10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

___________________

FORM 10-K

(Mark one)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended March 31, 2004

[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period From _____ to _____

Commission File No. 1-5438

FOREST LABORATORIES, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	11-1798614 (I.R.S. Employer Identification Number)
909 Third Avenue New York, New York (Address of principal executive offices)	10022 (Zip code)

(212) 421-7850
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the act:

Title of each class	Name of each exchange on which registered
Common Stock, $.10 par value Rights, as adjusted, to purchase one eighth of one-hundredth share of Series A Junior Participating Preferred Stock, par value $1.00 per share	New York Stock Exchange New York Stock Exchange

Securities registered pursuant to Section 12(g) of the act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes   X     No       .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant's knowledge, in the Proxy Statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      .

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes   X     No        .

The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2003 was $18,393,051,894.

Number of shares outstanding of the registrant's Common Stock as of June 10, 2004: 369,850,601.

The following documents are incorporated by reference herein:

Portions of the definitive proxy statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 in connection with the 2004 Annual Meeting of Stockholders of registrant.

Portions of the registrant's Annual Report to Stockholders for the fiscal year ended March 31, 2004.

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TABLE OF CONTENTS
(Quick Links)

            ITEM 1. BUSINESS            ITEM 2. PROPERTIES            ITEM 3. LEGAL PROCEEDINGS

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESAND REPORTS ON FORM 8-K

S-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTSS-2 VALUATION AND QUALIFYING ACCOUNTS

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTSBALANCE SHEETSSTATEMENTS OF INCOMESTATEMENTS OF COMPREHENSIVE INCOMESTATEMENTS OF STOCKHOLDERS' EQUITYSTATEMENTS OF CASH FLOWNOTES TO FINANCIAL STATEMENTS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

EXHIBIT 10.16EXHIBIT 13EXHIBIT 21EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I

ITEM 1.  BUSINESS

General

                  Forest Laboratories, Inc. and its subsidiaries (collectively, "Forest" or the "Company") develop, manufacture and sell ethical drug products which require a physician's prescription, as well as non-prescription pharmaceutical products sold over-the-counter. Forest's most important United States products consist of branded ethical drug specialties marketed directly, or "detailed," to physicians by the Company's Forest Pharmaceuticals, Forest Therapeutics, Forest Healthcare, Forest Ethicare and Forest Specialty Sales salesforces. The Company emphasizes detailing to physicians of those branded ethical drugs it believes have the most potential for growth, and the development and introduction of new products, including products developed in collaboration with licensing partners.

                  Forest's products include those developed by Forest and those acquired from other pharmaceutical companies and integrated into Forest's marketing and distribution systems. See "Recent Developments."

                  Forest is a Delaware corporation organized in 1956. Forest's principal executive offices are located at 909 Third Avenue, New York, New York 10022 (telephone number 212-421-7850) and its corporate website address is http://www.frx.com. Forest makes its electronic filings with the Securities and Exchange Commission ("SEC"), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports available on the corporate website free of charge as soon as practicable after filing with or furnishing to the SEC.

Recent Developments

                  Namenda™: In October 2003, Namenda (memantine HCl) was approved for marketing and distribution by the United States Food and Drug Administration ("FDA") for the treatment of moderate to severe Alzheimer's disease. Initial stocking of Namenda began in December 2003 and the Company's salesforce began promotion of the product in March 2004. Sales of Namenda to March 31, 2004 were $45,472,000. Namenda is a moderate-affinity, uncompetitive NMDA receptor antagonist that modulates the effects of glutamate - a neurotransmitter found in the brain. Excessive levels of glutamate are hypothesized to contribute to the dysfunction and eventual death of brain cells observed in Alzheimer's disease. Forest believes that Namenda's mechanism of action is distinct from drugs currently available to treat Alzheimer's disease. Forest obtained the exclusive rights to develop and market memantine in t he United States by license agreement with Merz Pharma GmbH of Germany ("Merz"), the originator of the product.

                  During fiscal 2004, Forest announced the results of a six month placebo-controlled Phase III study of memantine in patients with mild to moderate Alzheimer's disease. In the study, patients who received memantine performed significantly better on both primary measures of cognition and global functioning than those given a placebo. Based on the results of this study, Forest expects to submit a supplemental NDA ("sNDA") to the FDA seeking approval for the mild to moderate Alzheimer's disease indication during the second half of calendar 2004.

                  In addition, Forest is conducting a Phase II program for the use of Namenda in neuropathic pain. While a 16 week Phase III clinical study for this indication completed during fiscal year 2004 failed to demonstrate statistical significance for the study's primary endpoints, an analysis of the study results demonstrated statistically significant weekly improvements in the assessments of nocturnal pain for the first 14 weeks. Based on the outcome of this Phase II program, Forest may choose to initiate additional Phase III trials required to submit an NDA for approval of Namenda for this indication.

                  Lexapro®: In September 2002, Forest launched Lexapro (escitalopram oxalate), a single isomer version of Forest's Celexa® (citalopram HBr) for the treatment of major depression, following approval of the product by the FDA in August 2002. Citalopram is a racemic mixture with two mirror image molecules, the S- and R-isomers. The S-isomer of citalopram is the active isomer in terms of its contribution to citalopram's antidepressant effects, while the R-isomer does not contribute to the antidepressant activity. With Lexapro, the R-isomer has been removed, leaving only the active S-isomer. Clinical trials demonstrate that Lexapro is a more potent selective serotonin reuptake inhibitor ("SSRI") than its parent compound, and confirm the antidepressant activity of Lexapro in all major clinical measures of depression. During fiscal 2004, sales of Lexapro were $1,088,957,000. According to data published by IMS, an independent prescription audit firm, as of May 21, 2004, Lexapro achieved a 16.7% share of total prescriptions for antidepressants in the SSRI/SNRI category.

                  In December 2003, Lexapro received FDA approval of its sNDA for the treatment of generalized anxiety disorder ("GAD"), a disorder characterized by excessive anxiety and worry about every day events or activities for a period of 6 months or more. The approval was based upon three GAD studies involving Lexapro which demonstrated significantly greater improvement in anxiety symptoms relative to placebo. Forest began marketing Lexapro for the treatment of GAD in January 2004. An additional sNDA to further expand the labeling for Lexapro to include an indication for the treatment of social phobia, was filed on May 25, 2004 .

                  Lexapro was developed by Forest and H. Lundbeck A/S, a Danish pharmaceutical firm which licenses the exclusive United States marketing rights to this compound, as well as Celexa, to Forest.

                  Celexa: Sales of Celexa, an SSRI for the treatment of depression, were $1,087,281,000 for the fiscal year ended March 31, 2004. Forest continues to sell Celexa, but discontinued the active promotion of the product at the time Lexapro was launched. According to data published by IMS, an independent prescription audit firm, as of May 21, 2004 Celexa declined from a peak share of 17.5% achieved in August 2002, to an 8.7% share of total prescriptions for antidepressants in the SSRI/SNRI category.

                  Forest believes that one or more applications by generic distributors to introduce generic forms of Celexa are pending at the FDA, with possible approval during Forest's 2005 fiscal year. Forest expects to launch its own generic version of Celexa to compete with third party generic products when those products become available.

                  Neramexane: In July 2001, Forest entered into a license agreement with Merz for the development and marketing in the United States of neramexane. Neramexane, a patented novel NMDA receptor antagonist, is currently in Phase II clinical trials and is being tested for various CNS disorders.

                  Milnacipran: In January 2004, Forest entered into a license and collaboration agreement with Cypress Bioscience, Inc. for the development and marketing in the United States of milnacipran. Milnacipran is currently in Phase III development as a treatment of Fibromyalgia Syndrome ("FMS"). FMS is a frequent cause of chronic, widespread pain and is estimated to affect six to twelve million people in the United States. There are currently no products approved by the FDA for the treatment of this disorder. Pursuant to the collaboration agreement, Forest paid Cypress an upfront license fee and will pay Cypress milestone payments on the achievement of specific product development milestones, as well as running royalties based on net sales of the product following approval. Forest will be responsible for funding further development activities, which will be jointly managed by the two companies, and will have responsibility for sales and marketing activities, with Cypress having the option to perform up to 25% of physician details. The license agreement includes two patents covering the use of milnacipran for the treatment of FMS. In addition, Forest believes that, as a new chemical entity, milnacipran will qualify for five years of exclusivity under the Hatch-Waxman Act.

                  The current Phase III program is based on the results of a controlled randomized Phase II Study in 125 FMS patients. The Phase II Study demonstrated statistically significant improvements in multiple measures of clinical pain and secondary symptoms, including fatigue, mood and patient global status reports.

                  Subject to the successful completion of the Phase III program, Forest anticipates filing an NDA for milnacipran in fiscal 2008.

                  CCR1 Antagonists: In March, 2004, Forest entered into a license and collaboration agreement with ChemoCentryx, Inc., a privately held pharmaceutical development company, to develop and commercialize novel small-molecular therapeutics for autoimmune and inflammatory diseases, such as rheumatoid arthritis and multiple sclerosis. The collaboration focuses on CCR1, a specific chemokine receptor involved in the inflammation process. Under the terms of the arrangement, Forest paid ChemoCentryx an upfront payment and purchased shares of a class of ChemoCentryx preferred stock. Forest will provide funding for joint research for up to three years and will have exclusive worldwide marketing rights to CCR1 antagonists developed during such research, subject to the payment of product development milestones and running royalties. Forest will be responsible for clinical development of compounds select ed during the research phase. The most advanced compound in the research program may be ready to enter Phase I clinical studies within the next 12 months.

                 Benicar® Co-Promotion with Sankyo Pharma: In December 2001, Forest entered into a co-promotion agreement with Sankyo Pharma ("Sankyo") for the co-promotion in the United States of Benicar (olmesartan medoxomil) an angiotensin receptor blocker discovered and developed by Sankyo for the treatment of hypertension. The NDA for Benicar was approved by the FDA in April 2002 and the product was commercially launched by the Sankyo and Forest salesforces in the United States in May 2002.

                 Pursuant to the co-promotion agreement with Sankyo, Forest and Sankyo will share in the detailing of the product to physicians, hospitals, managed care organizations and other institutional users of pharmaceutical products over a six-year period. Forest will receive co-promotion income once the product becomes profitable on a cumulative basis beginning with the product launch based upon the Company's agreed contribution to the overall co-promotion effort for the six-year period. Thereafter, the Company will receive a reduced share of the profits. The Company expects that the product will become cumulatively profitable during the first half of fiscal 2005.

                  In August 2003 Forest and Sankyo jointly launched Benicar HCT™, a combination of Benicar and hydrochlorothiazide, a diuretic, which received FDA approval in June 2003. Hypertension is increasingly treated with drugs with different and complementary modes of action and accordingly Forest believes that the inclusion of this combination product in the co-promotion arrangement will enhance overall sales of the Benicar products. According to data published by IMS, an independent prescription audit firm, as of May 21, 2004, Benicar achieved a 9.44% share of total prescriptions in the angiotensin receptor blocker ("ARB") market.

                  Lercanidipine: In November 2000, Forest entered into a license agreement with Recordati, S.p.A., a pharmaceutical company based in Milan, Italy, for the exclusive rights to develop and market lercanidipine in the United States for the treatment of hypertension. Lercanidipine, currently marketed in forty-two countries, belongs to the dihydropyridine calcium channel blocker class of antihypertensives, one of the most widely used classes of antihypertensives. Lercanidipine has been widely studied in clinical trials and was found to have an excellent safety profile and comparable blood pressure lowering effects to other drugs in this class.

                  Although Forest received an approvable letter from the FDA in August 2002, the FDA did not approve the once-daily dosing regimen as submitted and requested additional data. Subsequently, Forest has reformulated lercanidipine and has begun a clinical program to support the requested dosing regimen. Forest expects to be able to submit the additional data requested by the FDA during fiscal 2008.

                  Acamprosate: In October 2001, Forest entered into a distribution, marketing, trademark license and supply agreement with a subsidiary of Merck KGaA ("Merck") of Darmstadt, Germany, pursuant to which Forest licensed exclusive rights to market acamprosate in the United States for the treatment of alcohol dependence. Acamprosate, developed by Merck, has been marketed in most European countries for several years under the brand name "Campral®." Merck submitted the NDA for acamprosate to the FDA in December 2001.

                  During fiscal 2003 the FDA determined that the acamprosate NDA was not approvable at this time. Merck has submitted an amendment to the NDA and expects FDA action during the second half of calendar 2004.

                  Tiazac®: Tiazac, licensed from Biovail Corporation and launched in 1996, is Forest's once-daily formulation of diltiazem, used in the treatment of hypertension and angina. In April 2003, the FDA approved a generic formulation of this product distributed by a third party. Forest has also launched a generic version of this product under Forest's license arrangement with Biovail and has discontinued promotional activities with respect to the brand.

                  Combunox™: In October 2002, Forest received an approvable letter from the FDA with respect to Combunox, Forest's combination oxycodone/ibuprofen product being developed for the management of moderate to severe acute pain. The Company submitted its response to the approvable letter in May 2004, and expects an FDA action in response to the information submitted in the second half of fiscal 2005. Forest licenses the United States rights to this product from the British Technology Group.

                  Dexloxiglumide: During fiscal 2004, Forest discontinued the development of dexloxiglumide for the treatment of constipation-predominant irritable bowel syndrome in the United States. The decision was based on the outcome of two placebo-controlled Phase III studies which failed to demonstrate statistically significant results on the studies' primary endpoint. Forest is continuing to evaluate dexloxiglumide, licensed from Rotta Research Laboratorium S.p.A. of Italy, the originator of the compound, for potential development in other gastrointestinal indications.

                  Forward Looking Statements: Except for the historical information contained herein, this report contains forward looking statements that involve a number of risks and uncertainties, including the difficulty of predicting FDA approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, the impact of legislative and regulatory developments on the manufacture and marketing of pharmaceutical products and the uncertainty and timing of the development and launch of new pharmaceutical products.

Principal Products

                  The Company actively promotes in the United States those of its branded products which the Company's management believes have the most potential for growth and which enable its salesforces to concentrate on groups of physicians who are high prescribers of its products. Such products include: Namenda, Forest's NMDA antagonist for the treatment of moderate to severe Alzheimer's disease; Lexapro, Forest's SSRI for the treatment of major depression; and Benicar, an angiotensin receptor blocker for the treatment of hypertension, which the Company co-promotes with Sankyo.

                  Sales of Lexapro, launched in September 2002, accounted for 41.1% of Forest's sales for the fiscal year ended March 31, 2004 and 11.1% of Forest's sales for the fiscal year ended March 31, 2003.

                  Sales of Celexa, launched in September 1998, accounted for 41.0% of Forest's sales for the fiscal year ended March 31, 2004 and 65.8% and 69.4%, respectively, of Forest's sales for the fiscal years ended March 31, 2003 and 2002.

                  Sales of Namenda, launched in March 2004, accounted for 1.7% of Forest's sales for the fiscal year ended March 31, 2004.

                  Sales of Tiazac, launched in 1996, accounted for 4.8%, 9.1% and 12.1% of sales for the fiscal years ended March 31, 2004, 2003 and 2002, respectively. See "Recent Developments - Tiazac."

                  Forest's generic line, marketed by the Company's Inwood Laboratories, Inc. subsidiary, includes generic equivalents to certain of the Company's branded products, as well as products using the Company's controlled release technology.

                  The Company's United Kingdom and Ireland subsidiaries sell both ethical products requiring a doctor's prescription and over-the-counter preparations. Their most important products include Sudocrem®, a topical preparation for the treatment of diaper rash; Colomycin®, an antibiotic used in the treatment of Cystic Fibrosis; Suscard® and Sustac®, sustained action nitroglycerin tablets in both buccal and oral form used in the treatment of angina pectoris; and Exorex™, used in the treatment of eczema and psoriasis.

Marketing

                  In the United States, Forest directly markets its products through its domestic salesforces, Forest Pharmaceuticals, Forest Therapeutics, Forest Healthcare, Forest Ethicare and Forest Specialty Sales, which detail products directly to physicians, pharmacies, hospitals, managed care and other healthcare organizations. During the 2004 fiscal year, the Company expanded its salesforce for the launch of the GAD indication of Lexapro and Namenda by 525 persons to approximately 2,825 persons. In the United Kingdom, the Company's Forest Laboratories U.K. subsidiary's salesforce, currently 40 persons, markets its products directly. Forest's products are sold elsewhere through independent distributors.

Competition

                  The pharmaceutical industry is highly competitive as to the sale of products, research for new or improved products and the development and application of competitive drug formulation and delivery technologies. There are numerous companies in the United States and abroad engaged in the manufacture and sale of both proprietary and generic drugs of the kind sold by Forest. Many of these companies have substantially greater financial resources than Forest. The Company also faces competition for the acquisition or licensing of new product opportunities from other companies. In addition, the marketing of pharmaceutical products is increasingly affected by the growing role of managed care organizations, including pharmaceutical benefit management companies, in the provision of health services. Such organizations negotiate with pharmaceutical manufacturers for highly competitive prices for phar maceutical products in equivalent therapeutic categories, including certain of the Company's principal promoted products. Failure to be included or to have a preferred position in a managed care organization's drug formulary could result in decreased prescriptions of a manufacturer's products.

Government Regulation

                  The pharmaceutical industry is subject to comprehensive government regulation which substantially increases the difficulty and cost incurred in obtaining the approval to market newly proposed drug products and maintaining the approval to market existing drugs. In the United States, products developed, manufactured or sold by Forest are subject to regulation by the FDA, principally under the Federal Food, Drug and Cosmetic Act, as well as by other federal and state agencies. The FDA regulates all aspects of the testing, manufacture, safety, labeling, storage, record keeping, advertising and promotion of new and old drugs, including the monitoring of compliance with good manufacturing practice regulations. Non-compliance with applicable requirements can result in fines and other sanctions, including the initiation of product seizures, injunction actions and criminal prosecutions based on pra ctices that violate statutory requirements. In addition, administrative remedies can involve voluntary recall of products as well as the withdrawal of approval of products in accordance with due process procedures. Similar regulations exist in most foreign countries in which Forest's products are manufactured or sold. In many foreign countries, such as the United Kingdom, reimbursement under national health insurance programs frequently require that manufacturers and sellers of pharmaceutical products obtain government approval of initial prices and increases if the ultimate consumer is to be eligible for reimbursement for the cost of such products.

                  During the past several years, the FDA, in accordance with its standard practice, has conducted a number of inspections of the Company's manufacturing facilities. Following these inspections, the FDA called the Company's attention to certain "Good Manufacturing Practices" compliance and record keeping deficiencies. Forest has responded to the FDA's comments and has modified procedures to comply with the requests made by the FDA.

                  The cost of human healthcare products continues to be a subject of investigation and action by governmental agencies, legislative bodies and private organizations in the United States and other countries. In the United States, most states have enacted generic substitution legislation requiring or permitting a dispensing pharmacist to substitute a different manufacturer's version of a drug for the one prescribed. Federal and state governments continue to press efforts to reduce costs of Medicare and Medicaid programs, including restrictions on amounts agencies will reimburse for the use of products. In addition, several states have adopted prescription drug benefit programs which supplement Medicaid programs and are seeking discounts or rebates from pharmaceutical manufacturers to subsidize such programs. Failure to provide such discounts or rebates may lead to restrictions upon the availa bility of a manufacturer's products in health programs, including Medicaid, run by such states. Under the Omnibus Budget Reconciliation Act of 1990 ("OBRA"), manufacturers must pay certain statutorily-prescribed rebates on Medicaid purchases for reimbursement of prescription drugs under state Medicaid plans. Federal Medicaid reimbursement for drug products of original NDA-holders is denied if less expensive generic versions are available from other manufacturers. In addition, the federal government follows a diagnosis related group ("DRG") payment system for certain institutional services provided under Medicare or Medicaid. The DRG system entitles a healthcare facility to a fixed reimbursement based on discharge diagnoses rather than actual costs incurred in patient treatment, thereby increasing the incentive for the facility to limit or control expenditures for many healthcare products.  Under the Prescription Drug User Fee Act of 1992, the FDA has imposed fees on various aspects of the appro val, manufacture and sale of prescription drugs.

                  In April 2003, the Federal Office of the Inspector General published guidance for pharmaceutical manufacturers with respect to compliance programs to assure manufacturer compliance with federal laws and programs relating to healthcare. The Company maintains a compliance program to assure compliance with applicable laws and regulations, as well as the standards of professional bodies governing interactions between pharmaceutical manufacturers and physicians, and believes it is in compliance with all material legal requirements and standards.

                  During fiscal 2004, the Medicare-Approved Prescription Drug Discount Card and Transitional Assistance Program was established pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Under the program, pharmaceutical benefit managers and health programs will offer discounted prices on prescription drugs to qualified Medicare recipients reflecting discounts negotiated with manufacturers. The failure of a manufacturer to offer discounts to these programs could result in reduced use of the manufacturer's products.

                  In March 2004, the FDA issued a public health advisory that requires companies that manufacture antidepressants, including the Company, to revise their products' labels to include detailed warnings about the potential for suicidal tendencies in patients who take the medications. FDA officials noted that studies have not established a link between suicidal tendencies and such antidepressants and the Company believes that its analysis of clinical data involving Lexapro and Celexa indicates no such link. There can be no assurance that labeling changes required by the latest or subsequent rule making will not have an adverse effect upon the marketing of the Company's antidepressant products.

                  The Company expects that competing healthcare reform proposals will continue to be introduced and debated. The adoption of any such proposal may entail new regulatory requirements and may affect the marketing of prescription drugs. The Company cannot predict the outcome or effect on the marketing of prescription drug products of the legislative and political process.

Principal Customers

                  For the years ended March 31, 2004, 2003 and 2002, McKesson Drug Corporation, Cardinal Health, Inc. and AmerisourceBergen Corporation accounted for 28%, 23% and 21%, 25%, 21% and 22%, and 23%, 19% and 23%, respectively, of the Company's net sales. No other customer accounted for 10% or more of Forest's net sales for those fiscal years.

Environmental Standards

                  Forest anticipates that the effects of compliance with federal, state and local laws and regulations relating to the discharge of materials into the environment will not have any material effect on capital expenditures, earnings or the competitive position of Forest.

Raw Materials

                  The principal raw materials used by Forest for its various products are purchased in the open market. Most of these materials are obtainable and available from several sources in the United States and elsewhere in the world, although the Company's most important products, including Namenda, Lexapro and Celexa, contain patented or other exclusively manufactured materials available to the Company only through its arrangements with its licensing partners. Forest has not experienced any significant shortages in supplies of such raw materials.

Product Liability Insurance

                  Forest currently maintains $150 million of product liability coverage per "occurrence" and in the aggregate. Although in the past there have been product liability claims asserted against Forest, none for which Forest has been found liable, there can be no assurance that all potential claims which may be asserted against Forest in the future would be covered by Forest's present insurance.

Research and Development

                  During the year ended March 31, 2004, Forest spent $246,461,000 for research and development, as compared to $204,883,000 and $157,794,000 in the fiscal years ended March 31, 2003 and 2002, respectively. Included in research and development expense are payments made pursuant to licensing agreements for new product opportunities where safety and efficacy have not yet been demonstrated and accordingly payments made in connection with acquiring the product rights are charged to research and development. Forest's research and development expenditures consist primarily of the conduct of preclinical and clinical studies required to obtain approval of new products, as well as clinical studies designed to further differentiate Forest's products from those of its competitors or to obtain additional labeling indications for its products.

Employees

                  At March 31, 2004, Forest had a total of 4,967 employees.

