Rivals vying to get the first multiple sclerosis pill to market face a key decision Thursday when U.S. experts vote on whether Novartis AG's (NVS) candidate Gilenia should be recommended for approval.

Gilenia is so far seen as leading the race to get an oral MS treatment approved. But it could lose that edge if safety issues prompt the U.S. Food & Drug Administration's Peripheral and Central Nervous System Drugs Advisory Committee to not recommend it at a meeting Thursday.

The drug has been linked in clinical trials to a number of potentially serious side effects, including heart problems and skin cancer.

A memo released Tuesday by the FDA in advance of Thursday's meeting said Gilenia was effective but carried "a number of safety issues."

The panel will be asked to vote on a series of questions including whether studies of a lower dose of the product should be conducted prior to approval. If the FDA were to endorse such an option, it would significantly delay approval of Gilenia.

Novartis hopes that won't happen and rather that the promise of Gilenia benefits will outweigh concerns over potential health risks.

"Novartis has been working to reduce the risk of disappointment by limiting its requested indication to treating relapsing-remitting multiple sclerosis with 0.5 milligrams of Gilenia once-daily, which appears to have a cleaner safety profile than 1.25 milligram daily dosing," said Mike Ward of Ambrian, who has a hold recommendation on the Swiss company.

Investors will be watching the FDA panel decision closely. So, too, will Merck KGaA (MRK.XE) of Germany, Sanofi-Aventis (SAN.FR) of France and Israel-based Teva Pharmaceutical Industries Ltd (TEVA) which are fielding rival treatments.

All raise the possibility for the first time that oral treatments might become available alongside the more cumbersome injections and infusions currently used to treat multiple sclerosis, a disease in which the body's immune system attacks nerve cells in the brain. People with the most common form of the disease--relapsing-remitting MS--experience attacks, or relapses, followed by periods of remission.

Merck KGaA Tuesday said it has just resubmitted its request for U.S. regulatory approval for its experimental oral MS product Mylinax, or cladribine, after having its initial submission kicked back by the FDA last November.

Sanofi last week said new data from a phase II study of its rival multiple sclerosis drug teriflunomide showed "improvement in outcomes" for patients suffering from relapsing multiple sclerosis. Teva's candidate laquinimod is licensed from NASDAQ-listed Active Biotech.

The FDA panel decision on Gilenia--licensed from Mitsubishi Tanabe Pharma of Japan and also known as fingolimod--is viewed by analysts as a key news event for Novartis, not least due to its potential to the Swiss group offset revenue lost due to expiring drug patents.

Analysts say Novartis' oral MS drug has a clear advantage in being easier to take than injectables from Elan Corp. PLC (ELN), Biogen Idec Inc (BIIB), Bayer AG (BAY.XE), Merck KGaA and Teva Pharmaceutical Industries Ltd, as well as not causing the flu-like symptoms seen with some of these products.

Jefferies, which has a buy rating on Novartis, said in a recent note: "We see this as a clear commercial advantage in this market, as is the lack of troublesome flu-like symptoms common with the interferons, hence our peak sales expectation for Gilenia now sits well above consensus, or circa $1.6 billion at $3.5 billion."

Stockbrokers Goodbody Tuesday said the FDA panel decision will have significant implications for companies offering MS treatments, including Ireland-based Elan, which markets controversial multiple sclerosis treatment Tysabri along with U.S. partner Biogen Idec Inc.

"If the committee recommends approval, it will have a negative impact on companies with existing MS treatments, including Elan ... Any question marks over the new drug will, conversely, be seen as positive for Elan," Goodbody said in a note to clients.

-By Sten Stovall, Dow Jones Newswires; +44 207 842 9292; sten.stovall@dowjones.com

(Jennifer Corbett Dooren contributed to this article.)