**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 June 30,2008**

**
[   ]
 
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 August 7, 2008: 304,865,595.

**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

            ITEM 1. 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)*                                                                                                                                                                                                                                     | June 30, 2008  (Unaudited)               | March 31, 2008                                               |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|-------------------------------------------------------------------|
|                                                                                                                                                                                                                                                 |                                                              |                                                              |
| **Assets**                                                                                                                                                                                                                                           |                                                              |                                                              |
|                                                                                                                                                                                                                                                 |                                                              |                                                              |
| Current assets:    Cash (including cash equivalentinvestments        of $986,990 in Juneand $833,018 in March)                                                                           |  

$   992,687                           | $   833,052                                   |
|     Marketable securities                                                                                                                                                                                                        | 840,085                                                      | 943,972                                                      |
|     Accounts receivable, less allowance fordoubtful accounts        of $19,185 in Juneand $19,882 in March                                                                               | 400,120                                                      | 445,987                                                      |
|     Inventories, net                                                                                                                                                                                                             | 471,201                                                      | 425,138                                                      |
|     Deferred income taxes                                                                                                                                                                                                        | 230,129                                                      | 226,095                                                      |
|     Other current assets                                                                                                                                                                                                         |        46,747             |        33,260             |
|         Total currentassets                                                                                                                                                                                  |   2,980,969                                        |   2,907,504                                        |
|                                                                                                                                                                                                                                                 |                                                              |                                                              |
| Marketable securities                                                                                                                                                                                                                                |      687,300                        |      663,625                        |
|                                                                                                                                                                                                                                                 |                                                              |                                                              |
| Property, plant and equipment                                                                                                                                                                                                                        | 573,510                                                      | 567,331                                                      |
|     Less: accumulated depreciation                                                                                                                                                                                               |      230,394                        |      217,294                        |
|                                                                                                                                                                                                                                                 |      343,116                        |      350,037                        |
| Other assets:    Goodwill                                                                                                                                                                                                        | 14,965                                                       | 14,965                                                       |
|     License agreements, product rights andother        intangibles, lessaccumulated amortization        of $448,898 in Juneand $421,719 in March |  

500,618                                              | 527,787                                                      |
|     Deferred income taxes                                                                                                                                                                                                        | 60,360                                                       | 59,778                                                       |
|     Other assets                                                                                                                                                                                                                 |          1,622  |          1,671  |
|         Total otherassets                                                                                                                                                                                    |      577,565                        |      604,201                        |
|                                                                                                                                                                                                                                                 |                                                              |                                                              |
|              Totalassets                                                                                                                                                            | $4,588,950                                                   | $4,525,367                                                   |
|                                                                                                                                                                                                                                                 | ========                                                     | ========                                                     |

*See notes to condensed consolidated financialstatements.*

** **

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

| *(In thousands, except for par values)*                                                                                                                                               | June 30, 2008  (Unaudited)                               | March 31, 2008                                                                                                |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                  |                                                                              |                                                                                                               |
| **Liabilities and Stockholders' Equity**                                                                                                                                              |                                                                              |                                                                                                               |
|                                                                                                                                                                                  |                                                                              |                                                                                                               |
| Current liabilities:    Accounts payable                                                                                                                          | $   101,837                                                   | $   223,720                                                                                    |
|     Accrued expenses                                                                                                                                              | 500,841                                                                      | 387,105                                                                                                       |
|     Income taxes payable                                                                                                                                          |        38,231                             |                     |
|        Total currentliabilities                                                                                                                    |      640,909                                        |      610,825                                                                         |
|                                                                                                                                                                                  |                                                                              |                                                                                                               |
| Long-term liabilities:    Income tax liabilities                                                                                                                  |      210,361                                        | 198,410                                                                                                       |
|     Deferred income taxes                                                                                                                                         |             761  |             815                                   |
|                                                                                                                                                                                  |      211,122                                        |      199,225                                                                         |
|                                                                                                                                                                                  |                                                                              |                                                                                                               |
| Stockholders' equity:    Series preferred stock, $1.00 par; sharesauthorized 1,000;        no shares issued oroutstanding |                                                                              |                                                                                                               |
|     Common stock, $.10 par; sharesauthorized 1,000,000; issued        421,451 shares inJune and 421,421 shares in March   | 42,145                                                                       | 42,142                                                                                                        |
|     Additional paid-in capital                                                                                                                                    | 1,444,958                                                                    | 1,434,172                                                                                                     |
|     Retained earnings                                                                                                                                             | 5,854,413                                                                    | 5,611,493                                                                                                     |
|     Accumulated other comprehensiveincome                                                                                                                         |         33,670                       | 34,592                                                                                                        |
|     Treasury stock, at cost                                                                                                                                       |                                                                              |                                                                                                               |
|         (116,668shares in June and 110,014 shares in March)                                                                              | (  3,638,267)                                                           | (  3,407,082)                                                                                            |
|             Totalstockholders' equity                                                                                     |   3,736,919                                                        |   3,715,317                                                                                         |
|                                                                                                                                                                                  |                                                                              |                                                                                                               |
|                 Totalliabilities and stockholders' equity                                             | $4,588,950                                                                   | $4,525,367                                                                                                    |
|                                                                                                                                                                                       | ========                                                                     | ========                                                                                                      |

