Forty-odd years ago, a new sedative and safe way to prevent morning sickness was launched to great fanfare. Three years later, the drug - thalidomide - had become one of the worst nightmares of modern medicine, with an estimated 12,000 babies worldwide born damaged with flippers in place of limbs. But recently, researchers have begun to discover that this potent drug can have powerful effects for the good as well as evil - offering unexpected relief in diseases ranging from HIV, to leprosy and rheumatoid arthritis, even cancer.

Last year, US regulators licensed the drug for the first time in the States as a treatment for leprosy and severe ulceration and is now considering it for cachexia - the wasting condition that often accompanies cancer.

What's behind the drug's revival is the discovery that it has a powerful ability to control production of a potent immune system chemical called tumour necrosis factor (TNF).

TNF is crucial to our body's defence against infection, but it is a double-edged sword. When it's working correctly, it is a key to good health; if it is produced for too long or at too high a level, it wreaks havoc. Having too much TNF is being linked to many hitherto-unexplained inflammatory conditions, such as rheumatoid arthritis, multiple sclerosis, leprosy and the rejection syndrome 'graft versus host' disease. In people with Aids, TNF overload is a major trigger of the chronic throat and mouth ulceration and wasting characteristic of advancing disease.

Thalidomide reduces TNF with dramatic results. Studies in Aids patients show it heals ulceration completely in around 50 per cent and improves the situation for the remainder. It also halts the wasting process, allowing patients to regain valuable weight.

Researchers from Nottingham found 80 per cent of patients with persistent oral and genital ulceration caused by a variety of conditions go into remission within a month of starting thalidomide therapy. Investigators at St Thomas's Hospital in London have found 50 per cent of patients with apparently incurable skin disease, lupus erythematosus, experience similar results.

Ann Shipley is one who has first-hand experience of thalidomide's new potential. Diagnosed with Behcet's disease, a condition which causes severe ulceration of the mucous membranes (found in the eyes, mouth, nose, throat, lungs, bowel, urinary tract and sex organs), she spent 20 years trying different drugs with little success, before being prescribed thalidomide. For her, she says, it has been a 'miracle drug'.

'Thalidomide put me completely into remission. I can eat, I can drink, I can go out and I've been in permanent work ever since. Without it, life would be awful. I hope I can stay on it for the rest of my life.' Other research suggests that thalidomide could also work as an anti-cancer drug because it restricts the growth of blood vessels, literally starving tumours away. It is this action which is thought to have obstructed the normal growth of limbs in the children of the sixties.

Researchers from the National Institutes of Health Clinical Centre in Bethesda, Maryland, have reported that the tumours of patients with prostate cancer stabilise with thalidomide treatment and levels of prostate-specific antigen - the chemical marker that signals malignant activity - go down. The researchers also reported positive trends against brain tumours, breast cancer and Karposi's sarcoma.

The drug may also help in diseases such as macular degeneration, the leading cause of blindness in the elderly, and diabetic eye complications, caused by new vessels growing across the eye.

Professor Angus Dalgleish, professor of oncology at St George's Hospital, London, has been conducting trials on thalidomide for more than three years. 'It is one of the most exciting drugs we've ever worked with because it potentially has a major role in several major diseases. You can take someone whose mouth is ravaged by ulcers, give them steroids or cyclosporin and nothing happens, but give them just one tablet of thalidomide and the next morning they will be drinking and eating. We had people who've had chronic diarrhoea for over a year which just stops with thalidomide.' Another potential area of benefit is rheumatoid arthritis. 'Thalidomide won't necessarily be a cure, but it may be a major controlling therapy that could change people's lives,' says Dalgleish.

In Britain, thalidomide is only prescribed under close consultant supervision - as are other highly potent drugs such as methotrexate and retinol A, both used to treat psoriasis. Patients must not conceive or continue a pregnancy while on the therapy. They are also monitored for signs of nerve damage, the drug's only major side-effect outside birth defects.

Dr Michael Denman, consultant rheumatologist at London's Northwick Park Hospital, who has pioneered the use of thalidomide for Behcet's Disease, believes that with good counselling and careful monitoring, thalidomide is as safe as other drugs, despite its tragic past.

'Thalidomide is just another drug that is nasty if misused. If it is used properly, it is a great deal safer than a lot of other drugs that have not been demonised. People can have a toxic reaction and suffer catastrophic consequences with any drug.'