Patents and Trademarks

                  Forest owns or licenses certain U.S. and foreign patents on many of its branded products and products in development, including, but not limited to, Aerobid®, Aerospan®, Lexapro, Tiazac, Cervidil®, Monurol®, Combunox, Namenda, lercanidipine, dexloxiglumide, neramexane and other compounds under development pursuant to license arrangements (see "Recent Developments"), which patents expire through 2014. Celexa is no longer subject to patent protection and its exclusivity under the Hatch-Waxman Act expired in January 2004, at which time third parties became eligible to file for approval of generic equivalents. Lexapro is covered by a United States patent which expires in 2009 and should be subject to a patent term extension until 2012. See "Item 3. Legal Proceedings" for a description of certain challenges to the validity of Forest's Lexapro patent. Forest believes these pate nts and other rights are or may become of significant benefit to its business. Additionally, Forest owns and licenses certain U.S. patents, and has pending U.S. and foreign patent applications, relating to various aspects of its Synchron® technology and to other controlled release technology, which patents expire through 2008. Forest believes that these patents are useful in its business; however, there are numerous patents and unpatented technologies owned by others covering other controlled release processes.

                  Forest owns various trademarks and trade names which it believes are of significant benefit to its business.

Backlog -- Seasonality

                  Backlog of orders is not considered material to Forest's business prospects. Forest's business is not seasonal in nature.

ITEM 2.  PROPERTIES

                  Forest owns a 150,000 square foot building on 28 acres in Commack, New York. This facility is used for packaging, warehousing, administration and sales training. Forest is currently expanding this facility by 185,000 square feet to accommodate additional packaging and distribution requirements for current and future products and to further expand sales training. The Company anticipates completing this expansion in the second half of calendar 2004. Forest recently purchased a 105,000 square foot warehouse and administrative office facility in Hauppauge, New York, which it was previously leasing.

                  Forest owns additional buildings of 180,000, 100,000 and 20,000 square feet in Commack, New York and is developing these locations as a research and development complex. Both the 100,000 and 20,000 square foot facilities are operational, and the 180,000 square foot facility (on 11 acres) to be used for research and development and warehousing is expected to become operational in fiscal 2007. Forest also leases an additional 28,000 square foot facility in Hauppauge, New York, for offices and warehousing for its research and development group. Forest recently leased a portion of a hotel facility in Hauppauge, New York for the purpose of housing sales representatives during sales training.

                  Forest also owns five buildings and leases three buildings in and around Inwood, New York, containing a total of approximately 145,000 square feet. The buildings are used for manufacturing, research and development, warehousing and administration. In addition, Forest leases approximately 59,000 square feet in Farmingdale, New York for use as a clinical laboratory testing facility. Forest leases an additional 57,000 square foot facility in Commack, which is used for Forest's information technology departments.

                  Forest also leases approximately 166,000 square feet of office space in Jersey City, New Jersey, which is used by certain of its medical, scientific and regulatory personnel.

                  Forest Pharmaceuticals, Inc. ("FPI"), a wholly-owned subsidiary of the Company, owns two facilities in Cincinnati, Ohio aggregating approximately 140,000 square feet used for manufacturing. In St. Louis, Missouri, FPI owns a 330,000 square foot facility on 26 acres of land. This facility is being used for warehousing, distribution and administration. FPI recently purchased a 40,000 square foot facility near its current distribution center, which will be used as offices. In addition, FPI owns a 22,000 square foot manufacturing facility in St. Louis, Missouri.

                  Forest Laboratories UK owns an approximately 95,000 square foot complex in the London suburb of Bexley, England, which houses its plant and administrative and central marketing offices.

                  Forest's Tosara subsidiary owns a 33,000 square foot manufacturing and distribution facility located in an industrial park in Dublin, Ireland. Forest Ireland, a subsidiary of Forest, owns an approximately 130,000 square foot manufacturing and distribution facility located in Dublin, Ireland. The facility is currently used principally for the manufacture of and distribution to the United States of Celexa, Lexapro and Namenda tablets. Forest Ireland recently purchased a 90,000 square foot facility in Dublin which, once it is refurbished, will provide complete redundancy for the manufacture of Lexapro and Namenda and additional capacity for future products.

                  Forest presently leases approximately 120,000 square feet of executive office space at 909 Third Avenue, New York, New York. The lease expires in 2010, subject to a five-year renewal option.

                  Management believes that further purchases or leases of property are likely in order to meet the present and anticipated increases in Forest's overall operations.

                  Net rentals for leased space for the fiscal year ended March 31, 2004 aggregated approximately $14,790,000 and for the fiscal year ended March 31, 2003 aggregated approximately $11,752,000.

ITEM 3.  LEGAL PROCEEDINGS

                  The Company remains a defendant in actions filed in various federal district courts alleging certain violations of the federal anti-trust laws in the marketing of pharmaceutical products. In each case, the actions were filed against many pharmaceutical manufacturers and suppliers and allege price discrimination and conspiracy to fix prices in the sale of pharmaceutical products. The actions were brought by various pharmacies (both individually and, with respect to certain claims, as a class action) and seek injunctive relief and monetary damages. The Judicial Panel on Multi-District Litigation has ordered these actions coordinated (and, with respect to those actions brought as class actions, consolidated) in the Federal District Court for the Northern District of Illinois (Chicago) under the caption "In re Brand Name Prescription Drugs Antitrust Litigation."

                  On November 30, 1998, the defendants remaining in the consolidated federal class action (which proceeded to trial beginning in September 1998), including the Company, were granted a directed verdict by the trial court after the plaintiffs had concluded their case. In ruling in favor of the defendants, the trial Judge held that no reasonable jury could reach a verdict in favor of the plaintiffs and stated "the evidence of conspiracy is meager, and the evidence as to individual defendants paltry or non-existent." The Court of Appeals for the Seventh Circuit subsequently affirmed the granting of the directed verdict in the federal class case in favor of the Company.

                  Following the Seventh Circuit's affirmance of the directed verdict in favor of the Company, the Company has secured the voluntary dismissal of the conspiracy allegations contained in all of the federal cases brought by individual plaintiffs who elected to "opt-out" of the federal class action, which cases were included in the coordinated proceedings, as well as the dismissal of similar conspiracy and price discrimination claims pending in various state courts. The Company, together with other manufacturers, remains a defendant in many of the federal opt-out cases included in the coordinated proceedings to the extent of claims alleging price discrimination in violation of the Robinson-Patman Act. While no discovery or other significant proceedings have been taken to date in respect of such claims, there can be no assurance that the Company will not be required to actively defend such claims or to p ay substantial amounts to dispose of such claims.

                  On January 14, 2003, Forest Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company, was named as a defendant, together with 29 other manufacturers of pharmaceutical products, in an action brought in the United States District Court for the Eastern District of New York by the County of Suffolk, New York, as plaintiff. The action alleges that plaintiff County was overcharged for its share of Medicare and Medicaid drug reimbursement costs as a result of reporting by manufacturers of "Average Wholesale Prices" which did not correspond to actual provider costs of prescription drugs. The action includes counts under the Federal RICO and False Claims Acts, as well as claims arising under state statutes and common law. The action asserts substantially similar claims to other actions (none of which include the Company as a defendant) which have been brought in various Federal District and State C ourts by various plaintiffs against pharmaceutical manufacturers and which have been assigned to the United States District Court of the District of Massachusetts under the caption "In re Pharmaceutical Industry AWP Litigation" for coordinated treatment. The action brought by plaintiff has been transferred to the District of Massachusetts for coordination with these multi-district proceedings. Forest has filed a motion to dismiss which is currently under consideration by the Court. Identical actions naming the Company as a defendant have been filed by the Counties of Westchester and Rockland in New York State, which actions have been transferred to the United States District Court for the District of Massachusetts. These actions are being held in abeyance pending the outcome of Forest's motion to dismiss. The Company believes there is no merit to these actions.

                  The Company has received a subpoena from the Office of the Inspector General of the Federal Office of Personnel Management requesting documents related to Celexa, a prescription medication approved for the treatment of depression. The subpoena primarily requests documents related to the marketing of Celexa and educational and promotional programs with physicians. The Company believes that other makers of pharmaceutical products for the treatment of various CNS indications have received subpoenas from this office. The Office of Personnel Management is the Federal Government's human resources agency. The Company is cooperating in responding to the subpoena. No claim, litigation or assessment has been asserted in connection with the subpoena.

                  In September 2003, the Company, together with H. Lundbeck A/S, filed an action for patent infringement against Ivax Pharmaceuticals, Inc. in the United States District Court of the District of Delaware under the caption "Forest Pharmaceuticals, Inc., Forest Laboratories Ireland, Ltd. and H. Lundbeck A/S v. Ivax Pharmaceuticals, Inc." The action is based upon the filing by Ivax with the Food and Drug Administration of an Abbreviated New Drug Application (an "ANDA") for a generic equivalent to the Company's Lexapro brand escitalopram oxalate. The Ivax ANDA seeks approval to market the generic product prior to the expiration of the Company's Lexapro patent which the Company expects to extend until 2012. Ivax has denied that the manufacture or marketing of its generic product, if approved by the FDA, would infringe the Company's patent and has asserted a counterclaim to the effect that the Com pany's Lexapro patent is invalid.

                 On May 21, 2004, the Company, together with H. Lundbeck A/S, filed an action for patent infringement against Alphapharma Pty Ltd. in the United States District Court for the Southern District Court of New York under the caption "Forest Laboratories, Inc., Forest Laboratories Ireland, Ltd. and H. Lundbeck A/S v. Alphapharma Pty Ltd." The action is based upon the filing by Alphapharma with the Food and Drug Administration of an Abbreviated New Drug Application (an "ANDA") for a generic equivalent to the Company's Lexapro brand escitalopram oxalate. The Alphapharma ANDA seeks approval to market the generic product prior to the expiration of the Company's Lexapro patent which the Company expects to extend until 2012. Alphapharma has not yet filed its Answer to the Company's Complaint.

                 The Company believes its patent is valid and intends to vigorously prosecute these actions.

                 The Company is not subject to any other pending legal proceedings, other than ordinary routine claims incidental to its business.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE
                  OF SECURITY HOLDERS                            

                  Not Applicable.

PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON
                  EQUITY AND RELATED STOCKHOLDER
                  MATTERS                                                            

                  The information required by this item is incorporated by reference to page 44 of the Annual Report.

                   Forest has never paid cash dividends on its Common Stock and does not expect to pay such dividends in the foreseeable future. Management presently intends to retain all available funds for the development of its business and for use as working capital. Future dividend policy will depend upon Forest's earnings, capital requirements, financial condition and other relevant factors.

ITEM 6.    SELECTED FINANCIAL DATA

                   The information required by this item is incorporated by reference to page 22 of the Annual Report.

ITEM 7.    MANAGEMENT'S DISCUSSION AND
                   ANALYSIS OF FINANCIAL CONDITION
                   AND RESULTS OF OPERATIONS              

                   The information required by this item is incorporated by reference to pages 15 through 21 of the Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE
                   DISCLOSURES ABOUT MARKET RISK

                   The information required by this item is incorporated by reference to page 21 of the Annual Report.

ITEM 8.    FINANCIAL STATEMENTS AND
                   SUPPLEMENTARY DATA             

                   The information required by this item is incorporated by reference to pages 23 through 43 of the Annual Report.

ITEM 9.    CHANGES IN AND DISAGREEMENTS
                   WITH ACCOUNTANTS ON ACCOUNTING
                   AND FINANCIAL DISCLOSURE                   

                   Not Applicable.

ITEM 9A.  CONTROLS AND PROCEDURES

                   As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company's internal control over financial reporting during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART III

                    In accordance with General Instruction G(3), and except for certain of the information called for by Items 10 and 12 which is set forth below, the information called for by Items 10 through 13 of Part III is incorporated by reference from Forest's definitive proxy statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 in connection with Forest's 2004 Annual Meeting of Stockholders.

ITEM 10.   DIRECTORS AND OFFICERS OF THE REGISTRANT

                    The Company has adopted a written code of conduct and ethics that applies to Forest's Chief Executive Officer, Chief Financial Officer and all of Forest's officers and employees and can be found on the Company's website, which is located at www.frx.com. Forest intends to make all required disclosures concerning any amendments to, or waivers from, the code of conduct and ethics on the Company's website.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                    MANAGEMENT AND RELATED STOCKHOLDER MATTERS            

                    The following sets forth certain information as of March 31, 2004 with respect to compensation plans of the Company under which securities of the Company may be issued:

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)
Equity compensation plans approved by security holders	27,305,423	$28.54	5,723,034
Equity compensation plans not approved by security holders	- -0-	N/A	- -0-
Total	27,305,423	$28.54	5,723,034

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

                     The response to this item is incorporated by reference to the issuer's definitive proxy statement for the 2004 Annual Meeting of Stockholders.

PART IV

ITEM 15.				EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
	(a)		1.	Financial statements. The following consolidated financial statements of Forest Laboratories, Inc. and Subsidiaries included in the Annual Report are incorporated by reference herein in Item 8:
					Report of Independent Certified Public Accountants
					Consolidated balance sheets - March 31, 2004 and 2003
					Consolidated statements of income - years ended March 31, 2004, 2003 and 2002
					Consolidated statements of comprehensive income - years ended March 31, 2004, 2003 and 2002
					Consolidated statements of stockholders' equity - years ended March 31, 2004, 2003 and 2002
					Consolidated statements of cash flows - years ended March 31, 2004, 2003 and 2002
					Notes to consolidated financial statements
			2.	Financial statement schedules. The following consolidated financial statement schedules of Forest Laboratories, Inc. and Subsidiaries are included herein:
Report of Independent Certified Public Accountants							S-1
Schedule II						Valuation and Qualifying Accounts	S-2
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
	3.			Exhibits:
	(3)(a)			Articles of Incorporation of Forest, as amended. Incorporated by reference from the Current Report on Form 8-K dated March 9, 1981 filed by Forest, from Registration Statement on Form S-1 (Registration No. 2-97792) filed by Forest on May 16, 1985, from Forest's definitive proxy statement filed pursuant to Regulation 14A with respect to Forest's 1987, 1988 and 1993 Annual Meetings of Stockholders and from the Current Report on Form 8-K dated March 15, 1988.
	(3)(b)			By-laws of Forest. Incorporated by reference to Forest's Current Report on Form 8-K dated October 11, 1994.
	(10)			Material Contracts
		10.1		Benefit Continuation Agreement dated as of December 1, 1989 between Forest and Howard Solomon. Incorporated by reference to Forest's Annual Report on Form 10-K for the fiscal year ended March 31, 1990 (the "1990 l0-K").
		10.2		Benefit Continuation Agreement dated as of May 27, 1990 between Forest and Kenneth E. Goodman. Incorporated by reference to the 1990 10-K.
		10.3		Benefit Continuation Agreement dated as of April 1, 1995 between Forest and Phillip M. Satow. Incorporated by reference to Forest's Annual Report on Form 10-K for the fiscal year ended March 31, 1995 (the "1995 10-K").
		10.4		Employment Agreement dated as of September 30, 1994 by and between Forest and Howard Solomon. Incorporated by reference to 1995 10-K.
		10.5		Employment Agreement dated as of September 30, 1994 by and between Forest and Kenneth E. Goodman. Incorporated by reference to the 1995 10-K.
		10.6		Employment Agreement dated as of October 24, 1995 by and between Forest and Dr. Lawrence S. Olanoff. Incorporated by reference to Forest's Annual Report on Form 10-K for the fiscal year ended March 31, 1996 (the "1996 10-K").
		10.7		Employment Agreement dated June 24, 1998 between Forest and Elaine Hochberg. Incorporated by reference to Forest's Annual Report on Form 10-K for the fiscal year ended March 31, 1998 (the "1998 10-K").
		10.8		Employment Agreement dated June 21, 1999 between Forest and John E. Eggers. Incorporated by reference to Forest's Annual Report on Form 10-K for the fiscal year ended March 31, 1999 (the "1999 10-K").
		10.9		Employment Agreement dated January 16, 1995 between Forest and Mary Prehn. Incorporated by reference to the 1998 10-K.
		10.10		Employment Agreement dated November 22, 2000 between Forest and Charles E. Triano. Incorporated by reference to Forest's Annual Report on Form 10-K for the fiscal year ended March 31, 2001.
		10.11		License Agreement dated September 11, 1995 between Biovail Corporation International and Forest. Incorporated by reference to Exhibit No. (C)(2) to Schedule 14D-1 of Forest dated September 18, 1995.
		10.12		License and Supply Agreement dated October 3, 1995 between Forest Laboratories (Ireland) Limited and H. Lundbeck A/S. Incorporated by reference to the 1999 10-K.
		10.13		Co-Promotion Agreement dated December 10, 2001 by and between Sankyo Pharma Inc. and Forest Laboratories, Inc. Incorporated by reference to Forest's Annual Report on form 10-K for the fiscal year ended March 31, 2002 (the "2002 10-K).
		10.14		S-Enantiomer License Agreement dated May 29, 2002 by and between Forest Laboratories (Ireland) Limited and H. Lundbeck A/S. Incorporated by reference to the 2002 10-K.
		10.15		S-Enantiomer Supply Agreement dated May 29, 2002 by and between Forest Laboratories (Ireland) Limited and H. Lundbeck A/S. Incorporated by reference to the 2002 10-K.
		10.16		License and Cooperation Agreement dated June 28, 2000 by and between Merz Pharma GmbH and Forest Laboratories Ireland Limited.
		13		Portions of the Registrant's 2004 Annual Report to Stockholders.
		21		List of Subsidiaries.
		23		Consent of BDO Seidman, LLP.
		31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b)				Reports on Form 8-K.
				On January 12, 2004, the registrant filed a Report on Form 8-K to report a press release announcing that earnings for the quarter ended December 31, 2003 were expected to exceed consensus estimates.
				On January 20, 2004, the registrant filed a Report on Form 8-K to report a press release announcing results of operations for the quarter ended December 31, 2003.

SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, Forest has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: June 14, 2004

FOREST LABORATORIES, INC.
By:   /s/Howard Solomon       
     Howard Solomon,
     Chairman of the Board,
     Chief Executive Officer
     and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Forest and in the capacities and on the dates indicated.

PRINCIPAL EXECUTIVE OFFICERS:
/s/ Howard Solomon           Howard Solomon	Chairman of the Board, Chief Executive Officer and Director	June 14, 2004
/s/ Kenneth E. Goodman           Kenneth E. Goodman	President, Chief Operating Officer and Director	June 14, 2004
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ John E. Eggers           John E. Eggers	Vice President - Finance and Chief Financial Officer	June 14, 2004
DIRECTORS:
/s/ William J. Candee, III           William J. Candee, III	Director	June 14, 2004
/s/ George S. Cohan           George S. Cohan	Director	June 14, 2004
/s/ Dan L. Goldwasser           Dan L. Goldwasser	Director	June 14, 2004
/s/ Lester B. Salans           Lester B. Salans	Director	June 14, 2004
/s/ Phillip M. Satow           Phillip M. Satow	Director	June 14, 2004

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Forest Laboratories, Inc.


The audits referred to in our report dated April 16, 2004 relating to the consolidated financial statements of Forest Laboratories Inc. and Subsidiaries, which is referred to in Item 8 of this Form 10-K, include the audit of the accompanying financial statement schedule. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits.

In our opinion, such financial statement schedule presents fairly, in all material respects, the information set forth therein.


 /s/ BDO Seidman, LLP 
BDO Seidman, LLP


New York, New York
April 16, 2004

S-1

				SCHEDULE II
FOREST LABORATORIES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
Column A	Column B	Column C	Column D		Column E
Description	Balance at beginning of period	Additions	Deductions		Balance at end of period
Year ended March 31, 2004:
Allowance for doubtful accounts	$16,925,000	$  4,246,000	$     409,000	(i)	$20,762,000
Allowance for cash discounts	16,040,000	84,826,000	85,812,000	(ii)	15,054,000
Inventory reserve	23,213,000	6,065,000	11,901,000	(i)	17,377,000
Year ended March 31, 2003:
Allowance for doubtful accounts	$13,641,000	$  4,415,000	$  1,131,000	(i)	$16,925,000
Allowance for cash discounts	13,466,000	66,734,000	64,160,000	(ii)	16,040,000
Inventory reserve	15,846,000	9,606,000	2,239,000	(i)	23,213,000
Year ended March 31, 2002:
Allowance for doubtful accounts	$11,123,000	$  2,920,000	$     402,000	(i)	$13,641,000
Allowance for cash discounts	8,665,000	47,870,000	43,069,000	(ii)	13,466,000
Inventory reserve	12,949,000	7,110,000	4,213,000	(i)	15,846,000
(i)  Represents actual amounts written off.
(ii) Represents cash discounts given.

S-2

FOREST LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 31, 2004, 2003 AND 2002

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Forest Laboratories, Inc.
New York, New York

We have audited the accompanying consolidated balance sheets of Forest Laboratories, Inc. and Subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Forest Laboratories, Inc. and Subsidiaries as of March 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

 /s/ BDO Seidman, LLP 
BDO Seidman, LLP

New York, New York
April 16, 2004

FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)

	MARCH 31,
	2004	2003
Assets
Current assets:
Cash (including cash equivalent investments of         $1,724,942 in 2004 and $1,263,156 in 2003)	$1,726,558	$1,265,508
Marketable securities	66,064	176,338
Accounts receivable, less allowance for doubtful         accounts of $20,762 in 2004 and $16,925 in 2003	287,618	192,067
Inventories, net	610,182	452,886
Deferred income taxes	205,071	156,957
Other current assets	20,741	11,577
Total current assets	2,916,234	2,255,333
Marketable securities	337,890	114,639
Property, plant and equipment:
Land and buildings	253,922	174,725
Machinery, equipment and other	150,160	130,093
	404,082	304,818
Less accumulated depreciation	106,125	86,820
	297,957	217,998
Other assets:
Goodwill	14,965	14,965
License agreements, product rights and other
intangibles, net	274,835	279,171
Deferred income taxes	16,387	17,627
Other	4,468	18,374
	310,655	330,137
	$3,862,736	$2,918,107
	========	========

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for par values)

	MARCH 31,
	2004	2003
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$   159,798	$   151,719
Accrued expenses	321,564	245,240
Income taxes payable	123,392	167,438
Total current liabilities	604,754	564,397
Deferred income taxes	2,118	1,892
Commitments and contingencies
Stockholders' equity:
Series A junior participating preferred stock,         $1.00 par; shares authorized 1,000;         no shares issued or outstanding
Common stock $.10 par; shares authorized         500,000; issued 405,144 shares in 2004 and         399,011 shares in 2003	40,514	39,901
Additional paid-in capital	846,297	687,905
Retained earnings	2,655,934	1,920,060
Accumulated other comprehensive income (loss)	10,324	(         3,429)
Treasury stock, at cost         (35,617 shares in 2004 and 35,539 shares in 2003)	(     297,205)	(     292,619)
	3,255,864	2,351,818
	$3,862,736	$2,918,107
	========	========

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

	YEARS ENDED MARCH 31,
	2004	2003	2002
Net sales	$2,650,432	$2,206,706	$1,566,626
Other income	29,842	39,100	35,198
	2,680,274	2,245,806	1,601,824
Costs and expenses:
Cost of sales	608,474	504,922	371,061
Selling, general and administrative	888,517	715,432	602,791
Research and development	246,461	204,883	157,794
	1,743,452	1,425,237	1,131,646
Income before income tax expense	936,822	820,569	470,178
Income tax expense	200,948	198,581	132,224
Net income	$   735,874	$   621,988	$   337,954
	========	========	========
Net income per common and common
equivalent share:
Basic	$2.01	$1.72	$0.95
	====	====	====
Diluted	$1.95	$1.66	$0.91
	====	====	====
Weighted average number of common
and common equivalent shares outstanding:
Basic	365,447	360,874	355,390
	======	======	======
Diluted	376,779	373,702	370,484
	======	======	======

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

	YEARS ENDED MARCH 31,
	2004	2003	2002
Net income	$735,874	$621,988	$337,954
Other comprehensive income (loss), net of tax:
Foreign currency translation gains (losses)	14,339	17,169	(         424)
Unrealized gains (losses) on securities:
Unrealized holding gain (loss) arising
during the period	(         586)	2,692	(      3,293)
Other comprehensive income (loss)	13,753	19,861	(      3,717)
Comprehensive income	$749,627	$641,849	$334,237
	=======	=======	=======

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 2004, 2003 AND 2002

(In thousands)

	Common stock		Additional paid-in	Retained	Accumulated    other           comprehensive	Treasury stock
	Shares	Amount	capital	earnings	income (loss)	Shares	Amount
Balance, March 31, 2001	388,653	$38,865	$528,989	$   960,118	($19,573)	35,451	$286,285
Shares issued upon exercise of stock
options	5,356	536	34,216
Treasury stock acquired from employees
upon exercise of stock options						46	3,557
Tax benefit related to stock options
exercised by employees			37,543
Other comprehensive loss					(    3,717)
Net income				337,954
Balance, March 31, 2002	394,009	39,401	600,748	1,298,072	(  23,290)	35,497	289,842
Shares issued upon exercise of stock
options	5,002	500	42,172
Treasury stock acquired from employees
upon exercise of stock options						42	2,777
Tax benefit related to stock options
exercised by employees			44,985
Other comprehensive income					19,861
Net income				621,988
Balance, March 31, 2003	399,011	39,901	687,905	1,920,060	(    3,429)	35,539	292,619
Shares issued upon exercise of stock
options	6,133	613	72,333
Treasury stock acquired from employees
upon exercise of stock options						78	4,586
Tax benefit related to stock options
exercised by employees			86,059
Other comprehensive income					13,753
Net income				735,874
Balance, March 31, 2004	405,144	$40,514	$846,297	$2,655,934	$10,324	35,617	$297,205
	======	======	=======	========	======	=====	=======

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	YEARS ENDED MARCH 31,
	2004	2003	2002
Cash flows from operating activities:
Net income	$   735,874	$   621,988	$337,954
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation	22,191	21,119	14,320
Amortization, impairments and write-offs	37,367	30,442	40,308
Deferred income tax benefit	(       10,880)	(       75,338)	(    21,534)
Foreign currency translation loss (gain)	1,023	147	(         667)
Tax benefit realized from the exercise
of stock options by employees	50,291	52,889	28,188
Net change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net	(       95,551)	(       75,777)	(         699)
Inventories, net	(     157,296)	(     104,671)	(    84,258)
Refundable income taxes		12,733	12,291
Other current assets	(         9,164)	4,066	(      5,696)
Increase (decrease) in:
Accounts payable	8,079	72,323	37,475
Accrued expenses	76,324	80,990	25,112
Income taxes payable	(       44,046)	86,116	38,763
Decrease in other assets	13,906	1,358	4,927
Net cash provided by operating activities	628,118	728,385	426,484
Cash flows from investing activities:
Purchase of property, plant and equipment, net	(     101,511)	(       79,574)	(    36,446)
Purchase of marketable securities	(     862,268)	(     741,015)	(  680,467)
Redemption of marketable securities	749,291	883,045	373,635
Purchase of license agreements, product
rights and other intangibles	(       32,759)	(       43,960)	(    31,045)
Net cash provided by (used in)
investing activities	(     247,247)	18,496	(  374,323)
Cash flows from financing activities:
Net proceeds from common stock options
exercised by employees under stock option plans	68,360	39,895	31,195
Effect of exchange rate changes on cash	11,819	18,871	(      3,044)
Increase in cash and cash equivalents	461,050	805,647	80,312
Cash and cash equivalents, beginning of year	1,265,508	459,861	379,549
Cash and cash equivalents, end of year	$1,726,558	$1,265,508	$459,861
	========	========	=======

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	YEARS ENDED MARCH 31,
	2004	2003	2002
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Income taxes	$205,506	$122,531	$74,977
	=======	=======	======

See accompanying notes to consolidated financial statements.

