UPDATE 2-Glaxo drug cuts risk of prostate cancer

* Study shows 23 pct risk reduction with Avodart over 4 yrs

* No significant increased incidence of severe tumour types

* Glaxo shares extend gains to 8 percent in U.S. trade

(Adds shares, further details, background)

By Ben Hirschler

LONDON, April 27 (Reuters) - GlaxoSmithKline Plc's (GSK.L) drug Avodart reduces the risk of prostate cancer, results of a large clinical study showed on Monday.

The finding is a boost for the British group's cancer business, which it has earmarked as a priority area for growth.

Industry analysts had said before the news was announced at the American Urological Association annual meeting in Chicago that a positive result could lift annual sales of Avodart by $500 million to $1 billion.

The so-called Reduce study found Avodart, known generically as dutasteride, significantly reduced the risk of all biopsy-detectable prostate cancer by 23 percent over four years, compared to placebo, in more than 8,100 men aged 50 to 75.

The trial looked at men who were at increased risk for prostate cancer because they had raised levels of prostate specific antigen (PSA).

Importantly, the study found no statistically significant difference in the incidence of high grade tumours -- a problem seen in an earlier trial with Merck & Co Inc's (MRK.N) rival drug Proscar.

Glaxo shares extended gains in U.S. trading, to stand 8 percent up on the day by 1750 GMT.

The stock had already risen more than 5 percent in London before the news, fuelled by expected demand for flu drug Relenza and additional sales of vaccines, due to the spread of a deadly strain of swine flu that has killed more than 100 people in Mexico. [ID:nLR144642]

Avodart, which had sales of 399 million pounds ($581 million) in 2008, is currently approved to treat benign prostate enlargement.

Preventing prostate cancer, the second leading cause of male cancer death, could open up a substantial new market for Avodart, as well as reinforcing its position in benign disease.

Confidence in the ability of drugs like Avodart to stop prostate cancer took a knock in 2003 when Proscar was found to cut overall cancer risk in a similar study but increase the incidence of more aggressive tumours.

In the case of Avodart, the Reduce study showed no difference in high grade tumours ranked 7-10 on the Gleason score. There were a slightly higher number of tumours scoring 8-10 -- with 29 cases detected in the Avodart group versus 19 for placebo -- but this was not statistically significant.

Glaxo said full results of the study would submitted for publication in a peer review journal later this year.

Convincing governments and insurance companies that prescribing the drug widely to prevent a relatively small number of cancer deaths makes economic sense is likely to be a gradual process.

And Glaxo does not have unlimited time, since Avodart will lose patent protection in 2015 -- and possibly a lot earlier, if Teva Pharmaceutical Industries Ltd (TEVA.TA) prevails in a generic challenge against Glaxo.

Merck's Proscar, meanwhile, is already available as a cheap generic. (Reporting by Ben Hirschler; Editing by Michael Kahn and Dan Lalor) ($1 = 0.6869 pound)