**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Q**__________________________________________

(Mark One)

**
[X] 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  
SECURITIES EXCHANGE ACT OF 1934
**

**For the Quarterly Period Ended December 31,2007**

**
[   ]
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
  
SECURITIES EXCHANGE ACT OF 1934
**

**For the transition periodfrom          to        **

**Commission File No. 1-5438**

**    FOREST LABORATORIES,INC.    ** (Exact name of registrant as specified in itscharter)

**
**Delaware***(State or other jurisdiction ofincorporation or organization)*

 

**11-1798614***(I.R.S. EmployerIdentification Number)*
   
**909 Third AvenueNew York, New York***(Address of principal executive offices)*

 

**10022-4731***(Zip code)*
**

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

*(Former name, former address and former fiscalyear, if changed since last report)*

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed bySection 13 or 15 (d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.Yes    X       No        .. 

Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, or a smaller reporting company. See thedefinitions of "large accelerated filer," "accelerated filer" and"smaller reporting company" in Rule 12b-2 of the Exchange Act.(Check one):

Large acceleratedfiler  X       Acceleratedfiler            Non-acceleratedfiler             Smaller reportingcompany                                                                                                                           (Donot check if a smaller                                                                                                                     reportingcompany)

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of theExchangeAct).  Yes           No    X   ..

Number of shares outstanding of Registrant'sCommon Stock as of February 8, 2008: 311,379,070.

**TABLE OF CONTENTS (Q*uick Links*)**

PART I -FINANCIAL INFORMATION

**            **ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

                           BALANCE SHEETS                           STATEMENTS OF INCOME                           STATEMENTS OF COMPREHENSIVE INCOME                           STATEMENTS OF CASH FLOWS                           NOTES TO FINANCIAL STATEMENTS

            ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL            CONDITION AND RESULTS OF OPERATIONS

            ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT            MARKET RISK

            ITEM 4. CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

            ITEM1. LEGAL PROCEEDINGS

            ITEM 1A RISK_FACTORS

            ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OFPROCEEDS            AND ISSUER REPURCHASES OF EQUITY SECURITIES

            ITEM 6. EXHIBITS            EXHIBIT 31.1            EXHIBIT 31.2            EXHIBIT 32.1            EXHIBIT 32.2

 

**PART I- FINANCIAL INFORMATION**

**FOREST LABORATORIES, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets**

| *(In thousands)*                                                                                                                                                                                                                                         | December 31, 2007       (Unaudited)        | March 31, 2007                                               |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|
|                                                                                                                                                                                                                                                     |                                                                                                             |                                                              |
| **Assets**                                                                                                                                                                                                                                               |                                                                                                             |                                                              |
|                                                                                                                                                                                                                                                     |                                                                                                             |                                                              |
| Current assets:    Cash (including cash equivalentinvestments        of $784,732 inDecember and $556,586 in March)                                                                           |  

$   789,709                                                                          | $   563,663                                   |
|     Marketable securities                                                                                                                                                                                                            | 967,593                                                                                                     | 788,951                                                      |
|     Accounts receivable, less allowance fordoubtful accounts        of $20,446 inDecember and $20,033 in March                                                                               | 404,387                                                                                                     | 382,655                                                      |
|     Inventories, net                                                                                                                                                                                                                 | 438,142                                                                                                     | 434,163                                                      |
|     Deferred income taxes                                                                                                                                                                                                            | 229,454                                                                                                     | 226,433                                                      |
|     Other current assets                                                                                                                                                                                                             |        35,329                                                            |        26,852             |
|         Total currentassets                                                                                                                                                                                      |   2,864,614                                                                                       |   2,422,717                                        |
|                                                                                                                                                                                                                                                     |                                                                                                             |                                                              |
| Marketable securities                                                                                                                                                                                                                                    |      823,303                                                                       |      660,392                        |
|                                                                                                                                                                                                                                                     |                                                                                                             |                                                              |
| Property, plant and equipment                                                                                                                                                                                                                            | 556,047                                                                                                     | 532,861                                                      |
|     Less: accumulated depreciation                                                                                                                                                                                                   |      205,359                                                                       |      171,775                        |
|                                                                                                                                                                                                                                                     |      350,688                                                                       |      361,086                        |
| Other assets:    Goodwill                                                                                                                                                                                                            | 14,965                                                                                                      | 14,965                                                       |
|     License agreements, product rights andother        intangibles, lessaccumulated amortization        of $409,008 inDecember and $377,219 in March |  

170,601                                                                                             | 157,049                                                      |
|     Deferred income taxes                                                                                                                                                                                                            | 56,202                                                                                                      | 27,681                                                       |
|     Other assets                                                                                                                                                                                                                     |          1,593                                                 |          9,482  |
|         Total otherassets                                                                                                                                                                                        |      243,361                                                                       |      209,177                        |
|                                                                                                                                                                                                                                                     |                                                                                                             |                                                              |
|              Totalassets                                                                                                                                                                | $4,281,966                                                                                                  | $3,653,372                                                   |
|                                                                                                                                                                                                                                                     | ========                                                                                                    | ========                                                     |

*See notes to condensed consolidated financialstatements.*

** **

**FOREST LABORATORIES, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets**

| *(In thousands, except for par values)*                                                                                                                                                 | December 31, 2007       (Unaudited)        | March 31, 2007                                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|
|                                                                                                                                                                                    |                                                                                                             |                                                                              |
| **Liabilities and Stockholders' Equity**                                                                                                                                                |                                                                                                             |                                                                              |
|                                                                                                                                                                                    |                                                                                                             |                                                                              |
| Current liabilities:    Accounts payable                                                                                                                            | $   165,760                                                                                  | $   154,614                                                   |
|     Accrued expenses                                                                                                                                                | 356,466                                                                                                     | 332,995                                                                      |
|     Income taxes payable                                                                                                                                            |        43,103                                                            |      139,999                                        |
|        Total currentliabilities                                                                                                                      |      565,329                                                                       |      627,608                                        |
|                                                                                                                                                                                    |                                                                                                             |                                                                              |
| Long-term liabilities:    Income taxes payable                                                                                                                      |      191,266                                                                       |                  |
|     Deferred income taxes                                                                                                                                           |             899                                 |             951  |
|                                                                                                                                                                                    |      192,165                                                                       |             951  |
|                                                                                                                                                                                    |                                                                                                             |                                                                              |
| Stockholders' equity:    Series preferred stock, $1.00 par; sharesauthorized 1,000;        no shares issued oroutstanding   |                                                                                                             |                                                                              |
|     Common stock, $.10 par; sharesauthorized 1,000,000; issued        421,388 shares inDecember and 420,695 shares in March | 42,139                                                                                                      | 42,069                                                                       |
|     Additional paid-in capital                                                                                                                                      | 1,421,670                                                                                                   | 1,354,264                                                                    |
|     Retained earnings                                                                                                                                               | 5,438,723                                                                                                   | 4,657,356                                                                    |
|     Accumulated other comprehensiveincome                                                                                                                           |         29,279                                                      | 21,879                                                                       |
|     Treasury stock, at cost                                                                                                                                         |                                                                                                             |                                                                              |
|         (110,023shares in December and 101,143 shares in March)                                                                            | (  3,407,339)                                                                                          | (  3,050,755)                                                           |
|             Totalstockholders' equity                                                                                       |   3,524,472                                                                                       |   3,024,813                                                        |
|                                                                                                                                                                                    |                                                                                                             |                                                                              |
|                 Totalliabilities and stockholders' equity                                               | $4,281,966                                                                                                  | $3,653,372                                                                   |
|                                                                                                                                                                                         | ========                                                                                                    | ========                                                                     |

