Drugmaker Forest Laboratories Inc. (NYSE: FRX) posted a 34 percent rise in quarterly profit on Tuesday, beating Wall Street estimates, helped by rising sales of its Alzheimer's disease medicine.

But sales of its flagship Lexapro anti-depressant failed to climb as much as some analysts expected, and the company did not raise its full-year forecast despite the better-than-expected quarterly performance.

Forest shares fell as much as 2.9 percent in morning trade but recovered some of that ground by early afternoon.

Despite the beat, Forest did not raise its fiscal 2008 forecast, which we would expect many on the Street to react negatively to, Natexis Bleichroeder analyst Corey Davis said in a research note.

Forest's shares have fallen about 10 percent this year despite the generally strong performance of Lexapro and Alzheimer's drug Namenda.

Both of those two big sellers are expected to lose patent protection in the next decade, leaving a gaping revenue hole, and investors are uneasy about Forest's ability to replenish its product line.

Forest has to put up great quarters - strong sales and strong earnings - because they have a looming patent expiration cliff, said Morgan Stanley analyst Michael Rockefeller.

So if you're not getting great beats from the company, you really don't have a lot of reason to own it. Near-term earnings visibility is all that you have, Rockefeller said.

Also weighing on shareholders' minds is a pending U.S. court decision over Lexapro's patent that could bring generic rivals even sooner.

Net income rose to $268.2 million, or 83 cents per share, in the fiscal first quarter ended June 30, from $200.6 million, or 62 cents per share, a year earlier.

Analysts, on average, had expected a profit of 77 cents a share, according to Reuters Estimates.

Net revenue rose 14 percent to $928.3 million.

Rockefeller said in a research note that earnings beat forecasts largely due to surprises from sales of smaller, non-promoted products and lower-than-expected sales, general and administrative expenses.

Sales of the blockbuster anti-depressant Lexapro climbed 9 percent to $552.3 million. Davis had projected $568 million, while Rockefeller had targeted $567 million.

Forest officials told analysts on a conference call that they continue to project modest share gains in the anti-depressant market for Lexapro during the rest of the fiscal year.

Sales of Namenda jumped 27 percent to $191.7 million.

The New York-based drugmaker said it continues to expect full-fiscal-year earnings of $3.05 to $3.15 per share. Analysts expect $3.12.

Expected launches for drugs for hypertension and fibromyalgia will increase its expenses, the company said.

Forest plans to invest in spending it prepares to launch drugs for hypertension and fibromyalgia, a pain condition.

Forest has had mixed clinical news on two experimental products in recent weeks. It received positive results for its fibromyalgia drug milnacipran, but a stroke drug failed its primary goal in a study.

Forest CEO Howard Solomon said the company has many development opportunities in review or negotiation.

I would expect that Forest will be in a position to solidify some of these opportunities during the remainder of the fiscal year, Solomon said in a statement.

Forest shares were down 65 cents, or 1.4 percent, to $45.98 in early afternoon trading on the New York Stock Exchange after falling as low as $45.26.