March 23 (Reuters) - U.S. health regulators on Thursday approved a drug developed by Merck KGaA and Pfizer Inc that helps the immune system to fight a rare form of skin cancer once it has spread to other parts of the body.

The Food and Drug Administration said it approved Bavencio, known chemically as avelumab, to treat metastatic Merkel cell carcinoma (MCC) in patients 12 years and older.

Bavencio belongs to a new class of oncology drugs called PD-L1 inhibitors that block a mechanism tumors use to evade detection from the immune system. It marks the first immunotherapy approval for the collaboration of Pfizer and Germany-based Merck, which has been playing catch-up with rivals, such as Bristol-Myers Squibb Co, Merck & Co and Roche Holding AG.

"While skin cancer is one of the most common cancers, patients with a rare form called Merkel cell cancer have not had an approved treatment option until now," Dr. Richard Pazdur, director of the FDA's Oncology Center of Excellence, said in a statement.

Bavencio received accelerated approval, which enables the use of drugs for serious conditions to fill an unmet medical need based on data the agency believes is likely to predict a clinical benefit. The companies are conducting required trials to confirm actual benefit to patients.

About 1,600 people in the United States are diagnosed with MCC every year, according to the National Cancer Institute. While most cases are treated with surgery, more than 30 percent eventually see the cancer spread, the FDA said.

(Reporting by Bill Berkrot; Editing by Richard Chang)