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The drug, Prochymal, will be used to treat a deadly side effect of bone marrow transplants called acute graft-versus host disease, which occurs in children.
Canadian regulators have approved the world's first stem cell drug.
The drug, Prochymal, will be used to treat a deadly side effect of bone marrow transplants called acute graft-versus host disease (GvHD), which occurs in children.
Acute graft-versus host disease kills about 80 percent of children affected.
Prochymal uses stem cells from healthy adult donors, with one donation able to create 10,000 doses of the drug, reported the New York Times.
The manufacturer, Maryland-based Osiris Therapeutics Inc., saw their shares climb 5.5 percent to $5.55 after losing 24 percent in the last year, reported Bloomberg.
In extended trading, stocks rose 14 percent.
The drug was approved, said Reuters, on the condition that further clinical tests are carried out.
There has been debate about the effectiveness of the drug in recent years.
Late stage clinical trials three years ago failed to show results but more recent tests have shown the drug to be relatively effective about a month into therapy.
Osiris says that it plans to seek approval from the US Food and Drug Administration this year.