Vaccines a rare bright spot in Merck's gloomy financials

The layoffs and cuts outlined by Merck ($MRK) earlier this month showed the faith it has in the vaccine unit to drive growth over the coming years. And this week brought fresh data to back its decision, with third-quarter results showing strong demand for vaccines propping up other struggling areas of the firm.

Another big quarter for human papillomavirus (HPV) vaccine Gardasil means the vaccine unit is up 15% over the first 9 months of the year. Gardasil achieved year-over-year growth of 15% in the third quarter, despite Japan's ongoing investigation into the safety of the vaccine causing international sales to fall. Merck is providing Japan with a "vast amount persuasive safety and efficacy data" in a bid to regain the government's recommendation, global human health president Adam Schechter said, but for now strong sales in the U.S. are offsetting problems overseas.

The U.S. public sector bought $60 million of Gardasil in the quarter--as well as $30 million of rotavirus vaccine RotaTeq--and this contributed to a 30% jump in sales of the HPV jab in Merck's home market. U.S. sales were also buoyed by increased uptake in boys. The next step is to win approval for V503, Merck's 9-valent HPV vaccine. Merck provided an update on V503 to the Advisory Committee on Immunization Practices, revealing it met its primary endpoints in a Phase III trial. The positive data means Merck is still on track to submit a biologics license application to the FDA by the end of the year.

V503 is designed to protect against 5 more HPV serotypes than Gardasil, which Merck claims will make it effective against 90% of strains. Merck needs V503 to build on the success of Gardasil to offset problems in other areas of the business. Growth of company cash-cow Januvia stalled in the third quarter, raising fears that rival diabetes drugs from Bristol-Myers Squibb ($BMY) and Eli Lilly ($LLY) are gaining ground. Merck must now try to boost sales while working through the restructuring, which began this week.

- read Merck's release
- check out the earning's call transcript
- here's Reuters' take
- and FierceBiotech's restructuring news