
financial support to Lundbeck in order for Lundbeck to
fulfil the FDA requirements. The obligation set forth in the
preceding sentence may, however, be terminated by Lundbeck
designating Forest or a FDA approved Affiliate or a FDA
approved Independent Third Party as Lundbeck's contract
manufacturer to produce Compound or Bulk Tablets for
Forest's requirements hereunder. Upon such designation
Lundbeck shall be deemed relieved from all obligations
undertaken hereunder relating to its production facilities
undertaken under this Agreement and Article 17 (b) shall
apply with regard to the consequences of the termination of
said obligation.

(b) Lundbeck agrees to carry out or cause to be carried out the
studies identified in the Over-all Development Plan in
Appendix A to this Agreement for the obtaining of
Registration of Finished Product, provided that Lundbeck's
obligation shall be limited to an aggregate cost of
[Confidential Treatment], hereinafter referred to as the
"Agreed Amount". Forest shall have the obligation to carry
out or cause to be carried out all such studies as
identified in the Over-all Development Plan that can not be
carried out within the limit of the Agreed Amount. Further
Lundbeck shall cause Forest to carry out the studies

<PAGE>
undertaken by Lundbeck in the Over-all Development Plan on
Lundbeck's account. Accordingly .Forest shall accept such
assignment on Lundbeck's behalf, it being understood that
the costs of the studies for which Lundbeck is obligated
shall not exceed the Agreed Amount, which shall then be
invoiced to Lundbeck. The invoiced amount, which can not
exceed the Agreed Amount, shall not fall due and thereby be
payable by Lundbeck until the, downpayment instalment
identified in Article 4 (d) has been paid by Forest to
Lundbeck.

(c) The Appendix referred to in Article 8 (b) forms an integral
part of this Agreement and is hereinafter referred to as the
"Plan". Forest shall with all due diligence conduct the
development of the Finished Product in accordance with the
procedures set forth in the Plan. For purposes of this
Article 8 of this Agreement, "all due diligence" shall mean
that Forest shall use efforts consistent with those used by
it with regard to its new drug application ("NDA")
submission for its own Finished Products deemed to have
equivalent commercial potential. All studies to be performed
according to the Plan shall follow the FDA standards and
standards agreed between the Parties.

(d) It is agreed between the Parties that development work
relating to Compound and Citaloprarn may be carried out by
the Parties individually in the Territory and by Lundbeck
also outside the Territory. Forest is not entitled to
perform development work outside the Territory without the
prior written approval from Lundbeck.

(e) Forest will perform the development work according to the
Plan at its own costs to the extent the costs of the
development work exceed the Agreed Amount. Any protocol must
be approved by Lundbeck. To obtain Lundbeck's comments for
the protocols Forest shall send to Lundbeck the protocol
draft and obtain Lundbeck's comments hereof before studies
are initiated. Comments shall be given within fifteen (15)
working days from Lundbeck having received the protocol
draft.

(f) The draft edition of the final report shall be issued to
Lundbeck for approval together with any and all Information
and Know How developed by Forest hereunder in so far not

<PAGE>

previously exchanged. The exchange of Information and Know
How shall take place no later than fifteen (15) working days
after Lundbeck having received the draft edition of the final report.
Lundbeck's comments shall, subject to discussions between the
Parties, be included in the final report.

(g) In order for Forest to comply with the Plan, Lundbeck will
free of charge supply to Forest the necessary amount of Bulk
Tablets and placebo tablets. Forest is aware and accepts
that Bulk Tablets and placebo tablets so supplied may
originate from batches which have been produced prior to the
completion of the Facilities Program. If such supplies are
not acceptable for the purpose of obtaining Registration,
Lundbeck may either replace the Bulk Tablets delivered with
Bulk Tablets meeting FDA requirements or designate an
alternative supply source in accordance with Article 8 (a)
i.f. in order to fulfil Forest's requirements hereunder.
Article 17 (b) shall apply with respect to any delay caused
by such supply impediments. Supplies shall be made within a
reasonable time, i.e. no more than four (4) months after
Forest's request. The supplies requested for galenic
development and for clinical testing under the Plan of
Finished Product prior to the filing of an application for
Registration by Forest for any form of Finished Product must
hot exceed the quantities stated in Appendix A (Delivery
plan for Bulk Tablets) to this Agreement. After Registration
has been obtained, Lundbeck shall neither supply Bulk
Tablets nor placebo tablets to Forest for clinical purposes,
unless separately agreed upon.

(h) In the event Forest is unable for reasons beyond its
control, cf. Article 20, to complete a study set forth in
the Plan, the Parties shall meet and discuss why the study
has not been completed and will agree as to the actions to
be taken to obtain Registration of the Finished Product as
quickly as possible.

(i) Intentionally Omitted.

(j) If any additional clinical studies not included in the Plan
are required by FDA for Registration in the Territory,
Forest will perform the studies at its own costs. However,
such studies can only be initiated after Forest having

<PAGE>

obtained Lundbeck's prior written approval, which approval
cannot be unreasonably withheld. Approval shall be deemed
given if Lundbeck has not rejected an application within
fifteen (15) working days from receipt. Before issuing
reports on the results of a study, a first draft report will
have to be forwarded and approved by Lundbeck. The same
procedure shall apply with respect to clinical phase IV
trials. Trials to be performed by Forest must not take place
outside the Territory. Subject to Article 8 (e) Forest must
neither perform Non-Clinical, Clinical 1-111, nor Clinical
Phase IV trials, that are not agreed upon either in the Plan
or separately. Any trial carried out shall be monitored by
Lundbeck's project and product managers, cf Articles 8 (1)
and 10 (c).

