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Drug Wars Registration Key

Troubled drug giant Merck is to go head-to-head with Glaxo- SmithKline (GSK) in a $7bn (pounds 4bn)-a-year battle to launch a vaccine that will prevent cervical cancer. Merck is pinning its hopes for a revival in its financial fortunes and reputation on Gardasil.

By being first mover, Merck will seek to steal the march on GSK's Cervarix vaccine in terms of marketing, education and, most importantly for the company, revenue generation. Both vaccines are intended to protect against human papilloma virus (HPV), the cause of cervical cancer.

But Merck may not quite have the time advantage the market is factoring in. While GSK will file for European approval for Cervarix in the first quarter of 2006, no date has yet been revealed for its US Federal Drug Administration (FDA) submission. A company spokesman said management would know by the end of the year.

The suspicion is that GSK may be able to fast-track the US process, using Merck's registration package as an educational primer for its own application.

'Once the FDA has had a chance to look at Merck's registration package, the data from Cervarix will be easier to put in context and the agency will allow filing as early as the first half of 2006,' said analyst Sav Neophytou of stockbroker Seymour Pierce.

'It's critical for Merck,' said analyst Robin Gilbert of Numis Securities of the vaccine race. 'GSK is a probably a more stable company at the moment.'

The US firm is facing a revenue hole of $2.5bn a year from the withdrawal of blockbuster painkiller Vioxx, as well as claims of $18bn from the resultant class actions and a series of patent expirations.

Projections for the size of the potential HPV vaccine revenue pie, while varied, are certainly attractive. Cervical cancer kills 1,100 women in the UK each year. Many, such as actress Brooke Shields, survive, but the treatment can often make it impossible for them to have children, although Ms Shields has since had a daughter.

Analysts are forecasting the US market for a cervical cancer vaccine could be worth up to $4bn by 2011. However, GSK executives are even more bullish. In a June presentation, they estimated the size of the potential revenue pool represented by the global HPV vaccine market to be as much as $7bn by 2010.

But even if sale projections prove optimistic, one analyst put things in perspective: 'Once it's over $1bn, it's worth having no matter who you are,' he said. With its US focus, Merck is likely to be stronger in the US market, with GSK taking up a greater share of international sales.

A key forecast assumption is that these cancer vaccines will be placed on the US drug schedule leading to a government- funded vaccination programme for teenage girls.

Given that Merck's Gardasil also provides protection against sexually transmitted genital warts, this may prove a difficult sell to morally minded middle America. Single-purpose Cervarix will face no such issues as it will be marketed as a pure cancer vaccine.

Vioxx hit profits and reputation

When a Texas court found US drug giant Merck guilty over the death of a 59-year-old tri-athlete using Vioxx, shock waves were felt throughout the pharmaceutical industry. As the market digested the ruling, that Merck pay his widow compensation of $253m ($140m), shares slumped and investors predicted a wave of litigation against some of the sector's biggest names over other controversial drugs.

Vioxx was Merck's breakthrough painkiller for arthritis but problems had emerged a year earlier, when a study revealed an increased risk of heart attacks or stroke. The group was eventually forced to pull the blockbuster as a result.

The drug was an important one " like many of its rivals, Merck faces increased competition from generic drugs, and analysts predicted Vioxx's removal would wipe $2.5bn off annual sales. In July, a month before the Texas court ruling, second-quarter results revealed a slump in profits, from $1.8bn in 2004 to $721m, while sales slid 9 per cent to $5.5bn.

Merck now faces around 5,000 lawsuits over Vioxx and, potentially, billions of dollars in liability. Several hundred UK patients are also considering suing.

Copyright 2005 Independent Newspapers UK Limited
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