FOREST LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of significant accounting policies:

Basis of consolidation: The consolidated financial statements include the accounts of Forest Laboratories, Inc. (the "Company") and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated.

Foreign currency translation: An Irish subsidiary of the Company reports its financial position and results of operations in the reporting currency of the Company. The financial position and results of operations of the Company's other foreign subsidiaries, which in the aggregate are immaterial, are determined using the respective local currency.

Cash equivalents: Cash equivalents consist of short-term, highly liquid investments (primarily municipal bonds with interest rates that are re-set monthly) which are readily convertible into cash at par value (cost).

Inventories: Inventories are stated at the lower of cost or market, with cost determined on the first-in, first-out basis.

Marketable securities: Marketable securities, which are all accounted for as available-for-sale, are stated at fair value in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," and consist of investments in municipal bonds maturing through 2006.

Accounts receivable and credit policies: The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management's best estimate of the amounts that will not be collected. In addition to reviewing delinquent accounts receivable, management considers many factors in estimating its general allowance, including historical data, experience, customer types, credit worthiness and economic trends. From time to time, management may adjust its assumptions for anticipated changes in any of those or other factors expected to affect collectability.

Property, plant and equipment and depreciation: Property, plant and equipment are stated at cost. Depreciation is provided primarily by the straight-line method over the following estimated useful lives:

	Years
Buildings and improvements	10-40
Machinery, equipment and other	3-10

Leasehold improvements are amortized over the lesser of the useful life of the assets or the lease term.

Goodwill and other intangible assets: In accordance with Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations," and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests. Goodwill impairment tests require the comparison of the fair value and carrying value of reporting units. Measuring fair value of a reporting unit is generally based on valuation techniques using multiples of sales or earnings, unless supportable information is available for using a present value technique, such as estimates of future cash flows. The Company assesses the potential impairment of goodwill annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Revenue recognition: Revenues are recorded in the period the merchandise is shipped. Provisions for estimated sales allowances, returns, rebates and other pricing adjustments are accrued at the time revenues are recognized as a direct reduction of such revenue. The accruals are estimated based on available information regarding the portion of sales on which rebates and discounts can be earned, adjusted as appropriate for specific known events, and the prevailing contractual discount rates. Provisions are reflected either as a direct reduction to accounts receivable or, to the extent that they are due to entities other than customers, as accrued expense. Adjustments to estimates, which have not been material, are recorded when customer credits are issued or payments made to third parties.

Shipping and handling costs: Presently, the Company does not charge its customers for any freight costs. The amounts of such costs are included in selling, general and administrative expenses and are not material.

Research and development: Expenditures for research and development, including licensing fees of early-stage development products, are charged to expense as incurred.

Savings and profit sharing plan: Substantially all non-bargaining unit employees of the Company's domestic subsidiaries may participate in the savings and profit sharing plan after becoming eligible (as defined). Profit sharing contributions are primarily at the discretion of the Company. The savings plan contributions include a matching contribution made by the Company. Savings and profit sharing contributions amounted to approximately $19,500,000, $14,600,000 and $11,000,000 for fiscal years 2004, 2003 and 2002, respectively.

Earnings per share: Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the effect of common shares issuable upon exercise of stock options and warrants. The two-for-one stock split effected as a 100% stock dividend in December 2002 has been reflected retroactively for all outstanding common stock, stock options and warrants.

Accumulated other comprehensive income (loss): Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are excluded from net income as these amounts are recorded directly as an adjustment to stockholders' equity. Accumulated other comprehensive income (loss) is comprised of the cumulative effects of foreign currency translation and unrealized gains (losses) on securities which amounted to approximately $10,782,000 and ($458,000) at March 31, 2004 and ($3,557,000) and $128,000 at March 31, 2003.

Income taxes: The Company accounts for income taxes using the liability method. Under the liability method, deferred income taxes are provided on the differences in bases of assets and liabilities between financial reporting and tax returns using enacted tax rates.

Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any adjustments when necessary.

Long-lived assets: Long-lived assets, such as intangible assets, property and equipment and certain sundry assets, are evaluated for impairment periodically or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets will be written down to fair value.

Stock-based compensation: The Company accounts for its stock option awards to employees under the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value based method, compensation cost is the excess, if any, of the quoted market price of the stock at grant date or other measurement date over the amount an employee must pay to acquire the stock. The Company makes pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied as required by Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation." The Company has never granted options below market price on the date of grant.

SFAS 123 requires the Company to provide pro forma information regarding net income and earnings per share as if compensation cost for the Company's stock option plans had been determined in accordance with the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants: dividend yield of zero for all three fiscal years; expected volatility of 29.23% in fiscal 2004, 31.29% in fiscal 2003 and 27.62% in fiscal 2002; risk-free interest rates of 4.5% in fiscal 2004, 4.3% in fiscal 2003 and 5.4% in fiscal 2002; and expected lives of 5 to 10 years for all three fiscal years.

Under the accounting provisions of SFAS 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:

Years ended March 31, (In thousands, except per share data)	2004	2003	2002
Net income:
As reported	$735,874	$621,988	$337,954
Deduct: Total stock-based employee compensation expense
determined under fair value method	(   39,021)	(   32,594)	(   65,659)
Pro forma	$696,853	$589,394	$272,295
	=======	=======	=======
Net income per common share:
Basic:
As reported	$2.01	$1.72	$0.95
Pro forma	$1.91	$1.63	$0.77
Diluted:
As reported	$1.95	$1.66	$0.91
Pro forma	$1.85	$1.58	$0.73

Fair value of financial instruments: The carrying amounts of cash, accounts receivable, accounts payable, accrued expenses and income taxes payable are reasonable estimates of their fair value because of the short maturity of these items.

Recent accounting standards:In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149 ("SFAS 149"), "Amendment of Statement 133 ("SFAS 133") on Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS 133. This statement is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. Presently, the company does not utilize any derivative instruments and only has minimal hedging activities.

2.  Earnings per share:

A reconciliation of shares used in calculating basic and diluted earnings per share follows:

Years ended March 31, (In thousands)	2004	2003	2002
Basic	365,447	360,874	355,390
Effect of assumed conversion
of employee stock options
and warrants	11,332	12,828	15,094
Diluted	376,779	373,702	370,484
	======	======	======

Options to purchase approximately 1,604,800, 3,110,600 and 4,591,600 shares of common stock at exercise prices ranging from $38.15 to $76.66 per share were outstanding during a portion of fiscal 2004, 2003 and 2002, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive. These options expire through 2014.

3.  Business operations:

The Company and its subsidiaries, which are located in the United States, Ireland and the United Kingdom, manufacture and market ethical and other pharmaceutical products. The Company operates in only one segment. Sales are made primarily in the United States and European markets. The net sales and long-lived assets for the years ended March 31, 2004, 2003 and 2002, are from the Company's or one of its subsidiaries' country of origin, as follows:

(In thousands)	2004		2003		2002
		Long-lived		Long-lived		Long-lived
	Net sales	assets	Net sales	assets	Net sales	assets
United States	$2,604,479	$446,499	$2,167,021	$420,760	$1,531,100	$347,026
Ireland	7,331	134,658	7,152	106,159	6,019	108,517
United Kingdom	38,622	11,068	32,533	3,589	29,507	3,507
	$2,650,432	$592,225	$2,206,706	$530,508	$1,566,626	$459,050
	========	=======	========	=======	========	=======

Net sales exclude sales between the Company and its subsidiaries.

For the years ended March 31, 2004, 2003 and 2002, McKesson Corporation, Cardinal Health, Inc. and AmerisourceBergen Corporation accounted for 28%, 23% and 21%, 25%, 21% and 22%, and 23%, 19% and 23%, respectively, of the Company's net sales.

The Company's antidepressant franchise consisting of Lexapro®, a selective serotonin reuptake inhibitor ("SSRI") for the treatment of depression, launched in September 2002 and Celexa®, an SSRI launched in September 1998, accounted for 82%, 77% and 69% of the Company's net sales for the years ended March 31, 2004, 2003 and 2002, respectively.

4.  Inventories:

Inventories, net of reserves for obsolescence, consist of the following:

March 31, (In thousands)	2004	2003
Raw materials	$359,075	$101,607
Work in process	40,982	38,190
Finished goods	210,125	313,089
	$610,182	$452,886
	=======	=======

5.  Marketable securities:

The debt security composition of the investment portfolio at March 31 was:

		Gross	Gross
		unrealized	unrealized	Market
(In thousands)	Cost	gains	losses	value
2004
Federal, state and local obligations	$404,412		($458)	$403,954
	=======		=====	=======
2003
Federal, state and local obligations	$290,849	$128		$290,977
	=======	====		=======

The contractual maturities of debt securities at March 31, 2004 consist of the following:

(In thousands)	Cost	Fair value
Less than one year	$  66,607	$  66,064
One to two years	337,805	337,890
	$404,412	$403,954
	=======	=======

The net unrealized holding loss of approximately $458,000 at March 31, 2004, as well as the net unrealized holding gain of approximately $128,000 at March 31, 2003 are included in Stockholders' equity: Accumulated other comprehensive income (loss).

6.  Intangible assets:

License agreements, product rights and other intangibles consist of the following:

(In thousands, except for amortization		March 31, 2004				March 31, 2003
periods which are stated in years)	Weighted average	Gross carrying	Accumulated				Gross carrying	Accumulated
	amortization period	amount	amortization	amount				amortization
Amortized intangible assets:
License agreements	14	$213,709	$  75,842		$193,709				$  64,200
Product rights	14	81,959	13,498		81,473				12,463
Buy-out of royalty agreements	9	95,061	48,744		95,061				39,612
Trade names	20	34,190	15,997		34,190				13,842
Non-compete agreements	9	22,987	22,875		22,987				22,064
Other	2	8,848	4,963		8,847				4,915
Total	11	$456,754	$181,919		$436,267				$157,096
		========	========		=======				=======

Amortization of license agreements, product rights and other intangibles for fiscal years ended March 2004, 2003 and 2002 amounted to approximately $37,367,000, $30,442,000 and $40,308,000, respectively. The annual amortization expense expected for fiscal years 2005 through 2009 is $29,866,000, $31,981,000, $32,090,034, $32,287,000 and $29,864,000, respectively.

During fiscal years 2004 and 2003, the Company determined that certain product rights were impaired due to a significant reduction in sales of those products because of heightened competition. These impairments amounted to $2,054,000 in fiscal 2004 and $5,000,000 in fiscal 2003, and are included in amortization expense. During fiscal 2004 the Company also announced that it had discontinued development of dexloxiglumide for irritable bowel syndrome ("IBS"), causing a write-off of the product right of $12,545,000 to research and development expense.

License agreements: During fiscal year 2004, the Company made a $20,000,000 milestone payment to Merz Pharma GmbH upon FDA approval of Namenda™ (memantine) for the treatment of moderate to severe Alzheimer's disease. The cost of this agreement is being amortized using the straight-line method over the estimated life of the product.

Product rights: In fiscal 2004 the Company made a milestone payment of $5,000,000 to Sankyo Pharma upon the launch of Benicar HCT™. In December 2001, the Company signed a marketing agreement with Sankyo Pharma to co-promote Benicar® for the treatment of hypertension. The Company will co-promote the product for a period of six years and receive a share of the product profits during that period, as defined. The Company will receive a reduced share of the product profits thereafter. Benicar was commercially launched in the first quarter of fiscal 2003, at which time the Company paid Sankyo $43,960,000. The costs incurred for Benicar are included in product rights and will be amortized in the future based on estimated revenues.

Marketing agreements: In January 2004, the Company entered into a marketing agreement with Cypress Bioscience, Inc. for the development and marketing of milnacipran in the United States. Milnacipran is currently being evaluated in a Phase III program for the treatment of Fibromyalgia Syndrome ("FMS"). The Company made an initial payment of $25,000,000 during the year which was recorded to research and development expense.

In March 2004, the Company entered into a collaboration agreement with ChemoCentryx, Inc. to develop and commercialize novel small molecule therapeutics for autoimmune and inflammatory diseases such as rheumatoid arthritis and multiple sclerosis. Under the terms of the agreement, Forest will license on a worldwide basis small molecule development candidates discovered by ChemoCentryx, and will take the lead in the clinical development and commercialization of the drugs. The Company made an initial payment of $10,000,000 during the year which was recorded to research and development expense.

7.   Accrued expenses:

Accrued expenses consist of the following:

March 31, (In thousands)	2004	2003
Employee compensation and other benefits	$  83,558	$  69,972
Managed care and Medicaid rebates	185,854	123,984
Clinical research and development costs	31,103	31,814
Other	21,049	19,470
	$321,564	$245,240
	=======	=======

8.  Commitments:

Leases: The Company leases manufacturing, office and warehouse facilities, equipment and automobiles under operating leases expiring through 2018. Rent expense approximated $32,212,000, $25,843,000 and $18,802,000 for fiscal years ended March 31, 2004, 2003 and 2002, respectively.

Future minimum rental payments under noncancellable leases are as follows:

Year ending March 31, (In thousands)
2005	$  29,886
2006	23,880
2007	18,940
2008	13,482
2009	13,580
Thereafter	68,450
	$168,218
	=======

Royalty agreements: The Company has royalty agreements on certain of its licensed products. Royalties are paid based on a percentage of sales, as defined. For fiscal years ended March 31, 2004, 2003 and 2002, royalties amounted to $10,406,000, $22,247,000 and $19,938,000, respectively.

License agreements: The Company has entered into several license agreements for products currently under development. The Company may be obligated in future periods to pay additional amounts subject to the achievement of certain product milestones, as defined.

9.  Stockholders' equity:

Preferred stock purchase rights: On September 30, 1994, the Company's Board of Directors declared a dividend of one preferred share purchase right ("Right") for each outstanding share of the Company's common stock, par value $.10 per share. Each Right will entitle the holder to buy one eighth of one-hundredth of a share of authorized Series A Junior Participating Preferred Stock, par value $1.00 per share ("Series A Preferred Stock") at an exercise price of $250 per Right, subject to adjustment. Prior to becoming exercisable, the Rights are evidenced by the certificates representing the common stock and may not be traded apart from the common stock. The Rights become exercisable on the tenth day after public announcements that a person or group has acquired, or obtained the right to acquire, 20% or more of the Company's outstanding common stock, or an announcement of a tender offer that would result in a beneficial ownership by a person or group of 20% or more of the Company's common stoc k.

If, after the Rights become exercisable, the Company is a party to certain merger or business combination transactions, or transfers 50% or more of its assets or earning power, or if an acquirer engages in certain self-dealing transactions, each Right (except for those held by the acquirer) will entitle its holder to buy a number of shares of the Company's Series A Preferred Stock or, in certain circumstances, a number of shares of the acquiring company's common stock, in either case having a value equal to two-and-one-half times the exercise price of the Right. The Rights may be redeemed by the Company at any time up to ten days after a person or group acquires 20% or more of the Company's common stock at a redemption price of $.001 per Right. The Rights will expire on September 30, 2004.

The Company has reserved 900,000 shares of Series A Preferred Stock for the exercise of the Rights.

Stock options: The Company has various Employee Stock Option Plans whereby options to purchase an aggregate of 52,000,000 shares of common stock have been or remain to be issued to employees of the Company and its subsidiaries at prices not less than the fair market value of the common stock at the date of grant. Both incentive and non-qualified options may be issued under the plans. The options are exercisable for five to ten years from the date of issuance.

The following table summarizes information about stock options outstanding at March 31, 2004:

	Options outstanding			Options exercisable
		Weighted average
Range of	Number	remaining	Weighted average	Number	Weighted average
exercise prices	outstanding	contractual life	exercise price	exercisable	exercise price
$ 4.55 to $30.00	12,240,895	3.2	$12.89	9,158,985	$11.23
30.01 to   50.00	13,011,852	5.4	38.98	6,430,506	37.03
50.01 to   76.66	1,921,220	6.8	59.13	19,155	53.23
	27,173,967	4.5	$28.65	15,608,646	$21.91

Transactions under the stock option plans are summarized as follows:

		Weighted average
	Shares	exercise price
Shares under option at March 31, 2001
(at $3.71 to $33.46 per share)	33,973,276	$13.44
Granted (at $31.43 to $41.49 per share)	4,884,100	38.48
Exercised (at $3.71 to $33.46 per share)	(  5,402,722)	6.44
Forfeited	(     782,920)	21.09
Shares under option at March 31, 2002
(at $3.71 to $41.49 per share)	32,671,734	18.18
Granted (at $35.86 to $53.23 per share)	4,516,200	44.78
Exercised (at $3.71 to $41.49 per share)	(  5,002,043)	8.44
Forfeited	(     662,539)	29.43
Shares under option at March 31, 2003
(at $3.75 to $53.23 per share)	31,523,352	23.33
Granted (at $43.30 to $76.66 per share)	2,503,550	54.65
Exercised (at $3.75 to $53.23 per share)	(  6,133,451)	11.61
Forfeited	(     719,484)	36.23
Shares under option at March 31, 2004
(at $4.55 to $76.66 per share)	27,173,967	$28.65
	========
Options exercisable at March 31:
2002	18,355,342	$14.27
2003	17,674,627	16.51
2004	15,608,646	21.91
Weighted average fair value
of options granted during:
2002		$15.32
2003		18.81
2004		20.89

At March 31, 2004, 5,723,034 shares were available for grant.

In connection with the acquisition of product rights in fiscal 1995, the Company issued 2,240,000 warrants, which expire on July 7, 2004, at an exercise price of $5.72 per share, which was equal to the then fair market value of the Company's common stock. As of March 31, 2004, 131,456 warrants remain outstanding.

10.  Contingencies:

The Company remains a defendant in actions filed in various federal district courts alleging certain violations of the federal anti-trust laws in the marketing of pharmaceutical products. In each case, the actions were filed against many pharmaceutical manufacturers and suppliers and allege price discrimination and conspiracy to fix prices in the sale of pharmaceutical products. The actions were brought by various pharmacies (both individually and, with respect to certain claims, as a class action) and seek injunctive relief and monetary damages. The Judicial Panel on Multi-District Litigation has ordered these actions coordinated (and, with respect to those actions brought as class actions, consolidated) in the Federal District Court for the Northern District of Illinois (Chicago) under the caption "In re Brand Name Prescription Drugs Antitrust Litigation."

On November 30, 1998, the defendants remaining in the consolidated federal class action (which proceeded to trial beginning in September 1998), including the Company, were granted a directed verdict by the trial court after the plaintiffs had concluded their case. In ruling in favor of the defendants, the trial Judge held that no reasonable jury could reach a verdict in favor of the plaintiffs and stated "the evidence of conspiracy is meager, and the evidence as to individual defendants paltry or non-existent." The Court of Appeals for the Seventh Circuit subsequently affirmed the granting of the directed verdict in the federal class case in favor of the Company.

Following the Seventh Circuit's affirmance of the directed verdict in favor of the Company, the Company has secured the voluntary dismissal of the conspiracy allegations contained in all of the federal cases brought by individual plaintiffs who elected to "opt-out" of the federal class action, which cases were included in the coordinated proceedings, as well as the dismissal of similar conspiracy and price discrimination claims pending in various state courts. The Company, together with other manufacturers, remains a defendant in many of the federal opt-out cases included in the coordinated proceedings to the extent of claims alleging price discrimination in violation of the Robinson-Patman Act. While no discovery or other significant proceedings have been taken to date in respect of such claims, there can be no assurance that the Company will not be required to actively defend such claims or to pay substantial amounts to dispose of such claims.

On January 14, 2003, Forest Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company, was named as a defendant, together with 29 other manufacturers of pharmaceutical products, in an action brought in the United States District Court for the Eastern District of New York by the County of Suffolk, New York, as plaintiff. The action alleges that plaintiff County was overcharged for its share of Medicare and Medicaid drug reimbursement costs as a result of reporting by manufacturers of "Average Wholesale Prices" which did not correspond to actual provider costs of prescription drugs. The action includes counts under the Federal RICO and False Claims Acts, as well as claims arising under state statutes and common law. The action asserts substantially similar claims to other actions (none of which include the Company as a defendant) which have been brought in various Federal District and State Courts by various plaintiffs against pharmaceutical manufacturers and which have been assigned to the United States District Court of the District of Massachusetts under the caption "In re Pharmaceutical Industry AWP Litigation" for coordinated treatment. The action brought by plaintiff has been transferred to the District of Massachusetts for coordination with these multi-district proceedings. Forest has filed a motion to dismiss which is currently under consideration by the Court. Identical actions naming the Company as a defendant have been filed by the Counties of Westchester and Rockland in New York State, which actions have been transferred to the United States District Court for the District of Massachusetts. These actions are being held in abeyance pending the outcome of Forest's motion to dismiss. The Company believes there is no merit to these actions.

