ImClone said data showed that when Erbitux is used in combination with radiation therapy, it prevents the spread of head and neck cancer more effectively than radiation therapy alone.

The study's results had been released last year but the stock is surging because they have been confirmed by an independent review committee, said Jim Reddoch, senior biotech analyst with Friedman Billings Ramsey & Co. Two months ago, ImClone announced it was postponing its application to sell Erbitux as a treatment for head and neck cancer until later this year instead of the second quarter as previously forecast to review the study data.

Erbitux already is approved to treat colorectal cancer. Reddoch said the study is "great news" because it shows that Erbitux can be used to treat other types of cancers, broadening its sales potential at a time when analysts were concerned about its sluggish revenue growth.

$400 Million Market

Reddoch estimates head and neck cancer is about a $400 million market with no treatments other than chemotherapy and radiation. Currently, Erbitux is a third-line treatment for colorectal cancer, which Reddoch says is a $350 million to $400 million market.

Shares of ImClone rose $3.99, or 13 percent, to $34.15 in afternoon trading on the Nasdaq Stock Market, still near the low end of a 52-week range of $29.51 to $87.24.

The announcement came a day after ImClone said financier Carl Icahn had filed with antitrust regulators for clearance to invest more than $100 million in the company, including already acquired shares.

The Icahn filing sets an investment ceiling of $500 million. As of March 15, the billionaire investor owned about 5 million ImClone shares, or close to 6 percent of its outstanding stock.

Separately, ImClone withdrew a proposed stock incentive plan because a number of holders expressed concern about the program's dilutive affect on shares.

New Growth Area

Erbitux is the drug at the center of the scandal that led Martha Stewart and ImClone's founder Sam Waksal to prison. Both Stewart and Waksal dumped ImClone shares in December 2001 before it became public that the FDA was rejecting the company's application for Erbitux's approval. The rejection sent ImClone shares into a tailspin.

Stewart was convicted for lying about the stock sale and was released from prison last March. Waksal pleaded guilty to insider trading charges and remains incarcerated.

ImClone receives a 39 percent royalty on Erbitux US sales from Bristol-Myers Squibb Co., which owns roughly 17 percent of the biotech company. In the first quarter, of this year the royalty revenue from Bristol-Myers totaled $34 million, essentially flat with the fourth quarter of 2004. Erbitux was approved last February.

"Investors were punishing the stock because of a lack of growth. Now they see a new growth area," Reddoch said.

Too Few Treatment Options

In the latest announcement, ImClone said data showed that when Erbitux is used in combination with radiation therapy, it prevents the spread of head and neck cancer more effectively than radiation therapy alone.

ImClone said the 424-patient study tested Erbitux in advanced squamous cell carcinoma of the oropharynx (the area of the throat at the back of the mouth), the larynx (or voice box) or hypopharynx -- the cavity at the back of the mouth that opens into the esophagus -- that has spread through the head and neck region.

"Head and neck cancer remains a disease with too few treatment options and no new therapeutic product approvals in over a decade," said Eric K. Rowinsky, chief medical officer of ImClone. "We look forward to discussing the next steps toward a regulatory filing with the FDA."

According to the American Cancer Society, about 40,000 Americans will be diagnosed with oral, head and neck cancer this year, including cancers of the throat, pharynx and larynx. More than 11,000 Americans died from the disease in 2004.