(k) Forest shall regularly and immediately upon Lundbeck's
reasonable request, advise the Lundbeck of the status of its
work under the Plan. Meetings in this respect will be held
alternatively in the United States at Forest's address and
in Denmark at Lundbeck's address. The Parties will confer
regularly to discuss any problem that may arise during the
term of this Agreement.

(l) Both Parties shall designate a project manager to oversee
the development of the Finished Product and inform each
other of his/her name and position. Such persons shall be
the focal persons for contacts related to research and
development issues for the term of this Agreement, i.e. also
after Registration and launch of Finished Product. If any
Party replaces such project manager by another person,
written notice shall be given to the other Party.

9. REGISTRATION
------------
(a) Forest will prepare the relevant and necessary documentation
for Registration of Finished Product with FDA and any other
relevant health authorities in the Territory. Forest shall
apply for Registration of Finished Product in the Territory
in its own name and on its own account. Upon grant of
Registration to Forest, Lundbeck may, in its own name and on
its own account, prepare and submit an application to the
FDA for a parallel Registration. The costs of such
additional Registration (including documentation costs and
FDA imposed user fees) shall be borne by Lundback. Towards
<PAGE>

FDA and any other relevant authority or Independent Third
Party Forest hereby grants to Lundbeck a "right of
reference" to the NDA submitted by FDA in order for Lundbeck
to obtain a Registration identical with the Registration
obtained by Forest. Lundbeck will only be entitled to
exercise its parallel Registration in case of breach or
termination of this Agreement or if the exclusive rights as
granted to Forest hereunder become Semi-Exclusive, of
Articles 2 (c) and 11 (b). Notwithstanding the parallel
Registration Forest undertakes to assign and transfer its
rights in any Registration in the Territory to Lundbeck or a
party designated by Lundbeck upon breach or Forest
termination of this Agreement.

(b) All costs and/or expenses arising or incurred in connection
with preparation and filing of the application for
Registration in the Territory and maintenance of
Registrations in the Territory shall be borne by Forest,
unless Lundbeck has expressly agreed to pay such costs.

(c) Neither Lundbeck nor Forest warrants that Registration of
the Finished Product will be obtained in the Territory. All
costs incurred and payments made by Forest and Lundbeck
under this Article 9 are non-refundable.

(d) Any Synthesis Data which might be mandatory in obtaining the
Registration will be delivered by Lundbeck directly to the
FDA, unless Forest is designated by Lundbeck to do so on
Lundbeck's behalf. In case the DI\AF due to national
mandatory legislation must be transferred to Forest from
Lundbeck, Forest is not entitled to gain access to Synthesis
Data, without having obtained the prior written approval of
Lundbeck, which shall not be unreasonably withheld. Having
obtained Lundbeck's approval, and provided Lundbeck is not
able to satisfy the requirements of the relevant authorities
itself, Lundbeck shall grant access to such data, subject to
the obligations of confidentiality stipulated in Article 7
hereof, and non-use, except for the required regulatory or
legal purpose. Lundbeck agrees that it shall make no changes
to the DMF or otherwise make changes to the manufacturing or
control procedures related to the manufacture of Compound,
Citalopram, Bulk Tablets or Finished Product without
obtaining, at Lundbeck's sole cost and expense, prior FDA
approval of such changes.

<PAGE>

10. MARKETING
---------
(a) Forest shall initiate marketing of Finished Product within
six (6) months from grant of Registration.

(b) Forest shall market the Finished Product as if it were a
pharmaceutical product resulting from Forest's own research.

(c) Both Parties shall at least one (1) year before the
anticipated start of the first Marketing Year designate one
product manager for the Finished Product who shall be
responsible for coordinating marketing and related issues
between the Parties and be the focal person for future
contacts between Forest and Lundbeck with respect to
marketing activities. Both Parties may replace such product
manager by giving written notice to the other Party. For the
term of this Agreement there will be a project manager in
charge of development, cf. Article 8 (1), and a product
manager in charge of marketing.

(d) Forest shall package the Finished Product in a package with
graphics and of a design which are comparable to those used
for other Forest products. The package material shall show
the legend "Licensed from H. Lundbeck A/S, Denmark" with
legible letters of reasonable size. Any and all packaging
material shall be designed in accordance with applicable FDA
requirements. Forest shall review proposed packaging
material with Lundbeck and shall give due regard to
Lundbeck's comments and suggestions.

(e) The Parties shall keep each other informed on all reports of
adverse reactions with respect to Compound, Citalopram
and/or Finished Product, coming to either Party's knowledge,
regardless of the origin of such reports. The term "reports"
shall also include publications in journals or other media.
All reporting, including but not limited to relevant adverse
reaction reporting, shall be handled in compliance with
detailed standards and routines as agreed between the
Parties no later than thirty (30) days prior to the
initiation of the development work to be performed by
Forest, and in any case in compliance with formal
requirements in the Territory. All material supplied by a
Party to the other Party under this provision shall be
Information in the hands of the receiving Party; however,

<PAGE>

notwithstanding Article 7 or any other provision of this
Agreement, Lundbeck shall be free to communicate to any
Affiliate and/or sub-licensee, which have been granted
rights with respect to Finished Product outside the
Territory, e.g., but not limited to Zeria, Information
received by the Parties under this provision provided such
Affiliates and sub-licensees are obliged under a secrecy
obligation which is at least as limiting as Article 7.
Information originating from a Lundbeck Affiliate or
licensee will be communicated to Forest under the license
agreements entered into between Lundbeck and its Affiliate
or licensee.

