Merck climbs after announcing massive growth for its top cancer drug, which is now on pace to generate $10 billion a year (MRK)

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• Merck rose about 3% in early trading Tuesday after crushing Wall Street estimates for second-quarter earnings and announcing rapid sales growth for its Keytruda cancer treatment.
• The cancer drug sold $2.63 billion in the second quarter, a nearly-$1 billion increase from the year ago period.
• Keytruda is now on pace to generate $10 billion in sale annually.
• The flagship cancer drug’s success is a setback for competitor Bristol-Myers Squibb and its rival Opdivo product. The company announced Opdivo failed a trial with lung-cancer patients July 24, sending its stock down 4%.
• Watch Merck trade live here.

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Merck jumped roughly 3% in early trading after smashing analysts’ estimates for second-quarter earnings, bringing in nearly $1 billion more than anticipated and announcing rapid growth for its flagship cancer therapy.

The bulk of the company’s sales win came from Keytruda, a cancer treatment that uses the immune system to attack cancer cells. The drug sold $2.63 billion in the second quarter, nearly $1 billion more than in the year ago period. Keytruda is on track to be a $10 billion-a-year product, and its success drove Merck to raise its 2019 revenue forecast.

"Our science-led strategy and execution across our key growth pillars have driven another quarter of accelerating revenue growth with strength across our global portfolio," Merck CEO Kenneth Frazier said in a statement.

Here are the key numbers:

Earnings per share: $1.30, versus the $1.158 estimate

Revenue: $11.76 billion, versus the $10.96 billion estimate

Keytruda sales: $2.63 billion, versus $1.67 billion in the year ago period

2019 revenue forecast: Between $45.2 billion and $46.2 billion, versus the previous expected range of $43.9 billion to $45.1 billion

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Keytruda’s success serves as a crushing blow to competitor Bristol-Myers Squibb and its rival treatment Opdivo. Bristol-Myers announced last week that Opdivo failed a major trial with lung-cancer patients. The July 24 news sent Bristol-Myers’ stock down about 4%. 

The second-quarter results also follow the White House’s decision to scrap a key part of its effort to lower drug prices. The Trump administration ran on the message of lowering the cost of prescription drugs, yet it abandoned its plan to eliminate rebates from government drug plans earlier in July.

If implemented, the rule would move profits from companies like CVS and Cigna to consumers by eliminating rebates, a key revenue stream for pharmacy benefit managers.

Merck was up about 8% year-to-date through Monday. The company has 15 "buy" ratings and 3 "hold" ratings, with a consensus price target of $91.73 per share, according to Bloomberg data.

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Source: Business Insider – feedback@businessinsider.com (Ben Winck)