Curis Inc said the U.S. Food and Drug Administration allowed it to resume testing of its experimental cancer drug, lifting a November order halting enrolment in an early-stage trial.
The drugmaker's shares rose as much as 13 percent in morning trading on the Nasdaq.
Enrolment for the study was halted after the death of a patient with advanced breast cancer, who experienced acute liver failure about a month after the drug, codenamed CUDC-427, was discontinued.
The trial began in the third quarter of 2013 in patients with advanced solid tumors or lymphomas.
The drug is designed to neutralize major inhibitors of apoptosis or programmed cell death - a process that ensures defective, damaged or superfluous cells are eliminated. Inhibition of apoptosis helps cancer cells persist and grow.
Many other cancer therapies, including chemotherapeutic agents, radiation and immunotherapy, also work by inducing apoptosis.
Curis acquired the license to develop and market the treatment from Genentech, a unit of the Roche Holding AG, for an upfront payment of $9.5 million in November 2012.
Curis said it intended to continue testing the drug as a monotherapy and evaluate its use in combination with chemotherapy drug, capecitabine, in patients of a type of advanced breast cancer.
Brean Capital analyst Daniel Brims said he expected the drug's breast cancer study to begin in the second quarter of this year.
Other pharmaceutical companies, including Novartis AG and Ascenta Therapeutics Inc, are also developing therapies to regulate apoptosis.
Roth Capital Partners analyst Joseph Pantginis raised the drug's projected chance of success to 15 percent from 5 percent following the regulator's decision. He raised his price target on Curis stock to $10 from $9.
The Lexington, Massachusetts-based company's shares were up 5.7 percent at $2.90 on Monday morning on the Nasdaq.
(Reporting by Natalie Grover in Bangalore; Editing by Kirti Pandey)