The Company has received a subpoena from the Office of the Inspector General of the Federal Office of Personnel Management requesting documents related to Celexa, a prescription medication approved for the treatment of depression. The subpoena primarily requests documents related to the marketing of Celexa and educational and promotional programs with physicians. The Company believes that other makers of pharmaceutical products for the treatment of CNS indications have received subpoenas from this office. The Office of Personnel Management is the Federal Government's human resources agency. The Company is cooperating in responding to the subpoena. No claim, litigation or assessment has been asserted in connection with the subpoena.

In September 2003, the Company, together with H. Lundbeck A/S, filed an action for patent infringement against Ivax Pharmaceuticals, Inc. in the United States District Court of the District of Delaware under the caption "Forest Pharmaceuticals, Inc., Forest Laboratories Ireland, Ltd. and H. Lundbeck A/S v. Ivax Pharmaceuticals, Inc." The action is based upon the filing by Ivax with the Food and Drug Administration of an Abbreviated New Drug Application (an "ANDA") for a generic equivalent to the Company's Lexapro brand escitalopram oxalate. The Ivax ANDA seeks approval to market the generic product prior to the expiration of the Company's Lexapro patent which the Company expects to extend until 2012. Ivax has denied that the manufacture or marketing of its generic product, if approved by the FDA, would infringe the Company's patent and has asserted a counterclaim to the effect that the Company's Lexapro patent is invalid.

On May 21, 2004, the Company, together with H. Lundbeck A/S, filed an action for patent infringement against Alphapharma Pty Ltd. in the United States District Court for the Southern District Court of New York under the caption "Forest Laboratories, Inc., Forest Laboratories Ireland, Ltd. and H. Lundbeck A/S v. Alphapharma Pty Ltd." The action is based upon the filing by Alphapharma with the Food and Drug Administration of an Abbreviated New Drug Application (an "ANDA") for a generic equivalent to the Company's Lexapro brand escitalopram oxalate. The Alphapharma ANDA seeks approval to market the generic product prior to the expiration of the Company's Lexapro patent which the Company expects to extend until 2012. Alphapharma has not yet filed its Answer to the Company's Complaint.

The Company believes its patent is valid and intends to vigorously prosecute these actions.

The Company is not subject to any other pending legal proceedings, other than ordinary routine claims incidental to its business.

11.  Other income:

Other income consists of the following:

Years ended March 31, (In thousands)	2004	2003	2002
Interest and dividends	$23,824	$30,343	$27,464
Contract revenue	5,810	6,552	5,899
Other income	208	2,205	1,835
	$29,842	$39,100	$35,198
	======	======	======

12.  Income taxes:

The Company and its U.S. subsidiaries file a consolidated federal income tax return.

The components of income before income tax expense were:

Years ended March 31, (In thousands)	2004	2003	2002
U.S.	$460,897	$373,832	$347,518
Non-U.S.	475,925	446,737	122,660
Income before income tax expense	$936,822	$820,569	$470,178
	=======	=======	=======

The provision for income taxes consists of the following:

Years ended March 31, (In thousands)	2004	2003	2002
Current:
U.S. federal	$107,155	$118,293	$101,393
State and local	11,267	10,683	10,000
Foreign	43,115	92,054	14,177
	161,537	221,030	125,570
Deferred:
Domestic	(    15,543)	(    40,102)	(   22,152)
Foreign	4,663	(    35,236)	618
	(    10,880)	(    75,338)	(   21,534)
Charge in lieu of income taxes,
relating to the tax effect of
stock option tax deduction	50,291	52,889	28,188
	$200,948	$198,581	$132,224
	=======	=======	=======

No provision has been made for income taxes on substantially all of the undistributed earnings of the Company's foreign subsidiaries of approximately $1,562,000,000 at March 31, 2004 as the Company intends to indefinitely reinvest such earnings.

The reasons for the difference between the provision for income taxes and expected federal income taxes at statutory rates are as follows:

Years ended March 31, (percentage of income before income tax expense)	2004	2003	2002
U.S. statutory rate	35.0%	35.0%	35.0%
Effect of foreign operations (principally Ireland)	(12.1)	(10.4)	(  5.8)
State and local taxes, less federal tax benefit	0.8	0.9	1.3
Research credit	(  0.9)	(  0.4)	(  0.3)
Permanent differences and other	(  1.4)	(  0.9)	(  2.1)
	21.4%	24.2%	28.1%
	===	===	===

The Company's effective tax rate is lower than the statutory rate principally as a result of the earnings generated in lower taxed foreign jurisdictions as compared with the United States. These earnings include income from manufacturing operations in Ireland, which operate under tax incentives that currently expire in 2010.

The IRS has completed and closed its audits of the Company's tax returns through fiscal 1995.

Net deferred income taxes consist of the following:

March 31, (In thousands)	2004	2003
Inventory reserves	$  38,794	$  52,454
Receivable allowances and other reserves	110,858	85,392
Depreciation	(     4,729)	(     3,120)
Amortization	10,216	9,606
Tax credits and other carryforwards	282	264
Accrued liabilities	15,839	14,955
Expenses deferred for tax purposes	6,276	6,517
Employee stock option tax benefits	43,488	7,720
Other	(     1,684)	(     1,096)
	$219,340	$172,692
	=======	=======

13.  Quarterly financial data (unaudited):

(In thousands, except per share data)

				Diluted
				earnings
	Net sales	Gross profit	Net income	per share
2004
First quarter	$605,748	$465,080	$179,817	$0.48
Second quarter	619,157	481,322	184,457	0.49
Third quarter	700,447	539,581	226,118	0.60
Fourth quarter	725,080	555,975	145,482	0.38
2003
First quarter	$467,189	$356,516	$123,828	$0.33
Second quarter	531,599	411,766	142,842	0.38
Third quarter	586,804	452,441	174,581	0.47
Fourth quarter	621,114	481,061	180,737	0.48

FOREST LABORATORIES, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The Company posted record revenues and earnings for the year which will be discussed further in Results of Operations. Among the key events during the year was the October approval by the Food and Drug Administration ("FDA") of Namenda™ for the treatment of moderate to severe Alzheimer's disease. In December, the FDA also approved a new indication for Lexapro® for the treatment of Generalized Anxiety Disorder ("GAD"). Both Namenda and the new indication for Lexapro were launched during the fourth quarter and have performed well thus far. These products will be an important component for our continued growth over the next several years. Also encouraging was a positive study outcome for the mild to moderate monotherapy study for Namenda which will support a supplemental New Drug Application ("sNDA") for that indication during the next fiscal year. The Company has continued to add new product opportunities during the year by completing license agreements for the treatments of Fibromyalgia Syn drome and therapeutics in the inflammation area.

Critical Accounting Policies

The following accounting policies are important in understanding the Company's financial condition and results of operations and should be considered an integral part of the financial review. Refer to Note 1 to the consolidated financial statements, "Summary of significant accounting policies" for additional policies.

Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and of revenues and expenses during the reporting period. Estimates are made when accounting for sales allowances, returns, rebates and other pricing adjustments, depreciation, amortization and certain contingencies. The Company is subject to risks and uncertainties, which may include but are not be limited to competition, federal or local legislation and regulations, litigation and overall changes in the healthcare environment that may cause actual results to vary from estimates. The Company reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any adjustments when necessary. Certain of these risks, uncertainties and assumptions are discussed further under the section entitled "Forward Looking Statements".

Goodwill and Other Intangible Assets

The Company has made acquisitions in the past that include goodwill, license agreements, product rights and other intangibles. Through fiscal 2001, these assets were amortized over their estimated useful lives, and were tested periodically to determine if they were recoverable from operating earnings on an undiscounted basis over their useful lives.

Effective with fiscal 2002, goodwill was no longer amortized but is subject to an annual impairment test based on its estimated fair value. License agreements, product rights and other intangibles will continue to be amortized over their useful lives and tested periodically to determine if they are recoverable from operating earnings on an undiscounted basis over their useful lives.

Revenue Recognition

Revenues are recorded in the period the merchandise is shipped. Provisions for estimated sales allowances, returns, rebates and other pricing adjustments are accrued at the time revenues are recognized as a direct reduction of such revenue. The accruals are estimated based on available information regarding the portion of sales on which rebates and discounts can be earned, adjusted as appropriate for specific known events, and the prevailing contractual discount rates. Provisions are reflected either as a direct reduction to accounts receivable or, to the extent that they are due to entities other than customers, as accrued expense. Adjustments to estimates, which have not been material, are recorded when customer credits are issued or payments are made to third parties.

Financial Condition and Liquidity

During fiscal year 2004 net current assets increased by $620,544,000. Continued growth of the Company's ongoing operations, particularly the antidepressant franchise and the launch in the fourth fiscal quarter of Namenda, contributed to increases in cash, marketable securities, accounts receivable and deferred income taxes. During the year, the Company shifted the composition of marketable securities in favor of longer term securities to receive more favorable rates of return. Accounts receivable increased in total due to the increase in sales but also increased in the number of days sales in accounts receivable, from 32 days in the prior year to 40 days. This increase was principally due to wholesaler buying patterns as proportionally more sales occurred the last month of the period than in the prior year. In the prior year's fourth quarter, approximately 29% of sales occurred in March in contrast to the current year's fourth quarter where approximately 35% of sales occurred in March and were not due at March 31 under the Company's standard payment terms of 30 days. Contributing to the relative increase in accounts receivable was the launch of Namenda. As is common in the industry, to ensure broad availability of Namenda in pharmacies, extended dating terms were offered to customers for their initial purchases of Namenda. Under these special terms, these receivables were not yet due at the end of March, and accounted for approximately three days of the increase. During fiscal year 2004, the Company shifted certain managed care contracts to performance-based rebate programs. Provisions for rebates are reflected in accrued expenses rather than as a reduction of accounts receivable. Consequently, this shift also contributed to an increase in accounts receivable and a caused a corresponding increase to accrued expenses.

The increase in inventories during the period was due primarily to an increase in raw materials which was partially offset by a decrease in finished goods. Raw materials increased in volume to support increasing sales and average cost increased due to a change in the mix of materials held in inventory for sale and for sampling. Under our licensing arrangements raw materials acquired for sampling of Celexa® (citalopram) and Lexapro (escitalopram oxalate) are purchased at a discount and raw materials held for samples made up a smaller proportion of inventories as compared to March 2003, at which time Lexapro was in its launch phase. The change in the mix of inventory has no impact on gross margin as sample expense is a component of selling, general and administrative expenses. In addition, finished goods inventories at March 31, 2003 were relatively high due to the early stage of the Lexapro launch where we were maintaining safety stock levels for both Lexapro and Celexa at a high level until the rate of conversion was established. During the course of this year inventories of both have been adjusted to appropriate levels.

Property, plant and equipment increased as the result of the continuing expansion of the Company's facilities in order to meet current and future product and research and development demands. On Long Island, the Company completeda 100,000 square foot research and development laboratory and is expanding its packaging and distribution facility, which will add approximately 185,000 square feet to that location. During the year an additional 180,000 square foot facility was purchased on Long Island and will be converted for future research and development activities. The Company also purchased an additional 90,000 square foot facility in Ireland which will provide additional manufacturing capacity for the production of Lexapro, Namenda and future products. Further property expansions and acquisitions are planned in the future to meet the needs from increased sales and related production, warehousing and distribution and for products under development.

During the third quarter a $20,000,000 milestone payment was made to Merz Pharma GmbH upon FDA approval of Namenda, which was recorded in license agreements, product rights and other intangibles. In the second quarter the Company announced that it had discontinued development of dexloxiglumide for irritable bowel syndrome ("IBS"), causing a write-off of the license agreement of $12,545,000 to research and development expense. During the fourth quarter, the Company entered into a development and marketing agreement with Cypress Bioscience, Inc. for milnacipran for the treatment of fibromyalgia and ChemoCentryx, Inc. for therapeutics in the inflammation area. The initial payments of $35,000,000 for these early stage licenses were recorded to research and development expense.

Management believes that current cash levels, coupled with funds to be generated by ongoing operations, will continue to provide adequate liquidity to facilitate potential acquisitions of products and capital investments.

Contractual Obligations

The following table shows the Company's contractual obligations (refer to Note 8 to the consolidated financial statements, "Commitments").

		Payments due by period (in thousands)
	<1 year	1-3 years	4-5 years	>5 years	Total
Operating lease obligations	$29,886	$42,820	$27,062	$68,450	$168,218

Off-Balance Sheet Arrangements

The Company is a party to several license agreements for products currently under development that may obligate Forest, in future periods, to pay additional amounts subject to the achievement of certain product development milestones, as defined.

Results of Operations

Net sales increased $443,726,000 to $2,650,432,000, a 20% increase from fiscal year 2003, primarily due to the continued success of the antidepressant franchise, particularly Lexapro. During the year Lexapro, which was launched in September 2002, surpassed Celexa as the Company's largest product with sales of $1,088,957,000 as compared to Celexa sales of $1,087,281,000 and contributed $844,227,000 to the net sales change. As anticipated, a portion of Lexapro's market share has come from Celexa which resulted in a Celexa sales decline of $364,698,000 for the year primarily due to volume. The Company anticipates further declines in Celexa sales as Lexapro continues to gain market share. At the end of the year, Lexapro had achieved a 15.9% share of total prescriptions in the SSRI market, while Celexa's share declined to 9.1% from a peak share of 17.5% in August 2002. Lexapro has patent protection until 2009 and the Company has applied for an extension to 2012. Earlier in the year, the Company received n otification from generic manufacturers that had filed an Abbreviated New Drug Application ("ANDA") with a Paragraph IV Certification with the FDA for a generic equivalent to Lexapro. The Company believes that its patents on Lexapro are valid and expects to defend its rights under those patents which would preclude the introduction of a generic product at least until after the expiration of the substance patent, including patent extension, which will be in 2012. The Company has commenced an action for patent infringement against the third party ANDA filers. Celexa had Hatch-Waxman marketing exclusivity through July 2003 and was granted a six-month extension based upon the submission of results of clinical studies in depressed pediatric patients. The earliest date at which a generic competitor was able to file an ANDA for review by the FDA was January 17, 2004. The Company believes that several have. Also contributing to the overall net sales change was the Company's introduction to the market of Namenda, for the treatment of moderate to severe Alzheimer's disease, which was launched by the salesforce in March 2004. Net sales, which include wholesaler stocking from December 2003 and January 2004, amounted to $45,472,000 for the year. Although the salesforce launched the product on March 1, 2004, the demand for the product was such that the Company began initial stocking sales in December 2003 to ensure Namenda's availability in pharmacies nationwide by January 2004 and samples were available via a "by request" sample program. While it is still early in the launch phase, Namenda's success thus far in terms of prescription trends and product reorders have been quite encouraging. In April 2003, a generic equivalent to the Company's Tiazac was introduced into the market, resulting in a decrease in sales of $109,884,000 for the year. The Company ceased all promotional efforts for Tiazac as of September 2003 and expects further declines in sales of its Tiazac brand as generic substitution rates continue to in crease. During the June 2003 quarter, the Company introduced its own generic version of Tiazac. Sales of that product for the year were $35,519,000, including initial stocking. The remainder of the net sales change for the year was due principally to volume declines on the Company's older unpromoted product lines.

Net sales in fiscal 2003 increased $640,080,000 to $2,206,706,000, a 41% increase from fiscal 2002. In September 2002, the Company launched Lexapro, the single isomer of Celexa. For the year, Lexapro sales amounted to $244,730,000 and Celexa sales amounted to $1,451,979,000. Combined, the antidepressant franchise contributed $608,915,000 to the net sales change. At March 31, 2003 Celexa's share of total prescriptions in the SSRI market was approximately 13.5% and Lexapro's share was approximately 8.1%. The Company believes, based on the results of clinical trials, that Lexapro is a superior product to Celexa. Therefore, upon the introduction of Lexapro, the Company ceased nearly all promotion and sampling of Celexa. A portion of Lexapro's market share was taken from Celexa and the Company anticipates prescription share and sales of Celexa will decline as Lexapro continues to gain market share. Net sales of Tiazac® increased $10,919,000 during fiscal year 2003 due primarily to volume. The remai nder of the net sales change of $20,246,000 was due primarily to price increases for our generic and other non-promoted product lines.

Other income for fiscal year 2004 decreased over the same period last year as the prior year included capital gains on the liquidation of certain long-term investments, a gain on the sale of assets and interest on tax refunds. Interest income also decreased as the Company received lower rates of return on invested funds during the current period. The increase in other income in fiscal year 2003 was the result of higher interest income resulting from increases in funds available for investment and capital gains on the liquidation of certain long-term investments, a gain on the sale of assets and interest on tax refunds. Included in other income for all periods were royalties on sales of Climara®, a transdermal estrogen product, which amounted to $5,810,000, $6,552,000 and $5,899,000 in fiscal years 2004, 2003 and 2002, respectively.

Cost of sales as a percentage of net sales for fiscal year 2004 was 23%, unchanged from fiscal year 2003. Cost of sales as a percentage of sales was 24% in fiscal year 2002. The improvement was due to an increase in overall plant utilization as well as a change in product mix, as the Company's antidepressant franchise, which has a relatively lower cost of goods, increased to 77% of total consolidated net sales for fiscal year 2003 as compared to 69% in fiscal year 2002. In fiscal year 2004, the antidepressant franchise comprised 82% of total consolidated net sales.

Selling, general and administrative expenses increased $173,085,000 in fiscal year 2004 and $112,641,000 in fiscal year 2003. In December 2003, the Company received marketing approval from the FDA for both its GAD indication for Lexapro and for Namenda to treat moderate to severe Alzheimer's disease. To effectively market these products, the Company added approximately 525 additional representatives to its salesforce during the third quarter. The GAD indication for Lexapro was launched in January 2004 and Namenda was launched in March 2004. This latest salesforce expansion brings the total number of representatives and managers to approximately 2,825. The cost of the expanded salesforce, including initial hiring and training costs, together with pre-launch and launch costs, resulted in an increase in selling, general and administrative expenses for the year.

The increases in research and development expense during each of the years presented were due primarily to costs associated with ongoing clinical trials and from staff increases and associated costs required to support currently marketed products and products in various stages of development. Fiscal year 2004 included a one-time write-off of the dexloxiglumide license after its phase III clinical program for the treatment of IBS failed to achieve statistically significant results. The Company continues to conduct clinical trials for additional indications for Lexapro. In May 2004, a supplemental New Drug Application ("sNDA") was filed to expand Lexapro's labeling to include the treatment of social phobia. In October 2003, the Company received FDA approval to market Namenda for the treatment of moderate to severe Alzheimer's disease. Namenda is also being studied for the treatment of mild to moderate Alzheimer's disease as well as an additional indication for neuropathic pain. Based on positiv e results from a Phase III study released in January 2004, Forest plans to file an sNDA for the treatment of mild to moderate Alzheimer's disease during the second half of calendar 2004. Neramexane, a follow-on NMDA receptor antagonist to Namenda, is currently in Phase II clinical trials and is being tested for various CNS disorders. Forest received an approvable letter from the FDA in August 2002 regarding lercanidipine for the treatment of hypertension. In December 2002, the FDA indicated that it would require the Company to conduct additional clinical trials in order to approve the dosing regimen requested by Forest. The Company has reformulated the lercanidipine formulation and has begun a clinical program to support the requested dosing regimen. During fiscal 2003, the FDA determined that the NDA for acamprosate, licensed from Merck KGaA for the treatment of alcohol dependence, was non-approvable. Subsequently, Merck KGaA submitted an amendment to the NDA and expects FDA action during the second half of calendar 2004. During the fourth quarter of fiscal 2004, the Company entered into two licensing agreements; the first with Cypress Bioscience, Inc. for the development and marketing of milnacipran, which is currently being evaluated for the treatment of Fibromyalgia Syndrome ("FMS"), a frequent cause of chronic, widespread pain, estimated to affect six to twelve million people in the United States. There are currently no products approved for the treatment of FMS. The second was a development agreement with ChemoCentryx, Inc. for a novel oral rheumatoid arthritis and multiple sclerosis therapeutic. The Company anticipates further increases in research and development for next fiscal year and beyond.

The effective income tax rate declined to 21% in fiscal year 2004 as compared to 24% and 28% in fiscal years 2003 and 2002, respectively. The lower effective tax rate was a direct result of the increase in the proportion of earnings generated in lower-taxed foreign jurisdictions versus the United States. These earnings include manufacturing and development income from our operations in Ireland, which are taxed at 10% through 2010 and at 12.5% thereafter.

The Company expects to continue its profitability into fiscal 2005 with continued growth in its principal promoted products.

Inflation has not had a material effect on the Company's operations for the periods presented.

Forward Looking Statements

Except for the historical information contained herein, the Management Discussion and other portions of this Form 10-K contain forward looking statements that involve a number of risks and uncertainties, including the difficulty of predicting FDA approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, the timely development and launch of new products and the risk factors listed from time to time in the Company's filings with the SEC, including the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2004.

Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, operations of the Company may be exposed to fluctuations in currency values and interest rates. These fluctuations can vary the costs of financing, investing and operating transactions. Because the Company had no debt and only minimal foreign currency transactions, there was no material impact on earnings due to fluctuations in interest and currency exchange rates.

EX-10

EXHIBIT 10.16

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

LICENSE AND COOPERATION AGREEMENT

            This License and Cooperation Agreement (the "Agreement") is made and entered into this 28^th day of June, 2000, by and between Merz + Co. GmbH & Co., a limited partnership with a limited company as its general partner organized and existing under the laws of Germany, with its principal business office located at Eckenheimer Landstrasse 100-104, D-60318 Frankfurt/Main, Germany ("Merz"), and Forest Laboratories Ireland Limited, a corporation organized and existing under the laws of the Republic of Ireland, with its principal business address located at Clonshaugh Industrial Estate, Clonshaugh, Dublin 17, Republic of Ireland ("Licensee").

W I T N E S S E T H:

            WHEREAS, Merz is the owner of certain United States patents for the application and use of Memantine relating to the treatment of various forms of dementia, and is currently marketing and distributing Memantine, under the name "Akatinol Memantine" for the treatment of such dementia in Germany; and

            WHEREAS, Merz has conducted and is currently conducting clinical trials of Memantine for the treatment of vascular dementia and Alzheimer's disease in the United States and Europe; and

            WHEREAS, Licensee wishes to acquire a license to use the Merz patents and certain Merz know-how for the manufacture, marketing, distribution, sale and use of the Contract Products (as defined herein) within the Territory (as defined herein) solely for the treatment of vascular dementia and Alzheimer's disease; and

            WHEREAS, Merz is willing to grant to Licensee a license to use the Merz patents and certain Merz know-how for the manufacture, marketing, distribution, sale and use of the Contract Products, in accordance with the terms and conditions, and subject to the limitations, of this Agreement; and

            WHEREAS, the parties wish to define the terms of their cooperation in securing Regulatory Approvals (as defined herein) for Memantine, including the Contract Products, for the treatment of vascular dementia and Alzheimer's disease, and for the marketing and distribution of the Contract Products within the Territory.

            NOW, THEREFORE, in consideration of the foregoing, the parties to this Agreement do agree as follows.

Article 1: Definitions

            For purposes of this Agreement, the following terms shall have the following meanings:

            1.1       An "Affiliate" of one of the parties to this Agreement shall mean and include any person, firm, corporation or other entity: (i) more than fifty percent (50%) of the voting stock or other equity interest is owned, directly or indirectly, by that party; (ii) which owns, directly or indirectly, more than fifty percent (50%) of the voting stock or other equity interest of that party; or (iii) more than fifty percent (50%) of the voting stock or other equity interest thereof is owned, directly or indirectly, by a person, firm, corporation or other entity that owns, directly or indirectly, more than fifty percent (50%) of the voting stock or other equity interest of that party.

            1.2       "Applicable Laws" shall mean and include all laws, regulations, rules, decrees, judicial and administrative orders, and governmental actions, policies and requirements having the force of law in the Territory.