*See notes to condensed consolidated financialstatements.*

 

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

| *(In thousands, except per share amounts)*                              |   |  Three MonthsEnded                     June30,             |
|------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                         |   |                                                                                                                                                                                                                                 |         2008  |        2007  |
|                                                                         |   |                                                                                                                                                                                                                                 |   |   |
| Net sales                                                                    |   |                                                                                                                                                                                                                                 | $893,745  | $842,616  |
| Contract revenue                                                             |   |                                                                                                                                                                                                                                 | 54,153  | 53,377  |
| Interest income                                                              |   |                                                                                                                                                                                                                                 | 18,230  |     26,738  |
| Other income                                                                 |   |                                                                                                                                                                                                                                 |          716  |       5,543  |
|                                                                         |   |                                                                                                                                                                                                                                 |   966,844  |   928,274  |
|                                                                         |   |                                                                                                                                                                                                                                 |   |   |
| Costs and expenses:    Cost of sales                     |   |                                                                                                                                                                                                                                 | 197,340  | 186,240  |
|     Selling, general and administrative                  |   |                                                                                                                                                                                                                                 | 342,955  | 261,328  |
|     Research and development                             |   |                                                                                                                                                                                                                                 |    112,112  |   136,908  |
|                                                                         |   |                                                                                                                                                                                                                                 |   652,407  |   584,476  |
|                                                                         |   |                                                                                                                                                                                                                                 |   |   |
| Income before income tax expense                                             |   |                                                                                                                                                                                                                                 | 314,437  | 343,798  |
|                                                                         |   |                                                                                                                                                                                                                                 |   |   |
| Income tax expense                                                           |   |                                                                                                                                                                                                                                 |     71,517  |     75,636  |
|                                                                         |   |                                                                                                                                                                                                                                 |   |   |
| Net income                                                                   |   |                                                                                                                                                                                                                                 | $242,920  | $268,162  |
|                                                                         |   |                                                                                                                                                                                                                                 | =======  | =======  |
| Net income per common share:                                                 |   |                                                                                                                                                                                                                                 |   |   |
|                                                                         |   |                                                                                                                                                                                                                                 |   |   |
|     Basic                                                |   |                                                                                                                                                                                                                                 | $0.79  | $0.84  |
|                                                                         |   |                                                                                                                                                                                                                                 | ====  | ====  |
|     Diluted                                              |   |                                                                                                                                                                                                                                 | $0.79  | $0.83  |
|                                                                         |   |                                                                                                                                                                                                                                 | ====  | ====  |
| Weighted average number of common    shares outstanding: |   |                                                                                                                                                                                                                                 |   |   |
|                                                                         |   |                                                                                                                                                                                                                                 |   |   |
|     Basic                                                |   |                                                                                                                                                                                                                                 | 307,043  | 319,580  |
|                                                                         |   |                                                                                                                                                                                                                                 | ======  | ======  |
|     Diluted                                              |   |                                                                                                                                                                                                                                 | 307,912  | 321,921  |
|                                                                         |   |                                                                                                                                                                                                                                 | ======  | ======  |

*See notes to condensed consolidated financialstatements.*

** **

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

| *(In thousands)*                  |   |      Three MonthsEnded                June30,               |
|-----------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |   |                                                                                                                                                                                                                                       |         2008  |        2007  |
|                              |   |                                                                                                                                                                                                                                       |   |   |
| Net income                        |   |                                                                                                                                                                                                                                       | $242,920  | $268,162  |
| Other comprehensive (loss) income |   |                                                                                                                                                                                                                                       |         (922) |       1,979  |
|                              |   |                                                                                                                                                                                                                                       |   |   |
| Comprehensive income              |   |                                                                                                                                                                                                                                       | $241,998  | $270,141  |
|                              |   |                                                                                                                                                                                                                                       | =======  | =======  |

