By Manas Mishra

(Reuters) - Merck & Co Inc <MRK.N> reported better-than-expected second-quarter results on Tuesday and raised its full-year earnings forecast on strong demand for its blockbuster cancer immunotherapy Keytruda and vaccines.

Merck shares rose 1.3% to $83.56 in afternoon trading.

Sales of Keytruda surged 58% to $2.63 billion in the quarter, ahead of Wall Street estimates for about $2.5 billion.

A run of positive clinical data for Keytruda and setbacks for its biggest rival - Bristol-Myers Squibb Co's <BMY.N> Opdivo - has led to a dominant position for Merck's drug as an initial treatment for advanced lung cancer, the most lucrative oncology market.

Keytruda, Merck's most important growth driver, has racked up U.S. approvals to treat numerous cancer types since it was first approved for advanced melanoma in 2014.

"We right now have built a wall of data that we feel very comfortable with," Chief Commercial Officer Franklin Clyburn said on a conference call with analysts.

Some investors have raised concerns about Merck over-reliance on Keytruda and have looked for a large deal to lessen that dependence, along the lines of AbbVie's <ABBV.N> $63 billion deal for Allergan Plc <AGN.N>.

But analysts have forecast continued strong Keytruda growth for several years.

Merck Chief Executive Officer Kenneth Frazier reiterated that Merck would focus on bolt-on deals "across the spectrum in terms of size" rather than a large, transformative acquisition.

Sales of Merck's Gardasil vaccine to prevent cancers associated with the human papillomavirus jumped 45.7% to $886 million, helped by both demand and a U.S. price increase.

Overall vaccine sales rose 33% to $2 billion, also boosted by the company's measles-mumps-rubella (MMR) shot amid the worst U.S. measles outbreak since 1992.

Sales of Merck's MMR and chicken pox vaccines rose 58% to $675 million in the quarter. Chief Financial Officer Robert Davis said he expects that business to grow, a forecast that is not based on the assumption of additional outbreaks.

The U.S. drugmaker increased its forecast for 2019 adjusted earnings, raising the midpoint by 16 cents. Merck now expects to earn between $4.84 and $4.94 per share, up from its prior view of $4.67 to $4.79.

Excluding items, Merck earned $1.30 per share, beating the average analysts' estimate by 14 cents, according to IBES data from Refinitiv.

Merck said net income for the quarter rose to $2.67 billion, or $1.03 per share, from $1.71 billion, or 63 cents per share, a year earlier.

Sales rose 12.4% to $11.76 billion, beating Wall Street estimates of $10.96 billion.

(Reporting by Manas Mishra in Bengaluru; Additional reporting by Michael Erman in New York; Editing by Anil D'Silva and Bill Berkrot)