*See notes to condensed consolidated financialstatements.*

 

**FORESTLABORATORIES, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Income(Unaudited)**

| *(In thousands, except per share amounts)*                              |    Three MonthsEnded             December31,          |  Nine MonthsEnded                    December31,           |
|------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                         |        2007                                                                                                                           |        2006                                                                                                                                                              |           2007  |           2006  |
|                                                                         |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
| Net sales                                                                    | $918,146                                                                                                                                                                 | $830,431                                                                                                                                                                                                    | $2,603,099  | $2,367,875  |
| Contract revenue                                                             | 52,705                                                                                                                                                                   | 38,914                                                                                                                                                                                                      | 156,395  | 130,485  |
| Interest income                                                              | 25,862                                                                                                                                                                   | 22,577                                                                                                                                                                                                      | 77,532  | 56,330  |
| Other income                                                                 |       1,529                                                                                                                                |       1,109                                                                                                                                                                   |          8,450  |          1,654  |
|                                                                         |   998,242                                                                                                                                                      |   893,031                                                                                                                                                                                         |   2,845,476  |   2,556,344  |
|                                                                         |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
| Costs and expenses:    Cost of sales                     | 213,506                                                                                                                                                                  | 195,539                                                                                                                                                                                                     | 589,738  | 556,322  |
|     Selling, general and administrative                  | 285,652                                                                                                                                                                  | 268,626                                                                                                                                                                                                     | 827,419  | 772,017  |
|     Research and development                             |   108,246                                                                                                                                                      |   112,029                                                                                                                                                                                         |      415,892  |      344,863  |
|                                                                         |   607,404                                                                                                                                                      |   576,194                                                                                                                                                                                         |   1,833,049  |   1,673,202  |
|                                                                         |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
| Income before income tax expense                                             | 390,838                                                                                                                                                                  | 316,837                                                                                                                                                                                                     | 1,012,427  | 883,142  |
|                                                                         |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
| Income tax expense                                                           |     89,081                                                                                                                                           |     66,536                                                                                                                                                                              |      217,264  |      191,123  |
|                                                                         |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
| Net income                                                                   | $301,757                                                                                                                                                                 | $250,301                                                                                                                                                                                                    | $   795,163  | $   692,019  |
|                                                                         | =======                                                                                                                                                                  | =======                                                                                                                                                                                                     | ========  | ========  |
| Net income per common share:                                                 |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
|                                                                         |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
|     Basic                                                | $0.97                                                                                                                                                                    | $0.79                                                                                                                                                                                                       | $2.52  | $2.17  |
|                                                                         | ====                                                                                                                                                                     | ====                                                                                                                                                                                                        | ====  | ====  |
|     Diluted                                              | $0.96                                                                                                                                                                    | $0.78                                                                                                                                                                                                       | $2.51  | $2.14  |
|                                                                         | ====                                                                                                                                                                     | ====                                                                                                                                                                                                        | ====  | ====  |
| Weighted average number of common    shares outstanding: |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
|                                                                         |                                                                                                                                                                          |                                                                                                                                                                                                             |   |   |
|     Basic                                                | 312,140                                                                                                                                                                  | 316,200                                                                                                                                                                                                     | 315,729  | 318,512  |
|                                                                         | ======                                                                                                                                                                   | ======                                                                                                                                                                                                      | ======  | ======  |
|     Diluted                                              | 313,107                                                                                                                                                                  | 320,363                                                                                                                                                                                                     | 317,279  | 323,048  |
|                                                                         | ======                                                                                                                                                                   | ======                                                                                                                                                                                                      | ======  | ======  |

*See notes to condensed consolidated financialstatements.*

** **

**FOREST LABORATORIES, INC.AND SUBSIDIARIESCondensed Consolidated Statements of Comprehensive Income(Unaudited)**

| *(In thousands)*                  | Three Months Ended           December31,          |      Nine MonthsEnded             December31,          |
|-----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |        2007                                                                                              |        2006                                                                                                                                      |        2007  |        2006  |
|                              |                                                                                                                                             |                                                                                                                                                                                     |   |   |
| Net income                        | $301,757                                                                                                                                    | $250,301                                                                                                                                                                            | $795,163  | $692,019  |
| Other comprehensive income (loss) | (      1,077)                                                                                                      |       6,083                                                                                                                                           |       7,400  |     14,054  |
|                              |                                                                                                                                             |                                                                                                                                                                                     |   |   |
| Comprehensive income              | $300,680                                                                                                                                    | $256,384                                                                                                                                                                            | $802,563  | $706,073  |
|                              | =======                                                                                                                                     | =======                                                                                                                                                                             | =======  | =======  |

