Merck shares rose more than 2% to $84 in early trading.
Keytruda has become the go to treatment for newly diagnosed advanced lung cancer, with eight out of 10 eligible U.S. patients now receiving the therapy.
"We still think we are in the early innings of growth for this product," Chief Financial Officer Robert Davis said in an interview. "In addition to new indications across different tumour types, you also see us moving into earlier lines of therapy."
Rivals AstraZeneca Plc and Bristol-Myers Squibb Co have been testing combinations of their cancer drugs in a bid to catch up in first-line advanced lung cancer, the most lucrative oncology market.
"While we know it'll be eventually competitive," Merck Chief Commercial Officer Franklin Clyburn said, "we feel very confident in our position."
"What we're hearing ... in the physician community is that they really believe Keytruda now has established itself as a standard of care in lung," Clyburn added on a call with analysts and investors.
Keytruda sales in the third quarter surged 62.5% to $3.07 billion, easily topping analysts' estimates of $2.88 billion, according to data from Refinitiv.
Higher demand in China, along with higher prices in the United States, boosted third-quarter sales of Gardasil, the company's vaccine to prevent cancer caused by human papillomavirus. Gardasil sales rose 26% to $1.32 billion, topping d beat estimates of $994.3 million.
The company noted that sales growth for Gardasil would be constrained in 2020 as demand for the vaccine outpaces supply. It said it intends to significantly ramp up production by 2023 to meet demand outside the United States.
Merck said it is increasing production from existing plants and commissioned construction of two new facilities for the vaccines.
Sales of medicines in China grew by 90%, excluding the impact of a stronger dollar, helping overall revenue grow nearly 15% to $12.40 billion. Analysts had expected sales of $11.64 billion.
Merck raised its 2019 adjusted earnings forecast to between $5.12 and $5.17 per share from a prior range of $4.84 to $4.94. Analysts were expecting $4.92 per share.
Excluding items, Merck earned $1.51 per share, sailing past the average analyst estimate of $1.24.
(Reporting by Saumya Sibi Joseph and Manas Mishra in Bengaluru and Michael Erman in New York; Editing by Shinjini Ganguli and Bill Berkrot)
By Manas Mishra and Saumya Joseph
