Eli Lilly (NYSE:LLY) reported great news from a late-stage study on Tuesday morning. How great was that news? Shares opened up 3.6%. That's something of a giant leap for Lilly, which had previously been up only 9% for the entire year.

The results are in
The phase 3 study included 1,093 patients with stage IV metastatic squamous non-small cell lung cancer, or NSCLC. Patients in one arm of the study were given Lilly's necitumumab in combination with gemcitabine and cisplatin. Patients in the control arm were given chemotherapy alone.

Necitumumab works by blocking the ligand binding site of the human epidermal growth factor receptor, or EGFR. This receptor has been linked to progression of malignant cancer.

Lilly found that patients taking the necitumumab regimen achieved statistically significant increased overall survival, the primary endpoint for the study. Detailed information about the survival rate will be provided in 2014, when Lilly presents the study data.

As for safety, Lilly said the most common adverse events for patients taking necitumumab were rash and hypomagnesemia, which is an abnormally low level of magnesium in the blood. Less frequent (but more serious) adverse events included thromboembolism, which occurs when a blood vessel is blocked by a blood clot dislodged from its original site.

Looking ahead
Lilly now plans to submit for regulatory approval of necitumumab by the end of 2014. The biggest risk in winning that approval will be from safety concerns, especially with possible blood clotting -- an issue noted in the latest results and one that has caused problems in the past.

Necitumumab was first developed by Imclone Systems, which Lilly bought in 2008 following a bidding war with Bristol-Myers Squibb (NYSE:BMY). Lilly and Bristol went on to become development partners on necitumumab. However, the partners were forced to temporarily suspend enrollment when patients in the phase 3 study experienced blood clots.

The two companies ultimately tangled in a legal skirmish over rights to the drug. Earlier this year, though, Lilly announced that it had secured worldwide rights for necitumumab.

Lilly could really use a regulatory win. The company is already losing revenue from Zyprexa. Two of its top drugs, Cymbalta and Humalog, lose patent exclusivity this year. 

Several other companies have done well with lung cancer drugs that target EGFR, including Roche's Tarceva and Boehringer Ingelheim's Gilotrif. Pfizer (NYSE:PFE) made $120 million from Xalkori during the first half of this year, even though Xalkori only is used in treating the 5% of NSCLC cases that have an abnormal ALK protein.

If necitumumab gains approval, it would be the first biologic to treat patients with squamous lung cancer. Even with several rival drugs on the market, some analysts think that peak annual sales for the drug could reach $2 billion.

It remains to be seen whether that approval will come. Safety issues have derailed cancer drugs in the past. However, for now, the necitumumab study results are certainly welcome news for Lilly.

Fool contributor Keith Speights and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.