*See notes to condensed consolidated financialstatements.*

** **

**FORESTLABORATORIES, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows(Unaudited)**

|                                                                                                                                      |     Nine MonthsEnded                                                                             |
|-------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(In thousands)*                                                                                                                          |              December31,             |
|                                                                                                                                      |            2007                                                                                            |             2006  |
| Cash flows from operating activities:                                                                                                     |                                                                                                                                                              |   |
|    Net income                                                                                                              | $   795,163                                                                                                                                   | $   692,019  |
|    Adjustments to reconcile net income to                                                                                  |                                                                                                                                                              |   |
|      net cash provided by operatingactivities:                                                                   |                                                                                                                                                              |   |
|        Depreciation                                                                                    | 34,988                                                                                                                                                       | 33,815  |
|        Amortization andimpairments                                                                     | 31,789                                                                                                                                                       | 46,554  |
|        Stock-basedcompensation expense                                                                 | 30,719                                                                                                                                                       | 28,056  |
|        Deferred income taxbenefit                                                                      | (       24,209)                                                                                                                | (       33,348) |
|        Foreign currencytransaction gain                                                                | (         1,420)                                                                                                     | (            632) |
|        Net change inoperating assets and liabilities:                                                  |                                                                                                                                                              |   |
|           Decrease(increase) in:                                                        |                                                                                                                                                              |   |
|              Accountsreceivable, net                                     | (       21,732)                                                                                                                | (       14,868) |
|              Inventories,net                                             | (         3,979)                                                                                                     | 202,169  |
|              Othercurrent assets                                         | (         8,476)                                                                                                     | (       10,233) |
|              Otherassets                                                 | 7,889                                                                                                                                                        | 46  |
|           Increase(decrease) in:                                                        |                                                                                                                                                              |   |
|              Accountspayable                                             | 11,146                                                                                                                                                       | (         5,630) |
|              Accruedexpenses                                             | 23,471                                                                                                                                                       |     66,916  |
|              Incometaxes payable                                         |        80,574                                                                                                             |        44,960  |
|                 Netcash provided by operating activities  |      955,923                                                                                                                        |   1,049,824  |
|                                                                                                                                      |                                                                                                                                                              |   |
| Cash flows from investing activities:                                                                                                     |                                                                                                                                                              |   |
|    Purchase of property, plant and equipment,net                                                                           | (       23,906)                                                                                                                | (       23,118) |
|    Purchase of marketable securities                                                                                       | (  2,062,330)                                                                                                                                           | (  1,793,461) |
|    Redemption of marketable securities                                                                                     |   1,720,777                                                                                                                                        |   1,554,881  |
|    Purchase of license agreements, product rightsand      other intangibles                  | (       45,000)                                                                                                                |                     |
|                 Netcash used in investing activities      | (     410,459)                                                                                                                           | (     261,698) |
|                                                                                                                                      |                                                                                                                                                              |   |
| Cash flows from financing activities:                                                                                                     |                                                                                                                                                              |   |
|    Net proceeds from common stock optionsexercised      by employees under stock optionplans | 25,672                                                                                                                                                       | 155,266  |
|    Tax benefit realized from the exercise ofstock      options by employees                  |         3,442                                                                                                        | 52,655  |
|    Purchase of treasury stock                                                                                              | (     356,327)                                                                                                                           | (     472,279) |
|                 Netcash used in financing activities      | (     327,213)                                                                                                                           | (     264,358) |
|                                                                                                                                      |                                                                                                                                                              |   |
| Effect of exchange rate changes on cash                                                                                                   |          7,795                                                                                                  |        12,955  |
| Increase in cash and cash equivalents                                                                                                     |      226,046                                                                                                                        | 536,723  |
| Cash and cash equivalents, beginning of period                                                                                            |      563,663                                                                                                                        |      414,579  |
| Cash and cash equivalents, end of period                                                                                                  | $    789,709                                                                                                                             | $    951,302  |
|                                                                                                                                      | ========                                                                                                                                                     | ========  |

|                                               |           |           |
|----------------------------------------------------|----------------|----------------|
| Supplemental disclosures of cash flow information: |           |           |
|                                               |           |           |
| Cash paid during the period for:                   |           |           |
|     Income taxes               | $157,512  | $127,067  |
|                                               |           |           |
|                                               |           |           |
|                                               |           |           |
|                                               |           |           |

*See notes to condensed consolidated financialstatements.*

 

**FOREST LABORATORIES, INC. ANDSUBSIDIARIESNotes to Condensed Consolidated Financial Statements(Unaudited)**

**1.   Basis of Presentation***(Inthousands)***:**

The accompanying unaudited condensed consolidated financialstatements have been prepared in accordance with U.S. generallyaccepted accounting principles for interim financial informationand with the instructions to Form 10-Q and Rule 10-01 of RegulationS-X. Accordingly, they do not include all of the information andfootnotes required by generally accepted accounting principles forcomplete financial statements. In the opinion of Management, alladjustments (consisting of only normal recurring accruals)considered necessary for a fair presentation have been included.Operating results for the nine-month period ended December 31, 2007are not necessarily indicative of the results that may be expectedfor the year ending March 31, 2008. For further information referto the consolidated financial statements and footnotes theretoincorporated by reference in the Company's Annual Report on Form10-K for the year ended March 31, 2007.

**2.   AccountsReceivable:**

Accounts receivable, net, consists of thefollowing:

|             | December 31, 2007                                                                                     |   |                             |
|------------------|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|
| *(In thousands)* |        (Unaudited)         |   | March 31, 2007    |
|             |                                                                                                  |   |                             |
| Trade            | $337,329                                                                                              |   | $330,580                         |
| Other            |     67,058                                                                        |   |     52,075   |
|             | $404,387                                                                                              |   | $382,655                         |
|             |  =======                                                                                    |   | =======                     |

**3.   Inventories:**

Inventories, net of reserves for obsolescence,consist of the following:

|             | December 31, 2007                                                                                     |   |                                      |
|------------------|-------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|
| *(In thousands)* |        (Unaudited)         |   | March 31, 2007             |
|             |                                                                                                  |   |                                      |
| Raw materials    | $252,886                                                                                              |   | $257,042                                  |
| Work in process  |       1,870                                                             |   |       8,449 |
| Finished goods   |   183,386                                                                                   |   |   168,672                       |
|             | $438,142                                                                                              |   | $434,163                                  |
|             |  =======                                                                                    |   | =======                              |

**4.   Net Income Per Share***(Inthousands)***:**

A reconciliation of shares used in calculating basic and dilutednet income per share follows:

|                                                                    | Three Months Ended       December 31,      | Nine Months Ended         December31,      |
|-------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|
|                                                                    |      2007                                                                     |      2006                                                                          |      2007 |      2006 |
| Basic                                                                   | 312,140                                                                                                | 316,200                                                                                                     | 315,729 | 318,512 |
| Effect of assumed conversion of   employee stock options |        967                                                          |     4,163                                                                               |     1,550 |     4,536 |
| Diluted                                                                 | 313,107                                                                                                | 320,363                                                                                                     | 317,279 | 323,048 |
|                                                                    | ======                                                                                                 | ======                                                                                                      | ====== | ====== |

Options to purchase approximately 14,516 shares of common stockat exercise prices ranging from $36.50 to $76.66 per share andoptions to purchase approximately 11,604 shares of common stock atexercise prices ranging from $36.50 to $76.66 per share that wereoutstanding during a portion of the three and nine-month periodsended December 31, 2007, respectively, were not included in thecomputation of diluted net income per share because they wereanti-dilutive. These options expire through 2017. Options topurchase approximately 3,526 shares of common stock at exerciseprices ranging from $50.56 to $76.66 per share and options topurchase approximately 6,923 shares of common stock at exerciseprices ranging from $45.76 to $76.66 per share that wereoutstanding during a portion of the three and nine-month periodsended December 31, 2006, respectively, were not included in thecomputation of diluted net income per share because they wereanti-dilutive. These options expire through 2016.

