Can Merck's Blockbuster and New Drugs Keep It Profitable?
Gardasil is Merck & Co.’s (MRK) leading vaccine franchise. Gardasil is a vaccine for the prevention of certain strains of HPV (human papillomavirus), a sexually transmitted disease. Total sales of Gardasil in 1Q16 were $378 million, an increase of ~5.3% over $359 million for 1Q15. Sales of Gardasil are estimated to increase to $455 million for 2Q16 and $665 million for 3Q16.
Why is Gardasil so important?
Gardasil is used in the prevention of certain HPV strains that are responsible for causing ~70% of cervical cancers. It’s also responsible for most HPV-induced cancers, including anal, vulvar, vaginal, and penile cancers, and genital warts.
The strong performance and presence of Gardasil 9 in the United States represent Merck’s strength in securing managed care access as well as the transition of customers to the 9-valent vaccine.
Contribution of Gardasil
Gardasil contributed ~4.1% of Merck’s total revenues in 1Q16, which is ~0.3% higher compared to its contribution in 1Q15. The revenue contribution of Gardasil is also estimated to increase to 4.6% of total estimated revenues for 2Q16 and 6.6% for 3Q16. That reflects a positive trend for Gardasil. The growth is driven by Gardasil 9 in the US markets.
Merck’s overall vaccines business
Overall, Merck’s vaccine sales were ~$1.3 billion in 1Q16, a 1% growth compared to 1Q15. Growth was driven by Gardasil and pediatric vaccines, which were offset by lower revenues from RotaTeq, Pneumovax, and Zostavax.
Merck’s Gardasil competes with GlaxoSmithKline’s (GSK) Cervarix. GlaxoSmithKline has acquired Novartis’s (NVS) vaccine business to strengthen its vaccines portfolio. Pneumovax competes with Pfizer’s (PFE) blockbuster Prevnar 13.
To divest risk, you can consider investing in ETFs such as the iShares Global Healthcare ETF (IXJ), which holds ~3.8% of its total assets in Merck.
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