By Sam Cage

ZURICH (Reuters) - Analysts raised forecasts for Roche Holding AG (ROG.VX: Quote, Profile, Research) on Monday after U.S. regulators approved its Avastin drug for treating advanced breast cancer, adding a potentially significant new revenue source.

Most observers had expected the Food and Drug Administration (FDA) either to delay a decision or reject the medicine for this use, so the news pushed Roche stock up nearly 4 percent in early trade, following 9 percent gains for its U.S. partner Genentech Inc DNA.N late on Friday.

"The market had hardly reckoned on this decision," said Zuercher Kantonalbank analyst Michael Nawrath, who reiterated an Overweight rating on Roche.

"The potential sales of 1 billion Swiss francs in 2008 had been taken out of our model. Now we are adding 5 percent to Avastin sales in 2008 and 2009," Nawrath said.

Roche participation certificates, its most widely traded form of equity, were 3.9 percent higher at 203.70 Swiss francs at 0927 GMT, while the European pharmaceuticals sector index was up 1.3 percent.

An FDA advisory voted 5-4 against approval in December, but positive new data from a clinical study was released last week.

"We expect many on the Street will need to increase 2008 and 2009 numbers, as approval will bring better reimbursement and ability to market in breast cancer," said Andrew Baum, analyst at Morgan Stanley, who kept an "overweight" rating on the stock.

Landsbanki Kepler analyst Denise Anderson, who maintained a "buy" rating, said she would add back the 500 million francs in 2008 sales that were deleted after the panel vote.