**5.   Stock-Based Compensation***(Inthousands)***:**

In August 2007 the stockholders of the Company voted to adoptthe 2007 Equity Incentive Plan (the 2007 Plan) which replaces andsupersedes all prior Stock Option Plans.  The 2007 Planprovides for the granting of incentive and nonqualified stockoptions, restricted stock, stock appreciation rights and stockequivalent units.  These awards generally vest in three tofive years.  Stock option grants may be exercisable for up toten years from the date of issuance.  As of December 31, 2007,13,950 shares were authorized and 10,464 were available for grantunder the 2007 Plan.

Effective April 1, 2006, the Company adopted the provisions ofStatement of Financial Accounting Standards No. 123(R),"Share-Based Payment" (SFAS 123R).  During the nine monthsended December 31, 2007, the Board of Directors awarded stockoptions and restricted stock to employees and non-employeedirectors.  The fair value for stock options is calculatedusing the Black-Scholes valuation model and restricted stock isaccounted for at fair value based upon the average high and lowstock price on the date of grant.  These compensation costsare amortized on an even basis (net of estimated forfeitures) overthe requisite service period. The Company has never awardedstock options or restricted stock below market price on the date ofgrant.

Compensation expense of $10,641 ($8,968 net of tax) and $30,719($25,964 net of tax) was recorded for the three and nine-monthperiods ended December 31, 2007. For the three and nine-monthperiods ended December 31, 2006, compensation expense of $10,158($8,597 net of tax) and $28,056 ($23,812 net of tax) was recorded.This expense was charged to cost of sales, selling, general andadministrative and research and development expense, asappropriate. Amounts capitalized as part of inventory costs werenot significant.

The weighted average number of diluted common shares outstandingis reduced by the treasury stock method which, in accordance withSFAS 123R, takes into consideration the compensation costattributed to future services not yet recognized.

**6.   Business Segment Information:**

The Company operates in only one segment. Below is a breakdownof net sales by therapeutic class:

| *(In thousands)*             |   Three Months Ended        December31,        |  Nine MonthsEnded             December31,         |
|------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |        2007                                                                                      |        2006                                                                                                                  |           2007 |           2006 |
|                         |                                                                                                                                |                                                                                                                                                            |   |   |
| Central nervous system (CNS) | $825,843                                                                                                                            | $728,844                                                                                                                                                        | $2,330,320 | $2,077,907 |
| Cardiovascular               | 6,478                                                                                                                               | 11,734                                                                                                                                                          | 21,746 | 41,055 |
| Other                        |     85,825                                                                                                      |     89,853                                                                                                                                  |      251,033 |      248,913 |
|                         | $918,146                                                                                                                            | $830,431                                                                                                                                                        | $2,603,099 | $2,367,875 |
|                         | =======                                                                                                                             | =======                                                                                                                                                         | ======== | ======== |

**7.   Long Term Debt**

On December 7, 2007, the Company established a $500 millionrevolving credit facility for the purpose of providing additionalfinancial liquidity for the financing of business development andcorporate strategic initiatives. The facility can be increased upto $750 million based upon agreement with the participating lendersand expires on December 7, 2012. As of February 8, 2007, theCompany has not drawn any funds from the available credit. Theutilization of the revolving credit facility is subject to theadherence to certain financial covenants such as leverage andinterest coverage ratios.

**8.   IncomeTaxes***(In thousands)***:**

On April 1, 2007, the Company adopted the provisions ofFinancial Accounting Standards Board (FASB) Interpretation (FIN48), "Accounting for Uncertainty in Income Taxes - aninterpretation of FASB Statement No. 109". As a result of theadoption of FIN 48, the Company increased its tax liabilities by$13,796 with a corresponding reduction to the April 1, 2007 balanceof retained earnings. In addition, accrued interest related tounrecognized tax benefits totaled $11,576 as of April 1, 2007.Interest and penalties, if any, are recorded in income tax expenseand are classified on the balance sheet with the related taxliability. Unrecognized tax benefits totaling $152,695 have beenreclassified from current income taxes payable to long-term incometaxes payable and totaled $191,266 at December 31, 2007 based onthe Company’s expectation of cash payments within the nexttwelve months.

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

The Company is subject to income taxes in the United States andseveral foreign jurisdictions. Significant judgment is required indetermining the worldwide provision for income taxes. TheCompany’s tax returns are routinely audited by U.S. federaland state as well as foreign tax authorities. The Company accruesliabilities for identified tax contingencies that result frompositions taken by the Company that are being challenged or couldbe challenged by tax authorities. The Company believes that itsaccrual for tax liabilities is adequate for all open years, basedon Management’s assessment of many factors, including itsinterpretations of the tax law and judgments about potentialactions by tax authorities. However, it is possible that theultimate resolution of any tax audit may be materially greater orlower than the amount accrued.

The Company’s income tax returns for fiscal years prior to1999 are no longer subject to review as such fiscal years aregenerally closed. Tax authorities in various jurisdictions are inthe process of reviewing the Company’s tax returns forvarious post-1999 fiscal years, including the Internal RevenueService (IRS), which has recently concluded its examination of theCompany’s U.S. federal income tax returns for fiscal years2002 and 2003.

In connection with that examination, in July 2007, the IRSissued a notice of proposed adjustment primarily relating to theCompany’s intercompany transfer pricing methodology. OnNovember 5, 2007, the IRS issued a Revenue Agent Report which seeksto assess approximately $206.7 million of additional U.S.corporation income tax relating to the examination period,excluding interest and penalties.

The Company continues to disagree with the IRS position andadjustment because it believes that it is inconsistent withapplicable tax laws and the Company intends to defend its positionvigorously. In accordance with the Company’s taxpayer appealsrights, a formal written protest of the proposed adjustment wasfiled with the IRS on January 7, 2008, for the issue to be resolvedvia an administrative appeals proceeding.

While the resolution of this issue may result in tax liabilitiesthat are greater or less than the reserves established, Managementbelieves that the ultimate resolution will not have a materialeffect on the Company’s financial position or liquidity. Ifthe IRS prevails in a position that increases the U.S. taxliability in excess of established reserves, it is likely that theIRS could make similar claims for years subsequent to fiscal 2003which could be material.

