* Cites risk of often fatal brain disease with Rituxan use
* FDA approves Rituxan label extension as retreatment option
* Analyst says decisions cancel out in sales forecasts
* Stock up 0.8 percent
(Adds details and background)
ZURICH, Oct 20 (Reuters) - U.S. regulators rejected use of Roche's drug Rituxan as a first line treatment against rheumatoid arthritis (RA) due to risk of an often fatal brain disease, the Swiss group said on Monday.
The Food and Drug Administration does not support approval of Rituxan -- in patients who have not previously received methotrexate or those who did not respond adequately -- due to the rare risk of progressive multifocal leukeoencephalopathy (PML), a statement said.
"We are committed to patient safety and understand the Agency's decision, given the uncertainty regarding the risk of PML, and we will discuss next steps with the FDA to determine an appropriate path forward," said Hal Barron, chief medical officer of Roche unit Genentech.
The FDA also approved a label expansion to use Rituxan, one of Roche's top-selling drugs, as a retreatment option in patients who had an inadequate response to current standard treatment.
Rituxan, which also treats cancer and is known outside the United States as MabThera, is already approved for use in RA patients who do not respond to other drugs known as tumour necrosis factor inhibitors.
"Overall we could have increased our Rituxan RA numbers by about $300 million for the longer treatment duration. However, we would need to reduce our expectations for Rituxan in the earlier setting by $300 million," said Vontobel analyst Andrew Weiss.
"Hence the impact of the two announcements should be neutral."
Roche stock rose 0.8 percent to 163.60 Swiss francs by 0902 GMT, just ahead of a 0.5 percent rise in the DJ Stoxx European healthcare index.
Roche aims to expand use of Rituxan, which is marketed in the United States with Biogen Idec, further in autoimmune diseases.
RA is an autoimmune disease characterised by inflammation that leads to stiff, swollen and painful joints which ultimately results in irreversible joint damage and disability. (Reporting by Sam Cage)