Boosted by China launch, Merck's Gardasil turns in a big first-quarter performance

Even as Merck's Gardasil sales suffer in the U.S. from the CDC's decision to implement a two-dose regimen, the HPV vaccine franchise posted strong growth in the first quarter as a China launch begins to pay off.

Globally, Gardasil and Gardasil 9 revenues grew 24% in the first quarter to $660 million, pushing Merck's vaccine unit to more than $1.5 billion in sales, or about the same as during the period last year. Measles, mumps and rubella vaccine sales grew versus last year's first quarter, as did Merck's sales from pneumococcal shot Pneumovax 23. 

Gardasil's performance beat Wall Street expectations by $73 million, according to a note from Barclays analysts. The original vaccine, which protects against four HPV types, won Chinese approval last year, following GlaxoSmithKline's Cervarix into the market. Late last month, the Chinese FDA granted Gardasil 9 a conditional approval only nine days into a review.

But not all of the company's vaccines grew year-over-year. Rotateq revenues fell 14% to $193 million—the WHO recently prequalifed a cheaper rotavirus competitor from Bharat Biotech—and aging shingles vaccine Zostavax tanked 58% to $65 million. GSK launched a highly touted competitor that's quickly scooping up share at the expense of Merck's shot. 

Gardasil remains Merck's top vaccine by sales, and the company's leadership is confident it can continue on its growth path thanks to the rollout in China.

On Merck's first-quarter conference call, President of Global Human Health Adam Schechter said he believes China "represents a very good opportunity for us," but he declined to put a number on sales potential from the market. In the U.S., sales fell due to the CDC's switch to a two-dose regimen—from three doses—intended to boost uptake. Merck executives have warned the decision will adversely affect sales.

Several of the sales dynamics are a continuation from last year, when Gardasil chipped in $2.3 billion—a 6% increase—despite a cyberattack in the third quarter that interrupted manufacturing and hurt performance. Zostavax also struggled last year after Glaxo's Shingrix launch. 

Looking ahead, Merck executives highlighted a few pipeline vaccines as future growth drivers. V114, a 15-valent pneumococcal shot that could challenge Pfizer's market dominance, just entered phase 3, Merck CEO Ken Frazier reminded analysts on the company's conference call. Pfizer's 13-valent Prevnar 13 generated $5.6 billion last year, leading the vaccine industry's sales charts. 

Merck's in-development vaccine could provide better protection than Prevnar 13 and expand coverage to new serotypes, Merck R&D head Roger Perlmutter said on the call. For its part, Pfizer is working on a new 20-valent shot that could launch around the same time as Merck's new vaccine, executives for that company recently said. 

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