UPDATE 1-Merck KGaA's Erbitux again rejected by EU panel

* European drug panel CHMP rejects Merck's appeal

* Negative opinion on use in lung cancer

* Merck KGaA shares down 2.9 pct

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FRANKFURT, Nov 19 (Reuters) - Merck KGaA's (MRCG.DE) cancer drug Erbitux was again rejected outright by an influential European expert panel on drug approval for use against lung cancer, the company said on Thursday.

Merck had harboured hopes that it would at least win a recommendation for a subgroup of lung cancer patients in its appeal against a negative opinion in July by the Committee for Medicinal Products for Human Use (CHMP), whose assessments guide European Union drug approvals.

Lung tumours are the most common form of cancer worldwide.

Erbitux, seen by Merck as a potential blockbuster with more than 1 billion euros ($1.5 billion) in peak annual sales, is already approved for use against bowel cancer and head and neck cancer.

Merck had been trying to persuade the CHMP to reconsider its rejection, which came despite promising results in a late-stage trial that drew nods of approval from researchers.

The shares were down 2.9 percent at 65.56 euros as 1617 GMT.

"This is very bad news for Merck and puts immense pressure on the shares," a German equity trader said.

(Reporting by Ludwig Burger)