Cephalon ( CEPH) on Friday received a second approval from the Food and Drug Administration for its cancer drug Treanda, this time as a treatment for patients with non-Hodgkins lymphoma (NHL).

Treanda is the only new cancer drug to receive FDA approval this year. In March, regulators approved the drug as a treatment for chronic lymphocytic leukemia (CLL), a cancer of the blood and bone marrow. Friday's approval extends Treanda's use to the indolent, or slow-growing, form of NHL, a cancer of the immune system.

Cephalon views Treanda as the backbone of a new cancer-drug business, which, along with its pain franchise, shifts the growth drivers for the company away from its maturing central nervous system drugs like Provigil.

Treanda's sales in the third quarter totaled $25 million, just a fraction of Cephalon's $490 million in total revenue for the quarter.

With two approvals now under its belt, however, Treanda's peak annual sales could reach $400 million to $500 million, according to various analyst estimates.

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Friday, the FDA approved Treanda for use in indolent NHL patients whose cancer continued to grow after treatment with Genentech's ( DNA) Rituxan and chemotherapy. The approval was based on a pivotal study of 100 patients, all treated with Treanda given by injection, which showed a 75% response rate with a median duration of response of just over nine months.

Indolent NHL is a far larger commercial market for Treanda than CLL.

Genentech's Rituxan is the dominant treatment in indolent NHL, contributing the lion's share of the drug's $2.3 billion in sales last year. Rituxan is such a big NHL drug, in part, because patients can be retreated with the drug once the cancer starts growing again. While patients can be retreated with Rituxan for years, the efficacy of Rituxan decreases with every retreatment and the drug eventually stops working.

With Treanda's approval, doctors now have a new effective treatment option for NHL patients where Rituxan no longer works. Initially, doctors may not turn to Treanda until after NHL patients are retreated with Rituxan two or three times. However, Cephalon hopes that over time, doctors will grow increasingly comfortable with Treanda to the point that the drug is used earlier and earlier.

Celgene ( CELG) is also seeking to expand the use of its cancer drug Revlimid into NHL.

For Cephalon to get close to Rituxan-like sales for Treanda, doctors will need to see more clinical data showing that Treanda can be effective for newly diagnosed NHL patients.

At December's American Society of Hematology (ASH) meeting, German researchers will present updated data from a study of newly diagnosed NHL patients treated with the combination of Rituxan and Treanda compared against Rituxan plus chemotherapy.

At last year's ASH meeting, data from this study suggested that a Rituxan-Treanda combination could be less toxic and better tolerated than Rituxan-chemotherapy, with equivalent efficacy.

This German study was relatively small, however. It will take studies enrolling more patients followed for much longer periods of time before Cephalon can collect enough data to convince doctors to use Treanda in newly diagnosed NHL patients.

Earlier this week, Cephalon reported a third-quarter profit of $112 million, or $1.64 a share, reversing a loss of $306.7 million, or $4.58 a share, one year ago, negatively impacted by significant charges related to a settlement of a government investigation.

Cephalon forecast 2009 adjusted income of $452 million to $459 million, or $6.50 to $6.60 a share. On the revenue front, the company guided to between $2.17 billion and $2.23 billion, bracketing the consensus target of $2.21 billion.

Cephalon shares closed up $2.13, or 3%, to $71.72 on Friday.
At the time of publication, Feuerstein's Biotech Select model portfolio was long Genentech and Cephalon.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.