            1.3       Merz' "Confidential Information" shall mean and include all of the Merz Know-How, and all other data and information, not in the public domain, relating to the Contract Products, the Indications, or the business, affairs, research and development activities, results of clinical trials, national and multinational regulatory proceedings and affairs, finances, plans, contractual relationships and operations of Merz, or to any of Merz' Intellectual Property Rights.

            1.4       The "Contract Products" shall mean and include all pharmaceutical products, manufactured by Licensee hereunder, as mono-preparations and combination preparations, with Memantine as an active ingredient, for use in any of the Indications, in any form of administration whatsoever.

            1.5       The "Effective Date" of this Agreement shall mean the day after the date on which the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. ss18a, expires. The parties shall use diligent efforts to file the required notifications under the Hart-Scott-Rodino Antitrust Improvements Act with the United States Department of Justice and the Federal Trade Commission, and to request early termination of the statutory waiting period, as soon as reasonably practicable after the date hereof.

            1.6       The "FDA" shall mean the United States Food and Drug Administration, or any successor agency thereto.

            1.7       The "First Commercial Sale" of the Contract Products in the Territory shall mean the date on which the Licensee first sells any of the Contract Products for use in any of the Indications, after obtaining all of the applicable Regulatory Approvals.

            1.8       "Improvements and Enhancements" to the Contract Products shall mean and include any and all Inventions, and any and all changes, modifications and amendments to Merz' Know-How which: (i) improve the performance or efficacy of the Contract Products; (ii) reduce any side effects, drug interactions or other adverse effects of the Contract Products; (iii) reduce the cost and/or increase the efficiency or productivity of the manufacturing and production processes for the Contract Products; or (iv) relate to the use of Memantine for the diagnosis and/or treatment of other indications or applications excluding: (A) ophthalmological applications; and (B) tinnitus, except to the extent that Licensee acquires any rights to use Memantine for either of those indications under Article 2.11 hereof.

            1.9       The "Indications" shall mean the use of the Contract Products for the treatment (including retarding the onset and progression) of vascular dementia and Alzheimer's disease and any mixed forms thereof, and any and all other indications and applications for the Contract Products and/or Memantine: (i) developed by Licensee pursuant to Article 2.1 hereof; or (ii) licensed by Merz to Licensee hereafter, pursuant to Article 2.11 hereof.

            1.10      "Inventions" shall mean and include any and all inventions and discoveries which are, or may be, patentable or otherwise protectable under the patent or other intellectual property laws within the Territory, which relate to the Contract Products, and which are conceived, discovered or reduced to practice during the continuance of this Agreement.

            1.11      "Intellectual Property Rights" shall mean and include all patents, as listed on Exhibit 1.11 hereto, Trademarks, as defined in Article 1.18, copyrights, data exclusivity rights, trade names and other proprietary rights relating to, embodied in, or associated with the Contract Products, and all applications, divisions, continuations, continuations-in-part, extensions, substitutions, renewals, confirmations, supplementary protection certificates, registrations, pipeline registrations, revalidations, reissues and additions of all patent rights hereunder.

            1.12      Merz' "Know-How" shall mean and include all present and future specifications, results of clinical trials, technical data and other information relating to the design, formulation, manufacture, production, quality control, Regulatory Approvals, distribution, sale and/or use of Memantine for any of the Indications.

            1.13      "Memantine" shall mean the NMDA antagonist (1-amino-3, 5-dimethyladamantane hydrochloride), as described in more detail in Exhibit 1.13 hereto, and covered by one or more of the Merz' patents, as listed on Exhibit 1.11 hereto, including synthetic precursors, prodrugs, polymorphs and salts thereof.

            1.14      Licensee's "Net Revenues" shall mean and include all gross revenues derived by Licensee or any of its Affiliates or sublicensees from the marketing, distribution, sale and/or use of the Contract Products or any generic versions of Memantine to unrelated third parties, as determined in accordance with United States generally accepted accounting principles, consistently applied, less: (i) all bona fide allowances for returns and discounts actually given to customers including, but not limited to, rebates, charge backs and contract administration fees directly related to the marketing, distribution and sale of the Contract Products; (ii) all costs of shipping, freight, transportation and insurance for the Contract Products, but only to the extent that such costs are included in Licensee's invoice price to its customers for the Contract Products; and (iii) all sales, use, excise and value added tax es that are included in Licensee's invoice price to its customers for the Contract Products.

            1.15      "Regulatory Approvals" shall mean and include all licenses, permits, authorizations and approvals of, and all registrations, filings and other notifications to, any governmental agency or department within the Territory, including, without limitation, the FDA, necessary or appropriate for the manufacture, production, marketing, distribution, sale and/or use of the Contract Products within the Territory.

            1.16      The "Supply Agreement" shall mean that certain Supply Agreement between the parties, dated June 28, 2000, attached hereto as Exhibit 1.16, under the terms of which Merz shall supply to Licensee the active ingredient raw material for the Contract Products.

            1.17      The "Territory" shall mean and include the United States of America, including its territories, commonwealths and possessions.

            1.18      The Merz "Trademarks" shall mean and include those trademarks and trade names, specified by Merz, as listed on Exhibit 1.18 hereto, and any trademarks and trade names proposed by Licensee for use with the Contract Products, and approved in writing by Merz, which approval shall not be unreasonably withheld; provided, however, that, in the event that Merz approves any such trademarks and/or trade names proposed by Licensee hereunder, Licensee shall assign, transfer and convey to Merz all rights, title and interests in and to all such trademarks and trade names, and such trademarks and trade names shall thereafter be deemed to be included in Merz' Intellectual Property Rights for all purposes of this Agreement.

Article 2: Grant and Scope of License

            2.1      Merz hereby grants to Licensee, and Licensee hereby accepts, a limited license to use Merz' Intellectual Property Rights and Merz' Know-How to obtain all required Regulatory Approvals, and to manufacture, produce, market, distribute, sell and use the Contract Products solely for use in the Indications within the Territory, in accordance with the terms and conditions, and subject to the limitations of, this Agreement. The license granted by Merz to Licensee under this Article 2.1 shall include the right to use Merz' Intellectual Property Rights and Merz' Know-How in conducting advanced research and development activities with respect to the Contract Products and/or Memantine, and to utilize the results of such advanced research and development activities, including any Improvements and Enhancements, in accordance with the terms and conditions, and subject to the limitations, of this Agreement.

            2.2      Licensee shall have a limited right to sublicense any of the rights granted by Merz to Licensee under this Article 2.1 solely to: (i) one or more Affiliates of Licensee; or (ii) any other person, firm, corporation or other entity that has been approved in writing as a sublicensee by Merz; provided, however, that Merz shall be required to approve any prospective sublicensee proposed by Licensee hereunder only where: (A) Merz reasonably determines that the prospective sublicensee has the financial resources, technical expertise and marketing and distribution capability to manufacture, produce, market, distribute and sell the Contract Products in accordance with the requirements of this Agreement; (B) the prospective sublicensee is not currently, and will not foreseeably be a direct competitor of Merz, and is not engaged in pending litigation, arbitration or other dispute with Merz; and (C) the pr ospective sublicensee enters into a written agreement with Merz, under which the prospective sublicensee agrees to comply strictly with all of the terms and conditions of this Agreement.

            2.3      Licensee's rights with respect to the licenses to Merz' Intellectual Property Rights and Merz' Know-How, granted to Licensee under Article 2.1 of this Agreement, shall be the exclusive right to obtain all required Regulatory Approvals, and to manufacture, produce, market, distribute and sell the Contract Products within the Territory, and the right to manufacture and produce the Contract Products in the Republic of Ireland, solely for distribution and sale within the Territory.

            2.4      Merz also hereby grants to Licensee, and Licensee hereby accepts a limited, exclusive, non-transferable license to use the Merz Trademarks solely in connection with the manufacture, production, marketing, distribution, sale and use of the Contract Products for the Indications within the Territory. Unless otherwise agreed in writing by Merz, Licensee shall affix the Trademarks to all of the Contract Products manufactured, produced, marketed, distributed and/or sold by Licensee under this Agreement.

            2.5      Notwithstanding the provisions of Article 2.4 hereof, in the event that Licensee reasonably determines that one or more generic drug manufacturers has introduced, or proposes to introduce, a generic version of Memantine within the Territory, upon written notice thereof to Merz, Licensee shall have the right to market, distribute and sell a generic version of Memantine within the Territory; provided, however, that Licensee's marketing, distribution and sale of a generic version of Memantine within the Territory in accordance with this Article 2.5, shall not affect or impair any of Merz' rights, or any of Licensee's other obligations, under this Agreement, unless otherwise agreed in writing by Merz.

            2.6      In furtherance of the rights and license granted by Merz to Licensee under this Agreement, within thirty (30) days after the Effective Date of this Agreement, Merz shall furnish to the Licensee a data package that shall include all of the Merz Know-How existing as of that Effective Date which, in Merz' reasonable opinion, are relevant to Regulatory Approvals and compliance with Applicable Laws, with respect to the Contract Products. Licensee shall not use any of the Merz Know-How furnished by Merz under this Article 2.6 for any purpose whatsoever, except as specifically authorized in this Agreement, or as otherwise specifically authorized in writing by Merz. In the event that Licensee reasonably believes that the Merz Know-How included in the data package furnished by Merz under this Article 2.6 is incomplete, Licensee shall provide written notice thereof to Merz, and Merz shall furnish correct ed copies of such Merz Know-How within thirty (30) days after receipt of Licensee's written notice hereunder.

            2.7      Without limiting the generality of Articles 2.1, 2.2, 2.3 or 2.6 hereof, Licensee specifically acknowledges and agrees that the license granted to Licensee hereunder is limited to the use of the Contract Products for the Indications within the Territory, and Licensee shall not knowingly market, distribute, sell or use any of the Contract Products for any other application or purpose whatsoever, and shall not actively promote, or solicit orders for, the sale of the Contract Products outside of the Territory, without the prior written authorization of Merz, which Merz may grant or withhold in its sole discretion.

            2.8      Licensee hereby acknowledges that Merz is the owner, or authorized licensee, of certain additional intellectual property rights and know-how, relating to the use of Memantine for certain other applications, including, but not limited to, [ * ]. Licensee further acknowledges and agrees that it shall have no rights whatsoever with respect to such other intellectual property rights or know-how, or to use Merz' Intellectual Property Rights and/or Merz' Know-How, for any other application, except as specifically agreed in writing between Merz and Licensee.

            2.9      Each party hereto represents and warrants that the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action on the part of that party, and do not conflict with the terms of any other contract, agreement, arrangement or undertaking to which that party is bound.

            2.10     Merz is the owner of the Merz Patent Rights listed on Exhibit 1.11 hereto, and is the owner or authorized licensee of the other Merz Intellectual Property Rights and Merz' Know-How, and Merz has the right to grant the license to such Intellectual Property Rights and Know-How to Licensee, as provided in this Agreement. Merz has not received any notice, and has no knowledge, of any claim by any other person, firm, corporation or other entity, in which such other person, firm, corporation or other entity within the Territory asserts that any of Merz' Intellectual Property Rights are invalid, or infringe the intellectual property rights of such other person, firm, corporation or other entity.

            2.11     In furtherance of the exclusive rights and license granted by Merz to Licensee pursuant to this Agreement, Merz shall not, during the continuance of this Agreement, market, distribute or sell any pharmaceutical formulations of Memantine, or grant any license or other authorization to any other person, firm, corporation or other entity to market, distribute and/or sell any pharmaceutical formulations of Memantine within the Territory for the Indications or for any other indication or application, except (i) ophthalmological applications; and (ii) tinnitus. In the event that Merz proposes to market, distribute or sell any pharmaceutical formulation of Memantine, or license or authorize any other person, firm, corporation or other entity to market, distribute and/or sell any pharmaceutical formulations of Memantine for any other indication or application, or in the event that Merz hereafter acquires the right (including the right to sublicense) to manufacture, produce, market, distribute and sell any pharmaceutical formulations of Memantine for any ophthalmological applications or indications or for tinnitus in the United States from one or more third parties, Merz shall enter into good faith negotiations with Licensee with respect to granting Licensee an exclusive license to manufacture, produce, market, distribute and sell the pharmaceutical formulations of Memantine within the Territory for such other indications or applications on mutually acceptable terms and conditions. In the event that the parties are unable to conclude such a license agreement for such other indications or applications, despite good faith negotiations, within one hundred twenty (120) days of commencing such negotiations, Merz shall have the right to enter into a license agreement for such other indications or applications with another person, firm, corporation or other entity provided that the terms and conditions of the license agreement with such other person, firm, corporation or other entity with respect to the Territory are not more favorable to such other person, firm, corporation or other entity than the final terms and conditions offered by Merz to Licensee for the manufacture, production, marketing, distribution and sale of pharmaceutical formulations of Memantine for such other indications or applications within the Territory.

            2.12     In furtherance of Licensee's manufacture and production of the Contract Products under this Agreement, Merz shall supply Licensee's requirements of Memantine, pursuant to, and in accordance with the terms and conditions of the Supply Agreement attached hereto as Exhibit 1.16.

Article 3: Regulatory Approvals and Compliance with Applicable Laws and Regulations

            3.1      Licensee shall be responsible for applying for, and shall use its reasonable best efforts to obtain all required Regulatory Approvals, including, but not limited to, a new drug application approval, from the FDA, for the manufacture, production, marketing, distribution, sale and use of the Contract Products within the Territory. Except as otherwise provided in this Agreement, or as required under Applicable Laws, all such Regulatory Approvals, including, but not limited to, the NDA for the Contract Products within the Territory shall be held in the name of Licensee. In furtherance of Licensee's obligations under this Article 3.1, Merz shall appoint Licensee as Merz' agent with respect to the Investigational New Drug ("IND") application opened by Merz with the FDA for Memantine for the Indications prior to the Effective Date of this Agreement.

            3.2      In the event that the FDA, or any other competent governmental agency within the Territory, requires any additional clinical trials or other studies in connection with the processing and consideration of any application by Licensee for any Regulatory Approval under Article 3.1 hereof, Licensee shall conduct all such additional clinical trials and studies, in accordance with Article 3.1 hereof, and Licensee shall be solely responsible for any and all costs and expenses incurred in connection with all such additional clinical trials and studies, and all other costs and expenses incurred in connection with all applications for all Regulatory Approvals under Article 3.1 hereof. Licensee shall furnish to Merz the results of all such additional clinical trials and studies, and copies of all other documents and materials submitted by Licensee to the FDA, or any other competent governmental authority, i n connection with any application submitted by Licensee for any Regulatory Approval for the Contract Products within the Territory.

            3.3      The data package furnished by Merz pursuant to Article 2.6 hereof shall include: (i) all relevant chemical, manufacturing and quality control data relating to the Memantine drug substance and the manufacture thereof in Merz' possession as of the Effective Date of this Agreement; and (ii) all other data included in the Drug Master File submitted by Merz or Merz' supplier to the FDA which Merz has the right to disclose to Licensee. Merz shall be solely responsible for filing and maintaining, and shall file and maintain, or cause Merz' supplier to file and maintain the Drug Master File for Memantine with the FDA, in accordance with the FDA's requirements and Applicable Laws, and neither Merz nor Merz' supplier shall modify that Drug Master File in a manner that would have a material adverse effect on the NDA or any other Regulatory Approval for the contract Products within the Territory. Merz sha ll, or shall cause Merz' supplier to, grant to Licensee a right of reference to that Drug Master File. Merz shall also furnish Licensee with all documentation and other assistance as Licensee shall reasonably request in connection with Licensee's applications for Regulatory Approvals for the Contract Products pursuant to Article 3.1 hereof; provided, however, that, in the event that the documentation included in the data package furnished to Licensee under Article 2.6 is not sufficient to permit Licensee to obtain all such required Regulatory Approvals, Licensee shall be solely responsible for preparing all necessary additional documentation, at Licensee's sole expense, to support Licensee's applications for such Regulatory Approvals.

            3.4      Licensee shall be solely responsible for maintaining all Regulatory Approvals issued to Licensee, pursuant to Article 3.1 in full force and effect throughout the continuance of this Agreement. Licensee shall furnish Merz with timely written notice of (i) each application submitted by Licensee for any Regulatory Approval for the Contract Products hereunder; (ii) the issuance of any such Regulatory Approval; and (iii) the renewal, extension, modification or revocation of any such Regulatory Approval.

            3.5      In the event that Licensee fails to take the following actions relating to obtaining Regulatory Approvals for the Contract Products, as to the manufacture, production, distribution, marketing and sale of the Contract Products in the Territory by the following completion dates, Licensee shall pay to Merz the following performance penalties:

	Milestone	Completion Date	Performance Penalty
a.	Licensee's delivery of clinical supplies (including medications, study protocols and all relevant documentation) to first investigators in Additional Pivotal Phase III Clinical Trials in the Territory, if required by the FDA	Four (4) months after (i) FDA approval of the study protocol for these Phase III Clinical Trials, and (ii) availability of packaged clinical supplies meeting FDA regulatory requirements for study use	[ * ] for each complete calendar month after the scheduled completion date, until completion of this Milestone
b.	Filing of initial application with the FDA for New Drug Application ("NDA") Regulatory Approval of the Contract Products for the Indications	(i) In the event that the FDA does not require any additional clinical studies prior to the submission of Licensee's application for the NDA Regulatory Approval, fifteen (15) months after the later to occur of: (A) Licensee's meeting with the FDA at which the FDA informs Licensee that no such additional clinical studies are required; or (B) the receipt by Licensee from Merz of all data specified in Article 3.3 hereof. (ii) In the event that the FDA does require additional clinical studies prior to the submission of Licensee's application for the NDA Regulatory Approval, nine (9) months after the later to occur of: (A) the completion of the last required clinical study, including Licensee's receipt of statistical analyses in a form appropriate for submission to the FDA; and (B) the receipt by Licensee from Merz of all data specified in Article 3.3 hereof.	[ * ] for each complete calendar month after the scheduled completion date, until completion of this Milestone
c.	First Commercial Sale of the Contract Products for the Indications in the Territory	Within four (4) months after issuance of all required Regulatory Approvals, including approval of the final packaging, labeling and Licensee's initial marketing materials for the Contract Products	[ * ], for each complete calendar month after the scheduled completion date, until completion of this Milestone

            3.6      In the exercise of its rights, and the performance of its obligations under this Agreement, including, but not limited to, the manufacture, production, marketing, distribution, sale and use of the Contract Products, Licensee shall comply with all Applicable Laws, and with all applicable Regulatory Approvals. Without limiting the generality of this Article 3.6, all Contract Products manufactured, produced, marketed, distributed or sold by Licensee under this Agreement shall be packaged and labeled strictly in accordance with such Applicable Laws and Regulatory Approvals.

            3.7       (a)       Each of the parties hereto shall disclose to the other party all safety reports and other information (collectively "Safety Data") which they may from time to time receive or obtain (whether from sources within or without the Territory) with respect to any adverse drug experiences with respect to the Contract Products, in accordance with the following timelines after receipt of such Safety Data by that party:

(i)	within five (5) calendar days -- all reports of serious adverse events from clinical studies with a seriousness determination of "death" or "life-threatening";
(ii)	within ten (10) calendar days -- all reports of serious adverse events from clinical studies with a seriousness determination other than "death" or "life threatening";
(iii)	within ten (10) calendar days -- all serious spontaneously reported adverse events involving the Contract Products from any source, including, but not limited to, medical literature; provided that any and all such reports shall be in the language of original publication, and an English language translation thereof, if applicable, shall be furnished as soon as reasonably practicable thereafter;
(iv)	two (2) weeks prior to the regulatory reporting date for any NDA Adverse Event Periodic Report, as provided under Applicable Law -- copies of all reported non-serious adverse drug reactions of United States origin;
(v)	Licensee shall provide Merz with copies of the IND Annual Report prepared by Licensee with respect to the Contract Products two (2) weeks prior to the time that Licensee submits that IND Annual Report to the FDA.

                       (b)       Each party shall cause each of its licensees or sublicensees, as the case may be, to disclose to it any and all Safety Data which that licensee or sublicensee may from time to time receive or obtain, in accordance with the time lines set forth in Article 3.7(a) hereof, and each party shall disclose to the other party hereto all Safety Data reported to it by any such licensee or sublicensee, as the case may be, within the number of days after receipt thereof from that licensee or sublicensee as specified in Article 3.7(a) hereof; provided, however, that, in all events, each party shall require its licensees or sublicensees, as the case may be, to report all such Safety Data to it so as to assure that both Merz and Licensee may comply strictly with all Safety Data reporting requirements with respect to the Contract Products established b y Applicable Law and/or any applicable Regulatory Approvals.

                        (c)       Each party shall promptly deliver to the other party hereto a copy of all correspondence and other communications which that party may receive from any government agency or department, whether within or without the Territory, relating to the Contract Products; provided, however, that the parties' respective obligations under this Article 3.7(c) shall not apply to procedural, non-substantive communications from any such governmental agency or department that do not relate to the safety of the Contract Products. Without limiting the generality of this Article 3.7(c), each party shall furnish to the other party hereto copies of the following Drug Safety Report submissions, as required under Applicable Law, prior to the delivery of such Drug Safety Report submissions to the competent governmental health or regulatory agency or depar tment:

(i)	all applicable United States FDA Adverse Event Periodic Reports involving the Contract Products;
(ii)	all international Periodic Safety Update Reports involving the Contract Products;
(iii)	all Medical Expert Safety Reports requested or required by any such governmental health or regulatory agency or department for the renewal of any Regulatory Approval for the Contract Products; and
(iv)	any information requiring, or justifying, any changes to the safety section of the International Core Label, or the United States Product Information, for the Contract Products.

                        (d)       All Safety Data, reports and other communications required to be furnished by each party to the other party under this Article 3.7 shall be delivered in accordance with the notice procedures set forth in Article 13.4 hereof.

            3.8      Each party shall provide the other party hereto with such assistance as the other party shall reasonably request in connection with the identification, analysis, mitigation and elimination of all such side effects, drug interactions and other adverse effects with respect to the Contract Products; provided, however, that, in the event that Licensee is required by the FDA or any other competent governmental agency to undertake any clinical trials or additional studies with respect to any such side effects, drug interactions or other adverse effects of the Contract Products, in order to maintain the Regulatory Approvals for such Contract Products, Licensee shall be solely responsible for performing such clinical trials or additional studies, at its sole expense.

Article 4: Licensee's Obligations

            4.1      Licensee shall use its best efforts to market, distribute and sell the Contract Products in the Territory, in order to maximize the Net Revenues derived from such Contract Products throughout the continuance of this Agreement. Without limiting the generality of Licensee's best efforts obligation under this Article 4.1, Licensee shall:

a.	apply for all required Regulatory Approvals as soon as reasonably practicable, in accordance with the provisions of Article 3.1 hereof;
b.	make the First Commercial Sale of the Contract Products in the Territory within one hundred twenty (120) days after the date on which all of the Regulatory Approvals required for the marketing, distribution, sale and use of the Contract Products are issued by the FDA or any other competent government agency, including approval of the final packaging, labeling and Licensee's initial marketing materials for the Contract Products; and
c.	not manufacture, produce, market, distribute or sell any products which are directly competitive with the Contract Products, to the extent that any such activities would involve the use of any of Merz' Intellectual Property Rights, Merz' Know-How or any other Merz Confidential Information, or would be otherwise inconsistent with any of Licensee's obligations under this Agreement.

            4.2      In the event that Licensee breaches any of its obligations under Article 4.1(c) hereof, with respect to the manufacture, production, marketing, distribution and/or sale of competitive products, Merz shall have the right to convert the exclusive and sole license rights provided for in Article 2.3 hereof into non-exclusive license rights, by furnishing written notice thereof to Licensee. In the event that Merz elects to exercise its rights under this Article 4.2, upon Merz' written request, at Merz' sole option, Licensee shall: (i) transfer to Merz all Regulatory Approvals applicable to the Contract Products; or (ii) provide Merz with any and all documents, materials, clinical studies, test reports and other information, and shall provide Merz with all assistance reasonably requested by Merz, in order to permit Merz to apply for, and obtain, duplicate Regulatory Approvals for the Contract Product s.

