Forest Laboratories ( FRX) produced such a strong third quarter that the New York drugmaker was compelled to raise its guidance for the fiscal year ending March 31.

Forest said Tuesday that it earned $250.3 million, or 78 cents a share, for the three months ended Dec. 31. The results included a $10.2 million charge for stock-option expenses and a $20 million product-milestone payment.

Analysts polled by Thomson First Call had forecast 66 cents a share. For the same period last year, Forest earned $195.2 million, or 57 cents a share. Third-quarter revenue of $893 million topped the corresponding period's sales by 18%.

The company boosted its full-year EPS guidance to a range of $2.79 to $2.84 from the previous forecast of $2.60 to $2.65, the third higher earnings revision since July. The new guidance excludes the one-time charge related to the recent acquisition of Cerexa, a developer of anti-infective drugs. Forest paid $494 million and will take a charge of $1.54 during its fourth quarter.

Despite the positive news, shares of Forest behaved erratically, rising in early-morning trading, then falling on heavier-than-average volume. By early afternoon, the stock was down 79 cents, or 1.5%, to $52.98.

As usual, Forest was led by the antidepressant Lexapro, whose third-quarter sales of $545.9 million advanced 13.6% from last year. Sales of Namenda, for treating Alzheimer's disease, climbed to $173.9 million from $124 million during the year-ago quarter.

Lawrence Olanoff, the president and chief operating officer, told analysts during a telephone conference call that Forest should file an application with the Food and Drug Administration by late March or early April for the blood-pressure drug nebivolol. The drug received conditional approval from the FDA in May 2005. Olanoff said he expects the FDA to take six months to review the application.

Twelve months ago, Forest licensed nebivolol from Mylan Laboratories ( MYL), which had itself licensed the U.S. and Canadian marketing rights from Johnson & Johnson ( JNJ).

Although some analysts say nebivolol has greater revenue potential as a treatment for congestive heart failure, Olanoff said Forest will likely wait until the FDA acts on the blood-pressure application. Forest continues to collect data on congestive heart failure based on research conducted by an Italian drugmaker.

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