Forest Seeds a Growth Plan

Meanwhile, the payoff from experimental compounds "is simply too far away to help," he says. Given the pressure on Lexapro and uncertainty over R&D, "the obvious strategic question [is] who will Forest buy and how much will it overpay?" Forman doesn't own shares. His firm is a market maker.

Another bearish view comes from Andrew Swanson of Citigroup, who also has a sell rating. "We continue to believe Forest's pipeline does not justify current valuation, while a hyper-competitive licensing environment limits Forest's ability to reasonably acquire new products," Swanson wrote in a late April report to clients.

The deluge of generic antidepressants, plus "limited market growth" in this category, "could certainly put the company's earnings at risk," said Swanson, who doesn't own shares and whose firm is a market maker.

A more favorable view of Forest, which has achieved success by licensing other companies' products, comes from Lehman Brothers' Richard Silver. A "strong near- [and] medium-[term] growth outlook remains very much intact," thanks to Lexapro and Namenda and to the blood-pressure drug Benicar, says Silver, who has an overweight rating on the stock. "Long-term earnings diversification remains a critical requirement over time."

Silver says Lexapro's outlook "remains strong," and he notes that Forest hasn't seen "any substantial changes" in Lexapro's status among major managed care companies in light of generic competition. He doesn't own shares, but Lehman says it does and seeks to do business with companies mentioned in research reports.