In a boost for the field of regenerative medicine, a small biotechnology company has received regulatory approval in Canada for what it says is the first manufactured drug based on stem cells.

The company, Osiris Therapeutics of Columbia, Md., said Thursday that Canadian regulators had approved its drug Prochymal, to treat children suffering from graft-versus-host disease, a potentially deadly complication of bone marrow transplantation.

“It’s really a good day for the concept and the hope behind stem cell therapies becoming a reality,” C. Randal Mills, the chief executive of Osiris, said in an interview.

Prochymal is a preparation of mesenchymal stem cells, which are obtained from the bone marrow of healthy young adult donors. The stem cells are separated out from the marrow and expanded in culture, so that one donation is enough to make as many as 10,000 doses.

Because these are adult stem cells, they do not raise the ethical concerns of embryonic stem cells, whose creation usually involves the destruction of human embryos.

Graft-versus-host disease occurs when the immune cells in a bone-marrow transplant see the recipient’s organs as foreign and attack them, causing potentially severe damage to the skin, liver and digestive tract. This happens most often when the donor is not an exact match for the recipient.

Doctors try using steroids or other drugs to damp the immune attack, but in many cases those don’t work, and the patient may die.

Prochymal is approved in Canada for children whose condition is not controlled by steroids. In a small trial, about 60 percent of such children had a clinically meaningful response to the drug, Osiris said.

“Any drug or a cell that has activity in the patients with severe disease is exciting and important,” said Dr. Joanne Kurtzberg, director of the pediatric blood and marrow transplant program at Duke University Medical Center.

Dr. Kurtzberg, who helped Osiris present its case to Canadian regulators, said the drug has saved some children’s lives from graft-versus-host disease and could lead to more successful bone marrow transplants.

Osiris is not expected to gain much revenue from patients with a rare disease in Canada. But it is a welcome success for a 20-year-old company that has had its share of failures.

In 2009, Prochymal failed in two late-stage clinical trials, showing little to no advantage over placebo in treating graft-versus-host disease. The company is also trying to develop Prochymal as a treatment for Crohn’s disease, diabetes, heart attacks and other illnesses, but has had some failures there as well.

Sanofi, the big French company that had the rights to sell Prochymal outside North America, said in February that it had discontinued its work on the drug.

Dr. Mills, Osiris’s chief executive, said the company realized the drug was most effective in the most severe cases of graft-versus-host-disease that did not respond to steroids, leading it to do the small trial in children.

Dr. Mills said that the Food and Drug Administration indicated that it would require more data before approval, prompting Osiris to seek approval in Canada first. He said the company would apply to the F.D.A. later this year.

Stem cells are already used in medicine. Bone marrow or stem cell transplants are used to treat various cancers and genetic diseases. But those transplants are medical procedures, not products sold by a drug company.

There are cell therapies that have been approved by regulators, such as Carticel, a Genzyme product that uses a patient’s own cells to repair cartilage in injuries. Last year the F.D.A. approved a cord blood product for use in transplantation. Those products are not manufactured for off-the-shelf use like Prochymal is, Dr. Mills said.