Credit: Reuters/Jason Reed
A view shows the U.S. Food and Drug Administration (FDA) logo at the lobby of its headquarters in Silver Spring, Maryland August 14, 2012.
The company's shares jumped about 38 percent in premarket trading.
The U.S. health regulator placed a hold on the development of the drug, sovaprevir, in July last year after data from an early-stage study showed elevated liver enzymes - a sign of liver damage - in some patients who received the drug.
Achillion submitted additional data on the drug in September, but the FDA maintained the hold.
The company said on Tuesday that the FDA had allowed it to test the drug in a maximum daily dose of 200 mg for hepatitis C patients and in single dose trials for healthy volunteers.
The regulator, however, maintained a hold on multiple dose studies on healthy volunteers.
Achillion's shares were trading at $5.85 before the bell.
The stock closed nearly 48 percent higher on Monday after Merck & Co said it would buy another hepatitis C drug developer, Idenix Pharmaceuticals.
(Reporting by Natalie Grover in Bangalore; Editing by Kirti Pandey)
