JPM: Merck turns to contract manufacturers to help with Gardasil supply, plans 2023 plant openings

Merck’s Keytruda has dominated headlines at the drugmaker in recent years as it’s racked up new uses and grown into a megablockbuster. But HPV vaccine Gardasil has been churning right along as well, and now huge demand for the vaccine is causing some supply constraints.

Merck has doubled capacity from existing facilities while it builds two new plants but that has not been enough to handle demand that has "skyrocketed," Merck CEO Ken Frazier told an audience at last week’s J.P. Morgan Healthcare Conference. Merck has now brought in contract manufacturers “in certain areas where we think there might be bottlenecks in our current process," he added.

Last fall, the company also borrowed Gardasil 9 doses from the U.S. Centers for Disease and Control and Prevention’s (CDC) Pediatric Vaccine Stockpile to help cover vaccinations, which allowed Merck to produce more for other parts of the world where demand is running high. The company said that move will cost Merck about $120 million in Q4 sales. 

In the long-term, the “real inflection point” will come when Merck opens two new bulk manufacturing plants, expected around 2023. At that time, Merck will be able to “address much more of the world's needs,” Frazier said. 

What’s driving higher demand for Merck's second best-selling product? More countries are taking a “gender-neutral approach” to vaccinating boys and girls against the virus that can cause several types of cancer, Frazier said. Aside from that, vaccination rates are up and Merck is expanding the vaccine's reach in markets around the world.  

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As a result, sales are up and Merck expects a “great opportunity for an awful long time,” Frazier said. In the first nine months of 2019, Gardasil sales came in at $3 billion, an increase of 34% over the same period in 2018. It was the company’s second-best-selling franchise behind megablockbuster cancer med Keytruda in the third quarter.

Merck isn't alone in running into supply shortfalls for a highly successful vaccine. GSK in 2017 launched Shingrix and is seeing "unprecedented" demand for its new shingles shot, execs have said. The company is working to boost supply for the vaccine with existing plants as it works to bring a new facility online, expected in 2024, GSK’s vaccine chief Roger Connor told FiercePharma at JPM.