(f) Lundbeck will, free of charge, provide Forest with Compound
to be Formulated and distributed by Forest as free samples.
The amount of free samples, for which Compound is delivered
free of charge, shall not exceed [Confidential Treatment] of
the units of Finished Product sold by Forest during the
first [Confidential Treatment] Marketing Years according to
the Net Sales recorded. However, Lundbeck will in addition
hereto, and at all times, supply additional Compound for
Formulation and distribution as free samples, at a price
equal to DKK [Confidential Treatment] per kg. Compound
delivered. The price of DKK [Confidential Treatment] shall
be inflated in accordance with the principles stated in
Article 13 (a). Lundbeck shall have the right to audit
Forest's books to confirm sample use. The Parties anticipate
that the need for samples will be approximately
[Confidential Treatment] of the amounts of Finished
Products, sold during the first three (3) Marketing Years.

(g) Forest shall pay for all costs related to its marketing and
sale of Finished Products in the Territory except as
expressly provided for herein.

11. MINIMUM NET SALES
-----------------
(a) During the first full Marketing Year in the Territory Forest
shall as a minimum achieve Net Sales corresponding to United
States Dollars [Confidential Treatment]. During the second
full Marketing Year in the Territory Forest shall as a
minimum achieve Net Sales corresponding to United States
Dollars [Confidential Treatment] and during the third full
Marketing Year in the Territory Forest shall as a minimum

<PAGE>

achieve Net Sales corresponding to United States Dollars
[Confidential Treatment].

(b) If the thresholds are not achieved in the designated
Marketing Years in accordance with Article 11 (a), the
licences as granted to Forest in Article 2 of this Agreement
shall become Semi-Exclusive upon a three (3) months notice
given by Lundbeck. In order to avoid the grant becoming
Semi-Exclusive Forest shall have the option of compensating
Lundbeck either 1) financially by paying to Lundbeck an
amount equal to [Confidential Treatment] of the non-achieved
Net Sales, cf. Article 5 (a), less the corresponding
manufacturing costs, or 2) by purchasing the amount of
additional Compound constituting the shortfall at the
purchase prise of [Confidential Treatment] of the non-achieved Net Sales,
cf. Article 5 (a), and/or 3) by carrying
backward or forward to one (1) previous or following year
the missing Net Sales. [Confidential Treatment]. If no
choice is made in due time, the grant becomes Semi-Exclusive,
subject to the notice of three (3) months to be
given by Lundbeck. Notwithstanding the foregoing, the
Parties agree that Forest shall have met the minimum Net
Sales requirements for a Marketing Year if Forest shall have
purchased that quantity of Compound during such year which,
if Formulated into Finished Product and sold at the then
applicable net selling price (determined by dividing Net
Sales for such Marketing Year by the number of units of
Finished Product included in such Net Sales) would equal or
exceed the minimum Net Sales requirement for such Marketing
Year.

12. FORECASTS/ESTIMATES
-------------------
(a) To secure uniform quality of Finished Product Lundbeck will,
for the term of this Agreement, supply and Forest will
purchase its entire requirements of Compound from Lundbeck
and Formulate such Compound. In order to secure timely
delivery of Forest's requirements for Compound, Forest must
apply the following forecast systems.

(b) Twelve (12) months before the first date on which Forest
reasonably anticipates to request the first delivery of
Compound to take place, Forest shall supply Lundbeck with a
forecast covering Forest's require ments of Compound from

<PAGE>

the anticipated first date of marketing to December 31 st
the same year plus the following three (3) years of
marketing, broken down to quarterly deliveries. The three
(3) year forecast is to be yearly updated so that Lundbeck
will always be in the possession of a three (3) year
forecast. The three (3) year forecasts shall neither be
binding on Forest nor on Lundbeck, but as stated in Articles
12 (c) and 12 (d).

(c) Six (6) months before the requested date of first delivery
of Compound, Forest shall place with Lundbeck a binding
order covering Forest's requirements up to the first coming
December 31 st from date of delivery. The binding order
shall be within the non-binding three (3) year forecast
placed under reference to Article 12 (b) for the
corresponding period.

(d) Further Forest shall during the term of this Agreement on a
running basis furnish Lundbeck with a binding written
forecast indicating Forest's expected purchases during
three (3) Calender Quarters. The forecasts to be given shall
be calculated on a quarter by quarter basis. Any forecast
shall be updated quarterly and the forecast shall be given
before the tenth (10) in the first month of a Calender
Quarter.

(e) The forecasts to be given under Article 12 (d) shall be
given six (6) months before the beginning of the relevant
three (3) Calender Quarter period in order for Lundbeck to
be in the possession of estimates for three (3) successive
Calender Quarters, six months before the beginning of any
three (3) Calender Quarter period covered by the estimate.
The first forecast to be given, cf Article 12 (c), shall
cover the period from date of delivery to the first coming
December 31 st and the following three (3) Calendar
Quarters. Within the (3) Calender Quarter forecast given,
the forecast given for the first Calender Quarter shall be
binding on Forest, while the forecasts given for the second
and third Calendar Quarters shall be binding on Forest
within plus/minus (+/-) twenty per cent (20%) of the amount
forecasted. The orders shall be binding on Lundbeck in
accordance with Article 14 (c).

<PAGE>

(f) Recognizing its obligations to its Affiliates and other
distributors and licensees Lundbeck will use its reasonable
effort to supply Forest's requirements of Compound even if
Forest orders exceed onehundredandtwenty per cent (120%) as
stated in Article 12 (e) above.

13. SUPPLY OF COMPOUND
------------------
(a) In accordance with Article 5 (b) a Minimum Supply Price,
corresponding [Confidential Treatment] (CIP, Forest,
Ireland, Incoterms 1990) per kg. Citalopram, delivered as
Compound has been agreed upon. The Minimum Supply Price
shall be inflated annually, first time upon elapse of the
calendar year 1998, with the inflation rate for 1998 as
annually calculated and published by the Danish National
Bank. The amounts payable to Lundbeck hereunder, including
Trademark and Know How royalties, will be either the above
mentioned Minimum Supply Price or [Confidential Treatment],
of the Net Sales, whichever amount is the higher.

