Forest Laboratories Inc, which is facing patent expirations on several of its biggest drugs, on Monday said it planned to buy rights to a new schizophrenia drug from Merck & Co and cut its annual operating costs by $500 million in 2016.

The specialty drugmaker said it will acquire rights to the oral drug, called Saphris (asenapine), which is approved to treat acute bipolar mania, for an upfront payment of $240 million to Merck and additional payments on defined sales milestones.

Saphris has been a poor seller for Merck, which earlier this year took $330 million in write-offs on the drug, due to reduced sales expectations for the product. The drug was acquired by Merck through its merger in 2009 with Schering-Plough Corp.

To help finance the deal, Forest said it would issue $1 billion in new long-term debt, through an offering of eight-year senior unsecured fixed-rate notes. Proceeds from the debt offering will also be used to fund share repurchases and for general corporate purposes, the company said.

Forest said its board authorized up to $1 billion in repurchases of its common stock, and the company would begin an initial $400 million accelerated buyback program before the end of the calendar year.

The moves come two months after Forest named Brent Saunders, the former head of eye-care products company Bausch & Lomb Inc, as its chief executive officer. He replaced Howard Solomon, who had been at the helm for 35 years.

Forest, which makes antidepressant Lexapro and Alzheimer's treatment Namenda, said it plans to reduce operating expenses by $500 million by the end of fiscal year 2016, compared with expenses it expects to incur in 2014.