UPDATE: Icahn Reports New Stakes In Genzyme, Forest Labs

Billionaire investor Carl Icahn displayed his continued interest in drug companies in a regulatory filing on Monday, reporting new stakes in Genzyme Corp. (GENZ) and Forest Laboratories Inc (FRX).

Icahn reported a new 1.45-million-share investment in Genzyme, a biotechnology company in which he previously owned a stake. He also acquired one million shares of specialty pharmaceutical company Forest Labs, amounting to a 0.33% stake. His total portfolio holdings were valued at $7.33 billion.

Icahn, known as a corporate activist unafraid to challenge company management, made the disclosures in a Securities and Exchange Commission filing that covered his portfolio through Sept. 30. The filing, known as a 13-F, showed Icahn actively investing on his often-stated belief that Big Pharma will need to keep buying small drug developers to replenish its pipeline of future products. In the past, Icahn has played a key role in making such transactions happen. For example, he was involved in the 2007 sale of MedImmune to AstraZeneca PLC (AZN) for $15.6 billion and last year's $4.5 billion acquisition of ImClone Systems to Eli Lilly & Co. (LLY), and he has pushed--so far unsuccessfully--for Biogen Idec Inc. (BIIB) to make a deal.

Icahn bought his stake in Genzyme amid a rough patch for the company. Shares of Genzyme have dropped more than 25% so far this year as multiple manufacturing difficulties weigh on investor interest in it. Some Wall Street analysts have speculated that Genzyme's prolonged production problems could make it vulnerable to takeover by a large pharmaceutical company. In 2007, Icahn bought 1.5 million shares in Genyzme but sold them a few months later after the shares rose and company executives made it clear that the company planned to remain independent.

Icahn also bought a stake in Forest, which generally acquires new products through either acquisitions or licensing deals with other companies rather than developing its own drugs. Although shares are up 58% from their March lows, the company is looking to replace sales of its antidepressant, Lexapro, which makes up the majority of its revenue, prior to generic competition in 2012.

Most of his largest holdings--including Biogen and Motorola Inc. (MOT)-- were unchanged in the quarter. He did, however, no longer report a stake in Endo Pharmaceutical Holdings Inc. (ENDP), which stood at 1.13 million shares as off June. Officials from Icahn's office weren't immediately available to comment on the newly reported moves.

As reported, Icahn trimmed his stake in Yahoo Inc. (YHOO) to about 62.9 million shares, representing about 4.48% of the Internet giant's outstanding shares. Icahn owned 75.6 million shares, about 5.4% of Yahoo, as of June 30. Last month, Icahn resigned from the company's board, citing a need to focus on other investments and believing it wasn't necessary to have an activist on the board.

Icahn had also already reported the sales of his 14.7-million-share stake in Guaranty Financial (GFGF), a holding company for Texas-based Guaranty Bank that ultimately failed and was seized by Federal bank regulators and sold to a Spanish bank.

Monday's disclosures don't include a complete picture of Icahn's holdings because he has been permitted to keep some of his investments confidential. Prominent investors are sometimes permitted to temporarily withhold information from their quarterly reports if the disclosure would interfere with an investment strategy.

Many investors that manage more than $100 million are required to file 13-Fs with their stock holdings within 45 days of the end of a given quarter, giving the public its freshest possible glimpse into the portfolios of well-known money managers. Most hedge-fund managers and others wait until the last possible moment to make these filings. The third quarter's deadline is Monday.

-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com

(Joseph Checkler contributed to this report)

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