Federal regulators approved a drug developed by Shire PLC to treat dry eye disease, a condition affecting an estimated 16 million Americans, the company said Monday.

The decision by the Food and Drug Administration came nine months after the agency asked Shire to submit additional information about its experimental treatment, called Xiidra, raising questions about when and whether it would enter the market.

The OK gives Shire, which is based in Ireland but run out of Lexington, a potential blockbuster in the specialty drug market. The company has projected that its drug could generate annual sales of more than $1 billion, starting in 2020.

Xiidra, a twice-daily eye drop solution, is the first prescription drug approved in the United States to treat both the signs of dry eye disease, such as corneal straining observed by physicians, and symptoms that include eye dryness and irritation. The company plans to launch the drug in the third quarter.

Shire did not immediately disclose the price of the drug. But a stock analyst, Umer Raffat of Evercore ISI in New York, said it was likely to be priced at a premium to another dry eye disease medicine, Restasis, which costs $5,000 a year per patient. Restasisis approved for a narrower set of symptoms.

Dry eye disease is marked by inflammation that can lead to damage to the surface of the eye. Shire’s clinical tests for the drug included trials involving more than 2,500 patients.

Flemming Ornskov, chief executive of Shire, said in an interview that the company would determine the price of Xiidra soon, but he declined to specify a date.

“This is important for patients with dry eye disease who now have another treatment option,’’ Ornskov said. “It’s also important for Shire because it gives us our first approval in ophthalmics, which is an area that’s very important to us. We are in the process of building a very attractive and innovative franchise in that area.’’

Shire, one of the largest makers of drugs to treat rare genetic disorders, recently completed the acquisition of Baxalta Inc.

It now has more than 3,000 workers in Massachusetts, making it the state’s second-largest biopharma employer, after Sanofi Genzyme.

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.