By Peter Loftus

The U.S. Food and Drug Administration approved Merck & Co.'s Keytruda for the treatment of the most common form of lung cancer, the second in a new wave of immune-boosting drugs to be cleared for one of the deadliest cancer types.

The FDA also approved a companion diagnostic from Dako North America, which tests for a substance on tumor cells known as PD-L1, to screen for patients who should receive Merck's Keytruda. A Merck-funded study found that Keytruda worked better in patients with higher levels of PD-L1 than in patients with lower or undetectable levels.

Merck shares declined 1.4% on the news because the FDA requirement that Keytruda should be used in PD-L1-positive patients could limit the population of patients using the drug.

Keytruda now joins rival Bristol-Myers Squibb Co.'s Opdivo as a new treatment option for certain patients with non-small cell lung cancer, which accounts for about 85% to 90% of all lung-cancer cases. The FDA approved Opdivo to treat a subtype of lung cancer in March and is expected to decide by January whether to expand Opdivo's use to a wider group of lung-cancer patients.

Both Keytruda and Opdivo work by blocking a substance on immune cells known as PD-1, lifting a natural brake on the immune system and allowing it to kill cancer cells. Doctors believe the anti-PD-1 drugs have potential to transform treatment of multiple tumor types, based on clinical trials showing improvements in survival and tumor-shrinkage rates versus some older treatments.

Analysts estimate the class has multibillion-dollar sales potential--fueled by hefty prices. Keytruda and Opdivo both cost about $12,500 a month per patient, or $150,000 if used for a full year.

On Thursday, the FDA approved the use of a combination of Opdivo and an older Bristol immunotherapy, Yervoy, for the treatment of melanoma. The treatment would cost about $256,000 for the first full year.

Write to Peter Loftus at peter.loftus@wsj.com

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(END) Dow Jones Newswires

October 02, 2015 14:36 ET (18:36 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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