* VA looking into reports of infection with Avastin use
* Regeneron shares close up 9.2 percent on Eylea prospects (Adds analyst comment, Eylea FDA action date, updates share price)
By Bill Berkrot and Ransdell Pierson
Sept 21 The U.S. Department of Veterans Affairs said it has stopped using Roche's ROG.VX Avastin to treat a sight-robbing eye disease as it looks into reports of increased risk of infection.
Roche's Lucentis is specifically approved to treat wet age-related macular degeneration -- the leading cause of blindness in the elderly. But its multibillion-dollar a year cancer drug Avastin, which works in a similar manner, is increasingly being used off-label to treat the disease because it costs a fraction of Lucentis when cut into the small doses needed for the eye disease.
"The Department of Veterans Affairs (VA) has ceased ophthalmologic use of Avastin pending the results of an ongoing investigation and will advise its physicians to consider alternate therapies," the VA said in a statement.
"Once the investigation is complete, VA will reassess how Avastin and similar therapies may be made available for ophthalmologic use and will issue further guidance."
Shares of Regeneron Pharmaceuticals Inc (REGN.O), which is awaiting U.S. approval of its new Eylea drug for the condition, rose to a new high.
"The fact that the VA made this decision shows that the risk of substituting Avastin for Lucentis might be a little greater than we thought before," said Morningstar analyst Lauren Migliore.
"It definitely bodes well for Lucentis and for the potential for Regeneron's eye drug Eylea," Migliore said.
Roche's Genentech unit, which makes both Avastin and Lucentis, has long cautioned against splitting up Avastin doses for the eye disease since the company never tested the drug for that use.
But Lucentis costs about $2,000 for a dose, while the cancer drug costs about $50 when used for macular degeneration, leading many ophthalmologists to go with the dose splitting option. While companies may only promote drugs for approved uses, doctors are free to prescribe them as they see fit, leading to unapproved, or off-label, use of many medicines.
Both Lucentis and Regeneron's Eylea have demonstrated an ability to improve the sight of patients, not just slow progression of the disease.
But there has been mounting government pressure to increase use of Avastin for macular degeneration in an effort to cut costs to Medicare and other health programs.
Results from a large U.S. government-sponsored study released in April found that Avastin works just as well as Lucentis for the eye disease, but had more side effects that required hospitalization.
Roche spokesman Terence Hurley said the drugmaker believes Lucentis -- not Avastin -- is the most appropriate medicine for the eye condition.
"There is a growing body of evidence that suggests injecting off-label Avastin into a person's eye may pose greater risks than Lucentis," he said, citing potential for infection and inflammation when the drug is split up.
"We do not believe that cost should be the only factor considered when choosing a medicine," he added.
Regeneron spokesman Peter Dworkin declined to comment on the Veterans Affairs decision, and whether it could ultimately bolster demand for its Eylea.
Dworkin noted that an advisory panel to the U.S. Food and Drug Administration in June unanimously recommended approval of Eylea after reviewing its safety and effectiveness. The FDA is expected to make its decision in November.
"Regeneron's Eylea stands to be well positioned in the market if it does get approved because it's dosed half as frequently and Lucentis and these are injections directly into the eye, so patients obviously appreciate less dosing," Morningstar's Migliore said.
The VA treats millions of U.S. veterans in its hospitals and facilities.
Regeneron shares closed up $5.93, or 9.2 percent, at $70.28 on Nasdaq after touching a new high of $79.90 earlier on Wednesday. (Reporting by Bill Berkrot and Ransdell Pierson; additional reporting by Alina Selyukh in Washington; Editing by Phil Berlowitz and Carol Bishopric)