gs: MRK (U/N): Key takeaways from ACIP
meeting on Gardasil
52-Week Range US$36-26
YTD Price Change 11.88%
Market Cap US$77.8bn
Current Yield 4.3%
Bottom line: We still view the birth cohort for HPV as likely to reach significant
penetration and that the catch-up market is difficult to reach as preventative indications
can meet consumer resistance. The ACIP recommendation of routine vaccination appears
likely when the group meets in June (recommendation not likely before FDA approval).
Indication for use in males remains a question for ACIP, with no direct efficacy data, but
very strong inferences. We believe that the catch-up cohort remains the upside case, but
hard to achieve. We continue to forecast peak sales of $1.5 billion by 2012 and reiterate
our Underperform rating on Merck. Our coverage view is Neutral.
Key takeaways from today:
- No recommendation, as expected. We believe that routine vaccination for a birth cohort
makes sense (11-12 year old females is the current recommendation option brought
forward by the ACIP working group) and will likely be the recommendation in June when
this group meets again. Targeting high risk groups not possible, so we do not expect that
to be a focus. Recommendation for 13-26, or some limited age range of young adult
catch-up cohort is also likely. The key to product growth will be the extent to which this translates
into requirements to attend middle school, high school or college. This decision will be made state
by state after the ACIP recommendation.
- We find the catch-up cohorts offer the most upside surprise, but will be the most difficult to reach.
We maintain that large-scale adoption in the US vaccine market is primarily driven by the threat of
access, rather than individual health needs. We compare to today's NY Times article on low flu
vaccination rates in healthcare workers (less than 40%), in a group that can clearly understand the
risk and has ready access to care. A persistent problem in the preventative care market is the
individuals optimistic assessment of the odds, and that will probably be a problem here as well.
- Data on cost-benefit has an important confounding issue: most cost-benefit models assume that
screening and vaccination are independent variables, but they may not be, as current cervical cancer
trends have meaningful regional differences with lack of screening the likely culprit. This confounds
economic considerations, influencing costs and mortality rates in the models.
- Males are not in the ACIP assumptions because there are no direct efficacy data, in their view.
Cost-benefit models have decreasing benefits in cervical disease from male vaccination with the
extent of female coverage. Future development by Merck focuses on males to 26 yrs old at the time.
- Does MRK have efficacy in males or not? MRK does not have direct efficacy in males, but argues
that 100% coverage in genital warts for women, high seroconversion, similar skin types should
heavily infer efficacy in males. GSK argues that this inference did not work in HSV. MRK also
fights for the value of herd immunity in male vaccination.
- The reduction in all-comers HPV infection is still considerable (approximately 30-50%+) and this
benefit seems to be INCREASING with time.
- HPV is not likely to add much in previously infected:
* seronegative (antibodies), PCR negative
(viral DNA): big benefit, as shown in large trials
* seropositive, PCR negative: big benefit for the
individual, but the recurrence rate is very low here, so the system-wide benefit is smaller
*seronegative, PCR positive: 28% reduction (trend, not statistically significant) in CIN 2/3
progression
* seropositive, PCR positive: No benefit on trend analysis
- Other challenges in seeking indications in the mid-adult cohorts include: 1) the fact that few
reacquire the same HPV type when cleared, 2) the relatively rapid incubation to CIN disease, 3) the
decreasing prevalence of High Risk HPV after age 30, 4) CIN 2 and 3 cells express very little L1,
the target of both vaccines, but could decrease the spread of prevalent infection due to
auto-inoculation.
ACIP recommends Rotateq for routine vaccination Later at this same meeting, Rotateq received
recommendation without restrictions for routine vaccination. This is a good win for Merck, but does
not change our view. US Rotateq revenues would achieve $750 mm with 100% coverage. We are
using $500 mm peak in the US, $625 mm globally, to account for Merck addressing price-sensitive
portions of the market and less-than-universal coverage.
I, James Kelly, hereby certify that all of |
