European regulators dealt Merck KGaA another blow by sticking with their recommendation against what once was the group's biggest pipeline hope, multiple sclerosis (MS) pill cladribine.

The European Union's drugs watchdog, which had already recommended against cladribine in September, prompting an appeal from Merck, still found that the benefits of cladribine tablets did not outweigh its risks, Merck said on Friday.

The regulator, whose view is invariably adopted by the European Commission for approval decisions, had in September mainly taken issue with cases of cancer.

Merck said it remained committed to completing ongoing clinical trials with cladribine tablets. It can re-apply for approval of the tablets in 2012 at the earliest, when trial results are due.

"This is really negative news for Merck," Frank Schneider of Frankfurt-based Alpha brokerage said.

While the family-controlled company is bolstered by a strong performance of a unit that makes chemicals for flat-screen televisions, its drugs division has been hobbled by a string of setbacks and saw the departure of the unit's head. Trials of experimental cancer vaccine Stimuvax were temporarily halted because of suspected side effects last year. Merck failed in 2009 to win EU marketing approval for the use of its blockbuster-hopeful Erbitux against lung tumors, the most common form of cancer.

Merck and rivals such as Novartis are vying to take a sizable chunk of the $10 billion market of injectable MS treatment but Merck has declined to give an assessment of peak sales potential.

Novartis's multiple sclerosis pill Gilenya, formerly known as Gilenia, won U.S. backing in September, putting it ahead of Merck in the race to be first with an MS pill in the United States.

U.S. regulators delayed the approval process of cladribine and an assessment is now due at the end of February.