UPDATE 2-U.S. court upholds patent on Forest's Lexapro

(Adds analyst's quotes, previous WASHINGTON)

NEW YORK, Sept 5 (Reuters) - A federal appeals court on Wednesday upheld the validity of a key patent on Forest Laboratories' (FRX.N) blockbuster depression drug Lexapro and affirmed a lower court's decision to block sales of generic forms of the drug made by Teva Pharmaceutical Industries Ltd (TEVA.O) and Cipla Ltd (CIPL.BO).

The U.S. Court of Appeals for the Federal Circuit rejected an appeal by Teva aimed at overturning a 2006 decision by a federal court in Delaware. Forest shares gained as much as 14.5 percent after the decision was made public.

Forest filed suit in September 2003 alleging that the generic version of Lexapro infringed its patent covering the drug's active ingredient.

Last year, a lower court agreed, upholding the patent's validity and barring Teva and Cipla from selling any products that infringed on the patent.

In Wednesday's ruling, the appeals court modified the lower court's injunction so that it only applies to escitalopram oxalate, the active ingredient in Lexapro.

A representative of Teva was not immediately available for comment.

Natixis Bleichroeder analyst Corey Davis said he anticipated the favorable appellate court ruling, and expected it would block the sale of the generics until March 2012, when Lexapro's U.S. marketing exclusivity lapses.

Davis said the decision removes a near-term risk for Forest, which sells Lexapro in partnership with Danish drugmaker Lundbeck (LUN.CO). It is Forest's biggest product, with annual sales of about $2 billion.

Concern about the Lexapro case and looming patent lapses on the anti-depressant and the company's Namenda treatment for Alzheimer's disease have overshadowed the promise of its experimental products, Davis said.

"We believe (Wall) Street may finally begin to give Forest more credit for its pipeline" of experimental drugs, he said, including its hypertension treatment nebivolol and its milnacipran medicine for fibromyalgia.

Shares of Forest closed up nearly 10 percent to end the day at $41.63 on the New York Stock Exchange, after having reached $43.38 earlier in the day. Teva stock was 22 cents higher at $43.85 on Nasdaq. (Reporting by Ransdell Pierson and Peter Kaplan)