Analysts at Citi upgraded shares of Dow-component Merck to buy from neutral, noting they expect strong sales from its Keytruda drug.

Keytruda is an immunotherapy drug used in cancer treatments. Citi increased its peak Keytruda sales forecast on the drug to $16 billion from $9 billion.

“Merck’s success with Keytruda has clearly outperformed our initial expectations which were based on Merck’s historic absence as a major oncology player,” analyst Andrew Baum said in a note to clients Wednesday.

The analyst raised Merck to buy from neutral. The shares jumped more than 1.6 percent in Wednesday premarket trading after the call.

“While competitors have clearly sought to learn from Merck, the breadth and depth of Keytruda’ s clinical trial program and boldness to commit significant capital to promising external modalities … gives it a likely sustained significant advantage, we believe,” Baum said.

Citi also raised its price target on Merck to $72 from $65, implying 13 percent upside for the stock. Merck shares closed at $63.22 on Tuesday.

Merck’s stock is up 7.4 percent year to date, underperforming against the Dow Jones industrial average, which has risen 16.4 percent.

Source: Investment Cnbc
Merck shares jump after Citi upgrade on stronger cancer drug sales