Merck warns of significant drop in Japanese Gardasil sales

Merck's ($MRK) human papillomavirus (HPV) vaccine Gardasil has enjoyed a strong start to 2013, with sales up 27% in the first half of the year. But Japan's decision to suspend promotion of the vaccine after it was linked to adverse events has raised some questions about its prospects.

Gardasil generated $140 million in sales in Japan last year, which was less than 10% of the total revenues brought in by the HPV vaccine. Merck is resigned to a fall in sales in Japan this year, with management telling investors the withdrawal of the health ministry's recommendation will have a significant negative impact. Gardasil is still available in Japan but, for now, lacks the health ministry's recommendation. Merck is looking to other markets to offset the loss of sales in Japan. Brazil is adding Gardasil to its national immunization program from 2014, and has set aside almost $160 million for buying HPV vaccines. 

The bigger concern is whether Japan's action will have knock-on effects in other markets. Merck is monitoring the situation. "We have not seen any significant impact at this time in other markets around that world," Merck Research Laboratories president Roger Perlmutter told investors. The focus now is on continued monitoring of adverse event reports, and presenting data on the safety and efficacy of Gardasil to the Japanese government.

GlaxoSmithKline's ($GSK) HPV vaccine Cervarix is also affected by Japan's decision. Sales fell in the second quarter--contributing to a 5% drop in GSK's turnover in Japan--as the jab continued to struggle. "We've clearly seen a slowdown in the HPV marketplace. And over the last year, we've seen a significant share decline for Cervarix. I don't think we are going to see anything dramatically change in that scenario," GSK CEO Andrew Witty told investors last week.

- here's the Merck transcript
- check out the GSK call

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