ImClone Systems and Bristol-Myers Squibb won approval in the USA yesterday to expand the indications of their colorectal cancer drug Erbitux to include the treatment of squamous cell carcinoma of the head and neck.

Erbitux (cetuximab) has been cleared by the US Food and Drug Administration (FDA) for use in combination with radiation therapy in the treatment of locally or regionally advanced head and neck cancer, and as a single agent in recurrent or metastatic disease where prior platinum-based chemotherapy has failed.

The approval follows a positive opinion for the monoclonal antibody-based drug in head and neck cancer in the European Union, where it is sold by German licensee Merck KGaA, as well as full approval from the authorities in Switzerland. Erbitux is the first new therapy for head and neck cancer to win US market authorisation in more than 30 years.

The approval is welcome news for ImClone, which said last month it was considering a sale or merger after the departure of its third chief executive since November 2005. It triggers a $250 million milestone payment from B-MS under the terms of their 2001 licensing agreement for Erbitux.

Around 40,000 cases of head and neck cancer were diagnosed in the USA last year, and 11,000 Americans died of the disease in those 12 months alone. Analysts have suggested that approval in the new indication could boost the peak sales potential of Erbitux up above $1.5 billion.

B-MS recorded sales of $413 million for the antibody in 2005, while Merck made $258 million from the drug in the same period, although the product is facing strong competition from Genentech and Roche’s Avastin (bevacizumab), which was cleared for colorectal cancer in 2004. Roche booked $1.3 billion in Avastin sales in 2005, its first full year on the market, while Genentech said it made $1.1 billion from the drug in the same period.

Meanwhile, another drug from Amgen called panitumumab - which works in a similar way to Erbitux - is in late-stage development and has also been tipped as a blockbuster-in-waiting.

Diversification of Erbitux into new indications such as head and neck cancer is one way ImClone, B-MS and Merck can offset competition to the product. The companies are already carrying out late-stage testing of the antibody in the second-line treatment of advanced colon cancer, the first-line treatment of recurrent and head and neck cancer and the first-line treatment of non-small cell lung cancer.