Updated from June 5

The official word has come down, and Tysabri is going back on the market, but U.S. regulators determined that the label for the multiple sclerosis drug will have to carry their strongest type of cautionary statement.

Biogen Idec

(BIIB) - Get Report

and

Elan

(ELN)

, the marketers of Tysabri, said Monday that the Food and Drug Administration has approved the product's return after a 16-month absence.

However, the drug's label will also contain what's called a black box warning because Tysabri was linked to a potentially fatal brain disease last year. The agency also recommended the drug be prescribed for patients who haven't responded well to other MS therapies or who can't tolerate other options.

Next up is Europe. Biogen CEO James Mullen said on a conference call Tuesday that his company and Elan expect to receive approval for Tysabri from European regulators in July. The drug would probably be available by the first half of 2007 in most major European markets, he added.

Tysabri can be used as a stand-alone treatment for relapsing forms of MS, to slow the progression of the disease and to reduce the recurrence of symptoms of the neuromuscular disease. Tysabri will probably be available next month, the companies said.

"We are pleased with the FDA's decision to once again make Tysabri available to patients and their families suffering from this chronic, debilitating disease," Kelly Martin, Elan's chief executive, said in a statement. "There continues to be a significant unmet medical need where Tysabri will be an important treatment option."

Following word of the decision, Biogen's shares fell about 5%, and Elan dropped nearly 12%. On Tuesday, Biogen recovered a bit, gaining 33 cents, or 0.7%, to $45.72. Elan though, was down another 65 cents, or 3.9%, to $15.87.

An outside panel of experts earlier this year had

urged the FDA to reapprove the drug following emotional pleas from a number of patients who wanted access to Tysabri.

Biogen and Elan pulled Tysabri off the market early last year after the drug, when combined with another immune-system suppressant, was connected to a serious brain disease called progressive multifocal leukoencephalopathy. Three cases of the illness were ultimately found. In two cases, the patients died.

The FDA's clearance was partly based on a risk-management plan designed to inform doctors and patients of the benefits and risks of Tysabri. Doctors who want to prescribe the drug, pharmacies and infusion centers that want to distribute it and patients who want to take Tysabri will have to enroll in a registry as part of a program that will monitor for new cases of PML or other infections.

Bernstein Research analyst Geoffrey Porges said in a report focusing on Biogen that the FDA, in requiring stricter language on Tysabri's label than its advisory committee recommended, appears to be trying to ensure that promotion efforts focus on keeping the product out of first-line usage, at least initially.

"While we were surprised to see the FDA advisory panel vote to reintroduce the product with such confidence, it is clear that the FDA harbors concerns about the potential for substantial numbers of PML cases to ultimately emerge with the reintroduction and promotion of this drug," Porges wrote in his research note. "The label contains a number of elements that are likely to restrict demand."

Because of the past PML cases, Tysabri isn't meant to be used with other immune-system suppressing or immune-modulating drugs, or in patients whose immune systems are compromised or who have undergone organ transplants.

During the companies' conference call, Martin pointed out that the FDA is requiring nothing on the label that would preclude the use of Tysabri as a first-line therapy for MS. He also said he believes there will "undoubtedly" be times when doctors will use Tysabri early on in the course of treating a patient.

As for the drug's price, Martin said the matter was complicated, but that Elan and Biogen will make a decision in the near future.