U.S. health regulators approved NPS Pharmaceuticals Inc's short bowel syndrome drug Gattex, but asked the company to conduct a post-market study to evaluate cancer risks associated with the drug.
NPS shares fell 5 percent to $8.63 in afternoon trade on the Nasdaq.
The company said it would launch the drug in the United States in the first quarter of next year.
An advisory panel in October had unanimously backed the drug but discussed the possibility that it could cause cancerous tumors in the small intestine when used over a long period.
Gattex is the third FDA-approved drug to treat adults with short bowel syndrome receiving nutritional support.
Short bowel syndrome is a condition in which the body is unable to absorb enough nutrients through the gastrointestinal tract and that forces patients to rely on intravenous feeding. It is mostly caused by the surgical removal of large parts of the small intestine.
The post-market study, conducted over 10 years, would test the potential risk of the drug to cause colorectal cancer and other conditions.
Gattex, administered once daily, improves intestinal absorption of fluids and nutrients, and reduces the frequency and volume of intravenous feeding.
(Reporting by Prateek Kumar and Vrinda Manocha; Editing by Saumyadeb Chakrabarty)