* Combination of durva/treme fails to beat chemotherapy
* Durva on its own also misses in Mystic immunotherapy study
* Study marks AstraZeneca's big bet on new cancer field
* Merck gains, Bristol-Myers falls in reaction to news (Adds Merck and Bristol share moves, CEO comment on dividend)
LONDON, July 27 (Reuters) - AstraZeneca's combination of two injectable immunotherapy drugs failed to help patients as hoped in a closely watched advanced lung cancer trial, triggering the biggest ever daily fall in its shares on Thursday.
The so-called Mystic study was the industry's most anticipated clinical experiment this year and the news saw the shares fall 16 percent, wiping some $14 billion off AstraZeneca's value.
The study was viewed as key to proving the value of the group's new drug pipeline and its future as an independent company, after it spurned a $118 billion takeover attempt by Pfizer in 2014.
Some analysts said investors would now focus on whether AstraZeneca will become a target again, although banking sources said Pfizer was unlikely to return and others, including Novartis, might be deterred by the weak growth outlook.
AstraZeneca Chief Executive Pascal Soriot told reporters he did not believe the group was now more vulnerable, noting that positive data could have actually made it more desirable.
Initial results from Mystic found the combination of durvalumab and tremelimumab was no more effective at stopping disease progression than chemotherapy in patients with a protein called PD-L1 on 25 percent or more of their cancer cells.
Immunotherapy drugs are designed to help the body's immune cells kill cancer and PD-L1 levels are used as a benchmark to determine if they are likely to work for individual patients.
As a secondary endpoint, although not formally tested, durvalumab monotherapy also would not have met a pre-specified threshold of progression-free survival benefit, the company added. Durvalumab is already on the market for bladder cancer, under the brand name Imfinzi.
Despite the negative initial results on disease progression, Soriot said there was still a chance the treatment might show a benefit in improving life expectancy when more data is available in 2018. "We must be patient as the Mystic trial continues as planned to evaluate overall survival."
Uncertainty about Mystic had been heightened by speculation that Soriot might be considering a highly paid new job as head of Israel-based Teva Pharmaceutical Industries.
Soriot declined to comment directly on what he described as "rumours" on Thursday, although company insiders said he would have had to make a statement if he had firm plans to leave.
"I'm not a quitter," Soriot said. "Im proud to be the CEO of this company and I look forward to continuing on our journey ahead and continuing to lead the incredible team ... the only thing I can tell you is I am here today."
GOOD FOR MERCK, BAD FOR BRISTOL
Immunotherapies promise to revolutionise cancer care, prompting a race to develop treatments in a market expected to be worth tens of billions of dollars in annual sales.
Lung cancer is the single biggest opportunity and Jefferies analyst Jeffrey Holford said the Mystic setback had removed around 10 to 15 percent of AstraZeneca's mid-term earnings potential.
AstraZeneca's pain is good news for Merck & Co, the only manufacturer on the market with an immunotherapy treatment for previously untreated lung cancer and its shares rose 3 percent.
But Bristol-Myers Squibb fell 5 percent, as investors worried about its experimental immunotherapy treatment that is similar to AstraZeneca's combination.
AstraZeneca - a relative latecomer in immunotherapy - has been pinning its hopes on a combination approach for advanced lung cancer, after already showing that durvalumab alone can help in earlier-stage disease.
Durvalumab, which AstraZeneca flagged in 2014 as having annual sales potential of $6.5 billion, is central to its drive into oncology - but it is not the only asset.
Offsetting the Mystic hit, the company also reported that its Tagrisso lung cancer pill improved progression-free survival in another trial called Flaura, which Soriot said put it on track for eventual sales of more than $4 billion a year.
AstraZeneca has also established a strategic oncology collaboration with Merck to study cancer drug combinations using its drug Lynparza, which is already approved for ovarian cancer but could have much wider uses when combined with immunotherapy.
Merck will pay AstraZeneca up to $8.5 billion under the deal, in exchange for half of future Lynparza sales, including $1 billion this year.
"AstraZeneca is currently at a crossroads," said Joe Walters, senior fund manager at Royal London Asset Management, a top-30 shareholder, according to Thomson Reuters data.
"In our view, the group should make every effort to capitalise on their strategic tie-up with Merck announced today and strong progress in the trials for Tagrisso."
The latest news came as AstraZeneca reported another fall in quarterly drug sales, hit by loss of patents on blockbusters like cholesterol pill Crestor.
Overall first-quarter revenue fell 10 percent in dollar terms to $5.05 billion, although core earnings per share (EPS) rose 5 percent to $87 cents. Industry analysts, on average, had forecast revenue of $5.0 billion and earnings of 80 cents, according to Thomson Reuters data.
Asked about the fall in the share price to 43 pounds from the 55 offered by Pfizer, Soriot insisted the drug pipeline was delivering and the company's dividend was not at risk.
"Theres a lot more in our pipeline than Mystic."
(Additional reporting by Pamela Barbaglia and Simon Jessop; Editing by Keith Weir and Alexander Smith)