(b) Based on the sales reports submitted Forest shall pay
Lundbeck in United States Dollars (US$) for all Forest's
purchases of Compound from Lundbeck hereunder. Terms of
payment shall be "current month of invoice plus 30 days".

(c) Lundbeck may terminate its obligation to supply Forest with
Compound, only as permitted by Articles 8 (a) or 17 (a) iv.
In such case Lundbeck shall, unless the termination is due
to breach by Forest, furnish Forest, or if applicable the
designated alternative contract manufacturer, with all
relevant production Know-How, Information and/or Synthesis
Data, not previously provided, needed for manufacturing of
Compound. However, it is being understood that the title to
such Information, Know-How and/or Synthesis Data shall
remain with Lundbeck and that Forest accordingly undertakes
to abide Article 7 of this Agreement also with respect to
such Information, Know How and/or Synthesis Data exchanged
after termination of the supply obligation of Lundbeck.
Notwithstanding the foregoing Forest shall have the right
disclose production Know-How, Information and Synthesis Data
to an Independent Third Party manufacturer solely for the
purpose of supplying Forest's requirements of Compound, Bulk
Tablets or Finished Product, provided that such Independent
Third Party acknowledges Lundbeck's proprietary interest

<PAGE>

therein and agrees to maintain the confidentiality thereof
to the same extent required of Forest hereunder. Upon such
Lundbeck termination Forest shall pay to Lundbeck a total
royalty, including Trademark royalty, of [Confidential
Treatment] of Net Sales of Finished Products manufactured on
basis of the Information, Know How and/or Synthesis Data
transferred from Lundbeck. Lundbeck shall to a reasonable
extent assist Forest and/or its designated contract
manufacturer in setting up a production. Forest shall hold
Lundbeck harmless with respect to costs arisen in this
connection. If Forest chooses to acquire its total
requirements of Compound from an Independent Third Party,
who neither has been nor is under contract with Forest,
which Independent Third Party is manufacturing Compound
independently from Information, Know-How and/or Synthesis
Data, Forest may return said Information, Know-How and/or
Synthesis Data to Lundbeck, whereafter the royalty payable
hereunder shall be reduced to a pure Trademark royalty of
[Confidential Treatment], as from January 1 in the calender
year following the physical return of the Information, Know-
How and/or Synthesis Data. It has been agreed that any such
Independent Third Party, in order for Forest to continue
applying the Trademark, must be a qualified FDA supplier and
approved by FDA for the manufacturing of Compound.

(d) The Parties reserve the right to inspect / audit the
facilities, processes, records and any other facts used by
each other in the manufacturing, processing, testing and
storage of the compound, Bulk Tablets and/or Finished
Product. Access to Synthesis Data are specifically excluded
from the said reservation. The inspection will be conducted
to ensure compliance with all pertinent acts, regulations
and guidelines promulgated by the FDA as well as evolving
standards being developed by FDA which are made public
through speeches and inspection activities. Such
inspection/auditing will be permitted during normal business
hours to include the manufacturing cycle of the Finished
Products involved.

(e) The Parties are very sensitive to proprietary Information,
Know How, Synthesis Data and processes. Any such data
obtained or observed by the personnel of the Parties during
the inspections/auditions shall remain confidential in
accordance with Article 7.

<PAGE>

14. CONDITIONS OF DELIVERY
----------------------
All purchases made by Forest from Lundbeck hereunder shall be
subject to the following conditions of delivery:

(a) Lundbeck warrants all Compound and/or Bulk Tablets supplied
by it here-under will be minufactured of proper materials
and on a plant approved by the Parties, meeting all quality
specifications stipulated in Appendix B, including
compliance with manufacturing practices as agreed between
the Parties, cf Article 8 (a).

(b) Forest shall receive title to Compound and assume risk of
loss upon delivery hereof at Forest, (CIP, Dublin, Ireland,
Incoterms 1990).

(c) Lundbeck will supply ordered quantities of Compound subject
to Articles 12 and 13, within three (3) months after receipt
of a firm purchase order from Forest indicating quantities
and requested delivery dates. The firm purchase order shall
correspond to the forecasts submitted, cf Article 12 (e),
covering the first Calender Quarter of any three Calender
Quarter forecast period. If Lundbeck is not able to deliver
the amounts of Finished Products so ordered, Article 14 (d)
shall apply. If Lundbeck has not confirmed its ability to
deliver the Finished Products ordered within one (1) month
from receipt of a binding order the order shall be deemed
accepted. Orders shall be deemed fulfilled, when the amount
of Compound delivered does not deviate from the amount
ordered with more than 15%. The amount actually delivered
shall be invoiced, notwithstanding the order size.

(d) If Lundbeck is not able to deliver the quantities of
Compound ordered, e.g. as a result of lack of production
capacity, Lundbeck shall inform Forest hereof without undue
delay, but shall with all due diligence try to identify a
second supply source, or, if unsuccessful, supply Forest
with all necessary production Know How and/or Synthesis
Data, as provided for in Article 13 (c). Lundbeck shall
receive full royalties, cf. Article 5 (a), less payment for
supplies equal to the Minimum Supply Price, if another
supply source is used hereunder. If Know How and/or
Synthesis Data are provided to Forest hereunder, Forest
shall return such Know How and/or Synthesis Data to Lundbeck

<PAGE>

on request, when Lundbeck has sufficient production
capacity.

