UPDATE 1-Europe approves AstraZeneca lung cancer drug

* European Commission grants marketing approval for Iressa

* Move revives hopes for drug largely written off

* Follows positive recommendation from EMEA in April

* Astra to conduct a follow-up study in Caucasian patients

(Adds details, background)

LONDON, July 1 (Reuters) - AstraZeneca's (AZN.L) once-daily cancer pill Iressa has been approved for certain lung cancer patients in Europe, reviving the fortunes of a product that had until recently been largely written off by industry analysts.

The drugmaker said on Wednesday that the European Commission had granted marketing authorisation for its use in treating adults with locally advanced or metastatic non-small cell lung cancer, whose tumours have an EGFR mutation.

The move had been expected, following a positive decision from the European Medicines Agency in April.

Iressa is on sale in Japan but has never made inroads in other markets, following its failure to show significant benefits in the overall population of lung cancer patients in a Phase III clinical study in December 2004.

Its comeback could pose a threat to Tarceva, another oral lung cancer treatment from OSI Pharmaceuticals Inc OSIP.O and Roche Holding AG (ROG.VX).

The endorsement of Iressa's use in a sub-set of lung cancer patients reflects a growing trend to more personalised treatment in cancer, as therapies are increasingly tailored to individuals' genetic profiles.

A mutation in the epidermal growth factor receptor (EGFR) is a characteristic occurring in 10 percent to 15 percent of lung cancers in Europe, and studies have shown these types of tumours are particularly sensitive to Iressa.

Iressa works by inhibiting an enzyme in the cell-surface receptor, thus blocking the transmission of signals involved in the growth and spread of tumours.

AstraZeneca will conduct a further follow-up study, to generate more data on the drug's effectiveness in a Caucasian population, and the company said it was in discussion with the European Medicines Agency to finalise the study design.

Iressa was once viewed as a likely blockbuster for the Anglo-Swedish group, but its failure in 2004 dealt a major blow to the product and it has since been seen as a niche medicine in Asia. (Reporting by Ben Hirschler; Editing by Hans Peters)