*See notes to condensed consolidated financialstatements.*

** **

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

|                                                                                                                                               |     Three MonthsEnded                                                                                                                                 |
|----------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(In thousands)*                                                                                                                                   |                June30,                  |
|                                                                                                                                               |        2008                                                                                                                                                     |         2007  |
| Cash flows from operating activities:                                                                                                              |                                                                                                                                                                                                    |   |
|    Net income                                                                                                                       | $242,920                                                                                                                                                                                           | $268,162  |
|    Adjustments to reconcile net income to                                                                                           |                                                                                                                                                                                                    |   |
|      net cash provided by operatingactivities:                                                                            |                                                                                                                                                                                                    |   |
|        Depreciation                                                                                             | 13,126                                                                                                                                                                                             | 11,317  |
|        Amortization andimpairments                                                                              | 27,179                                                                                                                                                                                             | 9,165  |
|        Stock-basedcompensation expense                                                                          | 10,587                                                                                                                                                                                             | 10,676  |
|        Deferred income tax(benefit) expense                                                                     | (      4,670)                                                                                                                                                             | 18,584  |
|        Foreign currencytransaction gain                                                                         | (         545)                                                                                                                                             | (         170) |
|        Net change inoperating assets and liabilities:                                                           |                                                                                                                                                                                                    |   |
|           Decrease(increase) in:                                                                 |                                                                                                                                                                                                    |   |
|              Accountsreceivable, net                                              | 45,867                                                                                                                                                                                             | (    16,047) |
|              Inventories,net                                                      | (    46,063)                                                                                                                                                                        | (    32,613) |
|              Othercurrent assets                                                  | (    13,487)                                                                                                                                                                        | (    23,025) |
|              Otherassets                                                          | 49                                                                                                                                                                                                 |            54  |
|           Increase(decrease) in:                                                                 |                                                                                                                                                                                                    |   |
|              Accountspayable                                                      | (  121,883)                                                                                                                                                                                   | 47,757  |
|              Accruedexpenses                                                      | 113,736                                                                                                                                                                                            |    39,211  |
|              Incometax liabilities                                                |     50,182                                                                                                                                                                     |    16,448  |
|                 Netcash provided by operating activities           |   316,998                                                                                                                                                                                |  349,519  |
|                                                                                                                                               |                                                                                                                                                                                                    |   |
| Cash flows from investing activities:                                                                                                              |                                                                                                                                                                                                    |   |
|    Purchase of property, plant and equipment                                                                                        | (      6,214)                                                                                                                                                             | (      9,604) |
|    Purchase of marketable securities                                                                                                | (  502,398)                                                                                                                                                                                   | (  827,325) |
|    Redemption of marketable securities                                                                                              |   582,609                                                                                                                                                                                |  607,821  |
|                 Netcash provided by (used in) investing activities |     73,997                                                                                                                                                                     | (  229,108) |
|                                                                                                                                               |                                                                                                                                                                                                    |   |
| Cash flows from financing activities:                                                                                                              |                                                                                                                                                                                                    |   |
|    Net proceeds from common stock optionsexercised      by employees under stock optionplans          | 202                                                                                                                                                                                                | 18,580  |
|    Tax benefit realized from the exercise ofstock      options by employees                           |                                                                                                                                                            |        3,372  |
|    Purchase of treasury stock                                                                                                       | (  231,185)                                                                                                                                                                                   | (    86,003) |
|                 Netcash used in financing activities               | (  230,983)                                                                                                                                                                                   | (    64,051) |
|                                                                                                                                               |                                                                                                                                                                                                    |   |
| Effect of exchange rate changes on cash                                                                                                            |        (         377)                                                                                                   |     1,874  |
| Increase in cash and cash equivalents                                                                                                              |    159,635                                                                                                                                                                          |  58,234  |
| Cash and cash equivalents, beginning of period                                                                                                     |   833,052                                                                                                                                                                                |  563,663  |
| Cash and cash equivalents, end of period                                                                                                           | $992,687                                                                                                                                                                                           | $621,897  |
|                                                                                                                                               | =======                                                                                                                                                                                            | =======  |

|                                               |          |          |
|----------------------------------------------------|---------------|---------------|
| Supplemental disclosures of cash flow information: |          |          |
|                                               |          |          |
| Cash paid during the period for:                   |          |          |
|     Income taxes               | $14,504  | $37,517  |
|                                               |          |          |
|                                               |          |          |
|                                               |          |          |
|                                               |          |          |

*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 (or GAAP) for interim financialinformation and with the instructions to Form 10-Q and Rule 10-01of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financialstatements. In the opinion of Management, all adjustments(consisting of only normal recurring accruals) considered necessaryfor a fair presentation have been included. Operating results forthe three-month period ended June 30, 2008 are not necessarilyindicative of the results that may be expected for the year endingMarch 31, 2009. For further information refer to the consolidatedfinancial statements and footnotes thereto incorporated byreference in the Company's Annual Report on Form 10-K for the yearended March 31, 2008.

**2.   AccountsReceivable:**

Accounts receivable, net, consists of thefollowing:

|             | June 30, 2008                                                                                         |   |                             |
|------------------|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|
| *(In thousands)* |        (Unaudited)         |   | March 31, 2008    |
|             |                                                                                                  |   |                             |
| Trade            | $341,551                                                                                              |   | $377,779                         |
| Other            |     58,569                                                                        |   |     68,208   |
|             | $400,120                                                                                              |   | $445,987                         |
|             |  =======                                                                                    |   | =======                     |

**3.   Inventories:**

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

|             | June 30, 2008                                                                                         |   |                                      |
|------------------|-------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|
| *(In thousands)* |        (Unaudited)         |   | March 31, 2008             |
|             |                                                                                                  |   |                                      |
| Raw materials    | $195,250                                                                                              |   | $234,288                                  |
| Work in process  |          625                                             |   |       1,360 |
| Finished goods   |   275,326                                                                                   |   |   189,490                       |
|             | $471,201                                                                                              |   | $425,138                                  |
|             |  =======                                                                                    |   | =======                              |