(e) Compound which does not meet requirements stated in Appendix
B, shall be returned to Lundbeck or forwarded to a
destination indicated by Lundbeck and at Lundbeck's expense,
and the purchase price thereof, including transportation and
importation costs, shall be credited to Forest's account;
provided, however, that Forest has informed Lundbeck of such
nonconformity within one (1) month from the date of Forest's
receipt of the goods at Forest's factory. Nonconforming
goods shall be replaced without unnecessary delay. However,
Lundbeck shall be responsible to replace non-conforming
goods where such non-conformity was the result of a latent
defect which could not reasonably be detected by Forest
applying its best efforts and using all due diligence,
within such one (1) month period. Consequential damages are
excluded unless resulting from gross negligence or
intentional wrongdoing of Lundbeck. Lundbeck's liability
under this Article is limited to the value of the shipment
as invoiced by Lundbeck.

15. TRADEMARK
---------
(a) Selection/Filing/Prosecution/Maintenance: Provided
----------------------------------------
registered in the Territory Forest may either choose to
apply Cipram , Cipramil or Seropram as Trademark, or if
Forest so prefers, freely select a different Trademark for
use in conjunction with the marketing of Finished Products
in the Territory hereunder. Forest's choice shall be subject
to Lundbeck's approval, which approval shall not be
unreasonably withheld. However Lundbeck is not obliged to
accept registration and use of an already registered
Lundbeck-trademark/Trademark if such registration does not
comply with Lundbeck's strategy in the Territory. Lundbeck
shall file applications for registrations for a Trademark
selected by Forest and approved by Lundbeck. Forest shall
have the right to market a generic version of the Finished
Product in the event it appears reasonably likely that a
generic version of Citalopram has been or will be
introduced in the Territory by an Independent Third Party.
Any name, including the generic name "citalopram", under
which such Finished Product is sold shall be deemed a
"Trademark" for purposes of Articles 5 (a) and this Article

<PAGE>

15 (a) and the marketing of such Finished Product shall be
governed by the financial terms and conditions provided by
Article 5 (a). Forest will notify Lundbeck promptly of its
decision to introduce a generic version of the Finished
Product in accordance with this Article 15 (a). Lundbeck
will prosecute such applications and maintain the
registration and keep Forest advised of the status of each
application and registration. If Lundbeck has difficulties
or is unable to register a selected Trademark, Lundbeck
shall advise Forest and Forest shall either request Lundbeck
to then continue prosecution of the application and/or
Forest shall select another Trademark. All out-of-pocket
costs and expenses (including attorney's fees) associated
with the filing of applica tions, prosecution of
applications, registrations and maintenance of registrations
shall be paid by Lundbeck. Forest shall assist and cooperate
with Lundbeck in its filing and proseduting all Trademark
applications and maintaining Trademark registrations as well
as sign all documents necessary to carry out filing and
prosecuting such applications and maintaining such
registrations. All uses of any Trademark by Forest anywhere
in the Territory shall inure to the benefit of Lundbeck.
Forest is not entitled to market Finished Product without
using Trademark.

(b) Ownership: Trademarks selected and registered in accordance
---------
with Article 15 (a) shall be and remain the sole and
exclusive property of Lundbeck.

(c) Enforcement: Forest will inform Lundbeck of any known
-----------
trademarks, applications, registrations, or use of
trademarks in the Territory, known or which ought to be
known by Forest, which may cause confusion with Forest's
selected Trademarks. Lundbeck may initiate action to enforce
its Trademarks rights at Lundbeck's cost. In the event
Lundbeck elects not to initiate action to enforce its
Trademark rights or fails or refuses to do so within sixty
(60) days after written request therefore by Forest, Forest
shall have the right at its option to initiate such action
in Lundbeck's name with Lundbeck's full cooperation. In
such action by Forest, Forest shall pay all costs and
expenses. Any award for damages collected through
infringement suit in the Territory shall be divided between
the Parties according to the share of loss or potential loss
each Party would suffer from the infringement. If a

<PAGE>

Trademark, identified and chosen by Lundbeck, must be
substituted by a new Trademark after launch of Finished
Product, due to an infringement suit brought against Forest
or Lundbeck, the Trademark royalty rate as provided for in
Article 5 (a), shall be reduced to two per cent (2%) for a
period of two (2) years from substitution has taken place in
the market. No further compensation shall be paid by
Lundbeck to Forest in this respect.

(d) Quality Controls: Forest will provide Lundbeck with samples
----------------
of Finished Products bearing the Trademarks at Lundbeck's
request. All Finished Products sold by Forest bearing the
Trademark shall meet the standard, specifications and
instructions laid down or proved by the FDA or the
equivalent authority in any state of the Territory. Forest
agrees and undertakes to use the Trademark only on/or in
connection with the Finished Products under this Agreement.
All Finished Products must bear Trademark.

(e) Infringement: If the Trademark has been identified and
------------
chosen by Forest, Forest shall be responsible for claims or
damages awarded as a result of Trademark infringements.
Forest shall indemnify Lundbeck for claims of Trademark
infringement made by an Independent Third Party.

16. INDEMNIFICATION
---------------
(a) Lundbeck shall defend, indemnify and hold harmless Forest
and its officers, directors, agents and employees from and
against any and all liability, demands, damages, costs,
expenses (including attorneys fees), and losses for death,
personal injury, illness or property damage arising (a) out
of the manufacture, distribution, use, testing, sale, or
other disposition, by Lundbeck, or any distributor,
customer, or representative of Lundbeck or anyone in privity
therewith, of Finished Product, or any Information, Know How
or Synthesis Data licensed by Lundbeck to Forest under this
Agreement, or (b) as a result of using any or all of the
Know How, Information or Synthesis Data licensed to Forest
under this Agreement or (c) the breach by Lundbeck of any
representations or warranties of Lundbeck made herein. Such
indemnification shall neither apply to liability resulting
from the gross negligence or intentional wrongful acts of
Forest, nor from Forest's failure to observe express

<PAGE>
warranties made to Lundbeck with respect to the Bulk Tablets
and/or Finished Product.

