China’s recent effort to crack down on healthcare corruption has spurred a slowdown in Gardasil shipments, according to Merck CEO Rob Davis.
On Tuesday, Davis told investors that China’s corruption work led to criminal charges against “a senior scientific representative” related to a Covid-19 vaccine, impacting immunization efforts in the country. Neither the local official nor the vaccine product were mentioned by name, and the company declined to say more when asked in a follow-up email.
“How long this lasts, how it will continue to play out, we’ll have to see,” Davis said on Merck’s second-quarter earnings call.
Merck’s shares $MRK were down almost 10% on Tuesday afternoon, one of the worst drops in the last few years. The company also revised down its non-GAAP earnings-per-share guidance by $0.77, attributing $0.60 per share to the acquisitions of Harpoon Therapeutics, EyeBio and Elanco’s aqua business. A spokesperson confirmed that Gardasil shipments contributed to the additional $0.17 per-share revision.
Gardasil is Merck’s second biggest product, and along with cancer drug Keytruda dwarfs the rest of its portfolio. But sales of the HPV vaccine were up just 1% from a year prior, the company reported, and China makes up 60% to 70% of international sales. Merck said its distribution partner in the region, Zhifei, was shipping less to points of vaccination, resulting in higher inventory.
At China’s Center for Disease Control and Prevention, “we have seen some dampening in them engaging in scientific discussions and driving for vaccination,” Davis said. If shipments don’t increase, Merck may ultimately ship less than the number of contracted doses for 2024, Merck warned.
According to Davis, the entire HPV vaccination market in China has been impacted, not just Merck. And last week, Johnson & Johnson said the corruption crackdown had hurt its medical devices sales in the country, including “both procedural volumes and engagement from healthcare professionals.”
Both J&J and Merck tried to strike an uncritical tone, saying they support China’s attempt at maintaining a fair marketplace.
Caroline LitchfieldDespite the slowdown, and the murky guidance on future impact, Merck reiterated its belief that Gardasil sales will reach $11 billion by 2030. CFO Caroline Litchfield said the company has been “measured” in projecting a scenario where shipped doses dip below contracted amounts. Davis noted that outside of China, Merck saw double-digit growth in “all regions” in the second quarter.
The HPV struggles come with the backdrop of tensions between the US and China around biotech and pharma technologies. US lawmakers continue to push legislation that would force American biotech and pharma companies to cut ties with some Chinese contractors. And in the past, China has occasionally engaged in corruption crackdowns that have caught up multinational companies with large operations in the country. A Merck spokesperson did not comment on whether the crackdown was retaliation for US lawmakers’ crackdown on China-based biopharma companies.
Beyond Gardasil:
- Merck didn’t say more about its recently announced RSV antibody data, though R&D chief Dean Li said the company was “very confident” in clesrovimab’s profile protecting against RSV-associated hospitalizations. A spokesperson confirmed to Endpoints News last week that Merck succeeded on that secondary endpoint, compared with placebo.
- Li was tight-lipped about a recently completed Phase 2b trial testing schizophrenia drug MK-8189. He said that if the data were comparable to previous Phase 2a figures, then Merck “would be eager” to see them.
- Davis sang the same tune as Novartis CEO Vas Narasimhan about M&A interest for obesity and weight management assets. He said Merck is not particularly interested in first-generation compounds, focusing instead on second- and third-generation options that include oral delivery, better tolerability or improved muscle retention.
Editor’s note: This story was updated with additional details from a Merck spokesperson regarding non-GAAP EPS revisions.