            4.3      All of the Contract Products manufactured or produced by Licensee shall be manufactured with Memantine as the active ingredient, strictly in accordance with Merz' Intellectual Property Rights and Merz' Know-How, as licensed to Licensee hereunder, and in accordance with any and all other standards, specifications, quality assurance procedures, manufacturing practices and requirements set forth in all applicable Regulatory Approvals. In furtherance of Licensee's obligations under this Article 4.2, upon Merz' written request, Licensee shall:

a.	provide Merz with written notice of Licensee's initial manufacture and production of the Contract Products, and permit Merz to inspect and test such initial Contract Products, in order to confirm that such initial Contract Products conform to the requirements of all applicable Regulatory Approvals and Merz' standards and requirements for the usage of the Trademarks;
b.	permit Merz to inspect Licensee's manufacturing facilities and operations for the Contract Products, in order to confirm that such facilities and operations conform to good manufacturing practices and to Merz' Know-How for such Contract Products; and
c.	furnish Merz with a reasonable quantity of samples of the Contract Products, from time to time during the continuance of this Agreement, in order to permit Merz to confirm that such Contract Products continue to conform to Merz' standards and requirements for the usage of the Trademarks.

            4.4      In the event that Merz reasonably determines that any of the Contract Products and/or Licensee's manufacturing facilities and operations do not conform to the requirements of Article 4.3 hereof, Merz shall give notice thereof, specifying all such deficiencies in the Contract Products or Licensee's manufacturing facilities and operations, as the case may be. Licensee shall take corrective action to remedy all such deficiencies in the Contract Products and/or Licensee's manufacturing facilities and operations, as the case may be, immediately upon receipt of such written notice from Merz. Upon completion of all such corrective action, Licensee shall furnish Merz with a reasonable number of samples of the Contract Products, and shall permit Merz to inspect Licensee's manufacturing facilities and operations, in order to confirm that all such deficiencies have been corrected.

            4.5      Attached hereto as Exhibit 4.5 is Licensee's sales forecast for Net Revenues to be derived by Licensee from the distribution and sale of the Contract Products within the Territory during each of the first three (3) twelve-month periods following the First Commercial Sale of the Contract Products within the Territory. At least ninety (90) days prior to the start of each year after the expiration of that initial three (3) year period during the continuance of this Agreement, Licensee shall furnish to Merz Licensee's detailed sales plan for the marketing, distribution and sale of the Contract Products in the Territory for the coming year.

            4.6      The parties shall use their best efforts to collaborate in the marketing and promotion of the Contract Products in the Territory. In furtherance of the parties' obligations under this Article 4.6, the parties shall form a joint marketing committee, comprised of two representatives from each of the parties. The joint marketing committee shall meet at least twice every calendar year, and shall cooperate in coordinating all joint marketing and promotional activities for the Contract Products in the Territory, including, but not limited to:

a.	the preparation and distribution of scientific and technical information and promotional materials with respect to the Contract Products;
b.	the organization, participation and conduct of research seminars, conferences and trade shows; and

Each party shall provide the other party hereto with written notice of its two representatives for the joint marketing committee within ninety (90) days after the Effective Date of this Agreement.

            4.7      Licensee shall furnish Merz with quarterly reports of all of Licensee's sales under this Agreement. Each such quarterly report shall (i) be furnished to Merz within forty-five (45) days after the close of the calendar quarter to which it corresponds; and (ii) state Licensee's total sales of the Contract Products during the calendar quarter, the Net Revenues derived by Licensee from all sales, and the royalties payable by Licensee to Merz with respect to such Net Revenues, in accordance with the provisions of Article 5.4 of this Agreement.

            4.8      Throughout the continuance of this Agreement, Licensee shall keep Merz informed of all material marketing plans and strategies, including, but not limited to, sales forecasts, market analyses and proposed advertising and promotional campaigns and programs, for the marketing, distribution and sale of the Contract Products in the Territory.

Article 5: Consideration

            5.1      In consideration for the rights and licenses granted by Merz to Licensee under this Agreement, Licensee shall make the following lump sum payments to Merz:

a.	[ * ] on the Effective Date of this Agreement.
b.	[ * ] upon completion of the pre-NDA Meeting between Licensee and the FDA, if the FDA indicates that it will be possible to obtain all required Regulatory Approvals for the Contract Products with the existing data from clinical trials and studies; or [ * ] upon completion of that pre-NDA Meeting, if the FDA requires additional pivotal phase III clinical trials, as a condition for processing Licensee's application for Regulatory Approvals for the Contract Products.
c.	[ * ] upon issuance of the Regulatory Approvals by the Food and Drug Administration for the Contract Products for the Indications in the Territory.

            5.2      All fees payable by Licensee to Merz under Article 5.1 hereof and any performance penalties payable by Licensee under Article 3.5 hereof, are non-refundable upon expiration or termination of this Agreement for any reason whatsoever. None of the fees payable by Licensee to Merz under Article 5.1 or performance penalties payable by Licensee under that Article 3.5 may be credited against any of Licensee's royalty obligations under Article 5.3 hereof.

            5.3      As further consideration for the rights and licenses granted by Merz to Licensee under this Agreement, Licensee shall pay royalties to Merz equal to [ * ] of Licensee's Net Revenues derived from the distribution and sale of the Contract Products to customers located within, or for use within, the Territory; provided, however, that all Memantine for the Contract Products supplied by Merz to Licensee under the Supply Agreement shall be supplied by Merz to Licensee at no additional charge therefor.

            5.4      Notwithstanding the provisions of Article 5.3 hereof, in the event that, during the continuance of this Agreement and thereafter, Licensee markets, distributes and sells a generic version of Memantine pharmaceutical products within the Territory, in accordance with the provisions of Article 2.5 hereof, so long as Merz is willing to supply Licensee's requirements of raw materials, pursuant to the Supply Agreement, Licensee shall pay royalties to Merz with respect to Net Revenues derived from the distribution and sale of such generic version of Memantine as follows, in lieu of the royalties provided for in Article 5.3 hereof:

	Licensee's Net Sales Price	Royalty Rate
a.	If Licensee's Net Sales Price for the generic version of Memantine is at least [ * ] of Licensee's Net Sales Price for the branded Contract Products	[ * ] of an amount equal to (i) Licensee's then prevailing Net Sales Price per unit of the branded Contract Products, multiplied by (ii) the number of units of the generic version of Memantine sold by Licensee, or any of its sublicensees, during the applicable calendar quarter.
b.	If Licensee's Net Sales Price for the generic version of Memantine is at least [ * ] of Licensee's Net Sales Price for the branded Contract Products	[ * ] of an amount equal to (i) Licensee's then prevailing Net Sales Price per unit of the branded Contract Products, multiplied by (ii) the number of units of the generic version of Memantine sold by Licensee, or any of its sublicensees, during the applicable calendar quarter.
c.	If Licensee's Net Sales Price for the generic version of Memantine is at least [ * ] of Licensee's Net Sales Price for the branded Contract Products	[ * ] of an amount equal to (i) Licensee's then prevailing Net Sales Price per unit of the branded Contract Products, multiplied by (ii) the number of units of the generic version of Memantine sold by Licensee, or any of its sublicensees, during the applicable calendar quarter.
d.	If Licensee's Net Sales Price for the generic version of Memantine is less than [ * ] of Licensee's Net Sales Price for the branded Contract Products	[ * ] Licensee shall purchase its requirements of bulk Memantine for such generic Memantine pharmaceutical products, in accordance with the Supply Agreement, at a price per kilogram specified by Merz, provided that that price per kilogram does not exceed the price per kilogram offered to Licensee by another person, firm, corporation or other entity for comparable quantities of bulk Memantine of comparable quality

For purposes of this Article 5.4, Licensee's "Net Sales Price" shall mean the Net Revenues derived by Licensee, or any of Licensee's sublicensees, as the case may be, from the sale of the generic version of Memantine, or the branded Contract Products, as the case may be, divided by the number of units of such products from which such Net Revenues were derived, as determined on a quarterly basis. Nothing in this Article 5.4 shall affect or impair Licensee's obligation to pay, and Merz' right to receive, royalties with respect to the branded Contract Products as provided in Article 5.3 hereof.

            5.5      In the event that the royalties payable by Licensee to Merz, as determined in accordance with the provisions of Article 5.3 hereof, in any twelve (12) month period during any of the first three (3) years commencing with Licensee's First Commercial Sale of the Contract Products are less than [ * ] of an amount equal to [ * ] of Licensee's annual sales forecast for that twelve (12) month period as furnished by Licensee to Merz pursuant to Article 4.5 hereof, multiplied by the applicable royalty rate, as set forth in Article 5.3 hereof, or Article 5.4 hereof, as the case may be (the "Minimum Royalty"), Licensee shall pay to Merz an amount equal to the difference between the Minimum Royalty for that twelve (12) month period and the royalties actually paid by Licensee with respect to that twelve (12) month period, within forty-five (45) days after the close of that twelve (12) month peri od. Licensee shall be entitled to a credit for the difference between any such minimum annual royalties and the amount of royalties determined pursuant to Article 5.3 hereof in any twelve (12) month period solely against Licensee's royalty obligation for the next twelve (12) month period.

            5.6      All payments by Licensee to Merz under this Agreement shall be paid in United States Dollars.

            5.7      All royalty payments by Licensee under Article 5.3 hereof shall be paid on a quarterly basis. Each such quarterly royalty payment by Licensee under Article 5.3 hereof, shall be paid within forty-five (45) days after the close of the calendar quarter to which it corresponds. Any minimum annual royalties payable by Licensee under Article 5.5 hereof shall be paid within forty-five (45) days after the close of the calendar year to which such minimum annual royalty payment corresponds.

            5.8      In the event that any fee payable by Licensee under Article 5.1 hereof or any penalty payable by Licensee under Article 3.5 hereof is not paid to Merz on or before the due date therefor, as specified in that Article 3.5 or Article 5.1, as the case may be, or any quarterly royalty payment or minimum annual royalty payment is not paid to Merz in accordance with the provisions of Article 5.7 hereof, Merz shall provide written notice thereof to Licensee. Any unpaid overdue amount that is not paid in full by Licensee within ten (10) days after the date of Merz' written notice thereof under this Article 5.8 shall bear interest, at a rate equal to five (5) percentage points over the then-applicable discount rate established by the Federal Reserve Bank of New York, or the maximum rate permitted under applicable law, whichever is less, until the entire unpaid overdue amount shall have been paid in full.< /P>

            5.9      All payments by Licensee to Merz under this Article 5 shall be paid in full, without deduction for any sales, use, excise, value added, withholding or other similar taxes, or any other governmental fees or charges. In the event that Licensee is required to withhold any taxes on any amount payable to Merz hereunder, under the Applicable Laws of the Territory, Licensee shall furnish Merz with official tax receipts, or other evidence of payment of such withholding taxes, sufficient to permit Merz to demonstrate the payment of such withholding taxes, in order to establish Merz' right to a credit for such withholding taxes against Merz' German income tax liability. Licensee shall provide Merz with all assistance reasonably requested by Merz in connection with any application to any competent tax authorities in the Territory to qualify for the benefit of a reduced rate of withholding taxation under a ny applicable Double Tax Treaty.

            5.10     Licensee shall maintain complete and accurate books and records of account, in accordance with generally accepted account principles, of all transactions and other business activities under this Agreement, sufficient to confirm the accuracy of all reports furnished by Licensee to Merz under Article 4.7 hereof, and all payments by Licensee to Merz under this Article 5. Upon reasonable written notice to Licensee, Merz or a certified public accountant designated by Merz, to which Licensee has no reasonable objection, shall have the right to audit such books and records of account of Licensee, in order to confirm the accuracy and completeness of all such reports and all such payments. Merz shall bear all costs and expenses incurred in connection with any such audit; provided, however, that if any such audit shall reveal any underpayments by Licensee hereunder in excess of two percent (2%) of the amount actually payable by Licensee to Merz hereunder, then, in addition to paying the full amount of such underpayment, plus accrued interest in accordance with Article 5.8 hereof, Licensee shall reimburse Merz for all costs and expenses incurred by Merz in connection with that audit.

Article 6: Advanced Research and Development; Enhancements and Improvements

            6.1      Licensee shall conduct any and all additional research and development activities, including, but not limited to, further clinical studies and trials, necessary for obtaining all required Regulatory Approvals for the Contract Products, and Licensee shall be solely responsible for all costs and expenses incurred in connection with any such additional research and development activities. Subject to written notice to, and consultation with, Merz, Licensee shall also conduct such life cycle management and marketing studies with respect to the Contract Products as Licensee and Merz shall mutually agree, and Licensee may conduct such other life cycle management and marketing studies as Licensee determines to be necessary or appropriate for the effective marketing, distribution and sale of the contract Products within the Territory. In addition, each of the parties hereto may conduct advanced research and development activities with respect to the use of the Contract Product and Memantine for the Indications. Each party hereto shall be solely responsible for all costs and expenses incurred by that party in conducting, or otherwise in connection with, such research and development activities under this Article 6.1. Each party shall provide reasonable notice of any advanced research and development activities with respect to the Contract Products for the Indications to the other party hereto, and shall consult with such other party about any such proposed advanced research and development activities; provided, however, that nothing in this Article 6.1 shall require Merz to obtain the prior approval of Licensee in order for Merz to conduct advanced research and development activities with respect to any indication or application of Memantine other than the Indications; provided that such advanced research and development activities will not have a material adverse effect on Licensee's marketing, distribut ion and sale of the Contract Products within the Territory.

            6.2      In order to coordinate and facilitate the parties' respective advanced research and development activities under Article 6.1 hereof, the parties shall form a research committee, comprised of three (3) professionally and technically qualified representatives of each of the parties hereto. Each party shall provide the other party hereto with written notice of its three (3) representatives for the research committee within ninety (90) days after the Effective Date of this Agreement. The parties hereto shall be jointly responsible for directing the activities of the research committee, which activities shall include the discussion, preparation, implementation and execution of all pre-clinical and clinical research projects with respect to the use of the Contract Products and/or Memantine for the Indications. The parties shall implement all advanced research and development projects with respect to Memantine and the Contract Products recommended by the research committee under this Article 6.2, unless one of the parties reasonably determines that any such advanced research and development project is not technically practicable or commercially feasible; provided, however, that nothing in this Article 6.2 shall limit or prevent either party from conducting advanced research and development activities, in accordance with Article 6.1 hereof, independently.

            6.3      Each party shall provide the research committee with written notice of all clinical studies, including, but not limited to, any and all known investigator initiated trials, together with the results thereof, of the use of the Contract Products and/or Memantine for the Indications, conducted by that party during the continuance of this Agreement. Each party shall make available to the other party hereto, and to the members of the research committee, copies of all reports of the results of all such clinical studies, and all other documents containing or embodying any studies, scientific information, know-how or other data relating to the use of the Contract Products and/or Memantine for the Indications, prepared by or for that party during the continuance of this Agreement. All such results, studies, scientific information, know-how and other data furnished by a party to the other party hereto sh all be deemed Confidential Information of the party furnishing such results, studies, scientific information, know-how or other data.

            6.4      In the event that, during the continuance of this Agreement, Merz or any Affiliate of Merz develops any Improvements or Enhancements with respect to the use of the Contract Products or Memantine for the Indications, Merz shall furnish Licensee with timely written notice of such Improvements and Enhancements, and shall furnish Licensee with a data package which, in Merz' reasonable opinion, contains all information, know-how and other data as Licensee will require in order to obtain Regulatory Approvals for such Improvements and Enhancements, and to implement such Improvements and Enhancements in Licensee's manufacture, production, marketing, distribution, sale and/or use of the Contract Products; provided, however, that Merz' obligations under this Article 6.4 shall not apply to any Improvements and Enhancements developed by any other licensee of Merz, to the extent that Merz is contractually pro hibited or restricted from licensing such Improvements and Enhancements, or delivering any information, know-how or other data pertaining to such Improvements and Enhancements, to Licensee. All information, know-how and other data with respect to any such Improvements and Enhancements shall be deemed to constitute Merz' Know-How, and Licensee shall have the right to use Merz' Know-How in the Territory, at no additional charge, in accordance with the terms and conditions, and subject to the limitations, of this Agreement.

            6.5      In the event that, during the continuance of this Agreement, Licensee develops any Improvements or Enhancements with respect to the use of the Contract Products or Memantine for the Indications, Licensee shall furnish Merz with timely written notice of such Improvements and Enhancements, and shall furnish Merz with a data package which, in Licensee's reasonable opinion, contains all information, know-how and other data as Merz will require in order to obtain Regulatory Approvals for such Improvements and Enhancements, and to implement such Improvements and Enhancements in Merz' manufacture, production, distribution, marketing, sale and/or use of any products whatsoever. Licensee shall, and hereby does, grant Merz a fully transferable, worldwide, perpetual, royalty-free license to use all information, know-how and other data pertaining to all Improvements and Enhancements furnished by Licensee to Merz hereunder for any purpose whatsoever; provided, however, that the license granted by Licensee to Merz under this Article 6.5 shall not include the right to sublicense the manufacture, production, marketing, distribution and sale of the Contract Products to any other licensee of Merz to the extent, but only to the extent, that Merz is contractually prohibited or restricted from licensing and disclosing Improvements and Enhancements developed by such other licensee to Licensee hereunder. The license granted by Licensee to Merz under this Article 6.5 shall be: (i) non-exclusive as to the Territory (but as to the Indications, only after the expiration or termination of this Agreement); and (ii) exclusive as to all countries outside of the Territory.

            6.6      In the event that a party hereto develops, discovers or acquires any Inventions or any other Improvements or Enhancements with respect to the use of the Contract Products or Memantine for the Indications, subject to the provisions of Article 6.4 or Article 6.5 hereof, as the case may be, that party shall be the sole owner of all Intellectual Property Rights in and to those Inventions or Improvements and Enhancements, as the case may be, and shall have the sole right, and shall be solely responsible, for applying for, obtaining, and bearing all costs and expenses associated with, all patents, data exclusivity rights and other Intellectual Property Rights with respect to all such Inventions or Improvements and Enhancements, as the case may be, as that party determines to be necessary or appropriate, in its sole discretion.

Article 7: Merz' Intellectual Property Rights

            7.1      Licensee hereby acknowledges that Merz is the owner, or authorized licensee, of all of Merz' Intellectual Property Rights, as specified in Exhibit 1.11 hereof, and Licensee shall acquire no rights, title or interest whatsoever in or to any of Merz' Intellectual Property Rights, except as specifically provided in the Agreement. During the continuance of this Agreement, and thereafter, Licensee shall take no action which, in the reasonable opinion of Merz, may adversely affect or impair any of Merz' rights, title or interests in and to any or all of Merz' Intellectual Property Rights. Without limiting the generality of this Article 7.1, Licensee shall not utilize any Merz' Intellectual Property Rights for any purpose whatsoever, except as specifically authorized in this Agreement.

            7.2      Licensee shall take such actions, and shall provide Merz with such assistance, as Merz shall reasonably request, in order to protect and perfect Merz's rights, title and interests in and to all of Merz' Intellectual Property Rights within the Territory; provided, however, that Licensee shall not register, or attempt to register, any of Merz' Intellectual Property Rights, or otherwise assert any ownership rights with respect to any of Merz' Intellectual Property Rights, including, but not limited to, any of the Trademarks, as defined in Article 1.18 hereof, anywhere in the world. Licensee shall furnish Merz with at least sixty (60) days written notice prior to the First Commercial Sale of any of the Contract Products in the Territory, in order to permit Merz to take such action as Merz, in its sole discretion, determines to be necessary or appropriate to protect and perfect Merz' rights, title an d interests in and to all of Merz' Intellectual Property Rights. Any and all costs and expenses incurred by Merz in protecting any of Merz' Intellectual Property Rights under this Article 7.2 shall be borne by Merz.

            7.3      All Contract Products manufactured, produced, marketed, distributed and/or sold by Licensee under this Agreement shall bear Merz' and Merz' licensors' patent numbers, and patent and proprietary rights notices, in accordance with the laws and commercial practices of the Territory. Subject to the provisions of Article 2.5 hereof, all such Contract Products shall also bear the Merz Trademarks, in accordance with the provisions of Article 2.4 hereof. Licensee shall not, during the continuance of this Agreement or thereafter, adopt, register or use any trademark, trade name, brand name, symbol or logo that is identical, or confusingly similar, to the Merz Trademarks.

            7.4      Licensee shall furnish Merz with timely written notice of any and all infringements and other unauthorized uses by any other person, firm, corporation or other entity of any of Merz' Intellectual Property Rights that come to the attention of Licensee during the continuance of this Agreement. Merz, as the owner of all of Merz' Intellectual Property Rights, shall be solely responsible for taking all actions, in the courts, administrative agencies, or otherwise, to prevent or enjoin any and all such infringements and other unauthorized uses of Merz' Intellectual Property Rights, and Licensee shall take no action with respect to any such infringement or unauthorized use of Merz' Intellectual Property Rights, without the prior written authorization of Merz; provided, however, that Licensee shall provide Merz with such assistance as Merz shall reasonably request in connection with any action to preven t or enjoin any such infringement or unauthorized use of any of Merz' Intellectual Property Rights.

            7.5      In the event that Merz, in its sole discretion, elects not to take any action to prevent or enjoin any such infringement or other unauthorized use of any of Merz' Intellectual Property Rights within fourteen (14) days after the date of Licensee's written notice under Article 7.4 hereof , Merz shall give written notice thereof to Licensee. Upon Licensee's written request, following receipt of Merz' written notice under this Article 7.5, Merz may authorize Licensee to take action in the courts, administrative agencies or otherwise to prevent or enjoin such infringement or unauthorized use of Merz' Intellectual Property Rights. Merz' authorization of Licensee to take such action with respect to Merz' Intellectual Property Rights within the Territory shall be subject to the following conditions and requirements:

a.	Licensee shall be solely responsible for any and all costs and expenses incurred by Licensee in connection with such action;
b.	Licensee shall take no action that is inconsistent with: (i) Merz' ownership of all rights, title and interests in and to all of Merz' Intellectual Property Rights; or (ii) any of Licensee's obligations under Articles 7.1 and 7.2 hereof;
c.	Merz shall have the right, at its sole expense, to participate in any such action, with counsel selected by Merz; and
d.	Licensee shall not enter into any settlement, or waive any claims or rights, with respect to any of Merz' Intellectual Property Rights.

            7.6      Any damages recovered by either party hereto, as a result of any action initiated by that party under Article 7.5 hereof, as the case may be, shall be used first for the payment or reimbursement of any and all expenses incurred by the parties in the prosecution of such action, and thereafter shall be allocated between the parties on the basis of [ * ] to Merz and [ * ] to Licensee.

Article 8: Confidentiality Information

            8.1      Licensee hereby acknowledges that all of Merz' Confidential Information, including, but not limited to Merz' Know-How, disclosed, revealed or otherwise made available to Licensee under, or as a result of, this Agreement is furnished to Licensee solely to permit Licensee to exercise its rights, and perform its obligations, under this Agreement. Licensee shall not use any of Merz' Confidential Information for any other purpose, and shall not disclose, reveal or otherwise make any of Merz' Confidential Information available to any other person, firm, corporation or other entity, without the prior written authorization of Merz.

            8.2      In furtherance of Licensee's obligations under Article 8.1 hereof, Licensee shall take all appropriate steps, and shall implement all appropriate safeguards, to prevent the unauthorized use or disclosure of any of Merz' Confidential Information. Without limiting the generality of this Article 8.2, Licensee shall disclose any of Merz' Confidential Information only to those of its officers, employees and authorized assignees and sublicensees under Article 12.1 hereof that have a need to know Merz' Confidential Information, in order for Licensee to exercise its rights and perform its obligations under this Agreement, and only if such officers, employees and authorized assignees and sublicensees have executed appropriate non-disclosure agreements, in a form reasonably acceptable to Merz, which effectively prohibits the unauthorized use or disclosure of Merz' Confidential Information. Licensee shall furnish Merz with immediate written notice of any unauthorized use or disclosure of any of Merz' Confidential Information by any officer, employee, assignee or sublicensee of Licensee, and shall take all actions that Merz reasonably requests in order to prevent any further unauthorized use or disclosure of Merz' Confidential Information.

