Updated from 7:34 a.m. EDT

The cancer drug Erbitux has prolonged the survival of lung-cancer patients, according to results of a large phase III study announced today by German drug maker Merck KGaA, which sells the drug in Europe.

The news sent shares of ImClone Systems ( IMCL) surging Tuesday morning. ImClone, of course, developed Erbitux and markets the drug in the U.S. with partner Bristol-Myers Squibb ( BMY).

Erbitux is used primarily to treat colon cancer and head-and-neck cancer. Until today, the large and lucrative lung cancer treatment market has been out of the drug's reach. If Erbitux becomes a player in the lung cancer market, it could pinch sales of Genentech's ( DNA) Avastin, which is currently the go-to targeted cancer drug for first-line lung cancer treatment.

ImClone shares recently were up $8.27, or 22%, to $46.20. Genentech shares were off $1.40, or 1.8%, at $77.75.

German Merck's so-called "Flex" study of Erbitux plus chemotherapy increased overall survival vs. chemotherapy alone in patients with advanced non-small-cell lung cancer. These patients had not previously received any chemotherapy treatment. No more details from the study were provided.

These positive results are somewhat surprising because a similar Erbitux first-line lung cancer study run by Bristol-Myers Squibb came up negative in July. That study, known as BMS CA225, combined Erbitux with a different chemotherapy regimen than the one used in this Flex study.

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