ImClone Systems to Submit New Application for Erbitux

ImClone Systems (search) said Thursday it will again seek federal approval for Erbitux (search), the cancer drug at the center of the insider trading probe that led to the indictment of the company's founder and his friend Martha Stewart (search).

The new application will include recently released data that found the drug effective in shrinking tumors of some colon cancer patients. If the application is approved by the Food and Drug Administration, the drug could be on the market by early next year.

Bristol-Myers Squibb, which owns 20 percent of ImClone and has rights to co-promote the drug, will join ImClone in the application.

ImClone founder Sam Waksal pleaded guilty to several charges including fraud after selling his shares in the company in December 2001, the day before its stock tanked on the news that the FDA had rejected an application to sell Erbitux in the United States.

Stewart, a longtime friend of Waksal, was indicted Wednesday and stepped down as chairwoman and chief executive officer of her media empire. Prosecutors say she dumped her ImClone stock after learning the Waksal family was selling its shares, then covered her tracks and lied to investigators and shareholders.

Shares of both companies surged on the news, released late Thursday. In after-hours trading, ImClone was up $7.94, or 21 percent, to $46.47 a share, after closing at $38.53 in regular trading on the Nasdaq Stock Market. Shares of Bristol-Myers gained $1.30, or 5 percent, to $28.20 on the New York Stock Exchange.

Waksal will be sentenced next week and could get six to seven years in prison, plus fines.