Merck reported better-than-expected quarterly revenue due to higher sales of its vaccines and cancer drug Keytruda, which won an early U.S. approval on Monday for use in previously untreated lung cancer patients.
Shares of Merck, which also raised its full-year profit and revenue forecasts, were up 1.23 percent at $61.50 in premarket trading on Tuesday.
The second-largest U.S. drugmaker is betting on Keytruda to boost earnings as expectations for the drug have been building since its success in treating selected untreated patients.
The approval from the U.S. Food and Drug Administration confirms Merck's leading position in the hot area of medicines that fight tumors by harnessing the body's immune system.
Annual sales of the drug are now expected to reach $8.1 billion in 2021, according to consensus forecasts compiled by Thomson Reuters.
Third-quarter sales of Keytruda, which is already approved to treat advanced melanoma and some forms of lung cancer, rose to $356 million from $159 million, slightly below the consensus estimate of $376 million, according to Evercore ISI.
Merck said the company's total sales increased 5 percent to $10.54 billion, above analysts' average estimate of $10.18 billion, according to Thomson Reuters I/B/E/S.
Sales for its Gardasil vaccine rose 38 percent to $860 million, well above Evercore's consensus estimate of $635.6 million.
Net income attributable to Merck rose to $2.18 billion, or 78 cents per share, for the third quarter ended Sept. 30, from $1.83 billion, or 64 cents per share, a year earlier.
Excluding items, the company earned $1.07 per share, beating the average estimate of 99 cents per share.
Merck said it has raised its full-year 2016 GAAP earnings to $2.02 to $2.09 per share from $1.98 to $2.08 per share. The full-year revenue range was also raised to $39.7 billion to $40.2 billion from $39.1 billion to $40.1 billion.
Up to Monday's close of $60.75, Merck's stock had risen 15 percent this year, compared with a 3.5 percent fall in the S&P 500 Healthcare index.