"This is the first drug approved for head and neck cancer that has shown a survival benefit in this population," the US Food and Drug Administration (FDA) said.
The approval came days after German licensee of the drug, Merck, also received a positive opinion from the EMEA (European Medicines Agency), for its approval in Europe, as well as full approval from the authorities in Switzerland.
The approval of the new indication is set to prove highly lucrative for US manufacturer BMS, with one analyst projecting it to rake in $73m in US sales this year.
Erbitux is already approved in the EU and US as a second-line treatment for recurrent or metastatic colorectal cancer and BMS recorded sales of $413m (€346m) for the drug in 2005, while Merck made $258m.
The approval also comes as welcome news for developers of the monoclonal antibody, ImClone, which stands to receive a $250 million milestone payment from B-MS as part of a licensing agreement for the drug.
Banc of America Securities analyst David Witzke also believes that Erbitux has the potential to pull in a further $400m in annual sales for ImClone.
However, while the windfall is significant, it may not be enough to save the struggling biotech company from the chopping block. After falling revenues and the departure of its third CEO since November 2005, the company hired an investment bank in January to explore "strategic alternatives," involving a sale, merger or alliance.
If approved in the EU, where 40,000 people die from head and neck cancer every year, sales from the new indication will also help take the pressure of Merck, who is struggling to fend off competition from Genentech and Roche's rival colorectal cancer drug Avastin, which became a blockbuster after it was released in 2004, reaping sales of $1.3bn for Roche and $1.1bn for Genentech after one year on the market.
Now in efforts to further exploit its marketing potential, BMS, Merck and Imclone are currently focusing on further extending the indication of Erbitux in metastatic head and neck cancer, as well as a second-line treatment of advanced colon cancer and first-line treatment of non-small cell lung cancer.
The latest license approval was based on the results from a Phase III study of 424 patients, where Erbitux combined with radiotherapy prolonged survival by an average of 19.7 months (49.0 months vs 29.3 months) compared with radiotherapy alone.
"With current radiation therapy, five-year survival rates for the disease have traditionally remained poor at around only 33 per cent, however, Erbitux offers the potential for improved control and prolonged survival in this challenging disease," said Elmar Schnee, deputy member of the executive board, business sector pharmaceuticals, Merck.
Erbitux (cetuximab) is an IgG1 monoclonal antibody that blocks the epidermal growth factor receptor (EGFR), which is responsible for tumour growth and spread in various cancers and is linked to poor prognosis.
By blocking the EGFR, Erbitux works on cancer cells in several ways to inhibit growth, invasion and spread of the tumour, repair to cancer cells and blood supply to the tumour, as well as enhancing the effects of chemotherapy and radiotherapy.