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Merck Gardasil Sales Climb In Third Quarter; HPV Vaccine Generates $70 Mil.

Executive Summary

Merck's human papilloma virus vaccine Gardasil generated $70 mil. in sales during its first full quarter on the market, the company reported

Merck's human papilloma virus vaccine Gardasil generated $70 mil. in sales during its first full quarter on the market, the company reported.

The vaccine, priced at $360 for a three-dose series, recorded $10 mil. in sales in the 11 days it was available during the second quarter.

Merck attributes Gardasil's success to the fact that it has been favorably received by payers. To date, "managed care plans representing over 90% of the covered lives of girls and women [between] the ages of nine to 26 in the U.S. have added Gardasil to their respective formularies," Merck CEO Richard Clark noted during an Oct. 20 earnings call.

Clark declined to comment on a question about insurance companies reimbursing physicians at a rate below the cost of the vaccine.

"We're not going to discuss terms with physicians," Clark said, pointing instead to Gardasil's formulary representation. "I think that's a critical part - that we're up to 90% - which certainly has accelerated and exceeded our expectation [of] where it would be on Oct. 20."

Gardasil was approved June 8 for the vaccination of women and girls ages nine to 26 to prevent cervical cancer and cervical, vulvar, and vaginal pre-cancers caused by HPV types 16 and 18, as well as genital warts and low-grade cervical lesions (CIN 1) caused by HPV types 6, 11, 16 and 18 (1 (Also see "Gardasil Clears FDA, But Dosing May Pose Administrative Challenges" - Pink Sheet, 12 Jun, 2006.), p. 3).

Gardasil has a significant head start over GlaxoSmithKline's Cervarix ; GSK reported Oct. 26 that it would delay the submission of its HPV vaccine until April 2007. The company had originally forecast FDA submission by year-end.

Gardasil was the third Merck vaccine to clear FDA this year, following the approvals of its rotavirus vaccine RotaTeq in February and its shingles vaccine Zostavax in late May.

Zostavax received a favorable recommendation Oct. 25 from CDC's Advisory Committee on Immunization Practices; ACIP voted unanimously to recommend that adults aged 60 and older receive the herpes zoster vaccine. The recommendation is in line with the label approved by FDA (2 (Also see "Merck Zostavax Gets Mid-Range Price, Loses Younger Age Group" - Pink Sheet, 5 Jun, 2006.), p. 9).

The ACIP recommendation is expected to further boost sales of the vaccine and be a "critical part" of managed care acceptance, Merck said.

"We're pleased during the third quarter, sales of Zostavax reached $10 mil., and there's really been extremely positive response from managed care organizations...and I think that was a major part of the uptake," Clark stated.

In the diabetes area, Merck is in the process of launching Januvia (sitagliptin), which FDA approved Oct. 16 as the first dipeptidyl peptidase-4 inhibitor (3 (Also see "Januvia Clears FDA; Sitagliptin Has “Neutral Effects” On Weight, Agency Says" - Pink Sheet, 23 Oct, 2006.), p. 6).

While the firm has been ramping up its efforts in its vaccines and diabetes programs under a growth plan announced in December 2005, Merck's cholesterol franchise continues to be one of its most significant revenue drivers.

Third quarter combined global sales of Zetia (ezetimibe) and Vytorin (ezetimibe/simvastatin), both marketed through a joint venture with Schering-Plough, were over $1 bil. Vytorin took in $524 mil. (up 41% from the year-ago period) and Zetia generated $502 mil. (a 39% increase year-over-year).

In the first full quarter since the launch of generic simvastatin in June, sales of Zocor were down 80% in the U.S. to $152 mil. Merck reiterated its FY 2006 sales guidance for Zocor, which is expected to generate $2.6 bil.-$2.9 bil. in worldwide revenues, despite the introduction of generics.

In the pipeline, Merck's investigational cannabinoid-1 receptor (CB1R) inverse agonist MK-0364 has entered Phase III, although the firm said it is "not in a position at this time to provide a potential product profile or a filing date" for the obesity treatment.

Merck's worldwide sales in the quarter were flat at $5.4 bil, while net income dropped 34% to $940.6 mil. The firm also said it had reserved an additional $598 mil. for future Vioxx litigation expenses, bringing the total reserve amount to $958 mil. as of Sept. 30.

- Brooke McManus

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