** **

**FOREST LABORATORIES,INC. AND SUBSIDIARIESMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS*(Dollar amounts in thousands)***

Total net revenues increased for the quarter and nine monthsended December 2007 due to growth of our key marketed productsLexapro® and Namenda® and higher co-promotion income fromBenicar®. During the December 2007 quarter, we signed anagreement with Daiichi Sankyo to co-promote AzorTM. Azor is aonce-daily combination of amlodipine and olmesartan medoxomil(Benicar) for the treatment of hypertension. Under the terms of theagreement, we will co-promote the product for a period of threeyears and receive co-promotion fees based on net sales. We willreceive residual fees at a reduced rate for the three yearsfollowing the co-promotion period. In conjunction with the signingof the agreement, we paid Daiichi Sankyo $20,000.

On December 18, 2007, the FDA approved our novel beta blockerBystolicTM (nebivolol) for the treatment of hypertension. Welicensed the U.S. and Canadian rights to Bystolic from Mylan Inc.(Mylan) in January 2006. Pursuant to that licensing agreement, wemade a milestone payment of $25,000 upon FDA approval. Oursalesforce launched the product on January 28, 2008.

On January 22, 2008, we entered into an agreement with Novexel,S.A. (Novexel) for the development, manufacture andcommercialization of Novexel’s novel intravenous betalactamase inhibitor, NXL 104 in combination with Forest’sceftaroline. NXL 104 is designed to be co-administered with selectantibiotics to enhance their spectrum of activity. Under the termsof the agreement, we will receive the exclusive rights toadminister NXL 104 with ceftaroline as a combination product inNorth America. We intend to initiate Phase I studies of theceftaroline/NXL 104 combination in fiscal 2009. Pursuant to theagreement, we paid Novexel an upfront license payment ofapproximately $110,000, which was charged to research anddevelopment expense.

**Financial Condition and Liquidity**

Net current assets increased by $504,176 from March 31, 2007.Cash and cash equivalents, short-term marketable securities andtrade accounts receivable increased due to ongoing operations.During the June 2007 quarter, pursuant to the 2007 RepurchaseProgram, we repurchased 1.8 million shares at a cost of $86,003, inthe September quarter we repurchased 4.95 million shares at a costof $188,801 and in the current quarter we repurchased 2.125 millionshares at a cost of $81,523, leaving 15.8 million shares stillavailable for repurchase under the program. Long-term marketablesecurities increased as certain funds, not required to fund theshare repurchase program, were shifted to longer-term in order toreceive more favorable rates of return. Of our total cash andmarketable securities position at December 31, 2007, 31%, or about$789,000, is domiciled domestically, with the remainder held by ourinternational subsidiaries. Inventories overall increased slightlyduring the period primarily to support the launch of Bystolic. Webelieve that current inventory levels are adequate to support thegrowth in our ongoing business. Other current assets increasedprimarily from the prepayment of meeting expenses related to theBystolic launch and the renewal of insurance programs in the June2007 quarter, which are paid in full at the time of renewal andexpensed over the life of the policy years. License agreements,product rights and other intangibles before accumulatedamortization increased from March 31, 2007 as a result of twoagreements in the current quarter. In October 2007, we paid DaiichiSankyo $20,000 in connection with the co-promotion agreement forAzor. In December 2007, we paid $25,000 to Mylan upon FDA approvalof Bystolic. Non-current deferred income taxes increased as aresult of an upfront licensing charge during the September 2007quarter in connection with the collaboration agreement withMicrobia, Inc. (Microbia) for the right to co-develop and co-marketlinaclotide. Increases in accounts payable and accrued expenseswere due to normal operating activities.

Property, plant and equipment before accumulated depreciationincreased from March 31, 2007. During the September 2007 quarter,we completed the refurbishment of a 90,000 square foot facility inIreland which will provide additional capacity for themanufacturing of Lexapro and Namenda and capacity for futureproducts. We also continued to make technology investments toexpand our principal operating systems to enhance supply chain andsalesforce applications.

On April 1, 2007, we adopted the provisions of FinancialAccounting Standards Board (FASB) Interpretation (FIN 48),"Accounting for Uncertainty in Income Taxes - an interpretation ofFASB Statement No. 109". As a result of the adoption of FIN 48, weincreased our tax liabilities by $13,796 with a correspondingreduction to the April 1, 2007 balance in retained earnings. Inaddition, accrued interest, related to unrecognized tax benefitstotaled $11,576 as of April 1, 2007. Interest and penalties, ifany, are recorded in income tax expense and are classified on thebalance sheet with the related tax liability. Unrecognized taxbenefits totaling $152,695 have been reclassified from currentincome taxes payable to long-term income taxes payable and totaled$191,266 at December 31, 2007 based on our expectation of cashpayments within the next twelve months.

During fiscal 2007 our Board of Directors (Board) approved the2007 Repurchase Program which authorized the purchase of up to 25million shares of common stock. On August 13, 2007 the Boardauthorized the purchase of an additional 10 million shares ofcommon stock. For the nine months ended December 31, 2007, we haverepurchased a total of 8.875 million shares at a cost of $356,327.As of February 8, 2008, we have repurchased a total of 19.2 millionshares at a cost of $828,606 under the 2007 Repurchase Program,leaving us the authority to purchase 15.8 million more shares.

Management believes that current cash levels, coupled with fundsto be generated by ongoing operations, will continue to provideadequate liquidity to facilitate potential acquisitions ofproducts, payment of achieved milestones, capital investments andthe continued share repurchases.

**Results of Operations**

Net sales for the three and nine-month periods ended December31, 2007 increased 11% and 10%, respectively, from the same periodslast year to $918,146 and $2,603,099, primarily due to strong salesof Lexapro and Namenda. Lexapro, our SSRI for the treatment ofdepression and anxiety in adults and our most significant product,with net sales of $603,454 and $1,714,830 for the quarter and ninemonths, grew 11% and 9%, respectively, and contributed $57,599 and$139,280 to the net sales change, of which $33,019 and $59,009 wasdue to volume and $24,580 and $80,271 was due to price.Lexapro’s patent is set to expire in March 2012. CaracoPharmaceutical Laboratories, Ltd. (Caraco), a generic manufacturer,has filed an ANDA with a Paragraph IV Certification for a genericequivalent to Lexapro. Forest, along with our licensing partner, H.Lundbeck A/S filed a lawsuit in the U.S. District Court for theEastern District of Michigan against Caraco for patentinfringement.

Net sales of Namenda, an N-methyl-D-aspartate (NMDA) receptorantagonist for the treatment of moderate to severe Alzheimer'sdisease, grew 26% in both the current quarter and nine months endedDecember 31, 2007 and totaled $218,735 and $603,325, respectively.This represents an increase of $44,853 and $122,776 as compared tothe same periods last year, of which $35,926 and $95,759 was due tovolume and $8,927 and $27,017 was due to price. During the Decemberquarter, we received notification from several companies that theyfiled ANDA’s with Paragraph IV Certifications to obtainapproval to market generic equivalents of Namenda. In January 2008,we along with our licensing partner Merz Pharma GmbH & Co. KgaAfiled lawsuits in the U.S. District Court for the District ofDelaware against several companies for patent infringement.Namenda’s patent is set to expire in April 2010. We haveapplied for patent term restoration which, if granted, would extendNamenda’s patent protection until September 2013.

