* Verzenio fails late-stage study

* Drug, however, shows evidence in secondary goals

* Co not to abandon drug's other ongoing studies - analyst

* Lilly shares down 1.2 pct (Adds analyst comments; details about competition; updates shares)

By Divya Grover

Oct 10 (Reuters) - Eli Lilly and Co said its recently approved breast cancer drug failed to meet a late-stage trial's main goal of improving overall survival in patients with non-small cell lung cancer.

The news comes as a blow to the drugmaker, which has suffered setbacks on two potential blockbuster treatments over the past year - the delay of a rheumatoid arthritis drug, as well as the failure of an experimental Alzheimer's treatment.

A positive data in lung cancer patients would have given the drug, Verzenio, a competitive edge over rival breast cancer treatments such as Pfizer Inc's Ibrance and Novartis AG Kisqali.

The drugmaker said on Tuesday that the late-stage trial was testing Verzenio in patients with advanced non-small cell lung cancer with mutation of the KRAS gene, whose cancer has progressed despite initial therapies.

The drug, whose chemical name is abemaciclib, was being compared with Roche's erlotinib, sold under the brand name Tarceva.

Verzenio belongs to a newer class of oral medicines called CDK 4/6 inhibitors that block cancer cells' ability to divide and proliferate.

Last month, the FDA approved the drug to treat advanced breast cancer that has progressed following prior treatment.

Verzenio, however, showed some evidence of improvement in the latest trial's secondary goals such as progression-free survival in patients and overall response rate, Lilly said.

The company currently has several ongoing trials evaluating Verzenio in non-small cell lung cancer, including a combination trial with Keytruda or chemotherapy, and does not plan to discontinue them, Guggenheim analyst Tony Butler wrote in a client note.

Lung cancer is by far the largest oncology market in the United States with Merck & Co Inc's Keytruda leading the space.

Keytruda is an immuno-oncology drug, which works by taking the brakes off the immune system and allowing the body’s natural killer cells to home in on tumours.

Lilly's shares fell 1.2 percent to $85.99 in afternoon trade on Tuesday.

The company last month laid off 8 percent of its employees in order to save around $500 million a year and made significant changes to its management. (Reporting by Divya Grover in Bengaluru; Editing by Maju Samuel)