Gardasil HPV-Vaccine is Just One Of Merck’s Troublesome Issues
The forth quarter earning reports, the report card for publicly held companies, held no good news for Merck or its stockholders. Merck released its not overly optimistic guidance for 2009 that forecasted earnings and revenue below that expected by Wall Street analysts. It is never a good to disappoint ‘the street.’ Merck named lower sales of its Vytorin and Zetia cholesterol pills, sold as part of a joint venture with Schering-Plough as one reason for declining profit.
In a statement, Merck CEO Dick Clark blamed “a volatile global economy,” currency exchange rates and “continued challenges” for key products. In response to changing market conditions and generic competition to their high profit meds, Merck is eliminating 7,200 jobs and closing production facilities.
Merck reported the expectation that revenues from Gardasil their HPV vaccine are will remain flat in 2009, as Merck continues to struggle with questions over safety and cost. Sales of Gardasil were down 4% in third quarter,2008 for instance. Merck’s revenue from other vaccines will increase to between $2.8 billion and $3.1 billion, compared with an estimated $2.6 billion to $2.8 billion this year.
Merck continues to have big hopes for their Januvia diabetes pill. Sales are expected to reach between $2.4 billion to $2.7 billion next year. Profits excluding one-time items will be $3.15 to $3.30 a share next year, compared with analyst estimates of $3.52. The declining US dollar will reduce earnings by 6% in 2009. Merck is maintaining its 2008 earnings forecast of $3.28 to $3.32 a share.
Forbes Take on Merck’s Guidance
Forbes.com continues to report on Merck’s numerous challenges. When Merck yanked its financial guidance for the year, some fund managers sold out of anger, suspecting Merck was using the SEAS result to cover for the worse-than-expected performance of Singulair and of Gardasil, a vaccine for the human papilloma virus that causes cervical cancer. Merck Chief, Richard Clark, did acknowledge those issues in his e-mail to employees and on a conference call with analysts.
The Gardasil vaccine, which generates $1.5 billion annually, hit speed bumps. Researchers have raised doubts about the cost-effectiveness of the vaccine, and there have been scattered reports of side effects, but there are bigger problems in the area of distribution.
Pediatricians are used to giving shots, and girls who see them have been getting vaccinated. But Gardasil is approved for women as old as 26, and primary care doctors and obstetrician-gynecologists have less financial incentive to vaccinate. Women ages 18 to 26 have just not been getting Gardasil, and Merck has introduced pilot programs to help docs pay for stocking the vaccine. The FDA also returned, with questions, an application to sell the vaccine for women as old as 46, delaying its approval.
Additionally, Merck has had difficulty manufacturing some of its vaccines, including Zostavax, for shingles. The products are literally on backorder. “You’ve got a product that’s in demand,” says Funtleyder, “and you can’t supply the demand.” Merck says the production problems will be solved and backorders filled by early 2009.
Merck says its manufacturing problems are not the result of its staff reduction, and that it won’t allow job cuts to hurt the quality of its products. The 7,000 jobs cut in 2005 included vacant positions, and the company didn’t stop hiring; total head count is down by about 4,000 to around 57,000. Still, the current round of 7,200 cuts, including a program called “spans and layers” that will result in one-quarter of executives (including many vice-presidents) leaving the company, could certainly lead to a brain drain.
What about research?
No big Merck drugs are expected to hit the market in 2009. For a moment, it appeared Merck’s focus on basic science was helping it get the jump on competitors. Its diabetes drug Januvia made it to market while competitors from Novartis (nyse: NVS – news – people ) and elsewhere failed because of side effects. Gardasil has had the U.S. market to itself because the similar Cervarix, from GlaxoSmithKline (nyse: GSK – news – people ), has been delayed.
But now Merck’s pipeline has been culled by delays and failures. Merck had high hopes for Cordaptive, a new drug to block the side effects of the proven heart medicine niacin. The FDA dashed them, wanting more safety data and, according to people who have been briefed on the agency’s response to Merck, more data comparing the new drug with aspirin, which some doctors prescribe with niacin today.
Merck Vice President Richard Pasternak says the aspirin issue was minor and that Merck is now collecting more data. Obesity drug Taranabant was killed because it caused depression and psychiatric side effects; similar medicines from Pfizer (nyse: PFE – news – people ) and Sanofi-Aventis (nyse: SNY – news – people ) were also nixed.
Merck does have a few gems. Its HIV drug Isentress is the only one of its kind, and it holds great promise. The experimental rolofylline, for acute heart failure, could be a blockbuster if it works. Merck’s basic science research in cancer is fascinating and could lead to important drugs if the company pays enough for clinical trials.
But many are sick of waiting for Merck to deliver. Deutsche Bank analyst Barbara Ryan thinks the company should just bite the bullet and make a big acquisition. She suggests Gilead Sciences (nasdaq: GILD – news – people ), a maker of HIV drugs and perhaps biotech’s biggest star.
On an October conference call with analysts, Clark was unbowed. “I have full confidence in the fundamentals of Merck’s business, our strong balance sheet and cash flow, our product portfolio, our deep strength in research and development, our great people and an excellent management team across the globe,” he said.
Editorial Note:
Readers have often asked why I include Big Pharma financial analysis as part my Inconvenient Woman Blog. For those of us who feel Gardasil is just bad science that is endangering our girls, I feel financial analysis offers a helpful data point. When some one we love becomes chronically ill or dies from a drug interaction, it is profoundly emotional. But to the Companies like Merck, and their stockholders, it’s all about an earnings ratio and the dividend.
One way to measure the effectiveness of our fight against Merck’s HPV-vaccine is seeing what impact we Inconvenient Women are having on their bottom-line. Merck will never stop producing a drug because it is the right thing to do. Gardasil will be pulled from the market because it is no longer profitable or the FDA has finally forced a recall and issued a order to stop sales and the CDC withdraws its support of the HPV-vaccine process.
That is why it is so important that Moms and daughters continue to contact their Federal, State and local officials with their concerns and personal experience with Gardasil. Every interview, article, YOUTUBE video is important. Wherever two or more are gathered, talk about Gardasil. Use MeetUp to schedule meetings to increase public awareness. Use Social Networking sites to get the word out, educate before you vaccinate. We are already seeing cracks in the Merck juggernaut. Lets hope that 2009 is the year to get CDC and the FDA to listen to the voices of the women and girls who are suffering in the name of earnings share.