The remainder of the net sales change for the periods presentedwas due to price and volume fluctuations of our older non-promotedproduct lines.

Contract revenue for the three and nine months ended December31, 2007 was $52,705 and $156,395, respectively, compared to$38,914 and $130,485 in the same periods last year primarily due toco-promotion income from our co-marketing agreement with DaiichiSankyo for Benicar of $51,753 and $153,868, respectively, ascompared to $38,664 and $128,695 last year. Under the terms of theagreement, fiscal 2008 is the final year of co-promotion activitiesand accordingly, beginning in fiscal 2009 we will receive a reducedshare of product profits over the remaining six year term of theagreement.

Interest income for the current quarter increased over the sameperiod last year primarily due to interest received on higherlevels of invested funds offset by lower average rates ofreturn.

Cost of sales as a percentage of net sales was 23.3% and 22.7%for the three and nine-month periods of the current year ascompared with 23.5% for the three and nine-month periods of theprior year.

Selling, general and administrative expenses increased $17,026and $55,402 for the three and nine-month periods ended December 31,2007 as compared to the same periods last year. The increase wasprimarily attributable to salesforce activity and promotionalsupport for products currently marketed as well as launch andpre-launch costs for Bystolic and milnacipran.

Research and development expense decreased $3,783 for thequarter ended December 31, 2007. In the current quarter, we paid$5,000 in connection with a development milestone compared to$20,000 in the same period last year. For the nine-month periodended December 31, 2007, research and development expense increased$71,029. During the current nine-month period we incurred thefollowing one-time charges: in September 2007 we recorded a $70,000licensing charge in connection with the collaboration agreementwith Microbia for the right to co-develop and co-marketlinaclotide. Linaclotide, which is currently in Phase II testing,is being investigated for the treatment of constipation-predominantirritable bowel syndrome and chronic constipation. During the June2007 quarter we recorded approximately $28,000 in milestoneexpenses related to the aclidinium and milnacipran developmentprograms. During the nine months ended December 2006, we recorded aone-time $60,000 licensing charge in connection with ourcollaboration agreement with Laboratorios Almirall, S.A. (Almirall)for the U.S. rights to aclidinium.

Research and development expense also reflects ongoing costsrelated to the following:

> 
· During the fourth quarter offiscal 2006, we entered into an agreement with Mylan for thecommercialization, development and distribution rights fornebivolol, a novel beta blocker. On December 18, 2007, we receivedFDA approval for Bystolic (nebivolol) for the treatment ofhypertension.  We plan to meet with the FDA regarding apotential regulatory pathway for an additional indication of CHF. Janssen Pharmaceutica N.V. (Janssen), the owner of  U.S.Patent No. 6,545,040 (RE 90/008,356) (the ‘040 Patent), whichis included in the rights licensed to us for nebivolol, received anOffice Action from the U.S. Patent and Trademark Office (theOffice) in response to a preliminary statement in a reexaminationproceeding commenced by Janssen of such patent.  The‘040 patent is directed to the pharmaceutical composition fornebivolol and the method of treating hypertension using nebivolol. The patent examiner has rejected the claims of the ‘040Patent in view of the prior art cited by the patent owner. This initial action, which is how the Office raises issues with thepatent owner, will now be followed by Janssen’s response,which Janssen has indicated it will file by February 13,2008.  While there can be no assurance that Janssen willprevail, we believe that some or all of the claims will besuccessfully restored.

· In December 2007, wesubmitted a New Drug Application (NDA) for milnacipran based onefficacy and safety data from two pivotal Phase III trialsinvolving over two thousand patients in which milnaciprandemonstrated improvement compared to placebo. We expect resultsfrom a third randomized pivotal Phase III study in calendar2008.

· In connection with ouracquisition of Cerexa, Inc. in January 2007, we acquired worldwidedevelopment and marketing rights (excluding Japan) to ceftaroline,a next generation, broad spectrum, hospital-based injectablecephalosporin antibiotic. Two Phase III studies of ceftaroline incomplicated skin and skin structure infections have completedenrollment. Additionally two Phase III studies in patients withcommunity acquired pneumonia (CAP) have begun enrollment. Weanticipate the skin and skin structure results in calendar 2008 andthe CAP results in 2009.

· In April 2006, we enteredinto a collaboration agreement with Almirall for the U.S. rights toaclidinium, a long-acting muscarinic antagonist which is beingdeveloped as an inhaled therapy for the treatment of chronicobstructive pulmonary disease (COPD). Enrollment of two large PhaseIII studies has been completed and we expect to have top-lineresults for these studies in the second half of calendar 2008. Weand Almirall are also pursuing the development of a fixed-dosecombination of aclidinium and the beta-agonist formoterol, which iscurrently in Phase I testing.

· During the September 2007quarter, we entered into a collaboration agreement with Microbia toco-develop and co-market the compound linaclotide. Linaclotide,which is currently in Phase II testing, is being investigated forthe treatment of constipation-predominant irritable bowel syndromeand chronic constipation. We expect to have results of the PhaseIIb studies during the first half of 2008 and hope to initiatePhase III testing toward the end of the year.

· In February 2008, wereceived preliminary results of a Phase III study of a novel,once-daily formulation of Namenda for the treatment of moderate tosevere Alzheimer’s disease.  The results indicate thatpatients treated with this formulation experienced statisticallysignificant benefits in cognition and clinical global statuscompared to placebo.  Based on the results of this study, weplan to pursue an NDA for Namenda using this formulation.

· During the third quarter offiscal 2005, Forest entered into a collaboration agreement withGedeon Richter Limited for the North American rights to RGH-188, acompound which is being developed for the treatment ofschizophrenia, bipolar mania and other psychiatric conditions. Areview of top-line results of a Phase II study in schizophreniaindicated that RGH-188 demonstrated a nominally statisticallysignificant (i.e., not adjusted for multiple comparisons)therapeutic effect compared to placebo in the low-dose arm and anumerical improvement compared to placebo in the high-dose arm thatdid not reach nominal statistical significance. Based on theseresults, and subject to a complete review of the full studyresults, we intend to continue the development of RGH-188 as atreatment of schizophrenia. An additional Phase II study of RGH-188for the treatment of bipolar mania study was commenced in April2007 and we expect results in calendar 2008.

· We are currently workingtoward generating proof of concept data for neramexane inAlzheimer’s disease.

