Drugmaker Eli Lilly and Co. said on Monday that U.S. regulators granted conditional approval for the firm's experimental treatment for sepsis, a deadly syndrome linked to blood infections.

The Indianapolis-based firm said it has received an "approvable letter" from the U.S. Food and Drug Administration for Xigris, edging Lilly closer to selling the drug to treat a syndrome that is most often acquired in hospitals and kills about 215,000 Americans each year after they suffer a severe bacterial infection. 

Lilly said final approval is contingent upon successful negotiation of labeling, agreement on post-approval clinical trials and successful completion of manufacturing inspections. 

"The action by the FDA puts us one step closer to the approval of Xigris, which we believe will occur in the near term," said John Lechleiter, executive vice president of pharmaceutical products and corporate development at Lilly. 

Xigris is one of a handful of experimental medicines Lilly is counting on to fill the revenue gap caused by dramatically slowing sales of its antidepressant Prozac, which is now facing competition from cheaper generics. 

Wall Street analysts view Xigris as a potential blockbuster for Lilly, with some forecasting sales of more than $1 billion a year. 

Deutsche Banc Alex Brown analyst Barbara Ryan called the move in line with expectations, and forecast the drug's approval within a few weeks and on track for launch by year-end, pending set conditions. 

"We expect a restrictive label for 'serious' sepsis, and will warn of the risks of intracranial bleeding. We forecast the patient population at 100,000 to 200,000 in the U.S. each year," said Ryan, adding she expects that tight wording on the label regarding the appropriate patient population will be successful in limiting use. 

Earlier this month, a U.S. advisory panel split on whether to recommend approval of Xigris as the first therapy for sepsis, or recommend further study. While some panel members viewed the drug as a potentially life-saving treatment, others cited safety concerns with risk of serious bleeding. 

"We feel strongly that our clinical data support Xigris becoming the first approved treatment for severe sepsis," Lechleiter said. 

Xigris, given intravenously, is a genetically engineered version of a human protein, called Activated Protein C, that helps balance the forces linked to sepsis — inflammation, coagulation and suppression of the body's clotting system. 

Other experimental treatments for sepsis include Chiron Corp. and Pharmacia Corp.'s Tifacogin, which is in late stage Phase III trials. 

Lilly shares edged up nearly 2 percent, or $1.45, to $81.09 on the New York Stock Exchange in afternoon trading on Monday.