On Friday, AstraZeneca (AZN) announced that it had achieved positive results in a phase 3 lung cancer study, known as Pacific. The key drug used in the trial, Imfinzi, was shown to greatly cut the risk of death in lung cancer patients. AstraZeneca surged to an eight-month high following the positive results, gaining 9.22% to close at $34 per share. 

The results of the trial were significant because for patients with stage 3 lung cancer, surgery is not typically an option for treatment, therefore, this new drug will possibly be their only hope for survival. In addition, these are patients who have already undergone treatment with chemotherapy without success. 

There are about over 100,000 patients with stage 3 lung cancer across the globe. In 2016, about one-third of all lung cancer cases had developed to the stage 3 level. How can AstraZeneca achieve blockbuster status with so few potential patients? Because the treatment cost for each patient is estimated to be around $150,000.

AstraZeneca is preparing another study targeting the same stage 3 lung cancer patient population with two key differences. The first is that it is combining Imfinzi with chemotherapy for a combination treatment. Secondly, this will also potentially allow the company to target an earlier stage population.

Following the positive results from AstraZeneca, Merck (MRK) fell by 1.5%. Merck was recently granted accelerated approval for its immunotherapy drug Keytruda to treat advanced lung cancer patients. However, the announcement of AstraZeneca's latest news that its cancer drug is nearing completion in the FDA approval process is an indicator of a direct competing threat against Merck's drug.