The Food and Drug Administration approved an eagerly awaited new multiple sclerosis drug Tuesday.

The drug, now called Tysabri, is made by Elan ( ELN) and Biogen Idec ( BIIB). Called Antegren during its development, the treatment is given intravenously once a month in a physician's office.

The approval is based on positive results seen in patients after one year of treatment, the FDA said. As part of the approval, Elan and Biogen Idec will continue clinical trials for another year.

The new drug will certainly help elevate Elan, which is trying to emerge from a financial crisis during the early part of the decade. Meanwhile, the question for Biogen -- and several competitors -- is whether the new drug will crimp sales of existing MS treatments.

In after-hours trading, BiogenIdec gained $1.22 to $58.65 and Elan rose $1.25 to $28.55.

According to the Multiple Sclerosis Association of America, some 350,000 people have been diagnosed with the disease in the U.S. An estimated 10,000 new cases are diagnosed each year, the FDA says.

The most common form of MS at the time of diagnosis is a relapsing-remitting form, in which acute symptoms or worsening of neurologic function can occur intermittently, the FDA says. The symptoms can diminish or disappear for months or years between relapses.

"The MS community is pleased that the FDA approval of Tysabri provides an additional treatment option for people with relapsing forms of MS. There are many people living with MS who may benefit from this different treatment approach," said Stephen C. Reingold of the National MS Society.

"This innovative treatment for multiple sclerosis represents a new approach to treating MS -- exciting news for patients with this serious disease," said Dr. Lester M. Crawford, acting FDA commissioner. "While we eagerly await long-term results from ongoing clinical trials, we have reason to believe that Tysabri will significantly reduce relapses in MS."

Although the cause of MS is unknown, it is widely considered to be an autoimmune disease in which the person's immune system attacks the brain and/or spinal cord, the FDA says. Tysabri appears to work by binding to these immune system cells, thus preventing them from traveling to the brain where they can cause damage.

In the first clinical trial of the product's safety and efficacy, the drug reduced the frequency of relapses by 66% relative to placebo, the FDA announcement said.

In another clinical trial, patients who had been treated with Biogen's MS drug Avonex but who had experienced one or more relapses while on Avonex were given either Tysabri or placebo. Avonex was continued throughout the study for both groups. In this trial, Tysabri reduced the frequency of relapses by 54% relative to placebo.

For Biogen Idec, the big question is whether -- or by how much -- Tysabri will cannibalize sales of Avonex. Analysts have said they expect Tysabri to perform well at the expense of other MS drugs, including Rebif from Serono ( SRA); Betaseron from Chiron ( CHIR); and Copaxone from Teva Pharmaceutical Industries ( TEVA).