Earlier in the week, ImClone Systems (NASDAQ:IMCL) reported positive data on lead cancer drug Erbitux that could expand the compound's use to a new indication.

The study, completed by ImClone's European marketing partner Merck KGaA, tested Erbitux as a front-line treatment for advanced non-small cell lung cancer (NSCLC) in combination with a chemotherapeutic agent.

In the study, Erbitux increased overall survival versus patients treated only with chemotherapy. Aside from announcing that Erbitux met this primary endpoint, no study data was released, as the companies are waiting to present it "at an upcoming medical conference."

NSCLC represents a large market opportunity for Erbitux. Currently, Iressa from AstraZeneca (NYSE:AZN) and Avastin and Tarceva from Genentech (NYSE:DNA) are the only targeted therapies approved to treat the disease. Of the trio, only Avastin is approved as a first-line therapy in lung cancer, although Tarceva and Iressa may be Erbitux's most direct competition, as they also are epidermal growth factor inhibitors.

Erbitux isn't the only exciting potential NSCLC compound in development. Exelixis (NASDAQ:EXEL) just announced positive phase 2 data for its first therapy targeted at the disease, and Onyx Pharmaceuticals (NASDAQ:ONXX) is also testing its lead drug in the disease.

The end of 2006 was a bad time for ImClone. A new competitor -- Amgen's (NASDAQ:AMGN) Vectibix -- entered the market and ImClone lost a costly court decision over key Erbitux patents, which it just paid $65 million to settle.

ImClone has experienced mostly the opposite case in 2007. In January, it announced that Erbitux was successful in a study as a treatment for front-line metastatic colorectal cancer, it has made good progress in advancing its pipeline drugs through the clinic, and now it has this lung cancer study that will help it expand the on-label usage of Erbitux.

Despite an earlier failure with Erbitux in extending progression-free survival in another phase 3 NSCLC study and a failed pancreatic cancer study, the turnaround this year continues for ImClone.

Exelixis is a Rule Breakers newsletter selection. If you're looking for more Foolish drug stock coverage, check out all our recommendations with a 30-day free trial.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool's disclosure policy was successful in phase 3 testing.