· During the second quarter offiscal 2005, Forest entered into a collaboration agreement withGlenmark Pharmaceuticals S.A. for the North American developmentand marketing of GRC3886, a PDE4 inhibitor for the treatment ofasthma and COPD. The FDA had requested additional preclinical workwhich we completed and submitted. FDA has now reviewed thisadditional data and has given us a response which allows us to moveforward with a larger Phase II proof of concept study in COPD, withsome limitations. In January 2008, we paid a milestone in light ofsuch regulatory position.

Among other research and development projects we continue tosupport are the following: RGH-896, a compound being developed forthe treatment of chronic pain and other CNS conditions; a group ofnovel compounds that target the group 1 metabotropic glutamatereceptors (mGLUR1/5); and ME1036, an injectable antibiotic whichhas demonstrated excellent pre-clinical activity against bothGram-positive and Gram-negative bacteria. In addition, we haveentered into several collaborations to conduct pre-clinical drugdiscovery.

Our effective tax rate was 22.8% and 21.5% for the respectivethree and nine-month periods ended December 31, 2007, as comparedto 21.0% and 21.6% for the same periods last year. The increase inthe current quarter principally resulted from the proportion ofearnings generated in the United States as compared with the lowertaxed foreign jurisdictions. Effective tax rates can be affected byongoing tax audits. See Note 8 to the Condensed ConsolidatedFinancial Statements (Unaudited).

We expect to continue our profitability in the current fiscalyear with continued growth in our principal promoted products.

Inflation has not had a material effect on our operations forthe periods presented.

** **

**Critical Accounting Policies**

The following accounting policies are important in understandingour financial condition and results of operations and should beconsidered an integral part of the financial review. Refer to thenotes to the consolidated financial statements for additionalpolicies.

Estimates and Assumptions

The preparation of financial statements in conformity withgenerally accepted accounting principles requires us to makeestimates and assumptions that affect the reported amounts ofassets and liabilities and of revenues and expenses during thereporting period. Estimates are made when accounting for salesallowances, returns, rebates and other pricing adjustments,depreciation, amortization and certain contingencies. Forest issubject to risks and uncertainties, which may include but are notlimited to competition, federal or local legislation andregulations, litigation and overall changes in the healthcareenvironment that may cause actual results to vary from estimates.We review all significant estimates affecting the financialstatements on a recurring basis and record the effect of anyadjustments when necessary. Certain of these risks, uncertaintiesand assumptions are discussed further under the section entitled"Forward Looking Statements".

Revenue Recognition

Revenues are recorded in the period the merchandise is shipped.As is typical in the pharmaceutical industry, gross product salesare subject to a variety of deductions, primarily representingrebates and discounts to government agencies, wholesalers andmanaged care organizations. These deductions represent estimates ofthe related liabilities and, as such, judgment is required whenestimating the impact of these sales deductions on gross sales fora reporting period. Historically, our adjustments for actual futuresettlements have not been material, and have resulted in either anet increase or a net decrease to net income. If estimates are notrepresentative of actual settlement, results could be materiallyaffected. Provisions for estimated sales allowances, returns,rebates and other pricing adjustments are accrued at the timerevenues are recognized as a direct reduction of such revenue.

The accruals are estimated based on available information,including third party data, regarding the portion of sales on whichrebates and discounts can be earned, adjusted as appropriate forspecific known events and the prevailing contractual discount rate.Provisions are reflected either as a direct reduction to accountsreceivable or, to the extent that they are due to entities otherthan customers, as accrued expense. Adjustments to estimates arerecorded when customer credits are issued or payments are made tothird parties.

The sensitivity of estimates can vary by program and type ofcustomer. However, estimates associated with Medicaid and contractrebates are most at risk for adjustment because of the extensivetime delay between the recording of the accrual and its ultimatesettlement, an interval that can range up to one year. Because ofthis time lag, in any given quarter, adjustments to actual mayincorporate revisions of prior quarters.

 

Provisions for Medicaid and contract rebates during a period arerecorded based upon the actual historical experience ratio ofrebates paid and actual prescriptions written. The experience ratiois applied to the period's sales to determine the rebate accrualand related expense. This experience ratio is evaluated regularlyto ensure that the historical trends are as current as practicable.As appropriate, we will adjust the ratio to more closely match thecurrent experience or expected future experience. In assessing thisratio, we consider current contract terms, such as the effect ofchanges in formulary status, discount rate and utilization trends.Periodically, the accrual is adjusted based upon actual paymentsmade for rebates. If the ratio is not indicative of futureexperience, results could be affected. Rebate accruals for Medicaidwere $26,910 at December 31, 2007 and $32,653 at December 31, 2006.Commercial discounts and other rebate accruals were $130,409 atDecember 31, 2007 and $119,481 at December 31, 2006. These andother rebate accruals are established in the period the relatedrevenue was recognized, resulting in a reduction to sales and theestablishment of a liability, which is included in accruedexpenses.

 

The following table summarizes the activity for the nine-monthperiod in the accounts related to accrued rebates, sales returnsand discounts *(In thousands)*:

|                  |   Beginning balance Provision for rebatesChanges in estimatesSettlements  Provision for returnsChanges in estimatesSettlements  Provision for chargebacks and discountsChanges in estimatesSettlements  Ending balance | December 31, 2007        $208,063          317,947              2,500      (   306,782)            13,665            24,134      (     22,704)              1,430            262,915       (      7,700)       (  266,145)       (    10,930)        $212,228        ======= |  | December 31, 2006        $158,277          275,702              3,301      (   226,685)            52,318            20,958       (       1,264)       (    15,915)              3,779          289,565       (      7,053)       (  279,428)              3,084        $217,458        ======= |
|--------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | Deductions for chargebacks (primarily discounts to grouppurchasing organizations and federal government agencies) aregenerally settled within 2-3 weeks of incurring the liability.Based on current contracting trends and chargeback activity, theCompany reduced the estimated liability at December 31, 2007 tomore closely reflect Management’s estimate of futurechargeback settlements.Forest's policy relating to the supply of inventory at wholesalersis to maintain stocking levels of up to three weeks and to keepmonthly levels consistent from year to year, based on patterns ofutilization. We have historically closely monitored wholesalecustomer stocking levels by purchasing information directly fromcustomers and by obtaining other third party information. Unusualor unexpected variations in buying patterns or utilizations areinvestigated.Sales incentives are generally given in connection with a newproduct launch. These sales incentives are recorded as a reductionof revenues and are based on terms fixed at the time goods areshipped. New product launches may result in expected temporaryincreases in wholesaler inventories, which as described above, areclosely monitored and have not resulted in increased productreturns. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

** **

**Forward Looking Statements**

Except for the historical information contained herein, theManagement Discussion and other portions of this Form 10-Q containforward looking statements that involve a number of risks anduncertainties, including the difficulty of predicting FDAapprovals, acceptance and demand for new pharmaceutical products,the impact of competitive products and pricing, the timelydevelopment and launch of new products, changes in laws andregulations affecting the healthcare industry, and the risk factorslisted from time to time in our filings with the SEC, including theAnnual Report on Form 10-K for the fiscal year ended March 31,2007.

