NEW YORK (AP) -- Forest Laboratories says it plans to cut jobs as part of a plan to trim $500 million in costs over the next two years, and will buy back at least $400 million in company stock to boost shareholder returns.
The drugmaker also agreed to pay $240 million for the U.S. marketing rights to Saphris, a Merck & Co. drug used to treat schizophrenia and bipolar mania.
The moves come less than three months after former Bausch & Lomb leader Brenton Saunders replaced longtime CEO Howard Solomon at the helm of the drugmaker. Shares of Forest Laboratories Inc. rose $2.67, or over 5%, to $53.98 in morning trading.
The stock has been trading around six-year highs, and peaked at $54.13 earlier Monday -- its highest price since May 2007.
The New York company said most of the spending cuts will be made by the end of March 2016. Forest said $110 million in savings will come from job cuts, but did not say how many positions would be cut. It had 5,800 employees as of March 31. The company did say that it won't make cuts to staff responsible for filing for approval of important late-stage drugs.
Forest expects to save $270 million from streamlining its research and development operations, $150 million from cutting marketing expenses, and the remainder from reductions in general, administrative and other spending. Forest will buy back $400 million in stock by the end of 2013, funded in part from the sale of $1 billion in debt due in 2021. The company could spend the remaining $600 million on share repurchases, but it said it will place a priority on merger, acquisition and licensing deals that will add to its profits.
Forest will pay Merck $240 million to get the U.S. rights to Saphris, and it could make additional payments if the drug reaches sales targets. Saphris was launched in 2009, and Forest said sales totaled $150 million over the 12 month-period that ended in September. It expects the deal to close in early 2014 and said it should add to its profit immediately.
