UPDATE 1-AstraZeneca to push ahead with BTG sepsis drug

* Phase IIb study of CytoFab to start in 2010

* CytoFab seen as high risk, high reward drug

* BTG shares up 1.2 pct, AstraZeneca flat

(Adds analyst comment, shares, background)

LONDON, July 29 (Reuters) - AstraZeneca (AZN.L) is to start a large mid-stage clinical trial of BTG's BGC.L CytoFab, an experimental drug for severe sepsis that BTG acquired when it bought the British biotech firm Protherics last year.

The 300-patient Phase IIb study will commence in 2010, BTG and AstraZeneca said on Wednesday. AstraZeneca bought the rights to develop CytoFab from Protherics in 2005.

KBC Peel Hunt analyst Paul Cuddon, who upgraded his price target for BTG to 208 pence on the news, said it removed a key near-term risk and justified the price paid for Protherics.

BTG shares rose 1.2 percent to 170p by 0815 GMT while AstraZeneca was flat.

The rewards for a successful medicine to treat sepsis, which affects 3 million people a year worldwide, are likely to be substantial.

But the drug industry is littered with previous failures in the area, suggesting there is no guarantee that CytoFab will necessarily get to market.

If the Phase IIb clinical trial and a final Phase III programme are successful, Piper Jaffray analyst Sam Fazeli said the drug could be launched in 2014/15 and might eventually achieve peak annual sales of 1.5 billion pounds ($2.46 billion). (Reporting by Ben Hirschler; Editing by Erica Billingham)