U.S. panel shakes confidence in Roche's top drug

* Roche shares fall to lowest level since April 2009

* U.S. panel rejects Avastin in advanced breast cancer

* U.S. decision unlikely to change Avastin label in Europe

* Avastin peak sales could be reduced by up to $1 bln

By Katie Reid

ZURICH, July 21 (Reuters) - Roche (ROG.VX) stock slid to its lowest level in over a year on Wednesday after a U.S. panel urged a ban on using top-selling cancer drug Avastin in advanced breast cancer, once again shaking confidence in the medicine.

The panel's near-unanimous rejection of the multibillion-dollar drug means it is very likely U.S. patients will no longer be treated with it, possibly shaving up to $1 billion off peak sales. [ID:nN20257144]

The news is the latest blow for Avastin, which stumbled at key hurdles this year when it failed in late-stage stomach and prostate cancer studies.

At 1259 GMT, Roche stock was trading 4.13 percent lower at 137 Swiss francs, paring some of its earlier losses when it fell to 135.50 francs, its lowest level since April last year.

Avastin is already widely used to treat a number of cancers and has been tipped to become the world's biggest selling prescription drug by 2014, with annual sales topping $9 billion. [IDnLDE63B1XF]

AVASTIN IN EUROPE

The drug, which accounted for 13 percent of Roche's sales in 2009, has full approval for metastatic breast cancer in Europe and analysts do not expect European authorities to copy any U.S. decision to revoke its label.

The Food and Drug Administration is due to reach a decision on the drug's use by Sept. 17.

"We doubt the (European Medicines Agency) EMA will amend the EU label given the absence of new data," Morgan Stanley analysts said.

"However, we suspect that over time, EU usage will slowly decline," the analysts said, adding they are reducing their $9 billion-estimate for Avastin sales in 2016 by around 15 percent.

Avastin has already been turned down by Britain's health cost watchdog NICE in breast cancer. [ID:nLDE667109]

The National Institute for Health and Clinical Excellence (NICE) decides if drugs should be paid for by the country's taxpayer-funded National Health Service.

Cash-strapped governments across the world are wrestling with record budget deficits by slashing drug prices and the Morgan Stanley analysts said worries about the price of Avastin may have played a role in the U.S. advisory panel's decision not to back it.

The wholesale price of Avastin is about $8,000 per month for advanced breast cancer. Roche limits the annual cost for any FDA-approved use to about $57,000.

CROWN SLIPPING

Roche, once regarded as the darling of the pharmaceutical industry, has seen its crown slip after recent setbacks in pipeline development and its stock has underperformed the European healthcare index .SXDP this year.

"This is the cheapest the shares have been versus the Swiss market for at least the last 15 years," analysts at Jefferies said in a note.

"We advocate building positions in the shares at these levels in expectation of solid first-half results and further guidance/cost saving measures from management," they said.

Roche is seen posting a 42 percent jump in first-half net profit on Thursday and most analysts have a buy rating thanks to strong growth prospects in oncology. [ID:nLDE66J1AD]

"Over the long term we believe Roche still deserves to trade at a premium to large cap pharma peers," analysts at Deutsche Bank said.

Roche is currently trading at 9.7 times 2011 earnings, clinging on to its premium over cross-town rival Novartis (NOVN.VX) and Britain's GlaxoSmithKline (GSK.L).

INDUSTRY IMPACT

The panel's decision also raises questions about whether progression free survival (PFS) will, in the future, be seen as a valid way of proving how effective a drug is.

The effectiveness of Avastin in advanced breast cancer was based on an improvement in PFS, but the U.S. panel wanted evidence that Avastin improved the overall survival rate (OS).

PFS is the length of time during and after treatment in which a patient is living with a disease that does not get worse, while OS is the percentage of people who are alive for a certain period after they were diagnosed with or treated for a disease.

"The panel bodes negatively for the industry overall as we believe hurdles for new agents in breast and other cancers have become almost insurmountable in the United States," analysts at Societe Generale said. (Editing by David Cowell)