gs: MRK(U/N): Gardasil approved, in-line with
our view
52-Week Range US$36-26
YTD Price Change 6.79%
Market Cap US$74.2bn
Current Yield 4.5%
Long Term Growth Rate
EPS Growth Estimate 1%
Merck's Gardasil was approved by the FDA today, in-line with expectations. The price
($120/dose, $360 for a course) is roughly in-line with our $300/course price, given some
slippage in obtaining three doses and discounts for government buying. We continue to
forecast six-year adoption rates of 85% by birth cohort women, 50% by birth cohort men
(not approved, but potentially in 2009),and 20% of "young adult catch-up cohort" women
to age 25. Our estimates are unchanged, with US revenues of $1.1 billion by 2010. We
note that social issues must be overcome to achieve our 85% adoption rate. Also, the
reduction in HPV-16/18 disease for women regardless of screening status is ~40%, and
disease by all HPV types which is mathematically lower, which could affect catch-up
cohort adoption (higher estimates must have higher catch-up expectations). We maintain
our Underperform rating.
How are we different from bullish views? We are less enthusiastic about the catch-up
cohort.
* The difference between our view and higher bullish forecasts is unlikely to
come from the female birth cohort. With an 85% adoption rate of the female birth cohort,
we have very strong coverage assumed for a population that will derive maximum benefit
from the vaccine. This is also the group that will most likely be the target of mandatory
vaccination for middle school enrollment, a potentially volatile issue politically, so actual adoption
could be lower and is unlikely to be higher.
* We believe our 20% "catch-up cohort estimate" is a
reasonably optimistic view. First, we note that this group (13-25 years old) is unlikely to have
mandatory vaccination and is healthy, busy, and would need to be focused on long-term health
outcomes to pursue the full course of three vaccinations. The commitment is not insignificant:
three doctors visits in six months and $360 list plus physician fees for the visit/administration (for
those without insurance). Clearly the insured will pay less, but the payors will need to evaluate the
benefit.
* We believe that results by "Any HPV type" are the important ones, and have fallen short
of anticipated 70% relative risk reduction. The positioning of HPV vaccines has been to prevent up
to 100% of the strains that cause 70% of the disease, which should equate to up to 70% of the total
disease by all HPV types. When the trials are examined by all HPV types, the results are still very
important to society, but much lower, especially for women of unknown status. (please see Table
1). Similar "General Population Impact" figures are inside the Gardasil prescribing information.
Table 1: Reductions of CIN 2/3 disease by population and HPV type (three pooled studies,
N=18,150)
HPV-6/11/16/18 Any HPV type MITT-2 (1) 98.5% 37.9% MITT-3 (2) 36.3% 12.2%
1 - MITT-2: At least one injection of the series of three, seronegative/PCR negative to HPV
6/11/16/18 at day 1, had any follow-up visit, and endpoints counted after one month. The "Any
HPV type" is actually an "RMITT-2" population, which also were required to have normal pap test
results at day 1. 2 - MITT-3: At least one injection of the series of three, any PCR/sero+/- status,
had any follow-up visit, and endpoints counted after one month. Source: FDA VRBPAC Briefing
Document.
Risks to our view: We may be making a distinction without a difference. The primary risk to our
view on the HPV vaccine is that the differences that we see in the efficacy rates are not important to
payors and perceived health outcomes, the differences become lost in the high volume debate on a
cancer vaccine. Further, in one trial (only administering HPV-16), the efficacy improved over time,
which could mean that these efficacy rates may change positively. We believe that payor groups are
likely to look at the "all-comer" figures: the presentation at the ACIP in June 29/30 will be
important to inform our view.
I, James Kelly, hereby certify .. |
