Industry watchers are predicting GlaxoSmithKline and Sanofi will post strong vaccines growth in the coming years, surpassing Merck in size along the way. But at a recent conference, Merck CEO Ken Frazier told investors not to underestimate his company's presence in the field.
Speaking at the Sanford Bernstein Strategic Decision Conference, Frazier said Merck is “excited by our vaccine pipeline and I think that’s a really strong part of Merck’s business,” according to a Seeking Alpha transcript.
Frazier said many people “underestimate” Merck’s vaccine business, but he sees things differently. To reinforce the point, Frazier pointed to Gardasil’s recent sales strength and a new cancer vaccines partnership with Moderna Therapeutics as evidence of Merck’s promise in vaccines.
The unit does face challenges, even with top-selling Gardasil, thanks to a recent Centers for Disease Control and Prevention decision to reduce the recommended dosing schedule. Competitors are coming for at least one of its other top products. But Frazier sees the Moderna deal, and other pipeline projects, paying off down the line.
Last summer, Merck linked up with Moderna on a personalized cancer vaccine partnership, paying $200 million up front to the Boston biotech for R&D work through proof of concept. If the program generates human proof-of-concept data, Merck has the option to make an additional undisclosed payment.
And if the work reaches that point, the pair would split costs and profits in a global collaboration. Last week, Frazier said it’s an arrangement that holds “great promise for us.”
“[T]hat’s the kind of transaction where I think we can create value for our shareholders, because our scientists see something that they believe they can employ in the context of vaccine development down the line,” he said. “And you are not overpaying in a big way,” noting that pharma’s “serial acquirers” haven’t always reaped the value they desire from M&A moves.
Frazier also said he’s “very excited” about a pneumococcal conjugate vaccine the company is testing in phase 2. If clinical trials go well for Merck, the candidate, V114, could potentially challenge Pfizer's megablockbuster Prevnar 13. The vaccine is designed to protect against 15 pneumococcal disease serotypes versus 13 for the Pfizer vaccine, which pulled in $5.7 billion in global sales last year.
Meanwhile, Gardasil's sales growth continues to be a boon for the business. In the first quarter of 2017, the vaccine’s revenue grew 41% to $532 million, pushing the company's overall vaccine growth to 21% for the period.
Last year, GlaxoSmithKline pulled its own HPV shot, Cervarix, from the U.S., handing the lucrative market to Merck. But Merck is also dealing with the CDC's recent decision to recommend a two-dose HPV vaccination schedule, down from three doses. Fewer doses could hurt sales if Merck can't expand uptake of the shot.
And even as Frazier touts his company’s promise in vaccines, other drugmakers are pushing ahead in the highly consolidated field. GSK is awaiting approval for a shingles vaccine, Shingrix, that could hurt Merck’s Zostavax if it reaches the market.
A report last year by life sciences commercial intelligence firm Evaluate predicted GSK’s vaccines sales would grow 6% yearly through 2022 to top the industry at $8.55 billion that year. The firm’s analysts predicted Sanofi’s vaccines sales would grow 5% each year during the period to $8.29 billion.
Pfizer was projected to be the third-largest vaccine player that year, according to Evaluate’s World Preview 2016, with vaccines sales of $7.43 billion. Merck was expected to round out the top four at $7.23 billion in 2022 vaccines sales. Pfizer and Merck were each projected to turn in annual vaccine growth of 2% over the period, according to the report.
In 2016, Merck topped the industry with $6.3 billion in sales, trailed by Pfizer with $6 billion, GSK with $5.8 billion and Sanofi with $5.15 billion, according to filings and conference call transcripts.