Evofosfamide, earlier known as TH-302, failed to improve overall survival when combined with chemotherapy in the two indications.
Evofosfamide is an investigational hypoxia-activated prodrug of a bis-alkylating agent that is preferentially activated under severe tumor hypoxic conditions.
Merck bought rights to develop evofosfamide in February 2012 from Threshold Pharmaceuticals.
Merck biopharma business head of global research and development Luciano Rossetti said: "Despite seeing signs of activity in pancreatic cancer, pre-specified primary endpoints were not met in both studies and therefore the data do not support filing in these indications.
"We decided today not to pursue investigation of evofosfamide in soft tissue sarcoma and pancreatic cancer, and we will be making a quick decision on the future of the ongoing evofosfamide clinical program."
Merck said it will now focus on the development of other candidates including avelumab skin cancer durg and other priority programs in oncology, immuno-oncology and immunology.
Avelumab is being developed and commercialized jointly by Merck and Pfizer under an alliance formed in November 2014.