UPDATE 3-FDA asks for additional study on ViroPharma HAE drug

* Yet to decide on additional trial - CEO

* Largest opportunity for Cinryze is prophylaxis -CEO

* ViroPharma shares fall as much as 13 pct

* Dyax sees HAE treatment approval by 2009 end

* Dyax shares rise up to 15 pct (Adds analyst, CEO comment; background; adds closing share price)

By Vidya L Nathan

BANGALORE, June 4 (Reuters) - ViroPharma Inc (VPHM.O) said U.S. health regulators declined to approve an additional indication of its treatment for a rare genetic disease, asking the company to conduct another clinical study, sending shares of the biotechnology company down 13 percent.

Shares of Dyax Corp (DYAX.O), which is also awaiting the U.S. Food and Drug Administration's approval for its drug to treat the disease, rose as much as 15 percent on hopes that its drug now stands a better chance to hit the market first.

ViroPharma's Chief Executive Vincent Milano told Reuters that the company has not yet decided on conducting the additional trial.

Maxim Group analyst Yale Jen said the company may not move the program forward.

"Why work on something that potentially could have absolutely no reward or very low reward?"

The drug, Cinryze, was already approved last year as a preventive therapy for hereditary angioedema (HAE), and the company is seeking marketing approval for the drug to also treat acute attacks of the possibly life-threatening disease.

When the FDA approves the drug for preventive use and not for use in severe attacks of the same disease, it sends mixed signals about the drug's efficacy to physicians, WBB Securities analyst Steve Brozak said.

Cinryze has been in the market only for a few months as a therapy to prevent attacks of HAE, which causes swelling, particularly of the face and airways.

The health regulator had not cited any safety concerns in its complete response letter to the new application, the company said.

Cinryze was expected to earn between $40 million and $150 million in sales as a treatment for acute HAE, compared with sales estimates of $200 million to $250 million in the preventive indication.

"The largest opportunity for Cinryze is in prophylaxis. We have never viewed the acute market as the larger indication. In fact, we think it pales in comparison," ViroPharma's Milano said.

VIROPHARMA VS DYAX

Dyax Chief Executive Gustav Christensen told Reuters that he expects the company's drug, ecallantide, to get approval by 2009 end.

ViroPharma and Dyax have been competing to be the first to market a treatment for acute attacks of HAE in the United States.

In March, the FDA had declined approval for Dyax's treatment for acute attacks of HAE and sought additional data on the safe use of the drug. The FDA informed Dyax that it needs to submit a risk evaluation and mitigation strategy (REMS) and additional information about the chemistry, manufacturing and control information before it could conclude its review of the drug.

"Now, the probability of Dyax being the only product or at least the first product to hit the market has significantly increased," Maxim Group's Yale Jen said.

ViroPharma's Milano said, "I think it would be naive to think that we would be the first, if Dyax is in a mix with a complete response letter and an REMS program. Right now they seem to be ahead of all the companies in development for an acute indication for HAE."

PRESSURE ON BOWEL DRUG

Currently, ViroPharma has only one more drug, Vancocin, treating a bacterial infection in the bowel, in the market and derives majority of its revenue from the antibiotic.

"Now the question becomes what happens with Vancocin going forward. There was pressure before, now it becomes more significant," WBB Securities' Brozak said.

Analysts expect generics for Vancocin, which accounted for nearly 90 percent of the company's sales in the first quarter, to enter the market as early as end-2009.

The FDA will convene an advisory panel meeting to discuss the bioequivalence guidelines to develop copy-cat versions of the drug on Aug. 4.

ViroPharma shares, which have risen 75 percent over the last three months, closed down 8 percent at $6.36 Thursday on Nasdaq. They had touched a low of $6.01 during the session.

Shares of Dyax, which have lost more than half of their value since receiving the complete response letter in March, rose as much as 15 percent to $1.89 Thursday and shed some of its gains to close up 12 percent at $1.83. (Editing by Aradhana Aravindan, Vinu Pilakkott)