(Adds comment from FDA, Ariad and analyst; adds background)
Dec 20 (Reuters) - A leukemia drug that was suspended amid safety concerns nearly two months ago is being allowed back on the U.S. market, though restricted to a smaller group of patients.
Shares of Ariad Pharmaceuticals Inc, which makes the drug, Iclusig, rose as much as 40 percent after news that the U.S. Food and Drug Administration approved the more restricted use of on Friday.
Iclusig was approved a year ago to treat chronic myeloid leukemia and Philadelphia chromosome positive acute lymphoblastic leukemia in patients who had failed to respond to at least one other therapy. It was suspended on Oct. 31 after being associated with a higher-than-expected risk of life-threatening blood clots and narrowing of blood vessels.
The FDA said it approved a revised label for the drug, limiting its use to patients with a specific genetic mutation and to those who are unable to use alternative treatments such as Novartis AG's Gleevec or Bristol Myers Squibb Co's Sprycel.
The drug's label will note that vascular blockages, which have the potential to cause heart attacks, strokes and death, have occurred in at least 27 percent of patients treated with Iclusig. It will also warn of an increased risk of heart failure.
"While this new restricted label will clearly cap Iclusig's sales potential, we still believe it can be a meaningful drug," Cory Kasimov, an analyst at J.P. Morgan, said in a research note. "The key question will now be whether Iclusig will be relegated to last line of defense (resulting in more modest sales potential) or will it begin to creep up the treatment algorithm."
Doctors are allowed to prescribe drugs on an "off-label" basis for indications other than those approved by the FDA, though companies are not allowed to market them for such unapproved uses. Ariad said it will start selling the drug, its only approved product, from mid-January.
Ariad's chief executive, Harvey Berger, told analysts on a conference call that about 1,300 patients a year will be eligible for Iclusig under the new label, down from 2,500 previously.
The drug is expected to generate sales of $315 million by 2019 according to the average estimate of three analysts polled by Thomson Reuters.
Iclusig costs at least $115,000 a year.
The FDA is requiring the company to implement a risk management program to promote awareness of the risks associated with Iclusig. The company must also conduct additional trials to test different, potentially less toxic, doses of the drug.
Dr. Richard Pazdur, head of the FDA's cancer division, said in an interview that if a less toxic dose was to be identified, "it would be reasonable," though speculative at this stage, to test Iclusig to another therapy for potential use in a broader patient population.
Ariad's Berger said he expects the company to begin the dosing trial in the second half of 2014.
"We believe these requirements are straightforward and manageable," he said.
Ariad's shares rose 24 percent to $6.85 in afternoon trading on Nasdaq. Earlier they rose as high as $7.75. (Reporting by Toni Clarke in Boston and Esha Dey in Bangalore; Editing by Leslie Adler) ))