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UPDATE 2-Novartis gene therapy approval signals new cancer treatment era

(Adds price of treatment, comment by investor and doctor, safety warning, CMS agreement, background, share prices)

Aug 30 (Reuters) - Novartis AG on Wednesday won highly anticipated U.S. approval for the first of a new type of potent gene-modifying immunotherapy for leukemia, a $475,000 treatment that marks the start of a potential new treatment paradigm for some cancers.

The approval was widely expected after an FDA advisory panel last month unanimously recommended the action, and Novartis shares closed virtually unchanged in Swiss trading on Wednesday.

Novartis announced an agreement with the U.S. Centers for Medicare and Medicaid Services under which payment for the therapy will be based on clinical outcomes achieved.

The treatment, to be sold under the name Kymriah, was approved for patients up to 25 years of age who have relapsed or were not helped by initial treatment for B-cell acute lymphoblastic leukemia (ALL).

Kymriah belongs to a new class of drugs called chimeric antigen receptor T-cell, or CAR-T therapies, that involves removing disease-fighting T cells from a patient, genetically modifying them to better recognize and attack cancer and then replacing them, where they can circulate for years seeking out the disease.

"Were entering a new frontier in medical innovation with the ability to reprogram a patients own cells to attack a deadly cancer, U.S. Food and Drug Administration Commissioner Scott Gottlieb said in a statement.

U.S. biotech Gilead Sciences Inc jumped into the field this week with its announcement of an $11.9 billion deal to buy Kite Pharma. Gilead shares were up more than 5 percent on Wednesday as Kite is widely seen as likely to receive the next U.S. approval of a CAR-T therapy.

Shares of Bluebird Bio Inc, which is also developing a treatment in the emerging field, were up 11.8 percent at $114.47 on the Nasdaq.

Two years ago many people would have told you these types of treatments were science fiction," said Brad Loncar, Chief Executive of Loncar Investments, which runs the Loncar Cancer Immunotherapy ETF

In clinical trials, CAR-T therapies have shown remarkable efficacy against blood cancers. In the pivotal Novartis trial, 83 percent of patients achieved remission with a disease that has historically poor outcomes.

"We've never seen anything like this before and I believe this therapy may become the new standard of care for this patient population," Dr Stephan Grupp of Children's Hospital of Philadelphia said in a statement.

However, this type of therapy is not without risk of severe side effects as the immune system goes into high gear. Kymriah will carry a boxed warning for cytokine release syndrome, a potentially lethal systemic response to the activation and proliferation of CAR-T cells, causing high fever and potential for neurological problems.

Juno Therapeutics Inc last year reported a handful of patient deaths during trials of its CAR-T therapy for leukemia. Its shares were down 5.7 percent at $41.30. (Reporting by Bill Berkrot and Mike Erman in New York, Natalie Grover in Bengaluru, Deena Beasley in Los Angeles and Julie Steenhuysen in Chicago; Editing by Shounak Dasgupta and Matthew Lewis)