* U.S. approves 2 mg dose of Lilly-Incyte's arthritis drug
* Drug priced at $25,000/year, 60 pct lower to AbbVie's Humira
* Olumiant label not as favorable as expected - analysts (Recasts lead; Adds comments from Lilly executive, analysts)
By Manas Mishra and Tamara Mathias
June 1 (Reuters) - Eli Lilly & Co's rheumatoid arthritis treatment was approved by U.S. regulators on Friday with a far more restrictive label than expected and the drugmaker said the drug would be priced at half the cost of available rival medicines.
The drug, Olumiant, was approved by the U.S. Food and Drug Administration (FDA) to treat adults with moderate-to-severe active rheumatoid arthritis who did not respond to commonly-used treatments known as TNF inhibitors.
Olumiant is a once-daily pill that belongs to a class of drugs known as JAK inhibitors which block inflammation-causing enzymes, known as Janus kinases, and was developed along with Incyte Corp.
The FDA approval was for a 2 milligram dose of the drug, but not the higher dose that analysts had expected to be more commercially successful.
Restricting the drug to patients who had already been treated with TNF inhibitors such as AbbVie's Humira could limit use, analysts said.
"We were disappointed, maybe not surprised, but disappointed, that it (label) didn't allow for the ability to use it earlier in therapy," Christi Shaw, president of Lilly Bio-Medicines told Reuters.
The list price of the drug is around $25,000 a year, a discount of about 60 percent to Humira, the leading TNF inhibitor, and half of Pfizer's Xeljanz, Shaw said.
Rheumatoid arthritis, a disease which causes inflammation and destruction of joints, affects more than 23 million worldwide.
Olumiant's label carries a boxed warning — the FDA's strictest — against risk of blood clotting, serious infections and malignancies including lymphoma.
FDA's decision comes nearly two months after an independent advisory panel voted in favor of the lower dose of Olumiant, and against the 4-milligram dose.
"The Olumiant approval was a bit worse than the panel's recommendation," Morgan Stanley analyst David Risinger said, noting that the panel had voted in favor of the drug being used by patients resistant to methotrexate, another treatment for rheumatoid arthritis.
Analysts had previously said that a U.S. approval of just the lower dose would limit the business opportunity for Lilly and Incyte. The doses, including the 4-milligram one, are already approved in over 40 countries.
"While an Olumiant 2 mg dose approval gives Lilly a path to market ... we see a relatively limited U.S. commercial opportunity at the lower dose," J.P. Morgan analyst Chris Scott said, estimating U.S. sales of about $400 million for the drug in 2022. (Reporting by Manas Mishra and Tamara Mathias in Bengaluru; Editing by Sai Sachin Ravikumar and Shounak Dasgupta)