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Merck & Co. reported better-than-expected quarterly earnings, fueled by sales of its new Keytruda immuno-oncology drug and Januvia diabetes treatment, sending its shares up 2 percent in premarket trading.
The second-biggest U.S. drugmaker said revenue grew 1 percent in the second quarter to $9.84 billion, above analysts' average estimate of $9.78 billion.
Keytruda, a recently approved treatment for melanoma and lung cancer that Merck is counting on to boost its earnings for years to come, posted sales of $314 million, about $20 million more than analysts had forecast.
The medicine, which takes the brakes off the immune system, is competing with similar Opdivo treatment. They belong to a new family of medicines called PD-1 inhibitors.
Keytruda was approved in October 2015 for patients with advanced lung cancer who had failed to benefit from previous treatments. A recent clinical trial suggested Keytruda is also effective in previously untreated patients, spurring hopes U.S. regulators will soon expand approved use of the drug to that far larger population.
Combined sales of Januvia and a related diabetes drug called Janumet rose 2 percent to $1.63 billion, topping forecasts by about $56 million.
But the medicines, facing growing competition, are no longer big earnings drivers for Merck.
Merck's new Zepatier treatment for hepatitis C, which has been on the U.S. market for about six months, contributed $112 million in sales during the quarter.
Credit Suisse analyst Vamil Divan said growing sales of newer drugs like Keytruda and Zepatier will likely be offset by future declines for older products, including Januvia and cholesterol fighters, Vytorin and Zetia.
He has a "neutral" rating on the drugmaker.
But J.P.Morgan analyst Chris Schott maintained his "overweight" rating on Merck, citing confidence in prospects for Keytruda, which is also being studied for many other types of cancer.
Merck earned $1.21 billion, or 43 cents per share, in the quarter. That compared with $688 million, or 24 cents per share, in the year-earlier period, when Merck took charges for its acquisition of Cubist Pharmaceuticals.
Excluding special items, the company earned 93 cents per share, ahead of the average analyst estimate of 91 cents, according to Thomson Reuters I/B/E/S.
Merck now expects full-year earnings per share of $3.67 to $3.77, excluding special items. It previously forecast $3.65 to $3.77 per share.