The approval was widely expected after an FDA advisory panel last month unanimously recommended the action.
Novartis shares closed virtually unchanged in Swiss trading.
Novartis also announced an agreement with the U.S. Centers for Medicare and Medicaid Services under which payment for the therapy will be based on clinical outcomes achieved.
The treatment, called Kymriah, was approved for patients up to 25 years of age who have relapsed or not helped by prior treatment for B-cell acute lymphoblastic leukaemia (ALL).
Dr Kevin Curran, a paediatric oncologist at Memorial Sloan Kettering Cancer Center in New York, noted the treatment`s high cost.
"Of course, we have to talk about pricing from a national standpoint," he said. "But if I have a parent and a (sick) child in front of me, and I have an opportunity to save them, we`re going to take that."
Kymriah belongs to a new class of treatments called CAR-T therapies. It involves removing disease-fighting T cells from a patient, genetically modifying them to better recognise and attack cancer, and then replacing them, where they can circulate for years seeking out the disease.
Novartis estimates some 600 ALL patients a year would be eligible for Kymriah. It expects to open five treatment centres within days and 35 by year-end.
"We’re entering a new frontier in medical innovation with the ability to reprogramme a patient’s own cells to attack a deadly cancer,” Food and Drug Administration Commissioner Scott Gottlieb said in a statement.
The FDA said it has granted 76 applications for trials involving experimental CAR-T therapies.
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"Two years ago many people would have told you these types of treatments were science fiction," said Brad Loncar, chief executive of Loncar Investments, which runs the Loncar Cancer Immunotherapy ETF
In clinical trials, CAR-T therapies have shown remarkable efficacy against blood cancers. In the pivotal Novartis trial, 83 percent of patients achieved remission with a disease that has historically poor outcomes.
"We`ve never seen anything like this before and I believe this therapy may become the new standard of care for this patient population," Dr Stephan Grupp of Children`s Hospital of Philadelphia said in a statement.
However, this type of therapy carries risk of severe side effects. Kymriah will have a boxed warning for cytokine release syndrome, a potentially lethal systemic response to the activation and proliferation of CAR-T cells, causing high fever and potential for neurological problems.
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(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)