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Bristol-Myers Squibb Company (BMY - Analyst Report) and partner Eli Lilly & Company (LLY - Analyst Report) recently announced that they have received approval from the US Food and Drug Administration (FDA) for a label expansion of their cancer drug, Erbitux.

The companies gained approval for the use of Erbitux as a first-line treatment in combination with FOLFIRI in patients with wild-type KRAS, epidermal growth factor receptor (EGFR)-expressing metastatic colorectal cancer (mCRC).

The FDA approved Erbitux for the new indication on the basis of data from an open-label, randomized, multicenter phase III study (CRYSTAL) conducted in ex-US markets. The clearance of the combination therapy marks the first FDA approval in nearly a decade for treating patients newly diagnosed with mCRC. Following the FDA’s decision, Erbitux becomes the first and only FDA-approved drug for treating mCRC patients with wild-type KRAS. The FDA stated that Erbitux should not be used to treat patients with KRAS mutation-positive colorectal cancer.

The FDA also stated that Erbitux should only be used to treat those mCRC patients who have undergone an FDA-approved test to foecast whether the drug will work. Apart from approving the label expansion, the FDA also cleared Qiagen’s (QGEN - Analyst Report) therascreen KRAS test kit which will serve as guidance on the use of Erbitux for treating mCRC patients.

The label expansion of Erbitux, already approved for multiple indications, should boost the sales potential of the cancer drug.

The colorectal cancer market represents huge potential. According to estimates provided by the company in its press release, about 143,460 cases of colorectal cancer are expected to occur in 2012. Apart from Erbitux, the colorectal cancer market includes Amgen’s (AMGN - Analyst Report) Vectibix.

Neutral on Bristol-Myers, Eli Lilly

We currently have a Neutral recommendation on Bristol-Myers in the long-run. The company carries a Zacks #3 Rank (Hold rating) in the short-run. We have a similar stance on Eli Lilly.

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