**4.   Fair Value Measurements:**

In the first quarter of fiscal 2009, the Company adopted SFASNo. 157 (or SFAS 157), "Fair Value Measurements". Thispronouncement defines fair value, establishes a framework formeasuring fair value under GAAP and requires expanded disclosuresabout fair value measurements. SFAS 157 does not require any newfair value measurements, but rather generally applies to otheraccounting pronouncements that require or permit fair valuemeasurements. SFAS 157 emphasizes that fair value is a market-basedmeasurement, not an entity-specific measurement, and defines fairvalue as the price that would be received to sell an asset ortransfer a liability in an orderly transaction between marketparticipants at the measurement date. SFAS 157 discusses valuationtechniques, such as the market approach (comparable market prices),the income approach (present value of future income or cash flow)and the cost approach (cost to replace the service capacity of anasset or replacement cost). These valuation techniques are basedupon observable and unobservable inputs. Observable inputs reflectmarket data obtained from independent sources, while unobservableinputs reflect the Company’s market assumptions. SFAS 157utilizes a fair value hierarchy that prioritizes inputs to fairvalue measurement techniques into three broad levels. The followingis a brief description of those three levels:

|   | Level 1: | Observable inputs such as quoted prices for identical assets orliabilities in active markets.                                                                                                                                                                                                                                                                                                      |
|--------|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Level 2: | Observable inputs other than quoted prices that are directly orindirectly observable for the asset or liability, including quotedprices for similar assets or liabilities in active markets; quotedprices for similar or identical assets or liabilities in marketsthat are not active; and model-derived valuations whose inputs areobservable or whose significant value drivers are observable. |
|   |     |                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Level 3: | Unobservable inputs that reflect the reporting entity’sown assumptions.                                                                                                                                                                                                                                                                                                                      |

The FASB issued FSP 157-2 which delayed the effective date ofSFAS 157 for all non-financial assets and liabilities, except thosethat are recognized or disclosed at fair value in the financialstatements on a recurring basis, until the beginning of fiscal year2010. The Company’s financial assets adjusted to fair valueat June 30, 2008 are its commercial paper investments included incash and cash equivalents, money market accounts, municipal bondsand notes, variable rate demand notes, floating rate notes andauction rate securities.  These assets are subject to themeasurement and disclosure requirements of SFAS 157.  TheCompany adjusts the value of these instruments to fair value eachreporting period.  No adjustment to retained earnings resultedfrom the adoption of SFAS 157.

**4.   Fair Value Measurements:***(Continued)*

The fair value hierarchy of the Company’s financial assetscarried at fair value and measured on a recurring basis is asfollows:

**Fair Value of Financial Assets***(In thousands)*

|             Description |   | Fair Value atJune 30, 2008     |   | Quoted Prices inActive Markets forIdentical Assets        (Level1)         |   | SignificantOther ObservableMarket Inputs       (Level2)        |
|-------------------------------------------------------------------------------------|--------|--------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|    Money market accounts                                             |   | $771,073                       |   | $771,073                                                                                                                                                   |   |                                                                                                                                 |
|    Municipal bonds and notes                                         |   |   147,373            |   |                                                                                                                                                       |   | $147,373                                                                                                                             |
|    Commercial paper                                                  |   |   843,185            |   |   526,612                                                                                                                                        |   |   316,573                                                                                                                  |
|    Variable rate demand notes                                        |   |   207,104            |   |                                                                                                                                                       |   |   207,104                                                                                                                  |
|    Floating rate notes                                               |   |   440,361            |   |   262,601                                                                                                                                        |   |   177,760                                                                                                                  |
|    Auction rate securities                                           |   |     37,892 |   |                                                                                                                                                       |   |     37,892                                                                                                       |

Money market accounts are included in cash and cash equivalentson the accompanying balance sheets and are classified as Level 1assets.  Certain commercial paper and floating rate noteinvestments are also classified as Level 1 assets because theyconsist of publicly traded securities which are priced and activelytraded on a daily basis.

The Company holds investments in auction rate securities (orARS) amounting to $37,892 (with underlying maturities from 23.5 to33.9 years) of which $22,597 are collateralized by student loans.Substantially all such collateral in the aggregate is guaranteed bythe U.S. government under the Federal Family Education LoanProgram.  The balance of the ARS investments of $15,295 areissued by local municipal governments. Liquidity for thesesecurities was normally dependent on an auction process that resetsthe applicable interest rate at pre-determined intervals, rangingfrom 7 to 35 days.  Beginning in February 2008, theauctions for the ARS held by the Company and others wereunsuccessful, requiring the Company to continue to hold them beyondtheir typical auction reset dates. Auctions fail when there isinsufficient demand.  However, this does not represent adefault by the issuer of the security. Upon an auction’sfailure, the interest rates reset based on a formula contained inthe security.  The rate is generally equal to or higher thanthe current market rate for similar securities.  Thesecurities will continue to accrue interest and be auctioned untilone of the following occurs: the auction succeeds; the issuer callsthe securities; or the securities mature. The Company classifiesthe ARS as non-current assets held for sale under the heading"Marketable securities" in the Company’s balance sheets andvalues them at purchase price free from impairment. The Companydetermines the fair value of these ARS instruments based on Level 2inputs in the SFAS 157 fair value hierarchy. Level 2 fair valuedeterminations are derived from directly or indirectly observablemarket based information.

Certain of the Company’s commercial paper and floatingrate notes and all of the Company’s variable rate notes andmunicipal bonds and notes are based on Level 2 inputs in the SFAS157 fair value hierarchy.

