UPDATE 3-US FDA staff question proposed Tarceva use

* Roche, OSI drug met main goals in study - FDA staff

* FDA reviewers raise questions about benefit

* OSI says drug effective, convenient

* OSI gains 1.9 pct, Roche up 0.5 pct (Adds analyst comment, sales; updates shares)

By Lisa Richwine

WASHINGTON, Dec 14 (Reuters) - U.S. drug reviewers raised questions about the benefits of a proposed new use for lung cancer pill Tarceva, documents released on Monday said.

Maker OSI Pharmaceuticals OSIP.O is seeking Food and Drug Administration approval to promote Tarceva for patients with lung cancer that remained stable after chemotherapy. The drug, co-marketed by Roche Holding AG ROG.VX, is already cleared for treating lung cancer that has gotten worse following at least one chemotherapy regimen.

FDA staff who reviewed OSI’s application said a company study met the main goals of showing Tarceva was better than a placebo when researchers measured the time before the lung cancer advanced.

“The main issue concerns other available treatment options” for patients who have just finished chemotherapy without their disease getting worse, the FDA said.

Tarceva, known generically as erlotinib, improved overall survival by about one month compared to a placebo when given to stable patients.

But both Tarceva and another drug, docetaxel, have been shown to improve survival of lung cancer patients by about three months when started after their disease has advanced.

“This raises the question whether treatment with single agent (Tarceva) or docetaxel after progression are better options,” FDA reviewers said in documents prepared for an outside advisory panel.

The panel is set to review OSI’s application for the wider Tarceva use at a public meeting on Wednesday. The FDA will make the final decision but usually follows panel recommendations.

Sanofi-Aventis SASY.PA sells docetaxel under the brand name Taxotere.

FDA reviewers said there were issues with various groups in OSI’s study. Tarceva “appears to have at best a weak (overall survival) effect” in patients who tested negative for the so- called EGFR mutation, which “raises the question” whether that group should be included in any approval.

They also said the drug’s survival effect was “very modest” in patients with a type of lung cancer known as squamous cell.

Ira Loss, an analyst with Washington Analysis, said the company’s data may not be strong enough to win the advisory panel’s support.

“If they get approval recommendations, it will be for a limited patient population,” Loss said.

Loss said it was “tough to argue there’s some benefit here” when survival was shorter compared with when the drug was given after chemotherapy failed.

OSI, in separate documents also released by the FDA, said Tarceva was “a convenient, oral, non-chemotherapy therapeutic option that delays disease progression and prolongs survival with a favorable safety profile.”

The company also said “efficacy was shown across study subgroups” in the trial, which included 889 patients who were randomly assigned to the drug or a placebo.

Swiss drugmaker Roche reported Tarceva sales of 1.2 billion Swiss francs ($1.16 billion) in 2008.

OSI receives royalties on sales of the drug, which is also approved for pancreatic cancer. OSI reported $196 million in net revenue from Tarceva in 2008, about half of the company’s total revenue.

Eli Lilly and Co's LLY.N drug, Alimta, already is approved for the wider use that OSI is proposing for Tarceva.

OSI shares rose 1.9 percent to close at $35.41 on Nasdaq. Roche shares gained nearly 0.5 percent in Swiss trading.

The FDA posted the documentshere. (Reporting by Lisa Richwine; editing by Dave Zimmerman and Andre Grenon)