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Merck (NYSE:MRK) is pulling the Dow Jones Industrial Average (DJINDICES:^DJI) up today after the pharmaceutical giant reported better-than-expected earnings. As of 1:20 p.m. EDT the Dow was up 93 points to 16,541. The S&P 500 (SNPINDEX:^GSPC) was up nine points to 1,879.

Merck is up 3% after reporting first-quarter earnings of $0.88 per share, beating analyst expectations of $0.79. Revenue fell 3.8% from $10.7 billion to $10.3 billion,falling short of analyst estimates of $10.5 billion. Merck's results were particularly affected by currency movements, as well as the continued drop in sales of asthma drug Singulair, which fell by 20% year over year as the drug's patent protection expired in the U.S. and the EU (it remains protected in Japan until 2016).

Merck boosted earnings by cutting costs, in particular making major staff cuts last year, laying off 8,500 employees. The company also cut its research and development spending by 17% year over year to $1.6 billion.

Merck's prioritization efforts have also led the company to put into play its two non-pharmaceutical groups, which are focused on consumer health and animal health, respectively. This week it was announced that Merck is in talks to sell its consumer health business to European consumer goods giant Reckitt Benckiser. Merck's consumer health business includes well-known brands such as Copperstone sunscreen, Claritin, Dr. Scholl's, and Lotrimin. Merck is reportedly asking for $10 billion for the business.

It is still unclear what Merck will do with its animal health business. Possibilities include acquiring other animal health businesses to give it the scale Merck desires, selling to an acquirer, or perhaps spinning the business off, as Pfizer did last year with its former animal-health business, Zoetis. Possible strategic acquirers include Sanofi with its Merial division -- itself a former joint venture between Merck and Sanofi -- or Eli Lilly with its Elanco division.

Merck's revenue has been declining as its blockbuster drugs go off patent. The company is working to refocus itself on its strengths of cancer drugs, cholesterol drugs, diabetes drugs, and vaccines, which means it must say no to opportunities that could distract it. That's the reason Merck is selling off its noncore assets. This strategy offers Merck the biggest potential rewards but also the highest risks as it loses the diversification advantages of multiple unrelated business segments. While Merck has been cutting R&D spending and selling off noncore assets, the company still continues to distribute cash to shareholders and has a 3% dividend yield. If Merck's drug trials go well and the company is able to replenish its pipeline, Merck could continue to crush the Dow for years more.

Dan Dzombak owns shares of Eli Lilly. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.