Novartis MS drug linked to new side effect

LONDON, April 14 (Reuters) - Fresh side-effect problems have emerged with Novartis AG's NOVN.VX experimental oral multiple sclerosis (MS) drug FTY720, with doctors reporting a case of hemorrhaging focal encephalitis.

A case report on the patient who developed the condition after taking part in a Phase III clinical trial of the medicine - one of the big hopes in the Swiss group’s pipeline - was published in the March edition of the journal Neurology.

Novartis said the patient concerned was recruited into the study seven months before hospital admission for the reported event, before which no new disease activity had occurred.

“As per normal procedures, this particular case was communicated in a timely fashion to health authorities and study investigators,” spokesman Eric Althoff said.

“It is difficult to interpret an isolated case report without the benefit of the full Phase III data set. At this stage, a relationship with FTY720 can neither be excluded nor confirmed,” Althoff said.

Citigroup analysts said they were still concerned about the safety of FTY720 and saw the most recent side effect report as a small positive for Merck KGaA MRCG.DE, whose rival MS pill cladribine may be the first MS drug taken by mouth, as opposed to injection, to hit the market.

Novartis said last year that two patients taking FTY720 in clinical trials had problems with infections and one died, but the role of the drug in the cases was unclear. [ID:nL05867627]

Novartis shares fell 1.6 percent to 41.80 Swiss francs by 1230 GMT, versus a 1.1 percent drop in the European healthcare sector .SXDP. Merck shares fell 2.6 percent.

Reporting by Ben Hirschler and Sam Cage; editing by John Stonestreet