By Peter Loftus and Austen Hufford 

Merck & Co. posted increases in third-quarter revenue and profit, helped by higher sales of a closely watched cancer treatment and vaccines.

The drugmaker's shares rose 1.7% Tuesday afternoon as results beat analysts' expectations. The company also narrowed and raised its full-year 2016 earnings forecast range.

Merck is trying to overcome ongoing pressure on sales of its top products because of competition from lower-cost copies. Sales of the anti-inflammatory drug Remicade, which Merck markets in Europe, have declined because of the availability of copycat versions there. And Merck expects a significant sales decline for its anti-cholesterol drugs Zetia and Vytorin after competing generics become available in the U.S. in December.

To help offset the sales pressure, the Kenilworth, N.J., company is counting on rising sales of its new cancer drug Keytruda, which works by harnessing patients' immune systems to destroy tumor cells. The U.S. Food and Drug Administration approved the drug Monday as a first treatment option for certain patients with advanced lung cancer, widening its use beyond second-line treatment after patients tried other drugs.

For the third quarter, Keytruda posted sales of $356 million, up from $159 million in the same quarter last year. J.P. Morgan analysts expect the latest regulatory approval in lung cancer to help more than double annual sales of the drug to $3.5 billion in 2017 from an expected $1.3 billion this year.

"Keytruda is changing the cancer treatment landscape," Roger Perlmutter, president of Merck Research Laboratories, said on a conference call with analysts. Merck is studying the drug's potential to treat more than 30 tumor types, with about 360 clinical trials under way.

Merck's total pharmaceutical revenue for the third quarter increased 5.8% to $9.44 billion, driven by growth in vaccines, oncology, cardiovascular drugs and hospital acute care.

In January, the FDA approved Merck's new treatment, Zepatier, for hepatitis C, the latest entrant in a booming market for drugs for the viral infection -- a market now dominated by Gilead Sciences Inc. Zepatier had sales of $164 million, compared with $112 million in the second quarter and $50 million in the first quarter.

In the company's vaccines business, combined sales of Gardasil and Gardasil 9, which protect against human papillomavirus, jumped 38% to $860 million on increased pricing and demand in the U.S. The Centers for Disease Control and Prevention last week recommended younger adolescents should get just two shots of the HPV vaccines, not three as previously recommended, which could reduce sales.

Sales of Proquad, a measles, mumps, rubella and varicella virus vaccine, increased 27% as the CDC bought the drug for its pediatric vaccine stockpile.

Sales of drugs and vaccines for pets and livestock increased 5% to $865 million, helped by flea-and-tick treatment Bravecto.

Research and development costs increased 11% to $1.7 billion on higher clinical development spending.

The company posted a profit in the quarter of $2.18 billion, or 78 cents a share, up from $1.83 billion, or 64 cents a share, a year prior. Excluding restructuring and acquisition-related costs and other items, per-share earnings rose to $1.07 from 96 cents.

Sales grew 4.6% to $10.54 billion.

Analysts polled by Thomson Reuters had forecast per-share earnings of 99 cents a share on revenue of $10.18 billion.

For the year, Merck now projects per-share adjusted earnings between $3.71 and $3.78 on revenue between $39.7 billion and $40.2 billion. It had previously expected earnings of $3.67 to $3.77 and revenue of $39.1 billion to $40.1 billion.

Write to Peter Loftus at peter.loftus@wsj.com and Austen Hufford at austen.hufford@wsj.com

 

(END) Dow Jones Newswires

October 25, 2016 13:47 ET (17:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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