**Quantitative andQualitative Disclosures About Market Risk**

In the normal course of business, operations may be exposed tofluctuations in currency values and interest rates. Thesefluctuations can vary the costs of financing, investing andoperating transactions. Because we had no debt and only minimalforeign currency transactions, there was no material impact onearnings due to fluctuations in interest and currency exchangerates.

**Controls andProcedures**

As of the end of the period covered by this report, the Companyconducted an evaluation, under the supervision and with theparticipation of the principal executive officer and principalfinancial officer, of the Company's disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934 (the Exchange Act)). Based on thisevaluation, the principal executive officer and principal financialofficer concluded that the Company's disclosure controls andprocedures are effective to ensure that information required to bedisclosed by the Company in reports that it files or submits underthe Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in Securities and ExchangeCommission rules and forms. There was no change in the Company'sinternal control over financial reporting during the Company's mostrecently completed fiscal quarter that has materially affected, oris reasonably likely to materially affect, the Company's internalcontrol over financial reporting.

**Part II -Other Information**

Item 1.  LegalProceedings

             Forestis a party to certain legal proceedings previously disclosed in ourAnnual Report on Form             10-K(Form 10-K) for the fiscal year ended March 31, 2007 and ourreports on Form 10-Q             forthe Quarters ended June 30, 2007 and September 30, 2007.

             Weand certain of our officers are defendants in consolidatedsecurities class action cases             pendingin the United States District Court for the Southern District ofNew York under the             caption*"In re Forest Laboratories, Inc. SecuritiesLitigation*.*"* Both fact and expert witness             discoveryhave been completed in this action. We are expecting to participatein a Court-             orderedmediation with plaintiffs’ representatives in February 2008.In addition, we anticipate             thatthe Judge in this action will shortly establish a schedule forsummary judgment motions and             fortrial.

             InJanuary 2008, we and Merz Pharma GmbH & Co. KgaA, our licensorfor Namenda,             commencedlawsuits in the United States District Court for the District ofDelaware for             infringementof US Patent No. 5,061,703 against several companies (includingTeva             Pharmaceuticals,Mylan, and Barr Laboratories, Inc.) who had notified us that theyhad filed             AbbreviatedNew Drug Applications with Paragraph IV Certifications seeking toobtain             approvalto market generic versions of Namenda. The ‘703 Patentexpires in April 2010. We             haveapplied for patent term extension which, if granted, would extendthe ‘703 Patent to             September2013.

             Asdescribed in the Form 10-K, we are a Defendant in a number oflitigations relating to claims             thatForest and other manufacturers improperly inflated "averagewholesale prices" or             "AWP."Subsequent to the date of the Form 10-K, the Plaintiffs haveamended their Complaint             inthe action brought by the various New York counties referenced inthe Form 10-K, and             discoveryis proceeding in that action. Also, the actions in Erie, Oswego andSchenectady             countieshave been remanded to state court. Finally, we have also been namedas a Defendant in             actionsbrought by the states of Idaho and Iowa.

Item1A. Risk Factors

              Therehave been no material changes with respect to the risk factorsdisclosed in our Annual              Reporton Form 10-K for the fiscal year ended March 31, 2007, except thatthe risk factor              captioned*The Effective Rate of Taxation upon Our Results of Operations isDependent on*              *Multi-National Tax Considerations* is hereby revised to read asfollows:

              Aportion of our earnings is taxed at more favorable rates applicableto the activities              undertakenby our subsidiaries based or incorporated in the Republic ofIreland. Changes              intax laws or in their application or interpretation, such as to thetransfer pricing between              Forest’snon-U.S. operations and the United States, could increase oureffective tax rate and              negativelyaffect our results of operations. The transfer pricing issue is thesubject of an              ongoingaudit by the Internal Revenue Service. See Note 8 to the CondensedConsolidated              FinancialStatements (Unaudited).

 

Item2.  Unregistered Sales of Equity Securities, Use ofProceeds and Issuer Repurchases of Equity             Securities

*             Purchaseof equity securities by Forest:*

             InMay 2006 our Board of Directors authorized a new share repurchaseprogram (the 2007             RepurchaseProgram) for up to 25 million shares of our common stock. On August13, 2007             theBoard authorized an additional 10 million shares to be availablefor repurchase. As of             February8, 2008, 15.8 million shares were available for repurchase underthe 2007             RepurchaseProgram.

             Thefollowing table summarizes the repurchase of common stock under the2007 Repurchase             Programduring the third quarter of the fiscal year covered by thisreport:

|   | **Period**             | **Totalnumber ofsharespurchased(1)**                                                              | **Averageprice paidper share**                                            | **Total number ofshares purchased aspart of publiclyannounced plans orprograms**                  | **Maximumnumber ofshares that mayyet be purchasedunder theprogram**                               |
|--------|------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
|   | 10/1/07through10/31/07 |    875,000                                                                         | $38.76                                                                    |   875,000                                                                               | 17,060,000                                                                                        |
|   | 11/1/07through11/30/07 | 1,249,800                                                                                         | $38.09                                                                    | 1,249,800                                                                                         | 15,810,200                                                                                        |
|   | 12/1/07through12/31/07 |            -      |        -      |            -      |            -      |

 (1)  All shares were purchased pursuant to thepublicly announced 2007 Repurchase Program, which        was effective as ofMay 18, 2006, amended on August 13, 2007, and has no set expirationdate. We        are authorized topurchase up to 35 million shares of our common stock under the 2007Repurchase        Program.

Item6.  Exhibits

             Exhibit31.1   Certification Pursuant to Section 302 of theSarbanes-Oxley Act of 2002             Exhibit31.2   Certification Pursuant to Section 302 of theSarbanes-Oxley Act of 2002             Exhibit32.1   Certification Pursuant to Section 906 of theSarbanes-Oxley Act of 2002             Exhibit32.2   Certification Pursuant to Section 906 of theSarbanes-Oxley Act of 2002

 

 

                                                                                                   SIGNATURES

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto dulyauthorized.

Date: February 11, 2008

> 
Forest Laboratories, Inc.(Registrant)

/s/ HowardSolomon       Howard SolomonChairman of the Board,Chief Executive Officerand Director

/s/ Francis I. Perier,Jr.               Francis I. Perier, Jr.Senior Vice President - Finance andChief Financial Officer