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

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

|                                                                                                          | Three Months Ended           June30,          |                                    |
|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|
|                                                                                                          |      2008                                                                                                                |      2007 |  |  |
| Basic                                                                                                         | 307,043                                                                                                                                           | 319,580                            |   |   |
| Effect of assumed conversion of employee   stock options and restrictedstock    |        869                                                                                                     |     2,341      |   |   |
| Diluted                                                                                                       | 307,912                                                                                                                                           | 321,921                            |   |   |
|                                                                                                          | ======                                                                                                                                            | ======                             |   |   |

Options to purchase approximately 14,951 shares of common stockat exercise prices ranging from $34.12 to $76.66 per share thatwere outstanding during a portion of the three-month period endedJune 30, 2008 were not included in the computation of diluted netincome per share because they were anti-dilutive. These optionsexpire through 2018. Options to purchase approximately 8,059 sharesof common stock at exercise prices ranging from $38.94 to $76.66per share that were outstanding during a portion of the three-monthperiod ended June 30, 2007 were not included in the computation ofdiluted net income per share because they were anti-dilutive. Theseoptions expire through 2017.

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

In August 2007 the stockholders of the Company voted to adoptthe 2007 Equity Incentive Plan (or the 2007 Plan) which replacesand supersedes all prior stock option plans.  Under the 2007Plan, 13,950 shares were authorized to be issued to employees ofthe Company and its subsidiaries at prices not less than the fairmarket value of the common stock at the date of grant. The 2007Plan provides 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 June 30, 2008,10,283 shares were available for grant.

 

Compensation expense of $10,587 ($8,817 net of tax) was recordedfor the three-month period ended June 30, 2008. This expense wascharged to cost of sales, selling, general and administrative andresearch and development expense, as appropriate. Amountscapitalized as part of inventory costs were not significant.

The weighted average number of diluted common shares outstandingis reduced by the treasury stock method which, in accordance withthe provisions of Statement of Financial Accounting Standards No.123(R), "Share-Based Payment", (or SFAS 123R), takes intoconsideration the compensation cost attributed to future servicesnot yet recognized.

**7.   Business Segment Information:**

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

| *(In thousands)*             |  Three Months Ended             June30,          |                                                 |
|------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|
|                         |        2008                                                                                                                      |         2007 |   |   |
|                         |                                                                                                                                                                |                                                 |   |   |
| Central nervous system (CNS) | $810,320                                                                                                                                                            | $747,508                                             |   |   |
| Cardiovascular               |  9,815                                                                                                                                                         |  8,419                                          |   |   |
| Other                        |     73,610                                                                                                                                      |     86,689                       |   |   |
|                         | $893,745                                                                                                                                                            | $842,616                                             |   |   |
|                         | =======                                                                                                                                                             | =======                                              |   |   |

**8.   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 August 7, 2008, the Companyhas not drawn any funds from the available credit. The utilizationof the revolving credit facility is subject to the adherence tocertain financial covenants such as leverage and interest coverageratios.

****

**9.   Income Taxes***(Inthousands)***:**

The Company files income tax returns in the United States andcertain foreign jurisdictions including Ireland. TheCompany’s income tax returns for fiscal years prior to 1999in most jurisdictions and prior to 2002 in Ireland are no longersubject to review as such fiscal years are generally closed. Taxauthorities in various jurisdictions are in the process ofreviewing the Company’s income tax returns for variouspost-1999 fiscal years, including the Internal Revenue Service (orIRS), 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 hasbeen filed with the IRS and the matter is in administrativeappeals.

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. income taxliability in excess of established reserves, it is likely that theIRS could make similar claims for years subsequent to fiscal 2003which could be material. However, at this time Management believesthat it is unlikely that the ultimate outcome will be determinedwithin the next 12 months. The Company’s continuing practiceis to recognize net interest related to income tax matters inincome tax expense. As of June 30, 2008, the Company had accrued anadditional $1,738 in interest for a total of $21,677 related to theresolution of various income tax matters.

The Company’s effective tax rate was 22.7% for thethree-month period ended June 30, 2008, as compared to 22.0% forthe same period last year.  The increase resulted primarilyfrom the net impact of one-time discrete tax adjustments relatedprincipally to stock-based compensation in prior years offset forthe most part by the termination of our co-promotion agreement forAzorTM and other tax matters. Effective tax rates may beaffected by ongoing tax audits. 

**10.   Termination of Co-PromotionAgreement***(In thousands)***:**

During the current quarter, the Company and its licensingpartner Daiichi Sankyo, terminated their co-promotion agreement forAzor.  As a result of terminating the agreement, the Companyrecorded a one-time charge of $44,100 to selling, general andadministrative expense which was composed of a termination fee ofapproximately $26,600 and $17,500 related to the unamortizedportion of the initial upfront payment. 

** **

** **

** **

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

Total net revenues increased to $966,844 for the quarter endedJune 30, 2008 as compared to $928,274 for the June 30, 2007 quarterdue to the continued growth of our key marketed productsLexapro® and Namenda® and sales of our newest productBystolicTM, a novel beta-blocker for the treatment ofhypertension launched in January 2008. During the current quarter,we and our licensing partner Daiichi Sankyo, (or Sankyo) terminatedour co-promotion agreement for AzorTM. As a result ofterminating the agreement, we recorded a one-time charge of $44,100to selling, general and administrative expenses which was composedof a termination fee of approximately $26,600 and $17,500 relatedto the unamortized portion of the initial upfront payment. As aresult of this charge, net income for the June 2008 quarter waslower than the prior year’s June quarter.

