(Bloomberg) -- Merck & Co. forecast annual profit ahead of Wall Street views as sales of its cancer blockbuster Keytruda remained strong ahead of a looming patent expiration.

Merck could face generic competition later this decade for its top-seller Keytruda, which grew 19% to $25 billion in sales last year. Under Chief Executive Officer Rob Davis, the company has inked billions of dollars worth of deals for new drugs to offset that pressure.

Investors are “under-appreciating the launch velocity for several key drugs,” Citi analyst Andrew Baum said in a note. Some promising new products with big sales potential could hit the market this year including sotatercept, a pulmonary hypertension drug under US regulatory review, as well as a pneumococcal vaccine that will compete with rival Pfizer Inc.’s blockbuster Prevnar.

Merck’s adjusted earnings for the year will be $8.44 to $8.59 a share, the Rahway, New Jersey drug company said Thursday in a statement. The range’s lower end is equal to analysts’ average estimate. The guidance includes a charge for the recent buyout of Harpoon Therapeutics Inc. 

That’s just one of many deals Merck’s struck recently. The drugmaker agreed last April to spend about $10.8 billion to buy Prometheus Biosciences Inc., a developer of treatments for autoimmune disorders. Months later, the company clinched a deal with Daiichi Sankyo Co. worth up to $22 billion and gives Merck the rights to sell three innovative cancer drugs from its Japanese partner.

Merck’s shares rose as much as 4.1% at the New York market open. They have gained 13% since the start of the year, well above the rise in the Standard & Poor’s 500 health index.   

Quarter’s Results

Sales in 2024 will be between $62.7 billion and $64.2 billion, Merck said in its statement, roughly in line with analysts’ expectations. Quarterly profits of 3 cents a share were sharply reduced by deal-related costs, including a charge of $1.69 a share related to the Daiichi Sankyo deal. 

The adjusted result still topped analysts’ average expectations for a loss. Merck reported a net loss of over $1.2 billion in the quarter including deal costs.  

For now, Merck remains heavily reliant on Keytruda. Its sales grew 21% to $6.6 billion in the quarter thanks to increased use against triple-negative breast cancer and kidney cancer. Vaccines were another bright spot, with three different shots reporting rapid growth. 

Overall fourth-quarter sales rose 6%, Merck said Thursday. Excluding the Covid-19 drug Lagevrio — which is declining in the post-pandemic era — sales growth for the quarter was 11%. 

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Tom Contiliano.

(Updates with analyst’s comment in third paragraph.)

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