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Forest Laboratories, Inc. (NYSE: FRX) today announced a series of significant strategic actions to streamline operations and reduce costs, leverage the Company’s balance sheet by issuing new debt, and return cash to shareholders through a new share repurchase authorization and an accelerated share repurchase program.
“After an extensive review of Forest’s operations and strategy, we are taking significant actions to make the Company more competitive, enable future growth through acquisitions and return cash to shareholders,” said Brent Saunders, Chief Executive Officer and President. “With our portfolio of new products, talented people and a long history of successful partnerships, we believe we are well positioned for a bright future if we take actions quickly and execute well. Furthermore, we believe the actions we are announcing today put us on a path towards rejuvenating the Company. Our objective is to drive long-term sustainable growth by focusing on the things we do very well and increasing our relevance to our stakeholders, including customers, colleagues, investors and partners,” added Saunders.
In order to streamline operations and reduce its operating cost base, the Company has initiated Project Rejuvenate, which is focused on three areas: flattening and broadening the organization to reduce layers and increase span of control, enhancing productivity and profitability by reprioritizing and rescaling the cost base, and streamlining work to reduce low value activities. The goals of Project Rejuvenate are to make Forest more nimble in responding to a changing environment and to reduce operating expenses by $500 million by the end of FY2016 relative to the FY2014 cost base.
The Company expects to achieve 65%-75% of the cost savings from Project Rejuvenate by the end of FY2015 and the remainder by the end of FY2016. Approximately $270 million of the savings will result from streamlining and realigning the research and development organization, approximately $150 million of the savings will be realized through a reduction of marketing expenses and the remaining $80 million in expected cost savings will come from a reduction in general, administrative and other expenses. The Company currently estimates that approximately $110 million of the $500 million in cost savings will be related to headcount savings. The sales force and colleagues with key responsibility for submission of important late-stage R&D programs are excluded from Project Rejuvenate.