**Financial Condition and Liquidity**

Net current assets increased by $43,381 from March 31, 2008.Cash and cash equivalents and marketable securities increased fromongoing operations. During the quarter ended June 30, 2008 andpursuant to the 2007 Repurchase Program, we repurchased 6.6 millionshares of common stock at a cost of $231,185 leaving 9.2 millionshares available for repurchase under the program. Of our totalcash and cash equivalents and marketable securities position atJune 30, 2008, 34%, or about $850,000, was domiciled domesticallywith the remainder held by our international subsidiaries. Wecurrently invest funds in variable rate demand notes, municipalbonds and notes, commercial paper including money marketinstruments, auction rate securities and European bank floatingrate notes that have major bank liquidity agreements. Theseinvestments, which are subject to general credit, liquidity andmarket risks, have not been materially affected by the U.S.sub-prime mortgage defaults that have affected certain sectors ofthe financial markets and caused credit and liquidity issues. Tradeand other accounts receivable decreased due to the timing ofreceipts. Finished goods inventory increased in order to supportcontinued demand for our products including Bystolic, which waslaunched in the fourth quarter of fiscal 2008. Raw materialinventories decreased as we are bringing these balances to morenormalized levels. We believe that current inventory levels areadequate to support the growth of our ongoing business. Licenseagreements, product rights and other intangibles net of accumulatedamortization decreased from March 31, 2008 primarily due to thewrite-off of the Azor license. Other current assets increased dueprincipally to the renewal of our insurance programs, which arepaid in full at the time of renewal and expensed over the life ofthe policy years. Accounts payable and accrued expenses in theaggregate decreased slightly while income taxes payable increaseddue to normal operating activities.

Property, plant and equipment before accumulated depreciationincreased from March 31, 2008 as we continued to make technologyinvestments to expand our principal operating systems to enhancesupply chain and salesforce applications.

During fiscal 2007 our Board of Directors (or Board) approvedthe 2007 Repurchase Program which authorized the purchase of up to25 million shares of common stock. On August 13, 2007 the Boardauthorized the purchase of an additional 10 million shares ofcommon stock. In the June 2008 quarter, we repurchased a total of6.6 million shares at a cost of $231,185. As of August 7, 2008,under the 2007 Repurchase Program, we have cumulatively repurchaseda total of 25.8 million shares at a cost of $1,059,791, leaving usthe authority to purchase 9.2 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 andcontinued share repurchases.

 

**Results of Operations**

Net sales increased $51,129 or 6.1% to $893,745 for the quarterended June 30, 2008 from $842,616 in the June 30, 2007 quarterprimarily due to strong sales of Lexapro, Namenda and Bystolic.

Lexapro, which is indicated for the treatment of majordepressive disorder and generalized anxiety disorder, and is ourmost significant product, had sales of $583,097 in the quarter,growing 5.6% and contributing $30,784 to the net sales change ascompared with last year, of which $30,277 was due to price and $507was related to volume. During fiscal 2007 Caraco PharmaceuticalLaboratories, Ltd. (or Caraco), filed an Abbreviated New DrugApplication (or ANDA) with a Paragraph IV Certification for ageneric equivalent to Lexapro. We along with our licensing partnerH. Lundbeck A/S have filed a lawsuit in the U.S. District Court forthe Eastern District of Michigan against Caraco for patentinfringement. Lexapro’s patent is set to expire in March2012.

Sales of Namenda, our N-methyl-D-aspartate (or NMDA) receptorantagonist for the treatment of moderate to severe Alzheimer'sdisease grew 14%, an increase of $26,899 to $218,618 in the quarter ended June 30,2008 as compared with June 30, 2007, of which $17,986 was due toprice and $8,913 was due to volume. During the third quarter offiscal 2008, we received notification from several companies thatthey filed ANDAs 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 of Delaware againstseveral companies for patent infringement. Namenda’s patentis set to expire in April 2010. We have applied for patent termrestoration which, if granted, would extend Namenda’s patentprotection until September 2013.

Sales of Bystolic, launched in January 2008, achieved sales of$4,374 in the quarter. Bystolic is our novel beta-blocker indicatedfor the treatment of hypertension. The remainder of the net saleschange for the period presented was due principally to volume andprice fluctuations of our older and non-promoted product lines.

Contract revenue for the current quarter was $54,153 compared to$53,377 in the same period last year, primarily due to co-promotionincome from our co-marketing agreement with Sankyo for Benicar.Fiscal 2008 was the final year of our active co-promotionactivities and we will receive a reduced share of product profitsover the remaining six-year term of the agreement, as defined.Going forward, we will not incur salesforce expenses for thisproduct.

Interest income for the current quarter decreased over the sameperiod last year primarily due to lower average rates of returnoffset by higher levels of invested funds. Other income for thecurrent quarter decreased over the same period last year primarilydue to a milestone payment received in the prior year related toour European program for an inhaled cystic fibrosis product.

Cost of sales as a percentage of net sales was 22.1% for theJune 2008 quarter, unchanged from the June 2007 quarter.

Selling, general and administrative expense increased to$342,955 in the current quarter as compared to $261,328 in the sameperiod last year primarily due to the one-time charge of $44,100relating to the termination of the Azor co-promotion agreement, aswell as increased salesforce activity and promotional support forproducts currently marketed, launch costs for Bystolic andpre-launch costs for milnacipran.

Research and development expense decreased to $112,112 in thecurrent quarter as compared to $136,908 in the same period lastyear. During the June 2007 quarter we recorded approximately$28,000 in milestone expenses related to the aclidinium andmilnacipran development programs.

