Gilenia, while effective, causes a gradual decline in lung function and is linked to certain cancers, Food and Drug Administration staff said in a review today. Outside advisers to the FDA will meet June 10 to recommend whether the drug, also called fingolimod, should be approved for sale.

Novartis, of Basel, Switzerland, is racing German drugmaker Merck KGaA to sell the first pill to stall MS, competing with injected remedies led by Biogen Idec Inc.’s Avonex. The FDA has said it will complete its review by September. Gilenia may go on sale in 2010 and reap $1 billion a year, Novartis has said.

“The pivotal efficacy studies provide robust evidence of the efficacy of fingolimod to reduce the frequency of clinical exacerbations in patients with relapsing remitting MS,” FDA staff said in the report. “The clinical development program also uncovered a number of safety issues, which will be the primary focus for the advisory committee meeting.”

Skin cancer and heart risks will probably fuel a “vigorous debate” at the panel meeting, Yaron Werber, an analyst for Citibank in New York, said June 4 in a research note. Those risks were linked to the treatment in a study published in January in the New England Journal of Medicine, and also identified as adverse events in the FDA review today.