By Hester Plumridge 

LONDON-- GlaxoSmithKline PLC's diabetes treatment albiglutide was approved for use by U.S. regulators on Tuesday, after a series of drug-development setbacks for the company.

Albiglutide was approved for use in Europe in March under the brand name Eperzan. It belongs to a class of drugs called GLP-1 receptor agonists, which work by stimulating the body's natural production of insulin and help regulate blood-sugar levels.

Glaxo expects the drug to be launched in the U.S. under the brand name Tanzeum in the third quarter of this year. Despite approval, Glaxo's drug is likely to face stiff competition from rivals that work in a similar way.

GLP-1 drugs are prescribed to people with Type 2 diabetes, usually when attempts to control the disease through diet and exercise have failed but when patients don't yet need insulin injections. Type 2 diabetes gets progressively worse with time, especially if blood sugar levels aren't well managed.

The leading drug prescribed for this type of treatment is Victoza from Novo Nordisk A/S, which must be injected every day. Albiglutide could prove to be more convenient for diabetics because it is a once-weekly injection.

Another once-weekly injection, called Bydureon from AstraZenecal PLC, is already available. However, Bydureon has had poor uptake because a large needle is needed for the injection, although it has recently been approved for use in the U.S. in an easier-to-use pen device.

Market expectations for albiglutide are modest. Analysts at Deutsche Bank are penciling in sales of just $360 million by 2018. That compares with Victoza sales of some $2.1 billion last year.

Albiglutide failed to beat Victoza in a head-to-head study in 2011, which measured the drug's efficiency at lowering the amount of glucose in the blood.

Albiglutide could also face stiff competition from a drug currently being developed by Eli Lilly & Co. called dulaglutide, another once-weekly GLP-1 injection which showed similar efficacy in a head-to-head study with Victoza. Dulaglutide could be approved later this year.

Novo Nordisk is also working on a once-weekly injection of GLP-1, called semaglutide.

Still, the approval is a positive for Glaxo, which halted development of a cancer vaccine earlier this month after disappointing clinical trial results.

In late March, it withdrew a regulatory application in Europe for use of its ovarian-cancer treatment Votrient in a new group of patients with the disease. And in November, it reported that a heart-disease drug it is developing--once one of its brightest pipeline hopes--had failed to show a meaningful effect on patients.

Write to Hester Plumridge at Hester.Plumridge@wsj.com

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