Claiming a powerful immunotherapy that's on track to become the biggest-selling drug in the world doesn't guarantee that everything will go right for a stock. Merck's (NYSE:MRK) Keytruda will almost certainly soon hold the No. 1 best-seller status, but the big pharma stock hasn't even been able to keep up with the S&P 500 index so far this year.

Merck announced its third-quarter results before the market opened on Tuesday. Thanks largely to Keytruda, the company made investors happy with those results. Here are the highlights from Merck's Q3 update.

Toy-sized shopping cart filled with pills on top of $100 dollar bills

Image source: Getty Images.

By the numbers

Merck announced Q3 revenue of $12.4 billion, a 15% increase from the $10.8 billion reported in the same quarter of the previous year. The drugmaker also easily beat the average analysts' revenue estimate of $11.64 billion.

The company reported net income in the third quarter of $1.9 billion, or $0.74 per share, based on generally accepted accounting principles (GAAP). This reflected a small decline from Merck's GAAP net income of $1.95 billion, or $0.73 per share, in the prior-year period.

On a non-GAAP (adjusted) basis, Merck's net income in the third quarter was $3.9 billion, or $1.51 per share. This reflected a solid increase from the prior-year period adjusted net income of $3.2 billion, or $1.19 per share. Wall Street analysts estimated that the company would post earnings of $1.24 per share in the quarter.

Behind the numbers

It wasn't surprising in the least that Keytruda again played the starring role in Merck's Q3 update. Sales for the cancer drug skyrocketed 62% year over year to nearly $3.1 billion. Keytruda especially received a boost from growth in the non-small cell lung cancer (NSCLC) indication.

But Keytruda wasn't the only great story for Merck in the quarter. Sales of human papillomavirus (HPV) vaccine Gardasil soared 27% year over year to $1.3 billion, driven largely by increased demand in China. The company's chickenpox vaccine Varivax also delivered a strong performance in Q3, with sales jumping 19% to $623 million. In addition, sales for neuromuscular blockage reversal drug Bridion climbed 31% to $284 million.

Merck's animal health unit generated revenue of $1.1 billion in the third quarter, up 10% from the prior-year period. This growth was fueled primarily by added sales from products picked up in the company's acquisition of Antelliq and a solid performance from existing companion animal products, particularly the Bravecto parasite control products.

In addition to its financial results, Merck had several other key pipeline developments in the third quarter, including:

  • Received several new regulatory approvals for Keytruda in the U.S., Europe, and China.
  • Announced FDA approval expanding the use of a combination of Pifeltro and other antiretroviral drugs and Delstrigo in treating HIV patients.
  • Received a positive opinion from the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) recommending approval of the Ervebo Ebola vaccine.

Looking ahead

Merck now anticipates revenue to be between $46.5 billion and $47 billion in full-year 2019, up from its previous guidance of $45.2 billion and $46.2 billion. The company also projects 2019 earnings per share (EPS) will be between $3.75 and $3.80, compared to the $3.78 and $3.88 provided in its previous outlook. Non-GAAP EPS is expected to be between $5.12 and $5.17, up from previous guidance of $4.84 and $4.94.

The things that investors in pharmaceutical stocks like Merck especially look forward to, though, are key pipeline advances. Merck has several big milestones coming up, including anticipated FDA approval decisions for Lynparza in treating pancreatic cancer this quarter, for C. diff drug Dificid by Jan. 24, 2020, for Ebola vaccine Ervebo by March 14, 2020, and for Keytruda in treating cutaneous squamous cell carcinoma (cSCC) by June 29, 2020.