Merck's Gardasil Sales Decline in China

By Michael Erman and Leroy Leo
(Reuters) – Merck & Co announced on Thursday that weak sales of Gardasil in China are likely to persist into 2025. The vaccine's distributor is reducing inventories amid low demand, leading to a 3% drop in the U.S. drugmaker's shares.

Gardasil's Sales Performance

Gardasil, which helps prevent cancers linked to the human papillomavirus, has traditionally been a key growth driver for Merck alongside the successful cancer treatment, Keytruda. Notably, much of Merck's international growth has been attributed to sales in China.

In the latest quarterly results, Gardasil's sales decreased by 11% to $2.31 billion, falling short of the average analyst estimate of $2.46 billion, according to LSEG data.

Factors Affecting Demand

Chief Executive Rob Davis discussed Gardasil's challenges in China, attributing the decline to demand issues driven by economic factors, concerns about anti-corruption affecting promotional activities, and ongoing inventory adjustments in the market. "Ultimately, what we have to do is drive demand," Davis emphasized.

Beijing's campaign targeting physician bribery has disrupted business operations and affected hospital agreements with international pharmaceutical companies.

Merck anticipates that Gardasil shipments to their partner, Zhifei, in China will be consistent with the third quarter. The company faced similar issues with Gardasil in the previous quarter.

Davis noted that while the inventory of Gardasil at vaccination points has been decreasing, the inventory levels at Zhifei remain higher than usual. He forecasts that these issues will not be resolved in the immediate future, likely extending through 2025.

Future Opportunities

Despite current challenges, Davis sees significant opportunity with an estimated 120 million females and 200 million males in China who could benefit from Gardasil. "We have to activate that demand to ensure we can drive that business," he stated.

Merck's overall sales in China fell 40%, from $1.67 billion last year to $996 million in the third quarter.

Additionally, Merck is not alone; GSK reported that sales of its shingles vaccine, Shingrix, also suffered in China's market.

Keytruda Remains Strong

On a brighter note, Merck's third-quarter earnings of $1.57 per share exceeded analyst expectations by 7 cents, largely because of another successful quarter for Keytruda, which is approved for multiple cancers. Sales of Keytruda rose 17% to $7.43 billion, surpassing Wall Street estimates of $7.20 billion.

Overall, Merck's sales reached $16.66 billion, beating analyst forecasts of $16.45 billion.