Approval was given by the United States Food and Drug Administration for an investigational new drug application for ZYGK1, Cadila Healthcare said in a filing to the Bombay Stock Exchange.
The company said it will now initiate Phase-I clinical trials for ZYGK 1.
Phase-I clinical trials are the first step of testing efficacy and possible side effects of a molecule on a limited human sample.
Speaking on the development, Zydus Cadila chairman and managing director Pankaj R Patel said: "We have been building a promising pipeline of new molecular entities at the Zydus Research Centre."
ZYGK1 is a new molecular entity, which is a 'potent and orally administered small molecule glucokinase activator', Cadila said.
In multiple preclinical models of Type 2 diabetes, ZYGK1 was found to be effective in controlling both fasting and non-fasting blood glucose, the company added.
A NME is a molecule developed by the innovator company in the early drug discovery stage, which after undergoing clinical trials could translate into a drug.
"We believe that these sustained efforts will help us address unmet healthcare needs in the focus areas of metabolic disorders and cardiovascular diseases," Patel added.
Shares of Cadila Healthcare were being quoted at Rs 833.90 apiece in afternoon trade on the BSE on Thursday, up 3.86 per cent from their previous close.