A cocktail of Merck's blockbuster drug Keytruda and two chemotherapy medicines helped lung cancer patients live longer and stopped the disease from advancing, early results from a key study showed on Tuesday.
Merck's shares rose 7 percent to $62.77 after data from the late-stage study.
The results cement Merck's position as a front-runner in the race to develop drugs that can be used as the initial or first-line treatment for patients with a common type of lung cancer.
Swiss drugmaker Roche, Merck's U.S. rival Bristol-Myers Squibb and AstraZeneca are all developing combination lung cancer treatments of their own.
Merck has already secured U.S. regulatory approval for its combination based on positive results from an earlier trial.
But it withdrew a European marketing application for the combination last year after regulators asked for more data, disappointing some Merck investors.
The latest results increase the chances of a European regulatory approval, an analyst at Evercore ISI said.
"While this announcement puts Merck back on track, the final competitive landscape in first-line lung cancer is still far from resolved," said Alistair Campbell, an analyst at Berenberg.
Lung cancer is a lucrative oncology market and a first-line approval makes a drug available to the most patients.
Keytruda brought Merck more than $1 billion in sales in the third quarter and analysts expect the drug to generate peak sales of about $8.2 billion by 2020.
But Merck will have to rely heavily on Keytruda being used as a first-line lung cancer treatment to achieve that milestone, analysts said.
Roche's shares fell 3.4 percent, while shares of Bristol-Myers and AstraZeneca dipped between 1 and 3 percent.
Roche said last month its immunotherapy Tecentriq, when combined with other drugs, doubled the percentage of lung cancer patients who survived a year without their disease advancing.
Merck's cocktail comprised Keytruda, Eli Lilly's Alimta and a standard chemotherapy and was tested on patients with a type of non-small-cell lung cancer.