Dive Brief:

• Merck & Co.'s flagship cancer drug Keytruda surpassed diabetes medicines Januvia and Janumet as the pharma's top-selling therapeutic franchise in the first quarter, underscoring the rapid sales growth of the immunotherapy over the past year.
• Sales of Keytruda came in just shy of $1.5 billion between January and March, up 142% from the $584 million earned during the same period a year ago, the company said Tuesday. Keytruda's edge in lung cancer has largely driven those gains, allowing Merck to catch rival Bristol-Myers Squibb in immunotherapy.
• Merck expects accelerating uptake of Keytruda, too, boosted by recent clinical results that show Keytruda can extend survival when used either as a monotherapy or in combination with chemotherapy to treat non-squamous cell lung cancer (NSCLC).

Dive Insight:

While both Keytruda and Opdivo won initial U.S. approval just months apart in 2014, Bristol-Myers' drug saw much faster sales growth to start. Securing OKs in first-line lung cancer has been Merck's ticket to catching Bristol-Myers, and Keytruda sales in the first quarter were roughly even with Opdivo's.

Merck expects the success of its KEYNOTE-189 study will further drive uptake of Keytruda as a first-line treatment for advanced NSCLC. Results, presented last month at the annual meeting of the American Association of Cancer Research, showed a combination of Keytruda and chemotherapy cut the risk of death in half compared to chemotherapy alone.

Importantly, data supported the combination's benefit across varying levels of PD-L1 expression , a biomarker used to identify patients most likely to respond to immunotherapy. Merck previously won a conditional approval for the combo from a smaller study, but physicians have been hesitant to broadly prescribe without further data.

Now, impressive results in hand, Merck hopes more doctors will prescribe Keytruda plus chemotherapy to NSCLC patients with PD-L1 expression levels below 50% or even below 1% — patient populations currently not served by Keytruda monotherapy.

"I think there is a lot of runway to go into those two segments," said Adam Schechter, head of global human health at Merck, on a May 1 earnings call.

In the U.S., lung cancer indications currently account for about 60% of Keytruda sales. But Merck hopes the KEYNOTE-189 results, along with other positive study readouts, could help drive a "halo effect" in other indications for which the drug is approved.

Keytruda's strengthening position hasn't always translated into rising share prices for Merck, however. Merck's stock increased just under 5% by value since the beginning of 2018, and several sell-offs over the past two years have contributed to a more up-and-down performance than might otherwise be expected.

Company CEO Ken Frazier, speaking on the earnings call, argued Merck's prospects for revenue growth through 2022 and beyond are currently underappreciated by Wall Street, pointing chiefly to Keytruda and vaccines.

Indeed, Merck raised and narrowed its sales forecast for 2018, and now expects to earn between $41.8 billion to $43 billion on the year. Frazier did not specify, though, what the company expects for revenue growth over the longer term.

Shares in Merck fell by more than 2% in Tuesday morning trading.

Perhaps weighing on investor enthusiasm is the company's increasing dependence on Keytruda to drive the company forward. Merck has been relatively quiet on the M&A front, spurring some calls for the company to be more active in adding to its pipeline through dealmaking.

A recent analysis by Cowen & Co., for example, found Merck's pipeline to rank in the bottom quartile among its pharma peers.

Addressing questions from analysts on M&A, Frazier said Merck continues to look for business development opportunities, but noted that a large-scale transformational deal was not the company's preference.

Overall revenue on the quarter increased by 6% year over year to total $10.04 billion. Sales of Januvia and Janumet increased 7%, while Merck's important Gardasil vaccine saw a 28% jump.