Federal advisors recommended keeping GlaxoSmithKline’s embattled type 2 diabetes drug Avandia on the market but said its label should include strict warnings on use. While not the worst outcome for GSK, new warnings could accelerate the drug company’s slide in terms of share in the PPAR market.

With conflicting studies on Avandia’s safety presented during yesterday’s testimony, panel members said the evidence was too cloudy to recommend severely restricting access. At the end of the day, they voted 20-3 that Avandia is associated with increased ischemic risk, which includes heart attacks, and 22-1 that the drug should stay on the market.

GSK subsequently confirmed its 2007 earnings outlook, sending its shares on the London Stock Exchange up 3.9%.

The unusual hearing followed months of controversy over Avandia’s cardiovascular risk. Debate grew after a New England Journal of Medicine meta-analysis in May linked the drug to an increased risk of heart attack. Subsequent analyses followed, and GSK staunchly defended Avandia with evidence from its own clinical trials.

As the hearing showed, even FDA staffers were divided. Among those calling for removal of Avandia yesterday were Dr. David Graham, the FDA drug safety officer, but his boss, CDER director Dr. Robert Meyer, disagreed, saying patients need multiple options, according to The New York Times.

GSK’s Dr. Murray Stewart argued that data compiled by managed care companies, as well as long-term clinical trials, showed the drug was safe and that patients were at no greater risk of heart problems than patients on other drugs.

But panelists overwhelmingly begged to differ, offering several different ideas for label warnings, including a “black box” focusing on patients who may be at elevated risk, such as those taking insulin along with Avandia.

GSK said it will suggest that the drug label reflect information about ischemic risk, according to The Wall Street Journal.

Takeda’s Actos, the other PPAR drug on the market, was not debated yesterday. A new heart precaution added to Avandia could give a further boost to the Takeda pill, whose market share has risen since the May meta-analysis. Avandia was GSK’s second-best selling drug last year with sales of $3.4 billion.

According to the Times, “[separate] evidence is overwhelming that Avandia and Actos worsen heart failure, a chronic condition in which the heart can no longer pump enough blood through the body.”

The FDA doesn’t have to follow the advice of its advisory committees but usually does.