Merck's Vaccine Victory Not Yet Complete

Matter expects Gardasil "to be a significant contributor to Merck's future growth" and predicts $3 billion in sales in 2009. Matter has an outperform rating. She doesn't own shares, and her firm doesn't have an investment-banking relationship.

Gardasil's revenue will come not only from the U.S. but from foreign markets. The vaccine has been approved in Mexico, and applications are under review by regulators in large markets such as the European Union and Brazil. Merck also is working with health officials and with the Gates Foundation to bring Gardasil to developing countries where the rates of HPV and cervical cancer are much higher.

The CDC estimates 6.2 million Americans become infected with genital HPV each year. An average of 9,710 cases of cervical cancer and 3,700 cancer deaths are linked to the virus annually. Worldwide, the CDC adds, there are 470,000 new cases and 233,000 deaths from cervical cancer each year.

John Boris of Bear Stearns says the FDA's strong support plus Merck's higher-than-expected pricing prompted him to raise his Gardasil sales estimates. For 2009, he predicts $2.4 billion, up from a previous estimate of $2 billion and well ahead of what he says was the Wall Street consensus of $1.5 billion.

Boris says GlaxoSmithKline (GSK Quote) is probably 18 months behind Merck in the U.S. market for a competing vaccine called Cervarix. GlaxoSmithKline plans to seek FDA approval by year end. Gardasil already has one advantage, because it's approved for preventing most HPV-caused genital warts. Cervarix, meanwhile, isn't designed for genital warts.

Boris has a peer-perform rating on Merck. He doesn't own shares, but his firm has had a non-investment-banking relationship with the company.

More Than Science

Because Gardasil doesn't work on people who are infected with HPV, Merck and public health experts say early vaccinations are important.

One federal survey shows that 25% of males and females had sex by age 15, a rate that rises to 70% for females at age 18 and 70% for males at age 19. "Clearly, these data point to a need for vaccination in early adolescence, before sexual initiation and multiple sex partners," said Dr. Nicole Liddon of the CDC's division of sexually transmitted disease prevention, according to the minutes of a February ACIP meeting.