Merck & Co. Inc. is sticking to its animal health division, rejecting suggestions that spinning off the unit would provide returns to shareholders and insisting that the division provides a counterweight to a perceived overreliance on its lead cancer product, Keytruda.

Merck has been looking for opportunities to boost growth and widen its pipeline through business development, said Chairman and CEO Kenneth Frazier, while acknowledging that the company's shares have underperformed in recent years.

But Frazier dismissed analyst suggestions that the animal health division, which saw a 13% year-over-year rise in sales to $1.07 billion, would be better valued outside the company and that a spinoff of the business would be beneficial for shareholders.

"From time to time, we're told that a concern is the concentration risk around Keytruda, and [the animal health portfolio] provides diversification from Keytruda as well as the rest of our human health portfolio," said Frazier in the company's first-quarter earnings call.

Merck competitor Eli Lilly and Co.'s Elanco animal health business, on the other hand, has seen declining sales, and the company put the unit on strategic review in 2017.

More than just a Keytruda story

Sales of Keytruda, Merck's blockbuster immuno-oncology drug, surged 151% on a yearly basis to $1.46 billion during the first quarter. Keytruda works by blocking an interaction between PD-L1 proteins on cancer cells and PD-1 proteins on healthy cells. There are more than 750 studies of Keytruda, including more than 400 combination clinical trials.

The U.S. drugmaker in April presented results from its phase 3 Keynote-189 study that showed Keytruda, combined with Eli Lilly's chemotherapy drug Alimta, cut the risk of death by half as an initial treatment of nonsquamous non-small cell lung cancer. Rival Bristol-Myers Squibb Co.'s Opdivo plus Yervoy combo also reduced death risk, but the company has yet to provide full data.

Despite the cancer therapy's success, Frazier said Merck wants to be "much more than just a Keytruda story." The company, which also booked higher sales for its HPV vaccine Gardasil, continues to look for partnerships that could enhance its pipeline, such as the company's cancer collaboration with Japanese drugmaker Eisai Co. Ltd., Frazier noted.

"We have the power and the flexibility to do deals at any size and stage and we're going to continue to look for things that can drive long-term value and growth for our company," Frazier added.