            8.3      Licensee's obligations under Articles 8.1 and 8.2 hereof shall not apply to the extent, but only to the extent, that any of Merz' Confidential Information:

a.	Passes into the public domain, or becomes generally available to the public through no fault of Licensee;
b.	Was known to Licensee prior to disclosure hereunder by Merz;
c.	Is disclosed, revealed or otherwise made available to Licensee by a third party that is under no obligation of non-disclosure and/or non-use to Merz; or
d.	Is required to be disclosed under Applicable Law, or in connection with any application by Licensee for any Regulatory Approvals under Article 3.1 hereof; provided, however, that Licensee shall furnish Merz with as much prior written notice of such disclosure requirement as reasonably practicable, so as to permit Merz, in its sole discretion, to take appropriate action, including seeking a protective order, in order to prevent Merz' Confidential Information from passing into the public domain or becoming generally available to the public.

            8.4      In the event of the termination of this Agreement due to (i) a voluntary termination by Licensee, pursuant to Article 12.1 hereof; or (ii) termination by Merz, pursuant to Article 12.3 or Article 12.4 hereof, Licensee shall return to Merz, or destroy, as Merz shall specify in writing, all copies of all documents and other materials that contain or embody any of Merz' Confidential Information, except to the extent that Licensee is required to retain such documents and materials: (i) in accordance with the requirements of any Applicable Laws or Regulatory Approvals; or (ii) to perform its post-termination indemnification obligations, as provided in Articles 10.4 and 10.8 hereof. Within thirty (30) days after the date of termination of this Agreement, as provided in this Article 8.4, Licensee shall furnish Merz with a certificate, duly executed by an officer of Licensee, confirming that Licensee h as complied with it obligations under this Article 8.4.

            8.5      In the event of any unauthorized use or disclosure by Licensee of any of Merz' Confidential Information, Merz shall be entitled to preliminary and permanent injunctive relief, as provided under Applicable Law, to prevent or enjoin any such unauthorized use or disclosure of any of Merz' Confidential Information by Licensee. In addition, in the event of any such unauthorized use or disclosure of Merz' Confidential Information, Merz shall be entitled to recover from Licensee all damages for all harm suffered or incurred by Merz as a result of any such unauthorized use of disclosure of any of Merz' Confidential Information.

            8.6      All of Licensee's obligations under Articles 8.1 and 8.2 hereof, with respect to the protection of Merz' Confidential Information, shall survive the expiration or termination of this Agreement for any reason whatsoever.

Article 9: Warranties and Liabilities

            9.1      Except as specifically provided in Articles 2.6, 2.9 and 2.10 hereof, Merz makes no representation or warranty with respect to any of Merz' Know-How furnished to Licensee under this Agreement. Without limiting the generality of this Article 9.1, Licensee hereby specifically acknowledges and agrees that Merz makes no representation or warranty whatsoever that Licensee will derive any benefit from any of Merz' Know-How, Merz' Intellectual Property Rights, or any of the rights and licenses granted by Merz to Licensee under this Agreement.

            9.2      EXCEPT AS SPECIFICALLY PROVIDED IN ARTICLES 2.4 AND 9.1 HEREOF, MERZ MAKES NO OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, OR NON-INFRINGEMENT, WITH RESPECT TO ANY OF MERZ' INTELLECTUAL PROPERTY, ANY OF MERZ' KNOW-HOW, OR ANY OTHER CONFIDENTIAL INFORMATION DISCLOSED, REVEALED OR OTHERWISE MADE AVAILABLE BY MERZ TO LICENSEE UNDER THIS AGREEMENT.

            9.3      Subject to Merz' compliance with its product warranty obligations with respect to Memantine under the Supply Agreement, Licensee hereby represents and warrants that all Contract Products manufactured, produced, distributed, marketed, sold and/or used by Licensee shall conform strictly with all of the requirements of Articles 3.6 and 4.3 of this Agreement. Except as specifically provided in Article 10.1 of this Agreement, Licensee shall be solely responsible for any and all claims by any third parties, including, but not limited to, product liability claims, and any and all losses, liabilities, damages, costs and expenses attributable to all such claims, arising from, relating to, or attributable to any of the Contract Products manufactured, produced, distributed, marketed, sold and/or used by Licensee under this Agreement.

            9.4      UNDER NO CIRCUMSTANCES WILL MERZ BE LIABLE TO LICENSEE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOST REVENUES OR LOSS OF GOODWILL, WHETHER BASED ON CONTRACT OR TORT, OR ARISING UNDER APPLICABLE LAW OR OTHERWISE, EVEN IF MERZ HAS BEEN PLACED ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. MERZ' TOTAL LIABILITY UNDER THIS AGREEMENT SHALL IN NO EVENT EXCEED FIFTY PERCENT (50%) OF THE SUM OF (i) ALL LUMP SUM PAYMENTS ACTUALLY PAID BY LICENSEE TO MERZ UNDER ARTICLE 5.1 HEREOF; AND (ii) ALL ROYALTIES ACTUALLY PAID BY LICENSEE TO MERZ UNDER ARTICLE 5.3 HEREOF.

Article 10: Indemnification and Insurance

            10.1     Merz shall defend, indemnify and hold Licensee harmless against any claims, suits, actions, proceedings, losses, liabilities, damages, costs and expenses (collectively "Claims and Liabilities") arising from, related to, or attributable to (i) an allegation that Licensee's use of Merz' Intellectual Property Rights and/or Merz' Know-How in accordance with the terms and conditions of this Agreement infringes any United States patent, copyright, trademark, data exclusivity right or trade secret right of any other person, firm, corporation or other entity; or (ii) the failure of any bulk Memantine supplied by Merz to Licensee under the Supply Agreement to conform to the specification therefor, as set forth on Exhibit 1.13 hereto. In the event that Licensee is subject to any Claims or Liabilities that are within the scope of Merz' indemnification obligation under this Article 10.1: (i) Licensee sha ll furnish Merz with written notice of any such Claim or Liability within thirty (30) days of the date on which Licensee receives notice thereof; (ii) Merz shall be solely responsible for the investigation, defense, settlement and discharge of such Claim or Liability; and (iii) Licensee shall furnish Merz with all assistance reasonably requested by Merz in connection with the investigation, defense, settlement and discharge of such Claim or Liability. Licensee's failure to perform any of its obligations under this Article 10.1 shall not be deemed to constitute a breach by Licensee of this Agreement, and shall not relieve Merz of its indemnification obligation hereunder, unless Merz does not receive timely notice of such Claim or Liability, or Merz' ability to defend and/or settle such Claim or Liability is otherwise materially impaired by Licensee's failure hereunder.

            10.2     In the event that it is determined by any court of competent jurisdiction that Licensee's use of Merz' Intellectual Property Rights and/or Merz' Know-How in accordance with the terms and conditions of this Agreement infringes, or Merz reasonably determines that Licensee's use of Merz' Intellectual Property Rights and/or Merz' Know-How is likely to infringe, any United States patent, copyright, trademark, data exclusivity right or trade secret right of any other person, firm, corporation or other entity, Merz shall use commercially reasonable efforts to: (i) procure a license from such other person, firm, corporation or other entity authorizing Licensee to continue to utilize Merz Intellectual Property Rights; or (ii) modify the Merz' Know-How, so as to render it non-infringing. In the event that neither of the foregoing alternatives is reasonably available or commercially feasible, Merz may terminate the rights and licenses granted to Licensee hereunder without any further obligations whatsoever to Licensee. For purposes of this Article 10.2, procuring a license from another person, firm, corporation or other entity shall be deemed to be not commercially feasible if the total cost to Merz of such a license would exceed [ * ] of the royalties thereafter payable by Licensee to Merz hereunder.

            10.3     Merz' obligations under Articles 10.1 and 10.2 hereof shall not apply to any allegations of infringement of the intellectual property rights of another person, firm, corporation or other entity that would not have arisen but for: (i) Licensee's use of Merz Intellectual Property Rights and/or Merz' Know-How in violation of the terms and conditions of this Agreement, including, but not limited to, Licensee's marketing, distribution, sale and/or use of any of the Contract Products outside of the Territory; (ii) any modification, adaptation or application of Merz' Know-How made by Licensee without the prior authorization of Merz; or (iii) any combination of the Contract Products with any other products, compounds or materials.

            10.4     Licensee shall defend, indemnify and hold Merz, its licensors, and their respective officers, directors, shareholders, employees, agents and representatives harmless against any and all Claims and Liabilities arising from, related to, or attributable to:

a.	Any claim, including any product liability claim, by any third party with respect to any of the Contract Products, except as specifically provided in Article 10.1 hereof, regardless of whether such claim is based on contract, breach of warranty, any form of tort, strict liability, or otherwise;
b.	Any allegation that any of the Contract Products fail to conform to the requirements of any Applicable Laws and/or any applicable Regulatory Approvals, including, but not limited to, the failure by Licensee to obtain any required Regulatory Approvals for the Contract Products;
c.	Any breach of any of Licensee's representations, warranties or covenants set forth in this Agreement; or
d.	Any other negligent, willful or intentionally wrongful act, error or omission on the part of Licensee, or any officer, director, employee, agent or representative of Licensee.

            10.5     Licensee's indemnification obligations under Articles 10.4(a) and 10.4(b) shall not apply to the extent, but only to the extent, that any product liability claim with respect to the Contract Products, or any failure of the Contract Products to conform to the requirements of Applicable Law and/or any applicable Regulatory Approval, is directly attributable to the failure of any bulk Memantine supplied to Licensee by Merz to comply with the specifications therefor set forth on Exhibit 1.13 hereto.

            10.6     In the event that Merz is subject to any Claims or Liabilities that are within the scope of Licensee's indemnification obligation under Article 10.4 hereof: (i) Merz shall provide Licensee with written notice of any such Claim or Liability within thirty (30) days after Merz receives notice of such Claim or Liability; (ii) Licensee shall be solely responsible for the investigation, defense, settlement and discharge of such Claim or Liability; and (iii) Merz shall provide Licensee with such assistance as Licensee shall reasonably request in connection with the investigation, defense, settlement and discharge of such Claim or Liability. Merz' failure to perform any of its obligations under this Article 10.6 shall not be deemed to constitute a breach by Merz of this Agreement, and shall not relieve Licensee of its indemnification obligation hereunder, unless Licensee does not receive timely notice of su ch Claim or Liability or Merz' ability to defend and/or settle such Claim or Liability is otherwise materially impaired by Licensee's failure hereunder.

            10.7     Licensee shall, at its sole cost and expense, obtain no later than the date of First Commercial Sale of the Contract Products in the Territory, and shall maintain in full force and effect during the continuance of this Agreement and thereafter in accordance with Article 10.9 hereof, commercial general liability insurance, which shall provide both (i) product liability coverage, and (ii) contractual liability coverage, which complies with all Applicable Laws of the Territory, and provides for minimum loss coverage at least equal to the insurance coverage maintained by Licensee with respect to Licensee's proprietary pharmaceutical products, but, in any event, not less than Two Million United States Dollars ($2,000,000.00) per incident and One Hundred Million United States Dollars ($100,000,000.00) annual aggregate. In the event that Licensee elects to self-insure all, or any portion of the cover age limits specified in this Article 10.7, including deductibles or retentions in excess of Two Hundred Fifty Thousand United States Dollars (US$250,000.00), such self-insurance program must be reasonably acceptable to Merz and its licensors. Licensee hereby specifically acknowledges and agrees that the insurance coverage limits set forth in this Article 10.7 shall not be construed to create any limit on Licensee's liability hereunder and/or indemnification obligation under Article 10.4 hereof.

            10.8     Licensee shall cause Merz and Merz' licensors to be named as additional insureds under Licensee's commercial general liability insurance policies under Article 10.7 hereof. Each such commercial general liability insurance policy obtained and maintained by Licensee under Article 10.7 shall provide for at least thirty (30) days written notice to Merz and Merz' licensors prior to cancellation, non-renewal or material change in such insurance policy. In the event of cancellation or non-renewal of any such commercial general liability insurance policy, Licensee shall, at its sole cost and expense, obtain replacement insurance coverage, in accordance with the requirements of Article 10.7 hereof, prior to the effective date of such cancellation or non-renewal.

            10.9     Licensee's indemnification obligation under Article 10.4 hereof, and Licensee's obligation to maintain commercial general liability insurance under Article 10.7 hereof, shall survive the expiration or termination of this Agreement for any reason whatsoever for a period of fifteen (15) years after the date of expiration or termination hereof.

Article 11: Term and Expiration

            11.1     This Agreement shall enter into effect on the Effective Date hereof, and shall remain in full force and effect for a period of fifteen (15) years following Licensee's First Commercial Sale of the Contract Products within the Territory, unless terminated earlier by mutual agreement between the parties, or in accordance with the provisions of Article 12 hereof.

            11.2     Upon expiration of this Agreement in accordance with Article 11.1 hereof, or upon termination of this Agreement by Licensee, due to a breach or default hereof by Merz, in accordance with Article 12.3 hereof, Licensee shall have a perpetual, non-exclusive license to use Merz' Intellectual Property Rights and Merz' Know-How in connection with the manufacture, production, marketing, distribution and sale of the Contract Products within the Territory. Licensee shall also have a perpetual license to use the Trademarks in connection with the marketing, distribution and sale of the Contract Products within the Territory, which license shall be exclusive for so long as Licensee is actually using the Trademarks as provided herein. In consideration for the licenses granted by Merz to Licensee under this Article 11.2, Licensee shall pay to Merz royalties equal to [ * ] of Licensee's Net Revenues derived from the sale of the Contract Products to which any of the Trademarks are affixed or with which any of the Trademarks are used. All royalties payable by Licensee to Merz under this Article 11.2 shall be paid on a quarterly basis in accordance with the provisions of Article 5 hereof.

            11.3     In furtherance of the perpetual, non-exclusive license granted to Licensee by Merz pursuant to Article 11.2 hereof, Merz shall use commercially reasonable efforts to assist Licensee in assuring a continuing source of supply of Memantine for the Contract Products, including the introduction of Licensee to Merz' suppliers and contract manufacturers; provided, however, that Licensee shall purchase its requirements of Memantine from Merz, in accordance with the terms and conditions of the Supply Agreement attached hereto as Exhibit 1.16, at a price per kilogram to be specified by Merz, provided, that that price per kilogram does not exceed the price per kilogram offered to Licensee by another person, firm, corporation or other entity for comparable quantities of bulk Memantine of comparable quality.

Article 12: Termination

            12.1     Licensee shall have the right to terminate this Agreement, effective immediately upon Licensee's written notice of termination to Merz, at any time prior to the approval of the NDA for the Contract Products by the FDA, in the event that Licensee reasonably determines that problems of safety and/or efficacy of the Contract Products are such that (i) FDA approval of the NDA for the Contract Products is unlikely; or (ii) the FDA will likely impose such restrictions on the labeling or distribution of the Contract Products, or the indications for which the Contract Products can be used, so as to have a material adverse effect on the marketing, distribution and sale of the Contract Products in the Territory (the "Termination Standard"). In the event of termination of this Agreement by Licensee pursuant to this Article 12.1, Licensee shall furnish Merz with all assistance reasonably requested by Merz in ord er to assure the transition of all pending clinical studies for the Contract Products from Licensee to Merz in accordance with all Applicable Laws and applicable ethical standards. Upon termination of this Agreement by Licensee pursuant to this Article 12.1, Licensee shall pay to Merz all lump sum payments payable by Licensee under Article 5.1 hereof, and all other amounts payable hereunder to Merz, which have accrued but which remain outstanding as of the date of termination. Except as provide in this Article 12.1, in Article 8.6 with respect to Merz' Confidential Information, and in Article 12.8 with respect to Merz' right of reference to Licensee's Regulatory Approvals, upon termination of this Agreement pursuant to this Article 12.1, Licensee shall have no further rights or obligations hereunder, including, but not limited to, the obligation to make any lump sum payment provided for in Article 5.1 hereof which has not accrued as of the date of termination.

            12.2     In the event that Licensee elects to terminate this Agreement pursuant to Article 12.1 hereof, Licensee shall give written notice thereof to Merz, stating the bases on which Licensee has determined that the Termination Standard has been met with reasonable specificity. In the event that Merz believes that the Termination Standard has not been met, Merz shall give written notice thereof to Licensee within twenty (20) days after that date of Licensee's notice of termination under this Article 12.2. In the event that Merz gives notice under this Article 12.2 that it disputes Licensee's assertion that the Termination Standard has been met, each party shall select a recognized independent expert in pharmaceutical development with experience in the regulation and marketing of pharmaceutical products in the United States who shall jointly determine if the Termination Standard has been met. In the event th at the two experts selected by the parties under this Article 12.2 are unable to make a joint determination whether the Termination Standard has been met, the two experts shall appoint a third expert whose determination shall be final and binding upon the parties; provided, however, that if the two experts jointly, or the third expert individually, determine that the Termination Standard has not been met, Licensee may nonetheless terminate this Agreement in accordance with Article 12.1 hereof, by paying a termination fee to Merz in an amount equal to [ * ] of the lump sum payments payable by Licensee to Merz under Article 5.1 hereof which have not otherwise accrued as of the date of Licensee's notice of termination hereunder. In the event that experts are appointed under this Article 12.2 to determine if the Termination Standard has been met, each party hereto shall (i) cooperate in the expeditious appointment of those experts; (ii) provide the experts with such documentation and information as the e xperts shall reasonably require to make their determination hereunder, subject to appropriate safeguards to protect the confidentiality of such documentation and information; (iii) bear all of the costs and expenses of the expert selected by that party; and (iv) bear fifty percent (50%) of the costs and expenses of the third expert, if required.

            12.3     In the event that either party to this Agreement (the "breaching party") commits any breach or default of any of its obligations hereunder, the other party hereto (the "non-breaching party") may give the breaching party written notice of such breach or default, and shall request that such breach or default be cured immediately. In the event that the breaching party fails to cure such breach or default within sixty (60) days after the date of the non-breaching party's notice thereof, or if such breach or default cannot be cured within sixty (60) days, the breaching party takes reasonable steps to commence, within that sixty (60) day period, and proceeds diligently thereafter to cure such breach or default, and does, in fact, cure such breach or default within a reasonable time after the non-breaching party's written notice thereof, the non-breaching party may terminate this Agreement by giving written notice of termination to the breaching party; provided, however, that, in the event that the breaching party certifies in writing that no grounds exist for termination of this Agreement under this Article 12.3, termination hereunder shall only be effective upon a final determination that the breaching party has committed a breach or default of its obligations hereunder, pursuant to an arbitration proceeding under Article 13.6 hereof. Termination of this Agreement in accordance with this Article 12.3 shall not affect or impair the non-breaching party's right to pursue any legal remedy, including, but not limited to, the right to recover damages, for any harm suffered or incurred by the non-breaching party as a result of such breach or default.

            12.4     In addition to the termination rights provided for in Article 12.3 hereof, Merz shall have the right to terminate this Agreement, immediately upon furnishing written notice of termination to Licensee, upon the occurrence of any of the following events:

a.

Licensee files a voluntary petition, or suffers the filing of an involuntary petition under the bankruptcy provisions of Applicable Law, is declared insolvent, undergoes voluntary or involuntary dissolution, makes an assignment for the benefit of creditors, fails or is unable to pay its debts as they come due, or suffers the appointment of a receiver or trustee over all, or substantially all, of its assets or properties;

b.

Licensee fails to use its best efforts to obtain all required Regulatory Approvals for the manufacture, production, marketing, distribution, sale and use of the Contract Products as soon as reasonably practicable after the Effective Date hereof; provided, however, that, in the event of any dispute between the parties under this Article 12.4(b), Licensee shall have the burden of proving that it used its best efforts to obtain all such Regulatory Approvals.

            12.5     In the event that this Agreement is terminated by Licensee pursuant to Article 12.1 hereof, or by Merz pursuant to Article 12.3 or Article 12.4 hereof, Licensee shall have no further rights under the NDA or any other Regulatory Approvals for the Contract Products. Licensee shall execute and deliver to Merz, or to such other party designated by Merz, or to the FDA, as the case may be, all further amendments to the NDA and all such other Regulatory Approvals, and all notifications, consents and other documents and instruments as may be reasonably required to confirm the termination of all of Licensee's rights hereunder. Upon termination of this Agreement by Merz pursuant to Article 12.3 or Article 12.4 hereof, Licensee shall immediately cease all manufacture, production, marketing, distribution and sale of the Contract Products.

            12.6     Termination of this Agreement for any reason whatsoever shall not relieve Licensee of its obligations: (i) to pay all royalties and other amounts payable to Merz which have accrued prior to, but remain unpaid as of, the date of expiration or termination hereof, or which accrue thereafter, in accordance with Article 11.2 hereof; (ii) with respect to Merz' Intellectual Property Rights, under Article 7 hereof, and Merz' Confidential Information, under Article 8 hereof; (iii) to defend, indemnify and hold Merz, its licensors and their respective officers, directors, shareholders, employees, agents and representatives harmless against Claims and Liabilities, as provided in Article 10.4 hereof; (iv) to maintain commercial general liability insurance coverage, in accordance with the requirements of Articles 10.6 and 10.7 hereof; and (v) with respect to the NDA and the other Regulatory Approvals for the Cont ract Products, as provided in Articles 12.5 and 12.8 hereof.

            12.7     Except in the case of termination of this Agreement by Licensee, due to a breach or default hereunder by Merz, the expiration or termination of this Agreement shall not adversely affect or impair Merz' right to continue to use any and all Improvements and Enhancements licensed by Licensee to Merz under Article 6.6 hereof. Except as otherwise specifically provided in this Agreement, upon expiration or termination of this Agreement for any reason whatsoever, Merz shall have no further obligations to Licensee hereunder.

            12.8     Upon termination of this Agreement by Licensee pursuant to Article 12.1 hereof, or upon termination of this Agreement by Merz pursuant to Article 12.3 or Article 12.4 hereof, Licensee shall grant to Merz such rights of reference to Licensee's Regulatory Approvals as Merz may reasonably request, in order to permit Merz to obtain all required Regulatory Approvals for the manufacture, production, marketing, distribution and sale of the Contract Products within the Territory.

Article 13: General Provisions

            13.1     Assignment: Except as provided in Article 2.2 hereof, Licensee shall not have the right or the power to assign or sublicense any of its rights, or delegate or subcontract the performance of any of its obligations under this Agreement, without the prior written authorization of Merz, which Merz may grant or withhold in its sole discretion; provided, however, that the prior written authorization of Merz shall not be required for Licensee to assign or sublicense any of its rights, or delegate or subcontract the performance of any of its obligations hereunder to an Affiliate of Licensee. Any permitted assignment or delegation hereunder by Licensee, whether to an Affiliate pursuant to this Article 13.1, or pursuant to the prior written authorization of Merz, shall not relieve Licensee of any of its obligations under this Agreement, including, but not limited to, Licensee's obligation to mak e royalty payments with respect to any and all Net Revenues derived by any of Licensee's assignees or sublicensees from the distribution, marketing and sale of any of the Contract Products.

            13.2     Independent Contractors: In the exercise of their respective rights, and the performance of their respective obligations, under this Agreement, the parties are, and shall remain, independent contractors. Nothing in this Agreement shall be construed to constitute the parties as partners, joint venturers, or participants in a joint enterprise or undertaking, or to constitute either of the parties as the agent of the other party for any purpose whatsoever. Neither party shall bind, or attempt to bind, the other party hereto to any contract or the performance of any other obligation, or represent to any third party that it is authorized to enter into any contract or binding obligation on behalf of the other party hereto.

