Updated with statement from Biogen Idec.

WASHINGTON, D.C. ( TheStreet) --U.S. regulators approved Novartis' ( NVS) Gilenya, the first treatment for multiple sclerosis that patients take as a once-daily pill, the company announced Wednesday.

Gilenya's approval by the U.S. Food and Drug Administration instantly changes the competitive landscape for multiple sclerosis (MS) drugs. Existing MS drugs made by Biogen Idec ( BIIB), Merck KGaA, Bayer and Teva Pharmaceuticals ( TEVA) are all administered by injection.

Novartis is now the only company to offer an oral MS drug, which may spark instant demand from doctors and patients eager for the convenience of a pill. Studies have also demonstrated that Gilenya works better than some of its competitors at tamping down the symptoms of MS. One of the pivotal studies used to approve Gilenya showed the drug to be superior to Biogen's Avonex in preventing MS relapses.

Counteracting the excitement for the new MS pill, however, is a side effect profile that may make doctors hesitant to use Gilenya ahead of older, more established MS drugs.

Investors were widely expecting FDA to approve Gilenya, although the agency did so without a restrictive black box warning for safety concerns and a patient monitoring system less onerous than expected.

"Gilenya has been approved for multiple sclerosis in the U.S. with a prescribing label and a REMS risk management requirement that are probably the best possible outcome both Novartis and investors could have hoped for," wrote J.P. Morgan European pharmaceutical analyst Alexander Hauber in a Wednesday note to clients.

Analysts, on averge, forecasts more than $1 billion in peak sales for Gilenya.

Biotech investors are most interesting to see what impact Gilenya has on Biogen Idec, which markets Avonex, the best-selling MS drug used primarily in patients newly diagnosed with the disease; as well as Tysabri, considered the most effective MS drug but one that can also cause the serious brain infection progressive multifocal leukoencephalopathy (PML). As a result, doctors use Tysabri more as a second-line treatment in MS.

Biogen shares fell in pre-market trading Wednesday on news of Gilenya's approval. Biogen released a statement on Gilenya: "The long-term safety profile of Gilenya has yet to be established and there is limited data for it in patients with certain common comorbidities."

JP Morgan biotech analyst Geoff Meacham, in a recent note to clients, said his polling of MS doctors found that Gilenya would likely have minimal impact on front-line MS drugs such as Biogen's Avonex, Merck's Rebif, Bayer's Betaseron or Teva's Copaxone but could have a larger effect on Biogen's Tysabri (which is co-marketed by the Irish drug maker Elan ( ELN).) He rates Biogen at neutral with a $55 price target.

Jefferies biotech analyst Thomas Wei is telling clients that Gilenya's approval and financial impact on Biogen's MS franchise is already largely baked into the stock's valuation. He rates Biogen a buy with a $66 price target.

Biogen isn't lying down while the MS market undergoes big changes. The company has its own oral MS drug, BG-12, in phase III studies, with data expected in the middle of 2011. Biogen is also developing a long-acting form of Avonex and another MS drug, daclizumab, in partnership with Abbott Labs ( ABT).

Merck KGaA is also developing an oral MS drug, cladribine, currently under FDA review with a decision possible in December.

Novartis shares closed Tuesday at $56.46, while Biogen closed at $58.23.

--Written by Adam Feuerstein in Boston.

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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.

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