The pill, known as MK-3102, is from the same class of medicines as Merck's successful daily diabetes drug Januvia, known as DPP-4 inhibitors.

The 685-patient study tested MK-3102 at five doses - ranging from 0.25 milligram to 25 mg - against a placebo, with the primary goal being reduction in A1c, a common measure of blood sugar.

After 12 weeks of treatment with the Merck drug, A1c was reduced 0.71 percent at 25 mg, 0.67 percent at 10 mg, 0.49 percent at 3 mg, 0.5 percent with 1 mg, and 0.28 percent for the lowest 0.25 mg dose. The reductions compared with placebo for all doses were deemed to be statistically significant, according to Merck, which presented the data on Wednesday at the European Association for the Study of Diabetes (EASD) meeting in Berlin.

Based on the encouraging Phase II results, Merck said it is beginning larger Phase III trials of the drug -- typically the final stage of human testing before seeking regulatory approval. The company said it has chosen to advance only the 25 mg dose for a Phase III program that will test MK-3102 against, and in combination with, a variety of diabetes treatments.

The 0.71 reduction seen with the 25 mg dose in the study is similar to the glucose reduction attained by Januvia, known chemically as sitagliptin.

Januvia has been a bright spot for Merck. It and a related combination diabetes pill called Janumet saw sales jump to $1.47 billion in the second quarter, putting the franchise on track for nearly $6 billion in sales this year.

"We do anticipate the efficacy, safety and tolerability of this will be comparable to sitagliptin," Nancy Thornberry, Merck's head of diabetes and endocrinology, said in a telephone interview from Berlin.

"We have almost six years of marketed use with sitagliptin, and so the safety and tolerability of the class as a whole has been extremely well established, as has the efficacy profile," Thornberry said.

However, she stressed that MK-3102 was a new compound and not simply a new formulation of Januvia. As with all new diabetes treatments since GlaxoSmithKine's Avandia was linked to serious heart risks, Merck will be expected to demonstrate the heart safety of MK-3102 in its Phase III trials.

Patients in the Phase II study began the trial with an A1c level of about 8 percent. American Diabetes Association guidelines call for A1c levels of 7 percent or lower.

The drug was generally well tolerated with a safety profile similar to placebo, Merck said.

As with Januvia, the new drug is likely to work by itself or in combination with other diabetes treatments, including insulin, Merck said.

"We think this is going to be a very attractive choice for patients who have a high pill burden. Any attempt to simplify the regimen for those patients is helpful," Thornberry said.

(Reporting by Bill Berkrot and Ransdell Pierson; Editing by Leslie Adler)

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