Forest Seeds a Growth Plan

Uncertainty about R&D is one big reason why Steinberg is neutral on the stock. He doesn't own shares, and his firm says it expects to seek or receive investment-banking related compensation.

Steinberg is one of 20 analysts who are neutral, according to Thomson Financial. Nine analysts have buy recommendations and six have sell ratings.

The bulls say Forest is well-managed, has a strong balance sheet and is acting prudently to cope with the Lexapro and Namenda patents expiring. The bears say, even under the best circumstances, revenue from new drugs won't offset the impact of generic competition on the big-sellers.

Some analysts fret that even before Lexapro loses its patent protection, generic copies of other antidepressants will stunt sales growth. Andrew Forman, of WR Hambrecht, recently warned clients about the "generic termites" gnawing away at Lexapro's sales.

Managed care firms, Forman says in an April 25 research report, will continue to encourage doctors and patients to use cheap copies of former brand-name drugs at the expense of Lexapro and other patent-protected antidepressants.

Forman, who has a sell rating, doubts Lexapro can achieve the 9% to 10% sales growth forecast by management. Generics now account for 49% of total antidepressant prescriptions in the U.S., up from 31% just 12 months ago, says Forman, citing data from IMS Health.