UPDATE 2-Maxygen says drug under Amgen patent cloud; shares sink

(Adds analyst comment; updates share movement)

By Varsha Tickoo

BANGALORE, June 13 (Reuters) - Shares of biotechnology firm Maxygen Inc (MAXY.O) slid as much as 30 percent after news that it could face a legal patent battle with sector leader Amgen Inc (AMGN.O) over its lead cancer drug.

Maxygen's drug Maxy-G34 falls under a broad category of proteins called G-CSF, for which Amgen got a patent on June 3.

G-CSF stands for granulocyte colony stimulating factor, a natural protein that can treat cancer by stimulating the body's bone marrow to produce more white blood cells.

"Maxy-G34 is Maxygen's most advanced compound and we believe a potential patent claim creates significant uncertainty for its shares," Standard & Poor's Equity Research analyst Jeffrey Loo said in a note to clients.

Loo cut Maxygen's rating to "sell" from "hold" and slashed its price target by $5 to $3. The analyst said Maxygen's pipeline is weak since it has just one compound other than Maxy-G34 in clinical development.

Maxygen's patents on the drug expire in 2021 while Amgen's patent is valid till 2015. Maxy-G34 is currently in mid-stage trials and a potential launch could take years.

Maxygen said the Amgen patent grant did not affect the validity of four of its own G-CSF patents, but Amgen could sue when it starts selling the drug.

"We've always run under the assumption that Amgen would take us to court," spokeswoman Michele Boudreau told Reuters.

In its filing with U.S. regulators, Maxygen said if Amgen decided to sue, it would have a "viable defense to any such infringement suit."

Amgen did not immediately return a call seeking comment.

Shares of Redwood City, California-based Maxygen were trading down $1.37 at $3.47 Friday afternoon on Nasdaq. Earlier in the session, they hit a life-low of $3.40.

Thousand Oaks, California-based Amgen was trading up 60 cents at $43.82 also on Nasdaq. (Editing by Amitha Rajan, Anil D'Silva )