(b) Forest shall defend, indemnify and hold harmless Lundbeck
and its officers, directors, agents and employees from and
against any and all liability, demands, damages, costs,
expenses (including attorneys fees), and losses for death,
personal injury, illness or property damage arising (a) out
of the manufacture, distribution, use, testing, sale, or
other disposition, by Forest, or any distributor, customer,
or representative of Forest or anyone in privity therewith,
of Finished Product, or any Information, Know How or
Synthesis Data licensed by Lundbeck to Forest under this
Agreement, or (b) as a result of using any or all of the
Know How, Information or Synthesis Data licensed to Forest
under this Agreement or (c) the breach by Forest of any
representations or warranties of Forest made herein. Such
indemnification shall neither apply to liability resulting
from the gross negligence or intentional wrongful acts of
Lundbeck, nor from Lundbeck's failure to observe express
warranties made to Forest with respect to the Compound.

(c) The Parties shall notify each other promptly of any claims
or suits involving the Parties own express warranties,
intentional acts or inaction and negligence and the Parties
shall cooperate amicably as to any litigation arising
therefrom.

17. TERM AND TERMINATION
--------------------
(a) The term of this Agreement shall be for a period beginning
with the Date of Execution of this Agreement and ending upon
effective termination, which may be notified by:

(i) Forest, giving a prior written notice of at least
three (3) months to the end of any calendar month,
until Registration application has been filed,
being agreed that such termination shall have no
influence on Forest's obligations under Article 4
(a) hereof,

(ii) Forest, giving a prior written notice of at least
three (3) months to the end of any calendar
quarter, after filing of Registration application,

<PAGE>
being agreed that such termination shall have no
influence on Forest's obligations under Articles 4
(a) and 4 (b) hereof,

(iii) Forest, giving a prior written notice of at least
six (6) months to the end of any calendar year,
after Registration has been granted being agreed
that such termination shall have no influence on
Forest's obligations under Articles 4 (a), 4 (b)
and 4 (c) hereof,

(iv) Lundbeck, giving a prior written notice of at
least three (3) years to the end of any calendar
quarter, after elapse of Licensed Patents.
Termination by Lundbeck hereunder shall only
effect the obligation of Lundbeck to supply to
Forest as provided for in Article 13, i.e. shall
not effect the remaining rights and obligations of
the Parties hereunder pursuant to provisions
hereof which survive termination by their express
terms, e.g. the Know How and Trademark royalty
payments, cf Article 13 (c) and the corresponding
licenses, which shall be continued in accordance
with Articles 2 and 5 (a).

(v) Lundbeck if Forest, before the elapse of the third
full Marketing Year, acquires control of, is taken
over by or merged with an Independent Third Party
competing directly with Lundbeck, i.e. an
Independent Third Party which directly or
indirectly controls or will control the marketing
and/or sale in, among other countries, the
Territory of one or more pharmaceutical products
classified as ATC IN16A drugs of the "Selective
Serotonin Re-Uptake Inhibitor (SSRI)", and/or the
"Selective Serotonin and Noradrenaline Re-Uptake
Inhibitor (SNRI)" generations, including, but not
limited to Nefazodone (Serzone) and/or Venlafaxine
(Effexor) for use in claims directly competing
with approved claims for Citalopram.

(b) In the event of termination without cause in accordance with
the terms of this Article, neither Party shall be liable to
the other, either for compensation or for damages of any

<PAGE>

kind or character whatsoever, whether on account of the loss
by Forest or Lundbeck of present or prospective profits on
sales or anticipated sales, or expenditures, investments or
commitments made in connection therewith or on account of
any other cause or thing whatsoever. This clause shall not
effect the obligations of Forest under Article 4 hereof.

(c) If force majeure conditions as set forth in Article 20
persist for a time period of more than six (6) months from
the date when the notice in which a Party has pleaded force
majeure was sent, the other Party will be entitled to
terminate this Agreement with immediate effect.

18. TERMINATION FOR CAUSE
---------------------
(a) If either Party is in material breach of any of its
obligations under this Agreement, the other Party may give
notice of such breach to the defaulting Party and request
the latter to remedy the same. If the Party in breach fails
to remedy said breach within thirty (30) days after the date
of notice or, if not susceptible of cure within such thirty
(30) days, such cure has been commenced and is being
diligently pursued within such period, then this Agreement
may be terminated immediately by written notice of
termination given by the complaining Party, providing such
notice is given within ninety (90) days from the expiration
of the first thirty (30) day period. If the breach by its
nature cannot be remedied, the notice of breach shall have
effect as notice of termination at the date it is received
by the defaulting Party. As far as breach of obligations as
described under Article 8 is concerned, the above described
remedy procedure shall not apply. Notwithstanding anything
to the contrary set forth herein, no termination of this
Agreement (whether by reason of breach or an extended event
of force majeure) shall be deemed to be effective unless so
ordered by an arbitration decision or order in accordance
with section 27 hereof. In any such arbitration proceeding,
the arbitrators shall be instructed that termination shall
be ordered only where the breach or event of force majeure
in question may not otherwise be cured or abated and where
such breach or event causes the frustration of the material
objectives of this Agreement.

<PAGE>

(b) This Agreement can be terminated with immediate effect upon
thirty (30) days notice by a complaining Party if the other
Party shall become insolvent, bankrupt, or if a receiver
shall be voluntarily or involuntarily appointed to direct
the business of either Party for the benefit of creditors or
otherwise. The complaining Party shall be entitled to
maintain rights granted and obligations undertaken hereunder
i.e. e.g. that the exclusive licenses granted to Forest
hereunder shall not be void as a result of Lundbeck's
insolvency or bankruptcy.