Research and development expense also reflects thefollowing:

> 
· In May 2008, we filed ansNDA for Lexapro for the additional indication of adolescentdepression. The filing was based on the results from a Phase IIIstudy of Lexapro in the treatment of adolescents aged 12-17, withMajor Depressive Disorder, which indicate that patients treatedwith Lexapro experienced statistically significant improvement insymptoms of depression.

· Regarding nebivolol(Bystolic), we plan to file an sNDA in early calendar 2009 for anew indication of congestive heart failure based on the results ofa previously completed Phase III study (the Seniors study).

· In December 2007, wesubmitted an NDA to the FDA for milnacipran in the treatment offibromyalgia syndrome based on data from two Phase III studieswhich demonstrated significant therapeutic effects. We expect FDAaction with respect to this NDA by the end of October 2008. We alsoexpect results from a third randomized pivotal Phase III study inlate 2008.

· 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 with activity against gram-positivebacteria such as MRSA and gram-negative bacteria. In June 2008, wereported positive results from two globally conducted, multi-centerPhase III studies of ceftaroline for complicated skin and skinstructure infections. Enrollment continues for ceftaroline in twoPhase III studies for community acquired pneumonia and weanticipate those results in calendar 2009. The data from these twoindications, if supportive, will serve as our planned submissionpackage to the FDA for initial marketing approval.

· In April 2006, we enteredinto a collaboration agreement with Laboratorios Almirall, S.A. (orAlmirall) for the U.S. rights to aclidinium, a novel long-actingmuscarinic antagonist which is being developed as an inhaledtherapy for the treatment of chronic obstructive pulmonary disease(or COPD). An international Phase III program is currently beingconducted by us and Almirall. Enrollment has been completed and weexpect top-line results to be available in the second half ofcalendar 2008. We and Almirall are also pursuing the development ofa fixed-dose combination of aclidinium and the beta-agonistformoterol, which is currently in Phase II testing.

· During the September 2007quarter, we entered into a 50/50 partnership with IronwoodPharmaceuticals, Inc. (or Ironwood) to co-develop and co-market thecompound linaclotide. Linaclotide is currently being investigatedfor the treatment of constipation-predominant irritable bowelsyndrome (or IBS-C) and chronic constipation (or CC). In March2008, we and Ironwood announced positive top-line results from twoPhase II(b) randomized, double-blind, placebo-controlled studiesassessing the safety, therapeutic effect and dose response of fourdifferent once-daily doses of linaclotide in the treatment of IBS-Cand CC. Linaclotide was well tolerated at all doses. Based on thisdata we anticipate initiating Phase III studies in both indicationsin the second half of calendar 2008.

· In February 2008, wereceived preliminary results of a Phase III study of memantine HClin a novel once-daily formulation of Namenda for the treatment ofmoderate to severe Alzheimer’s disease.  The resultsindicate that patients treated with this formulation experiencedstatistically significant benefits in cognition and clinical globalstatus compared to placebo.  Based on the results of thisstudy, we intend to prepare and file an NDA for this new once-dailyformulation.

· During the third quarter offiscal 2005, Forest entered into a collaboration agreement withGedeon Richter Ltd. (or Richter) for the North American rights toRGH-188, and related compounds, being developed as an atypicalantipsychotic for the treatment of schizophrenia, bipolar mania andother psychiatric conditions. A review of top-line results of aPhase II study in schizophrenia indicated that RGH-188 demonstrateda nominally statistical significant (i.e., not adjusted formultiple comparisons) therapeutic effect compared to placebo in alow-dose arm and a numerical improvement compared to placebo in ahigh-dose arm that did not reach nominal statistical significance.Based on the review of the results, we and Richter initiated aPhase II(b) dose-ranging study in schizophrenia patients. Thisstudy is being performed in order to better determine an optimaldose to take into the planned Phase III program. An additionalPhase II study of RGH-188 for the treatment of bipolar mania wascommenced in April 2007 and we expect results in the second half ofcalendar 2008.

· During the second quarter offiscal 2005, Forest entered into a collaboration agreement withGlenmark Pharmaceuticals Ltd. for the North American developmentand marketing of GRC 3886, a PDE4 inhibitor for the treatment ofasthma and COPD. We have commenced a Phase II study of thiscompound for the COPD indication with results expected in thesecond half of calendar 2009.

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 series ofnovel compounds that target group 1 metabotropic glutamatereceptors (mGLUR1/5); NXL104, a novel intravenous beta-lactamaseinhibitor being developed in combination with ceftaroline; andME1036, an injectable carbapenem antibiotic which has demonstratedpre-clinical activity against both gram-positive and gram-negativebacteria. In addition, we have entered into several collaborationsto conduct pre-clinical drug discovery.

Our effective tax rate was 22.7% for the three-month periodended June 30, 2008, as compared to 22.0% for the same period lastyear.  The increase resulted primarily from the net impact ofone-time discrete tax adjustments related principally tostock-based compensation in prior years offset for the most part bythe termination of our co-promotion agreement for AzorTM andother tax matters. Effective tax rates may be affected by ongoingtax audits. 

