Drug giant Merck & Co. Inc. (NYSE: MRK) reported third-quarter 2018 results before markets opened Thursday. The company reported adjusted diluted earnings per share (EPS) of $1.19 and revenues of $10.79 billion. In the same period a year ago, Merck reported EPS of $1.11 on revenues of $10.33 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.14 and $10.88 billion in revenues.

On a GAAP basis, Merck posted EPS of $0.73, which includes acquisition- and divestiture-related costs, restructuring costs, a charge of $420 million related to the termination of a collaboration agreement with Samsung Bioepis (Samsung) for insulin glargine and certain other items.

Net income on a GAAP basis totaled $1.95 billion, while non-GAAP net income totaled $3.18 billion. Non-GAAP net income excludes $651 million in costs related to acquisitions and divestitures, $149 million in restructuring costs and $428 million in certain other items.

Pharmaceutical sales were up 5% year over year. Excluding currency exchange effects, sales were up 7%. The company’s Keytruda cancer drug posted a sales increase of 80% in the quarter, ringing up $1.89 billion in sales. Other cancer drugs, Gardasil and Gardasil 9, posted a 55% sales gain to $1.05 billion.

Merck’s board chair and chief executive, Kenneth C. Frazier, said:

We built on our strong momentum during the quarter and believe that Merck is well-positioned to continue creating sustainable value for shareholders and patients. Our focused execution is driving our operational results, with KEYTRUDA making a difference to cancer patients around the world. We are also continuing to advance our broad pipeline, including in oncology, vaccines, hospital and specialty as well as animal health. With this strong performance, we are highly confident in our portfolio, strategy and pipeline as demonstrated by our announced capital return actions today.

In its financial outlook statement, Merck narrowed and lowered its full-year adjusted EPS range from $2.51 to $2.59 to a new range of $2.41 to $2.47. The decline is the result of the $420 million charge related to the cancellation of the company’s contract with Samsung. On a GAAP basis, Merck raised its EPS forecast from $4.22 to $4.30 to a new range of $4.30 to $4.36. The revenue forecast of $42.1 to $42.7 billion was unchanged.

Analysts have estimated fourth-quarter adjusted EPS at $1.04 and full-year EPS at $4.29. Fourth-quarter revenue is tagged at $10.82 billion and full-year revenue at $42.46 billion.

Since the beginning of the year, Merck’s stock is up 25.4%, the second-best performer among the Dow 30 stocks.

Shares of Merck’s stock traded up about 1% in Thursday’s premarket, at $71.25 in a 52-week range of $52.83 to $73.49. The 12-month consensus price target on the stock was $77.93 before today’s report.

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