* Rheumatoid arthritis major new market for Cimzia
* UCB drug competes with established anti-TNF blockbusters
* Shares up 21.59 percent; Nektar shares up 27 pct (Adds analyst reaction, latest shares)
By Philip Blenkinsop and Antonia van de Velde
BRUSSELS, May 14 (Reuters) - Belgian pharmaceutical group UCB (UCB.BR) received a major boost on Thursday when U.S. regulators approved its rheumatoid arthritis drug Cimzia, sending its stock 18 percent higher.
Shares of UCB's U.S. partner Nektar Therapeutics (NKTR.O) also rose 27 percent to touch their highest in 52 weeks at $6.45 Thursday morning on Nasdaq.
The news will reduce UCB's reliance on older drugs, some of which have lost patent protection, and is a vindication of its investment in biotechnology. Cimzia is a biological medicine given by injection.
"It is a massive sigh of relief," said ING analyst Mark Clark. "The timing is a surprise to everyone as the company had talked about having to supply extra information (to U.S. authorities). A decision was only expected in the fourth quarter."
Analysts at Morgan Stanley said the approval was an important milestone that reduced the risk of investing in UCB, adding that the dosing regimen was better than expected.
UCB, which has a collaboration on Cimzia with U.S.-based Nektar, will pay the smaller company royalties on sales.
Nektar would also get manufacturing revenue during research, clinical development and commercialization of the drug.
Cimzia, already cleared to treat bowel disorder Crohn's disease in the United States, would be made available this week, UCB said in a statement.
It may be administered either at two or four weeks after initial doses, as a monotherapy or with the older drug methotrexate.
"Not only does Cimzia underpin 20 percent of our 30 euros fair value, it is a major driver of UCB's deleveraging strategy," Morgan Stanley said in a research note.
UCB has a high level of debt compared to its rivals following recent acquisitions, with around 2 billion euros of debt requiring refinancing in 2010/11.
Shares in the company were up 21.59 percent at 23.50 euros by 0937 GMT in a flat market for European drug stocks .SXDP.
Cimzia belongs to a class of arthritis drugs that work by blocking an inflammatory protein called tumour necrosis factor (TNF). But it is a late entrant.
It will compete against three established anti-TNF blockbusters -- Amgen's (AMGN.O) Enbrel, Johnson & Johnson's (JNJ.N) Remicade and Abbott Laboratories' (ABT.N) Humira -- and a new product, called Simponi, from J&J.
Cimzia will cost $1,300 a month, a 5 percent discount to Humira and 35 percent less than Simponi.
Morgan Stanley said it estimated annual Cimzia sales would reach 650 million euros ($881.1 million) by 2015, based on a 4 percent market share, but added this could prove conservative.
Some 5 million people suffer from rheumatoid arthritis globally and around 1.3 million in the United States. Women are three times more likely than men to get the disease.
In clinical trials, patients treated with Cimzia alone experienced significant improvements in signs and symptoms, function and pain. Together with methotrexate, patients experienced rapid and significant improvements as early as week one, UCB said.
Seperately, another U.S. biotechnology company Medarex Inc MEDX.O said its experimental rheumatoid arthritis treatment met the main goal of a mid-stage trial. (Additional reporting by Ben Hirschler and Vidya L Nathan; Editing by Anshuman Daga, Sharon Lindores, Anil D'Silva) ($1=.7377 Euro)