UPDATE 1-U.S. FDA panel backs approval of Novo Nordisk diabetes drug

(Adds analyst's comment, background)

WASHINGTON, Oct 18 (Reuters) - Novo Nordisk A/S's new diabetes drug semaglutide is effective, reasonably safe and should be approved, an advisory panel to the U.S. Food and Drug Administration concluded on Wednesday.

The panel voted 16-0 with one abstention in favor of the drug being approved. It would compete with others in a class known as glucagon-like peptide-1 (GLP-1) analogs, which imitate an intestinal hormone that stimulates the production of insulin.

The FDA typically follows the recommendations of its advisors.

Novo Nordisk is hoping that semaglutide, a once-weekly injection, will take market share from Eli Lilly & Co's once-weekly Trulicity, which in turn has been taking share from Novo Nordisk's once-daily Victoza. Novo Nordisk is also developing an oral form of semaglutide.

"We believe semaglutide will be a formidable competitor for Lilly's Trulicity," Alex Arfaei, an analyst at BMO Capital Markets, said in a research note.

Analysts on average expect annual semaglutide sales to reach $3.17 billion by 2023, with sales of Trulicity, which was approved in the United States in late-2014, rising to $3.71 in 2023, according to Thomson Reuters data.

Panelists discussed data showing that semaglutide was associated with an initial worsening of diabetic retinopathy, a condition caused by damage to blood vessels in the retina due to high blood sugar levels. The damage can cause progressive deterioration in vision, potentially leading to blindness.

But they found that the benefit of reducing blood sugar overall offset this risk, which the company argues is transient. Analysts expect the drug's label to carry a standard warning, similar to insulins, regarding diabetic retinopathy.

The FDA is scheduled to make its decision on semaglutide by Dec. 5th. (Reporting by Toni Clarke; Editing by Sandra Maler)