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.
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.