19. RIGHTS UPON AND PROCEDURE OF TERMINATION
----------------------------------------
(a) Upon termination of this Agreement by Forest under Article
17, or upon termination of this Agreement by Lundbeck based
on a material breach by Forest under Article 18, Lundbeck
shall have the right to buy back any stocks of Compound,
Citalopram, Bulk Tablets and/or Finished Products in
Forest's possession at Forest's landed cost if supplied by
Lundbeck or, if manufactured by or on behalf of Forest at
Forest's manufacturing costs. In the event Lundbeck does not
wish to exercise the right to buy back Compound, Citalopram,
Bulk Tablets and/or Finished Products, Forest shall have the
right to Formulate the remaining Compound and sell out the
Finished Products within a period of six (6) months from
Lundbeck having announced that it will not buy back the
stock. It is understood that also Trademark royalties as
warranted hereunder will be due calculated on basis of Net
Sales of the remaining stock after termination. When the
said six (6) month period expires Forest is obliged to
destroy any Finished Product in excess and must prove
towards Lundbeck that destruction has taken place.

(b) At the effective date of any termination by Forest, of
Article 17, or by Lundbeck, cf. Article 18, Forest shall
cease using Trademark, the per mission to perform clinical
trials in the Territory, Registration, Information, Know
How, Synthesis Data and Trademark. Further the per mission
to perform clinical trials and any Registration shall be
transferred to Lundbeck and Forest shall return to Lundbeck
all tangible Information, Know How and/or Synthesis Data,
originating from Lundbeck, in copy and original, including
data on computer discs and/or any other electronic devices.
Forest is neither entitled to retain any copies for its own
<PAGE>

files, nor entitled to hold any lien on tangible
Information, Know How or Synthesis Data, originating. from
Lundbeck, permission for clinical trials and/or
Registration.

(c) Further, upon the effective date of termination of any
reason Lundbeck shall have the worldwide right to use solely
for Compound and/or Citalopram Know How and Information
related to Compound and/or Citalopram as developed by
Forest, cf Article 2 (e). This means that Lundbeck is free
to use the Registration of Forest or Lundbeck's parallel
Registration, cf. Article 9 (a), including Information and
Know How as developed by Forest, in the Territory.

(d) If Lundbeck gives notice to Forest alleging a material
breach of this Agreement pursuant to Article 18 and if
Forest asserts it is not in material breach, the Parties can
implement the dispute resolution procedures pursuant to
Article 27. If an award is made in favour of Lundbeck which
is then not remedied within the time period provided for to
cure the default, Forest shall immediately transfer its
Registration to Lundbeck and shall make and supply to
Lundbeck Finished Product at Forest's manufacturing costs
until Lundbeck or its Affiliate or licensee has received
governmental approval to make or have made Finished Product
in the Territory or for twenty four (24) months after the
date of the award, whichever is earlier.

20. FORCE MAJEURE
-------------
Neither Party shall be liable for non-performance of any
provision of this Agreement due to force majeure. Force majeure
will have the meaning stated below under (a):

(a) Strikes, lockouts, other industrial disturbances;
rebellions; mutinies; epidemics; landslides, lightning,
earthquakes, fires, storms, floods, sinking, drought; civil
disturbances; explosions; act or decisions of duly
constituted municipal, state or National Governmental
authorities or of Courts of Law including but not limited to
the FDA; impossibility to obtain equipment, supplies, fuel
or other required materials; unexpected drug toxicity
findings; unexpected serious adverse drug reactions; or any

<PAGE>

other causes similar or completely different, all beyond the
control of the Party pleading force majeure preventing the
Party from performing its rights and obligations and not to
be overcome by due diligence of such Party; provided neither
Party shall have any obligation to settle a labour dispute
in order to exercise due diligence.

(b) The Parties agree that if either of them find themselves
wholly or partly unable to fulfil their respective
obligations in this Agreement by reasons of force majeure,
the Party pleading force majeure will as soon as possible
notify the other Party of its inability to perform giving a
detailed explanation of the occurrence which excuses
performance. If said notice is given, the performance of the
notifying Party shall be abated for so long as performance
may be prevented by force majeure. Except for the payment of
funds that are due and payable prior to any force majeure,
neither Party shall be required to make up for any
performance that is prevented by force majeure. However, if
a force majeure situation prevails for more than six (6)
months, the Agreement can be terminated immediately, and
Article 17 (c) will apply.

21. ASSIGNABILITY AND SUB-LICENCES
------------------------------
(a) Forest is entitled to sub-license its rights under this
Agreement, subject to Lundbeck's approval not being
unreasonably withheld. Refusal may e.g., but not limited to,
be given in so far the sublicensee is having a material
interest in a pharmaceutical product competing directly with
Finished Product.

22. WARRANTIES AND REPRESENTATIONS
------------------------------
I Lundbeck hereby represents and warrants the following:

(a) Lundbeck is free to enter into this Agreement and does
not have any agreement with respect to the Licensed
Patents, Know How, Information and/or Synthesis Data
which would conflict with the rights granted hereunder.

<PAGE>

(b) Lundbeck is the sole owner of and controls the right,
title and interest in and to the Licensed Patents, Know
How, Information and Synthesis Data and that Lundbeck,
with the exception stated in Article 3 (b), has and
will continue for the term hereof to have the sole
right to grant licences under and disclose Licensed Pat
ents, Know How, Information and/or Synthesis Data
hereunder.

