European drug regulators have recommended AstraZeneca's new thyroid cancer pill Caprelsa, or vandetanib, for approval, giving a boost to a drug which has suffered past setbacks.

The Anglo-Swedish drugmaker said in a statement on Friday its application for a marketing authorisation for Caprelsa received a positive opinion from the European Medicines Agency for the treatment of advanced and non-operable medullary thyroid cancer.

Vandetanib was once seen as a potential $1 billion (631 million pounds)-plus blockbuster for AstraZeneca, but suffered a major setback after failing to extend survival in patients with lung cancer.

The drug is now targeted at the niche market of treating patients with non-operable advanced medullary thyroid cancer (MTC), which accounts for about 4 percent of thyroid cancers.

U.S. drug regulators approved it for MTC in April.

Analysts on average now expect sales of Caprelsa to reach $112 million by 2016, according to consensus forecasts on Thomson Reuters Pharma.

AstraZeneca said the European agency came to its decision after reviewing data from Phase III clinical trials of the drug, which included a double-blind trial of 331 patients with advanced MTC that had spread to other parts of the body, and showed a 54 percent reduction in risk for disease progression with Caprelsa compared to placebo.

Thyroid cancer affects around 48,000 people a year in Europe and kills around 6,300, of which between 5 to 10 percent have MTC.

Advanced MTC has a poor prognosis and clinical outcomes for patients with this disease have not changed substantially in the past 20 years. Currently there are no approved therapies in Europe for this advanced stage of the disease.

(Editing by Mike Nesbit and Ben Hirschler)