Merck should have been cheered by the news that the CDC plans to reinstate booster shots of meningitis vaccine for kids because the vaccine supply has come back online. The company, after all, has a large vaccine division and makes meningitis vaccines.
But it is just salt in Merck’s wounds. The supply was interrupted in 2007 because it was Merck’s HiB vaccines that were recalled for sterilization issues. Merck’s vaccine supply won’t reappear until late 2009 and the company’s vaccine factory won’t be fully operational until 2010, Dow Jones Newswires reported.
So Sanofi-Aventis is stepping into the breach to provide vaccines in the meantime — stealing Merck’s vaccine business out from under its nose.
Check the scale of Merck’s vaccine business problem, according to its Q1 2009 earnings report:
- Revenues fell 13 percent to $859.7 million
- Profits fell 7 percent to $578.6 million
- The decline in sales of HPV vaccine Gardasil alone was more than $100 million.
In Merck’s Q1 2009 conference call, analysts once again asked when Merck was going to get its vaccine act together:
John Boris – Citigroup: Can we just get an update as to how confident you are that your vaccine production will be kicking in, in the back half of the year and how validation of the new North Carolina facility is progressing?
CEO Dick Clark: We are on track with the validation and certification of our new facility for the later part of this year and we’re excited about that. As you know that project was approved in 2003/2004 so for vaccine and for sterile facilities it takes quite a bit of time, but we’ll be moving towards final validation and then release a product by the end of this year and early next year.
This sounds familiar because it is. In Q3 2008, Boris asked the same question and got a different answer: product would start shipping in early 2009. Clearly, deadlines have been pushed back.
So what is Merck doing in the meantime? Trying to persuade the FDA that boys should also be vaccinated with Gardasil even though, obviously, they don’t get the cervical cancer that HPV can cause.
Whether Merck can claw back another $100 million in revenues from boys is an open question — this is actually Plan C for Merck. Plan A was the teenage girls’ indication, which initially worked well but has now evidently plateaued into maturity. Plan B was to ask for an indication for women aged 29 to 45 but the FDA rejected that, probably because most women in that age group have already had the disease and sloughed it off.
And even if the boys’ indication is approved, can you see school districts and parents rushing their lads for this jab? As long as all the girls are getting it, it would be cheaper not to. And yes, that’s exactly the kind of double standard I expect to see applied.
Here’s some wild speculation: Perhaps Merck is expecting to encounter this resistance so it can litigate in every state and district where it’s mandatory for girls on the grounds that it is discriminatry not to include boys in the program. A victory could provide a court-ordered revenue boost.
The company expects FDA action on its application in the fourth quarter of 2009.