            13.3     Force Majeure: Neither party shall be liable for any failure to perform, or any delay in the performance of, any of its obligations under this Agreement (other than Licensee's obligation to make timely payments to Merz in accordance with Article 5 hereof) to the extent, but only to the extent, that such party's performance is prevented by the occurrence of an event of force majeure. For purposes of this Article 13.3, an event of force majeure shall mean and include, war, civil war, insurrection, rebellion, civil unrest, fire, flood, earthquake, adverse weather conditions, strike, lockout, labor unrest, unavailability of supplies, materials or transportation, acts of the public enemy, acts of government authorities, and, in general, any other cause or condition beyond the reasonable control of the party whose performance is affected thereby; provided, however , that the failure of Licensee to obtain all required Regulatory Approvals for the Contract Products from the FDA or any other competent government agencies shall not be deemed to constitute an event of force majeure, but shall be grounds for termination of this Agreement by Merz, in accordance with the provisions of Article 12.4(c) hereof. Any event of force majeure which prevents Merz from supplying bulk Memantine for the Contract Products to Licensee, in accordance with that certain Supply Agreement between the parties dated June 28, 2000, shall not affect or impair any of the parties' respective rights and/or obligations under this Agreement; provided, however, that, so long as that event of force majeure persists, Licensee shall have the right to purchase bulk Memantine for the Contract Products from any other person, firm, corporation or other entity, for use solely in accordance with the terms and conditions of this Agreement, and Merz shall use commercially reasonable efforts to assist Licensee in locating one or more alternative sources of supply of bulk Memantine for the Contract Products. In the event that a party's performance is affected by the occurrence of any event of force majeure, that party shall furnish immediate written notice thereof to the other party hereto.

            13.4     Notices: All notices, reports and other communications between the parties under this Agreement shall be sent by registered air mail, postage prepaid and return receipt requested, by international air courier, or by facsimile, with a confirmation copy sent by registered air mail or international air courier, addressed as follows:

To:	Merz	Merz + Co. GmbH & Co.
		Eckenheimer Landstrasse 100-104
		D-60318 Frankfurt/Main
		Germany
		Attention:
		Facsimile:

To:	Licensee	Forest Laboratories Ireland Limited
		Clonshaugh Industrial Estate
		Clonshaugh, Dublin 17
		Ireland
		Attention:
		Facsimile:

With a copy to:	Forest Laboratories, Inc.
	909 Third Avenue
	New York, NY 10022
	U.S.A.
	Attention: Chairman of the Board
	Facsimile:

All notices, reports and other communications given in accordance with this Article 13.4 shall be deemed received: (i) if sent by registered air mail, seven (7) days after the date of mailing; (ii) if sent by international air courier, two (2) days after the date of dispatch; and (iii) if sent by facsimile, twenty-four (24) hours after the time of transmission.

            13.5     Governing Law: This Agreement shall be governed by, and interpreted in accordance with the laws of the State of New York, U.S.A., without reference to conflicts of laws principles; provided, however, that the validity of all Intellectual Property Rights hereunder shall be determined under the laws of that jurisdiction in which those Intellectual Property Rights are registered or for which an application for registration has been filed. The United Nations Conventions on Contracts for the International Sale of Goods shall not be applicable to this Agreement.

            13.6     Dispute Resolution: Any dispute relating to the validity, performance, construction or interpretation of this Agreement which cannot be resolved amicably between the parties shall be submitted to binding arbitration, to be held in London, England, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (the "ICC Rules"). Any arbitration proceeding under this Agreement shall be conducted in the English language before an arbitration panel comprised of three (3) arbitrators, who shall be selected as follows: (i) each party shall select one (1) arbitrator within twenty (20) days after the date on which one of the parties gives written demand for arbitration in accordance with the ICC Rules; and (ii) the third arbitrator, who shall act as chairman of the arbitration panel, shall be selected by the other two arbitrators, within twenty (20) days after those other two arbitrators have been selected; provided, however, that, in the event that a party fails to select an arbitrator, or the two arbitrators selected by the parties fail to select a third arbitrator, in accordance with the provisions of this Article 13.6, such arbitrator shall be selected by the Chairman of the International Chamber of Commerce, upon written request therefor by either of the parties. The decision and award of the arbitrators in any arbitration proceeding between the parties under this Article 13.6 shall be: (i) in writing, stating the reasons therefor; (ii) based solely on the terms and conditions of this Agreement, as interpreted in accordance with the laws of the State of New York, U.S.A.; (iii) final and binding upon the parties hereto; and (iv) enforceable in any court of competent jurisdiction. Notwithstanding the provisions of this Article 13.6, Merz shall have the right to seek preliminary and permanent injunctive relief in any court of competent jurisdiction, in accordance with Applicable Law, in order to prevent or enjoin any misappropriation, misuse, unauthorized disclosure or infringement of any of Merz' Intellectual Property Rights and/or Confidential Information.

            13.7     Severability: If any provision of this Agreement is determined by any court or administrative tribunal of competent jurisdiction to be invalid or unenforceable under Applicable Law, the parties shall negotiate in good faith a replacement provision that is commercially equivalent, to the maximum extent permitted by Applicable Law, to such invalid or unenforceable provision. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the other provisions of this Agreement.

            13.8     Counterparts: This Agreement may be executed in several duplicates, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

            13.9     Headings: The subject headings of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any provision of this Agreement.

            13.10    Entire Agreement and Amendments: This Agreement, together with all Exhibits attached hereto, constitutes the entire agreement between the parties, and supersedes all prior agreements, understandings and communications between the parties, with respect to the subject matter hereof. No modification or amendment of this Agreement, including, but not limited to this Article 13.10, shall be binding upon the parties unless in writing and executed by the duly authorized representative of each of the parties.

            13.11    Waivers: The failure by either party hereto to assert any of its rights hereunder, including, but not limited to, the right to terminate this Agreement due to a breach or default by the other party hereto, shall not be deemed to constitute a waiver by that party of its right thereafter to enforce each and every provision of this Agreement in accordance with its terms.

            IN WITNESS WHEREOF, the parties have caused this Agreement to be executed this 28^th day of June, 2000, by their duly authorized representatives.

Merz + Co. GmbH & Co.	Forest Laboratories Ireland Limited
By:  /s/Dr. Jochen Huckmann	By:  /s/Howard Solomon
Name: Dr. Jochen Huckmann	Name: Howard Solomon
Title:   President	Title:   Chairman
By: /s/Friedhelm Klingenburg
Name: Friedhelm Klingenburg
Title: Vice President - Corporate Development

EXHIBIT 1.16

Supply Agreement

            This Supply Agreement (the "Agreement") is made and entered into this 28^th day of June, 2000, by and between Merz + Co. GmbH & Co., a limited liability company organized and existing under the laws of Germany, with its principal business office located at Eckenheimer Landstrasse 100-104, D-60318 Frankfurt/Main, Germany ("Merz"), and Forest Laboratories Ireland Limited, a corporation organized and existing under the laws of the Republic of Ireland, with its principal business office located at Clonshaugh Industrial Estate, Clonshaugh, Dublin 17, Republic of Ireland ("Licensee").

W I T N E S S E T H:

            WHEREAS, Merz and Licensee have entered into that certain License and Cooperation Agreement, dated June 28, 2000 (the "License Agreement"), under the terms of which Merz has granted Licensee a license to utilize certain Merz Intellectual Property Rights and Merz Know-How for the manufacture, production, marketing, distribution, sale and use of certain Contract Products, based upon Memantine, for the diagnosis and treatment of vascular dementia and dementia syndrome related to Alzheimer's disease; and

            WHEREAS, Licensee wishes to acquire Memantine from Merz, for use in the manufacture and production of the Contract Products; and

            WHEREAS, Merz is willing to supply Memantine to Licensee in accordance with the terms and conditions, and subject to the limitations, of this Agreement.

            NOW, THEREFORE, in consideration of the foregoing, and the mutual covenants and conditions set forth herein, the parties to this Agreement do agree as follows:

Article 1: Definitions

            For purposes of this Agreement, all defined terms set forth in the License Agreement shall have the same meaning for purposes of this Agreement as set forth in that License Agreement.

Article 2: Purchase and Sale of Memantine

            2.1      Subject to the terms and conditions of this Agreement, Licensee shall purchase from Merz all of Licensee's requirements of, and Merz shall sell to Licensee, Memantine for use by Licensee solely in the manufacture and production of the Contract Products, in accordance with the terms and conditions, and subject to the limitations, of the License Agreement.

            2.2      Each order by Licensee for Memantine shall be in the form of a written purchase order, substantially in the form of Exhibit A hereto, stating (i) the quantity of Memantine ordered; and (ii) the requested delivery date thereof; provided, however, that, in no event shall the requested delivery date for any quantity of Memantine ordered by Licensee hereunder be less than sixty (60) days from the date of Licensee's order therefor. All orders for Memantine submitted by Licensee under this Article 2.2 shall be for at least one hundred (100) kilograms of Memantine. In the event of any inconsistency between the terms and conditions of any such purchase order and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control.

            2.3      Except in the event that Licensee is in default of any of its material obligations under the License Agreement, subject to the provisions of this Article 2.3 Merz shall accept all purchase orders submitted by Licensee hereunder. Licensee shall, from and after the Effective Date, deliver to Merz at least [ * ] prior to the start of each calendar quarter Licensee's non-binding estimate of Licensee's requirements of Memantine for the ensuing [ * ] period (the "[ * ] Rolling Estimates"), including the monthly quantities of Memantine forecast for each month of that [ * ] month period. The [ * ] Rolling Estimates shall be confirmed by Licensee's binding purchase orders, each of which (i) shall specify Licensee's requirements of Memantine for a [ * ] month period; (ii) shall be submitted to Merz at least ninety (90) days prior to the delivery date spec ified thereon; and (iii) shall specify a quantity of Memantine which is not less than [ * ] nor more than [ * ] of the quantity specified on Licensee's [ * ] Rolling Estimate for that calendar quarter; provided, however, that, in the event that the quantity of Memantine ordered by Licensee on any purchase order submitted by Licensee hereunder is more than [ * ] of the amount forecast by Licensee for that calendar quarter on Licensee's [ * ] Rolling Estimate, Merz shall use commercially reasonable efforts to supply such excess quantity of Memantine, but shall have no liability hereunder to Licensee if, despite such commercially reasonable efforts, Merz is unable to do so.

            2.4      Except as otherwise agreed between the parties, the Memantine covered by each purchase order submitted by Licensee, and accepted by Merz, hereunder, shall be delivered by Merz to Licensee on an ex works, Merz' facility, Frankfurt/Main, Germany, basis (Incoterms 2000), at which point, title and risk of loss or damage to Memantine shall be transferred from Merz to Licensee. Without limiting the generality of this Article 2.4, Licensee shall be solely responsible for all the handling, freight and insurance charges for the transportation of Memantine from Merz' facility to Licensee's facility, and for compliance with all export and import requirements and formalities specified under Applicable Law.

            2.5      Merz shall use its commercially reasonable efforts to deliver the Memantine covered by each purchase order submitted by Licensee, and accepted by Merz, on or before the requested delivery date therefor, as set forth in that purchase order; provided, however, that Merz shall not be liable for any delay in delivery of any Memantine beyond the requested delivery date therefor, where, despite Merz' commercially reasonable efforts, such delay in delivery is due to any event of force majeure, as defined in Article 13.3 of the License Agreement, or to any other cause or condition beyond the reasonable control of Merz.

Article 3: Product Warranty and Limitation of Liability

            3.1      Merz warrants that all of the Memantine supplied by Merz to Licensee under this Agreement shall conform to Merz' specifications therefor, as set forth on Exhibit 1.13 of the License Agreement hereto. In the event that Licensee reasonably determines that any of the Memantine supplied by Merz to Licensee fails to conform to Merz' warranty, as set forth in this Article 3.1, Licensee shall provide Merz with written notice thereof. Merz shall then have the opportunity to inspect and test such Memantine, and, in the event that Merz reasonably determines that such Memantine does not conform to Merz' warranty thereof, Merz shall replace such Memantine at no charge to Licensee.

            3.2      Subject to Merz' indemnification obligation, as set forth in Article 10.1 of the License Agreement, Licensee hereby acknowledges and agrees that (a) the remedy set forth in Article 3.1 constitutes Licensee's sole remedy in the event that any of the Memantine supplied by Merz under this Agreement fails to conform to Merz' warranty thereof; and (b) Merz shall have no responsibility whatsoever with respect to any Memantine that: (i) has been mishandled by Licensee or any other person, firm, corporation or other entity; (ii) has been combined with any other substance or product; or (iii) has been used in any manner, or for any indication, application or other purpose, except as specifically authorized in the License Agreement.

            3.3      MERZ' WARRANTY, AND THE REMEDY FOR FAILURE OF ANY MEMANTINE TO CONFORM TO THAT WARRANTY, AS SET FORTH IN ARTICLE 3.1 HEREOF CONSTITUTE MERZ' SOLE AND EXCLUSIVE WARRANTY, AND LICENSEE'S SOLE AND EXCLUSIVE REMEDY, WITH RESPECT TO THE MEMANTINE SUPPLIED BY MERZ TO LICENSEE HEREUNDER. ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY SPECIFIC PURPOSE, ARE HEREBY DISCLAIMED AND EXCLUDED. WITHOUT LIMITING THE GENERALITY OF THIS ARTICLE 3.3, MERZ MAKES NO WARRANTY WHATSOEVER THAT LICENSEE WILL DERIVE ANY BENEFIT FROM ANY OF THE MEMANTINE SUPPLIED BY MERZ UNDER THIS AGREEMENT.

            3.4      UNDER NO CIRCUMSTANCES WILL MERZ BE LIABLE TO LICENSEE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, WHETHER BASED ON CONTRACT OR TORT, OR ARISING UNDER APPLICABLE LAW OR OTHERWISE, EVEN IF MERZ HAS BEEN PLACED ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. MERZ' TOTAL LIABILITY UNDER THIS AGREEMENT SHALL NOT EXCEED THE AMOUNT SPECIFIED IN ARTICLE 9.4 OF THE LICENSE AGREEMENT.

Article 4: Term and Termination

            4.1      This Agreement shall enter into effect on the Effective Date of the License Agreement, and shall remain in full force and effect until terminated in accordance with the provisions of this Article 4.

            4.2      This Agreement shall automatically terminate upon termination of the License Agreement by Licensee pursuant to Article 12.1 thereof, or by Merz pursuant to Article 12.3 or 12.4 thereof; provided, however, that upon expiration of the License Agreement, as provided in Article 11.1 thereof, all of the provisions of this Agreement shall remain in full force and effect, subject to Merz' providing Licensee with written notice of the price per kilogram at which Merz will thereafter sell and supply Memantine to Licensee hereunder.

            4.3      If, after the expiration of the License Agreement, Licensee commits any breach or default of any of its obligations under this Agreement, including, but not limited to, the obligation to make timely payments of the purchase price for all Memantine supplied by Merz to Licensee after such expiration, Merz may give Licensee written notice of such breach or default, and shall request that such breach or default by cured immediately. In the event that Licensee fails to cure that breach or default within sixty (60) days after the date of Merz' written notice hereunder, Merz may terminate this Agreement by providing written notice of termination to Licensee. Termination of this Agreement in accordance with this Article 4.3 shall not affect or impair Merz' right to pursue any legal remedy, including, but not limited to, the right to recover damages for any and all harm suffered or incurred by Merz as a result of Licensee's breach or default hereunder.

            4.4      Upon termination of this Agreement for any reason whatsoever, Merz shall have no further obligations to Licensee hereunder, including, but not limited to, the obligation to supply Memantine to Licensee. The termination of this Agreement for any reason whatsoever shall not relieve Licensee of any obligations that have accrued as of the date of termination hereof, including, but not limited to, the obligation to pay to Merz the purchase price for any and all Memantine supplied by Merz to Licensee after the date of expiration of the License Agreement.

Article 5: General Provisions

            The general provisions of the License Agreement, as set forth in Article 13 thereof, are hereby incorporated by reference into this Agreement.

            IN WITNESS WHEREOF, the parties have caused this Agreement to be executed this 28^th day of June, 2000 by their duly authorized representatives.

Merz + Co. GmbH & Co.	Forest Laboratories Ireland Limited
By:  /s/Dr. Jochen Huckmann	By:  /s/Howard Solomon
Name: Dr. Jochen Huckmann	Name: Howard Solomon
Title:   President	Title:   Chairman
By: /s/Friedhelm Klingenburg
Name: Friedhelm Klingenburg
Title: Vice President - Corporate Development

EX-13

EXHIBIT 13

 QUARTERLY STOCK MARKET PRICES

	High	Low
April-June 2002	$41.775	$34.150
July-September 2002	41.725	32.125
October-December 2002	54.990	42.950
January-March 2003	56.360	44.450
April-June 2003	61.350	46.850
July-September 2003	56.190	41.850
October-December 2003	63.230	45.750
January-March 2004	78.030	61.500

As of June 11, 2004 there were 1,876 stockholders of record of the Company's common stock.

SELECTED FINANCIAL DATA

March 31, (In thousands)	2004	2003	2002	2001	2000
Financial Position:
Current Assets	$2,916,234	$2,255,333	$1,195,112	$   884,149	$  676,472
Current Liabilities	604,754	564,397	324,968	223,618	242,329
Net Current Assets	2,311,480	1,690,936	870,144	660,531	434,143
Total Assets	3,862,736	2,918,107	1,951,873	1,446,930	1,128,881
Total Stockholders' Equity	3,255,864	2,351,818	1,625,089	1,222,114	884,690
Years Ended March 31, (In thousands,
except per share data)	2004	2003	2002	2001	2000
Summary of Operations:
Net Sales	$2,650,432	$2,206,706	$1,566,626	$1,174,527	$872,822
Other Income	29,842	39,100	35,198	30,647	26,479
Costs and Expenses	1,743,452	1,425,237	1,131,646	906,447	741,854
Income Before Income Tax Expense	936,822	820,569	470,178	298,727	157,447
Income Tax Expense	200,948	198,581	132,224	83,631	44,759
Net Income	735,874	621,988	337,954	215,096	112,688
Net Income Per Share:
Basic	$2.01	$1.72	$0.95	$0.62	$0.34
Diluted	$1.95	$1.66	$0.91	$0.59	$0.32
Weighted Average Number of
Common and Common
Equivalent Shares
Outstanding :
Basic	365,447	360,874	355,390	349,056	335,132
Diluted	376,779	373,702	370,484	365,968	351,780

No dividends were paid on common shares in any period.
All amounts give effect to the December 2002 100% stock dividend (refer to Note 1 to the consolidated financial statements).

EX-21

EXHIBIT 21

Forest Laboratories, Inc.

List of Subsidiaries

Subsidiary	Jurisdiction of Incorporation
Forest Pharmaceuticals, Inc.	Delaware
Inwood Laboratories, Inc.	New York
Forest Laboratories UK Ltd.	United Kingdom
Forest Laboratories Ireland Ltd.	Republic of Ireland
Forest Tosara Ltd.	Republic of Ireland

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Forest Laboratories, Inc.
New York, New York


We hereby consent to the incorporation by reference in the Registration Statements of Forest Laboratories, Inc. on Forms S-8, filed with the Securities and Exchange Commission on October 28, 1994, October 18, 1998 and October 26, 2000 and Form S-3 filed with the Securities and Exchange Commission on November 30, 1993, respectively, of our reports dated April 16, 2004 on the consolidated financial statements and schedule of Forest Laboratories, Inc. appearing in the Annual Report on Form 10-K as of and for the year ended March 31, 2004.



 /s/ BDO Seidman, LLP  
BDO Seidman, LLP


New York, New York
June 14, 2004

EX-31

Exhibit 31.1

CERTIFICATION

I, Howard Solomon, Chairman of the Board, Chief Executive Officer and Director, certify that:

       1.  I have reviewed this annual report on Form 10-K of Forest Laboratories, Inc. ("the Company");

       2.  Based on my knowledge, this report does not contain any untrue statement of a material
            fact or omit to state a material fact necessary to make the statements made, in light
            of the circumstances under which such statements were made, not misleading with respect
            to the period covered by this report;

       3.  Based on my knowledge, the financial statements, and other financial information included in
            this report, fairly present in all material respects the financial condition, results of
            operations and cash flows of the Company as of, and for, the periods presented in this
            report;

       4.  The Company's other certifying officer and I are responsible for establishing and maintaining
            disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
            for the Company and we have:

                   a.  designed such disclosure controls and procedures, or caused such disclosure controls and
                        procedures to be designed under our supervision, to ensure that material information
                        relating to the Company, including its consolidated subsidiaries, is made known to us by
                        others within those entities, particularly during the period in which this report
                        is being prepared;

                   b.  evaluated the effectiveness of the Company's disclosure controls and procedures and
                        presented in this report our conclusions about the effectiveness of the disclosure controls
                        and procedures, as of the end of the period covered by this report based on such
                        evaluation; and

                   c.  disclosed in this report any change in the Company's internal control over financial
                        reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred
                        during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in
                        the case of an annual report) that has materially affected, or is reasonably likely to
                        materially affect, the Company's internal control over financial reporting.

       5.  The Company's other certifying officer and I have disclosed, based on our most recent evaluation
            of internal control over financial reporting, to the Company's auditors and the audit committee of
            the Company's board of directors (or persons performing the equivalent function):

                    a.  all significant deficiencies and material weaknesses in the design or operation of internal
                         control over financial reporting which are reasonably likely to adversely affect the
                         Company's ability to record, process, summarize and report financial information; and

                    b.  any fraud, whether or not material, that involves management or other employees who
                         have a significant role in the Company's internal control over financial reporting.

Date: June 14, 2004

/s/ Howard Solomon       
Howard Solomon
Chairman of the Board,
Chief Executive Officer
and Director

EX-31

Exhibit 31.2

CERTIFICATION

I, John E. Eggers, Vice President - Finance and Chief Financial Officer, certify that:

       1.  I have reviewed this annual report on Form 10-K of Forest Laboratories, Inc. ("the Company");

       2.  Based on my knowledge, this report does not contain any untrue statement of a material
            fact or omit to state a material fact necessary to make the statements made, in light
            of the circumstances under which such statements were made, not misleading with respect
            to the period covered by this report;

       3.  Based on my knowledge, the financial statements, and other financial information included in
            this report, fairly present in all material respects the financial condition, results of
            operations and cash flows of the Company as of, and for, the periods presented in this
            report;

       4.  The Company's other certifying officer and I are responsible for establishing and maintaining
            disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
            for the Company and we have:

                   a.  designed such disclosure controls and procedures, or caused such disclosure controls and
                        procedures to be designed under our supervision, to ensure that material information
                        relating to the Company, including its consolidated subsidiaries, is made known to us by
                        others within those entities, particularly during the period in which this report
                        is being prepared;

                   b.  evaluated the effectiveness of the Company's disclosure controls and procedures and
                        presented in this report our conclusions about the effectiveness of the disclosure controls
                        and procedures, as of the end of the period covered by this report based on such
                        evaluation; and

                   c.  disclosed in this report any change in the Company's internal control over financial
                        reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred
                        during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in
                        the case of an annual report) that has materially affected, or is reasonably likely to
                        materially affect, the Company's internal control over financial reporting.

       5.  The Company's other certifying officer and I have disclosed, based on our most recent evaluation
            of internal control over financial reporting, to the Company's auditors and the audit committee of
            the Company's board of directors (or persons performing the equivalent function):

                    a.  all significant deficiencies and material weaknesses in the design or operation of internal
                         control over financial reporting which are reasonably likely to adversely affect the
                         Company's ability to record, process, summarize and report financial information; and

                    b.  any fraud, whether or not material, that involves management or other employees who
                         have a significant role in the Company's internal control over financial reporting.

Date: June 14, 2004

/s/ John E. Eggers            
John E. Eggers
Vice President - Finance and
Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Forest Laboratories, Inc. (the "Company") on Form 10-K for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Howard Solomon, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

            1.          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

            2.          The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Howard Solomon      
Howard Solomon
Chairman of the Board,
Chief Executive Officer
and Director
June 14, 2004

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

            In connection with the Annual Report of Forest Laboratories, Inc. (the "Company") on Form 10-K for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John E. Eggers, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

            1.         The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

            2.         The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ John E. Eggers         
John E. Eggers
Vice President - Finance and
Chief Financial Officer
June 14, 2004