Can Merck's top performers keep new generics, biosims at bay?

Merck & Co. sales took an upswing in the third quarter--a significant one, 5% year-over-year. Just in time, too, as Merck braces for generic competition to its blockbuster cholesterol meds Zetia and Vytorin later this year--and continues to suffer from Remicade biosimilars in Europe.

But this quarter’s boost didn’t come from the sources market watchers might expect, a fact that might actually help as those generics bite into sales.

It wasn’t Keytruda, for instance, the hot immuno-oncology drug. The PD-1 med, which nabbed a new indication in lung cancer Monday, actually came in below expectations by about $20 million.

Nor was it Zepatier, the company’s new hep C therapy, which also came in below analyst estimates.

The diabetes blockbuster Januvia? Also fell short, analyst-wise, and declined year-over-year by 1% amid pressure in the diabetes market--though it still brought in $1.55 billion.

The quarter’s unexpected outperformers were vaccines, in fact, led by Merck’s human papillomavirus vaccine Gardasil. Sales of that shot, which have never met up to expectations, rose by a whopping 38% to $860 million. That’s more than $200 million above estimates. The jab racked up some public-sector purchases, but also benefited from GlaxoSmithKline’s surprise exit from the U.S. market with its HPV rival Cervarix. The company cited increased prices and volume in the U.S. for the quarter as the absence of its rival conferred additional pricing power and a monopoly share of the market.

Then there were its MMR and varicella vaccines, including the Proquad shot that combines all four. That group of shots rose to almost $500 million from $390 million last year, a 27% hike.

Can those vaccines continue to outperform as Zetia and Vytorin’s sales come under attack and Remicade continues to decline? It’s a big gap to fill--$944 million in Q3 sales alone for Zetia and Vytorin. Remicade, for its part, slid by 30% to $311 million, giving up more than $130 million in sales compared with last year.

Gardasil might or might not, what with the monopoly market access and some new efforts by the Centers for Disease Control and Prevention to spur doctors to recommend the shot as a cancer-fighter, rather than STD protection. Then again, a key CDC committee last week recommended a two-dose course, rather than three-dose, which could cut into total sales if new uptake and any price differences don’t make up the difference.

Meanwhile, there’s Keytruda. For the quarter, it may have missed expectations but it still brought in a none-too-shabby $356 million--and with new indications under its belt and more pending at the FDA, Keytruda could soon take flight.

After all, with Keytruda’s first-line lung cancer nod, conferred by the FDA Monday, the Merck med will be all alone in an indication that chief rival Bristol-Myers Squibb won’t be able to match anytime soon. Previously untreated patients are a big group, offering an immediate boost to sales. Oncologists say they’re ready to pick up the first-line banner. And analysts expect the approval to help boost Keytruda in the second-line setting too, even though BMS’ Opdivo currently leads the way in those patients who’ve failed on a prior therapy--and Roche’s Tecentriq just last week won its approval in the field.

And Merck execs still seem upbeat about Zepatier, citing its contribution to the overall 6% hike in pharma sales. This year, Zepatier missed out on 2016 formulary placement, which could change for 2017, Evercore ISI analyst John Scotti pointed out in a Tuesday note.

“The Zepatier launch continues to look slow, despite Merck’s success in some markets,” particularly the Veterans Administration, Scotti noted. “The real test for the HCV franchise will come when 2017 contracts are negotiated, though – recall MRK missed the window for 2016 contracts, and so has launched without the benefit of access to the most lucrative private payer markets.”

Merck raised its full-year guidance on the strong Q3: It’s now expecting $39.7 billion to $40.2 billion for the year, up from $39.1 billion to $40.1 billion.

by Tracy Staton | Oct 25, 2016


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