In connection with our previously reported adoption of theprovisions of Financial Accounting Standards Board InterpretationNo. 48, "Accounting for Uncertainty in Income Taxes - aninterpretation of FASB Statement No. 109", we accrued an additional$1,738 in interest related to unrecognized tax benefits totaling$21,677 for the resolution of various income tax matters.

We expect to continue our profitability in the current fiscalyear with continued sales growth in our principal promotedproducts.

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 condensed consolidated financial statements foradditional policies.

> 
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 settlements, 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 expenses. 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 $37,861 at June 30, 2008 and $26,890 at June 30, 2007.Commercial discounts and other rebate accruals were $143,688 atJune 30, 2008 and $137,111 at June 30, 2007. These and other rebateaccruals are established in the period the related revenue wasrecognized, resulting in a reduction to sales and the establishmentof a liability, which is included in accrued expenses.

 

The following table summarizes the activity in the accountsrelated to accrued rebates, sales returns and discounts *(Inthousands)*:

                

  Beginning balance Provision for rebatesChanges in estimatesSettlements  Provision for returnsChanges in estimatesSettlements  Provision for chargebacks and discountsChanges in estimatesSettlements  Ending balance

    June 30, 2008         $229,681           118,232                              (   109,605)               8,627               6,744        (      5,687)               1,057             78,645                              (    81,772)        (      3,127)         $236,238        =======

    June 30, 2007         $208,063           100,159                          (    83,523)            16,636               9,239       (      9,559)       (         320)             81,501       (      7,700)       (    85,578)       (    11,777)         $212,602        =======

Deductions for chargebacks (primarily discounts to grouppurchasing organizations and federal government agencies) closelyapproximate actual as these deductions are settled generally within2-3 weeks of incurring the liability.

Forest's policy relating to the supply of inventory atwholesalers is to maintain stocking levels of up to three weeks andto keep monthly levels consistent from year to year, based onpatterns of utilization. We have historically closely monitoredwholesale customer stocking levels by purchasing informationdirectly from customers and by obtaining other third partyinformation. Unusual or unexpected variations in buying patterns orutilizations are investigated.

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 historically have not resulted in increasedproduct returns.

**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 31,2008.

**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, 2008.

             Withrespect to the *Louisiana Wholesale Drug Company* matteridentified in the Form 10-K, the             U.S.Circuit Court of Appeals for the District of Columbia Circuit, byway of a decision dated             July25, 2008, has affirmed the grant of summary judgment in favor ofForest.

             TheU.S. District Court for the Southern District of New York has setthe trial date in the action             *In re Forest Laboratories, Inc. Securities Litigation,* asfurther described in the Form 10-K, for             theweek of November 3, 2008.

             Weare named in approximately 70 product liability lawsuits. More than40 of the lawsuits             allegethat Celexa or Lexapro caused or contributed to a suicide orsuicide attempt. More than             25of the lawsuits allege that Celexa or Lexapro caused or contributedto birth defects. The suits             seeksubstantial compensatory and punitive damages. We are defending allthe suits vigorously.

             Amultidistrict proceeding (or MDL) has been established, and all ofthe federal court cases             involvingsuicide allegations have been transferred to Judge Rodney Sippel inthe United States             DistrictCourt for the Eastern District of Missouri. The final venue of thebirth defect cases has             notbeen determined. While litigation is inherently subject touncertainty and accordingly we             cannotpredict or determine the outcome of the lawsuits, we believe theclaims lack merit. We             currentlymaintain $140 million of product liability coverage per"occurrence" and in the             aggregate.

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, 2008, except thatthe risk factor              captioned*Our Business, and in Particular the Treatment of CNS Disorders,Presents Risk of*              *Product Liability Claims* is hereby revised to read asfollows:

              Asmore fully discussed in "Item 1. Legal Proceedings", we area party to various legal              actionsasserting product liability claims relating to the use of Celexa orLexapro. These              casesinclude claims for wrongful death from suicide, injury from suicideattempts while              usingCelexa or Lexapro. We believe that suicide and related events areinherent in the              symptomsand consequences of major depressive disorder and therefore thesetypes of              occurrencesare not unexpected from patients who are being treated for suchcondition,              includingpatients who may be using our products. In addition, some of theactions              allegethat Celexa or Lexapro cause or contribute to birth defects. Whilewe believe              thereis no merit to the cases which have been brought against us,litigation is inherently              subjectto uncertainties and there can be no assurance that we will not berequired to              expendsubstantial amounts in the defense or resolution of some of thesematters.

 

 

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             August7, 2008, 9.2 million shares were available for repurchase under the2007             RepurchaseProgram.

             Thefollowing table summarizes the repurchase of common stock under the2007 Repurchase             Programduring the quarter ended June 30, 2008.

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**Period**

**Totalnumber ofsharespurchased(1)**

**Averageprice paidper share**

**Total number ofshares purchased aspart of publiclyannounced plans orprograms**

**Maximumnumber ofshares that mayyet be purchasedunder theprogram**
 
4/1/08through4/30/08

      3,087,000

        $35.05

              3,087,000

       12,723,200
 
5/1/08through5/31/08

      3,566,800

        $34.48

              3,566,800

          9,156,400
 
6/1/08through6/30/08

               -     

               -     

                        -     

                   -     

 (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: August 8, 2008

> 
Forest Laboratories, Inc.(Registrant)

/s/ HowardSolomon       Howard SolomonChief Executive Officer

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