UPDATE 2-Spectrum says CMS OKs reimbursement of its cancer drug

* Says CMS ruled to allow reimbursement of Zevalin

* Ruling effective Jan. 1, 2010

* Shares rise as much as 8 pct (Adds details, analysts' comments; updates stock movement)

BANGALORE, Nov 3 (Reuters) - Spectrum Pharmaceuticals Inc (SPPI.O) said the Centers for Medicare and Medicaid Services (CMS) finalized a policy ruling to allow reimbursement for the company's cancer drug, Zevalin, effective Jan. 1, 2010.

Analysts said they were expecting CMS to allow reimbursement for Zevalin, but added they do not expect a significant ramp in sales until the first quarter of 2010.

"This is very good news for the company -- long term, it will help generate sales given the ease with which physicians will get reimbursed," Rodman & Renshaw senior biotechnology analyst Reni Benjamin said.

The policy ruling was based on the average sales price (ASP) methodology applicable to other injectable drugs and biologicals, the company said.

"We believe that securing ASP methodology for Zevalin removes a significant historical barrier to its use," Chief Executive Rajesh Shrotriya said in a statement.

Zevalin, or ibritumomab tiuxetan, is indicated for the treatment of patients with previously untreated follicular non-Hodgkin's lymphoma, who achieve a partial or complete response to first-line chemotherapy.

It is also indicated for the treatment of patients with relapsed or refractory, low-grade or follicular B-cell non-Hodgkin's lymphoma.

The company has another drug on the market, Fusilev, which is currently approved by the FDA as a rescue after high dose of a certain chemotherapy drug in patients with osteosarcoma, a type of bone cancer.

Spectrum is also trying to get Fusilev approved for advanced metastatic colorectal cancer.

Morgan Joseph & Co analyst Shiv Kapoor, who has a "hold" rating on the stock, said the company's revenue growth will likely disappoint due to a longer-than-expected delay in Fusilev approval.

"We continue to believe that the FDA will likely ask for an additional clinical trial to show non-inferiority of Fusilev over generic leucovorin," Kappor said.

Last month, the FDA had declined to approve the supplementary marketing application for Fusilev, noting that the submission did not show that the drug is non-inferior to standard treatment leucovorin.

However, at that point the regulators did not request any changes to the currently approved indications.

Shares of the company were up 7 percent at $4.57 in morning trade on Nasdaq. They had touched a high of $4.63 earlier in the day. (Reporting by Esha Dey in Bangalore; Editing by Gopakumar Warrier and Pradeep Kurup)