(c) To the best of Lundbeck's knowledge, each patent
included with-in the Licensed Patents is valid and
enforceable and was not fraudulently procured from the
relevant governmental patent granting authority.

(d) Lundbeck is not presently aware of any patent owned by
an Independent Third Party that would be infringed by
the manufacture, use or sale of Finished Product.

(e) There are no actions, suits or claims pending or
alleged anywhere in the world with respect to Compound,
Citalopram, Licensed Patents, Know How, Information cr
Synthesis Data.

(d) To the best of Lundbeck's knowledge, the Information
and Know-How supplied by Lundbeck to Forest, to enable
the latter to evaluate the safety and efficacy of
Citalopram, is correct and adequate for the purpose.

II Forest hereby represents and warrants the following:

(a) Forest is acknowledged by the authorities/FDA in the USA as
an approved manufacturer and marketer of drugs and is as
such under the inspection of the said authorities.

(b) Forest, to the best of its knowledge, has been granted every
reasonable assistance by Lundbeck in any enquiry concerning
Compound, Citalopram, Bulk Tablets, Finished Product, Know
How, Information, and Licensed Patents.

23. PUBLICATION AND PUBLIC ANNOUNCEMENTS
------------------------------------
(a) When and if Forest, its Affiliate and/or sub-licensee wishes
to make presentations and/or publications relating to the

<PAGE>
results of any studies conducted pursuant to this Agreement,
Lundbeck shall be consulted before such presentations and/or
publications are made. Forest shall take reasonably notice
of Lundbeck's comments and requests with respect to the
content of the pre sentations and/or publications to be
made. This provision shall also apply for internal news
letters issued in the Forest group. Any publicity, press
release or announcement relating to the Finished Product
issued by Forest orally or in writing mentioning Lundbeck
shall only be released if reviewed and approved by Lundbeck
in advance.

(b) Each Party agrees that, except as may be required by law, it
shall not disclose substance or details of this Agreement
without the prior written consent of the other Party.

24. NOTICE
------
(a) All notices hereunder shall be in writing and shall be
delivered personally or mailed by registered or certified
(air) mail, postage prepaid, or delivery service for which
receipt is given, to the following addresses of the
respective Parties with a copy to the addressee's General
Counsel:

If to Forest: Forest Laboratories (Ireland) Ltd.
c/o Forest Laboratories
909 Third Avenue
New York NY 100222, USA
Telefax + 1 212 750 9152

If to Lundbeck: H. Lundbeck A/S
Ottiliavej 9
DK-2500 Copenhagen-Valby
Denmark
Attention: Legal Department
Telefax + 45 3630 2732

Such notice shall be effective upon receipt.

<PAGE>

25. ENTIRE AGREEMENT AND MODIFICATIONS
----------------------------------
(a) This Agreement constitutes the entire agreement between the
Parties concerning the subject matter hereof and supersedes
all written or oral prior agreements or understandings with
respect thereto, except from the Secrecy Agreement dated
April 20, 1995 entered into between the Parties. No
variation or modification of the terms of this Agreement nor
any waiver of any of the terms or provisions hereof shall be
valid unless in writing and signed by an authorized
representative of each Party or by the Party against whom
enforcement thereof may be sought. The headings contained in
this Agreement are for convenience and reference purposes
only and shall not affect the meaning or interpretation of
this Agreement.

(b) Wherever this Agreement requires the consent of Lundbeck to
any proposed action, such consent shall not be unreasonably
withheld or delayed.

26. SEVERABILITY
------------
(a) The provisions of this Agreement are separate and divisible,
and the invalidity or unenforceability of any part shall not
affect the validity or enforceability of any remaining part
or parts, all of which shall remain in full force and
effect. However, the Parties agree to substitute any invalid
or unenforceable provision by a vahd and enforceable
arrangement which achieves to the greatest extent possible
the financial balance and mutual understanding already
established between the Parties.

27. GOVERNING LAW
-------------
(a) In the event of any controversy or claim arising out of or
relating to any provision of this Agreement or the breach
thereof, the Parties shall try to settle the problem
amicably between themselves. Should they fail to agree, the
matter in dispute shall be settled in accordance with the
Rules of Conciliation and Arbitration of the International
Chamber of Commerce in Paris. The arbitration shall be held
in London, England, or at Lundbeck's option in the Territory

<PAGE>

and English shall be the language used during proceedings.
Applicable law shall be English law, without giving effect
to EEC regulations not otherwise applicable by their terms
to the transactions contemplated by this Agreement. The
award rendered by arbitration shall be final and binding on
both Parties and enforceable by any court having
jurisdiction.

This Agreement has been made in duplicate and signed by the
Parties hereto.

Copenhagen, 1995 New York, NY 1995

H. Lundbeck A/S Forest Laboratories
(Ireland) Ltd.

/s/ Eric Sprunk-Jansen /s/ Howard Solomon
________________________ ____________________________
Eric Sprunk-Jansen Howard Solomon
President President

Endorsement, of Article 2(k) hereof

New York, NY 1995
Forest Laboratories, Inc.

Howard Solomon
President
<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Forest Laboratories, Inc.
New York, NY

We hereby consent to the incorporation by reference in the
Registration Statements of Forest Laboratories, Inc. on Form
S-8, filed with the Securities and Exchange Commission on
November 13, 1990 and October 28, 1994, and Form S-3 filed
with the Securities and Exchange Commission on November 30,
1993 and August 8, 1994, of our reports dated April 30, 1999,
on the consolidated financial statements and schedule of
Forest Laboratories, Inc. Annual Report on Form 10-K for the
year ended March 31, 1999.

/s/BDO SEIDMAN, LLP
- --------------------------
BDO Seidman, LLP

New York, New York
June 29, 1999

<PAGE>

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