Egis and Neolabs won a patent lawsuit against Eli Lilly’s blockbuster antidepressant drug Zyprexa in Germany – according to Egis’ CFO Mr László Marosffy. Recently, both the Canadian Federal Court and the German Patent Court has ruled against Zyprexa’s patent protection running until 2011, claiming the patent is not a novelty, allowing drugmakers to market the generic version of this drug. However, Eli Lilly top management indicated they would like to appeal against the court decision. Zyprexa used to treat serious psychiatric disorders, such as schizophrenia and bipolar disorder generated US$ 1.16bn sales for Eli Lilly in 4Q06. While Zyprexa’s sales is seen flat by Eli Lilly’s CEO for 2007 due to recent studies highlighting its side-effects (higher chance for diabetes and weight gain), the drug is still considered to have the best side-effect profile among its substitutes. Our view: We do not expect Eli Lilly’s appeal to delay the introduction of the generic version of Zyprexa, and we estimate that the two companies whom won the lawsuit will get certain marketing exclusivity in Germany. We forecast the sales of the generic version of Zyprexa could generate US$ 20m for Egis per annum (assuming the German market of Zyprexa currently amounts to US$ 150m and generic competition will erode it to US 100m). We believe this sales should have above average margin content resulting in an EBIT addition of US$ 6m (HUF 1.1bn) for Egis per annum. Assuming production of this drug would start only in the next business year (from 1 Sept 2007), we forecast that the production and marketing of copycat version of Zyprexa could lift our EBIT estimates for Egis by 9.3% for 2008/07 from HUF 11.8bn to HUF 12.9bn and by 6.9% for 2009/08 from HUF 15.9bn to HUF 17.0bn. We expect positive share price reaction.