Q2 2024 Earnings Summary
- Merck expects to launch more drugs in the next 5 years than in the last 10 years, many of which are projected to be blockbuster-plus opportunities, indicating a strong and maturing pipeline.
- The successful U.S. launch of WINREVAIR is off to a strong start, with over 2,000 prescriptions and positive physician feedback, suggesting significant potential for future growth.
- Merck remains confident in GARDASIL's long-term growth, expecting to achieve sales of over $11 billion by 2030, with China remaining an important market, including potential approval for male vaccination.
- Uncertainty and Potential Decline in GARDASIL Sales in China Due to Market Dynamics and Competition: Merck acknowledges that GARDASIL sales in China may face flattening or potential decline as the female population becomes fully penetrated, with expected competition from a 9-valent vaccine entrant in 2025. Additionally, anti-bribery and anti-corruption campaigns in China have dampened vaccination efforts, creating uncertainty about future sales. ( , , )
- Projected Decrease in Contracted GARDASIL Sales with Zhifei: The latest contract with Zhifei indicates potential GARDASIL sales declining from around $4.5 billion in 2024 to approximately $2.5 billion in 2025 and 2026, suggesting a significant reduction in future revenues. ( )
- Earnings Neutral Despite Increased Revenue Guidance Due to Higher Investments: Despite raising revenue guidance, Merck's earnings outlook remains neutral as increased investments, including those related to business development deals like EyeBio, are offsetting revenue gains, which may impact profitability. ( )
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GARDASIL Sales Decline in China
Q: What caused the GARDASIL sales decline in China?
A: GARDASIL sales in China declined due to a significant step down in shipments from Zhifei to vaccination points in Q2, which was surprising and a departure from prior trends. Multiple factors may be contributing, including China's anti-bribery and anti-corruption drive, leading to reduced scientific engagement and fewer immunizations. Despite this, Merck remains confident in the meaningful opportunity in the China market. -
Impact of Anti-Bribery Actions and Competition
Q: Is anti-bribery enforcement or competition affecting GARDASIL sales?
A: The recent anti-bribery efforts in China are believed to impact the HPV vaccine market, affecting scientific engagement and immunizations. Merck does not believe upcoming competition is causing the decline, as GARDASIL remains the market leader with stable or increasing market share. They anticipate potential 9-valent competitors next year but have accounted for this in their planning. -
Future of GARDASIL Sales Growth
Q: Will GARDASIL sales in China decline in coming years?
A: Merck expects a flattening of GARDASIL sales in China as the female indication becomes fully penetrated, followed by growth with the male population coming on board. While acknowledging potential pricing risks, they believe GARDASIL will remain highly sought after even with competition, and the market expansion opportunity in China is significant. -
Long-Term GARDASIL Growth Path
Q: Where is the bigger opportunity for GARDASIL's growth?
A: Merck sees significant opportunity in both Tier 1-3 and Tier 4-5 cities in China, with 30-40% penetration in females across these tiers. Global GARDASIL penetration is only about 10%, indicating substantial room for growth through male vaccination, expansion into low and middle-income markets, and increased capacity to activate mid-adult segments. -
Zhifei Contract and Male Indication
Q: Does the decline in Zhifei contract sales include male approval upside?
A: The current Zhifei contract focuses on the female population aged 9 through 45 and does not include potential upside from the male indication. Merck plans to work with its partner to secure appropriate doses to protect as many males as possible once the male indication is approved. -
WINREVAIR Launch and Sales
Q: How is the WINREVAIR launch progressing?
A: As of the end of June, over 2,000 patients received prescriptions for WINREVAIR, with 75-80% expected to convert to commercial product. In the quarter, about 1,000 patients started treatment. The time from prescription to approval is about two to three weeks, including insurance approval and patient training. Merck anticipates continued growth in both prescribers and patients. -
Future Outlook for WINREVAIR
Q: How are WINREVAIR sales expected to trend in Q3?
A: Merck expects WINREVAIR sales to increase in Q3 due to more patients being prescribed the product and rising stock levels. They remain confident in the outlook for WINREVAIR, consistent with their high expectations. -
Obesity/Cardiometabolic Business Development
Q: What are Merck's plans in obesity/cardiometabolic space?
A: Merck continues to focus on early-stage opportunities and has the financial flexibility to consider deals of all sizes, typically in the $1 billion to $15 billion range. In obesity, they are looking at next-generation plays, such as oral delivery, high tolerability, combinability, and muscle mass preservation, rather than pursuing first-generation treatments. -
Additional WINREVAIR Data
Q: Have they worked through the initial bolus of WINREVAIR patients?
A: Merck is still seeing continued growth in both prescribers and patients for WINREVAIR and has not yet fully worked through the initial bolus of patients. The majority of current patients are on triple or double therapy, including prostacyclin. Access is expected to improve as more insurance plans put coverage in place after the standard 90 to 120 days post-launch waiting period. -
RSV Antibody Filing Plans
Q: When will the RSV antibody be filed and available?
A: Merck plans to file the RSV antibody, aiming for availability in the next RSV season, not the current one. The product is not weight-based and can be given as a single dose covering the entire RSV season of 5-6 months. Global markets, including China, are being considered thereafter. -
Comparison of Clesrovimab to Competitor
Q: How does clesrovimab compare to [byfortis] on hospitalizations?
A: While specific data are pending public presentation in the second half, Merck is very confident in clesrovimab's profile regarding RSV-associated hospitalizations. The antibody can be given as a single dose, is not weight-based, and is expected to cover the entire RSV season. -
ODAC Recommendations on Lung Cancer
Q: Any risk to label extensions due to recent ODAC on peri-adjuvant therapy?
A: Merck is aware of the FDA's emphasis on overall survival (OS) as the gold standard in earlier-stage cancers and is considering this in their development programs. They highlight having four approvals with OS benefit, including perioperative treatments in TNBC and lung cancer, and continue to work closely with the FDA. -
MK-8189 in Schizophrenia
Q: What should we expect from the MK-8189 Phase IIb trial?
A: Merck's Phase IIa study showed efficacy in schizophrenia with a reduction in body weight of about 6 pounds over 4 weeks, addressing concerns leading to patient discontinuation. If Phase IIb results are comparable, Merck would be eager to advance the program. -
Vaxneuvance ACIP Recommendation for Ages 50-64
Q: Will ACIP revisit Vaxneuvance recommendation for ages 50-64?
A: The ACIP expressed interest in revisiting the recommendation for ages 50-64 in October, particularly due to ongoing burden and racial and ethnic disparities in pneumococcal disease. Merck is confident in their data and looks forward to the potential expanded age-based recommendation. -
WINREVAIR Script Conversion and Interpath Filing
Q: Is the 75-80% script conversion included in FY24 guidance?
A: Yes, the conversion rate of 75-80% of WINREVAIR prescriptions to commercial product is embedded within Merck's FY24 guidance. Regarding the Interpath filing, Merck is focused on getting the Phase III trial fully enrolled to move forward.