Forest Wants Antibiotics Maker

Forest Laboratories(FRX) said Thursday it had offered $494 million for Cerexa, a privately held developer of antibiotics.

If successful, the cash bid for the Alameda, Calif.-based company would give Forest worldwide marketing rights, excluding Japan, for a pair of experimental injectable antibiotics and the option on a third product.

Cerexa's most advanced antibiotic is geared to stop drug-resistant bacteria. The drug is being developed as a treatment for pneumonia contracted outside hospitals or extended-care facilities and for complicated skin and skin structure infections.

Late-stage clinical trials will begin in the first quarter for the skin-infection indications and in the second quarter for pneumonia. Forest said it expects the drugs to reach the market in 2010 or 2011.

Forest, which specializes in licensing other companies' drugs, said it will sell the antibiotics in the U.S. via its own sales representatives but might try to license the products in foreign markets or acquire an overseas sales force.

Forest expects to close the deal in the fourth quarter of its fiscal year, which ends March 31. Afterward, Forest will take a charge of 96 cents a share. Excluding the charge, Forest continues to predict fiscal-year earnings per share of $2.60 to $2.65.

Investors initially reacted to the deal by driving Forest's stock down as low as $49.85, but by early afternoon it was trading at $51.14, off 16 cents.

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