Posted on 11/11/2006 7:12:07 AM PST by BenLurkin
WEST POINT, Pa. (AP) -- There's a not-so-secret ingredient used to make Merck & Co.'s new vaccine to prevent cervical cancer: common baker's yeast. But there's nothing simple about the manufacture and marketing of Gardasil, the first cervical-cancer vaccine approved by regulators. The Whitehouse Station, N.J., pharmaceutical giant expects Gardasil to become one of its best-selling products, and the company is making big changes to ensure its launch is successful.
Adding to the challenge is that Gardasil is one of three new vaccines Merck has launched this year. The others are Rotateq, designed to prevent rotavirus in children, and Zostavax for the prevention of shingles in the elderly. This represents a change of pace for Merck because the company previously averaged three or four new vaccines per decade.
Vaccines are only a small part of Merck's business, representing 5 percent of total sales in 2005, but are growing rapidly with sales up 64 percent for the third quarter. This growth is important because generic competition for its prescription drugs has hurt the company's overall growth.
However, managing the rapidly successive launches this year has forced Merck to juggle its sales force and make its manufacturing processes more efficient at a time when the company is in cost-cutting mode.
The changes can be seen at Merck's biggest location, a sprawling campus outside Philadelphia in West Point, Pa., where about 9,000 employees perform research, make vaccines and handle other tasks. In a plant that Merck expanded a few years ago while Gardasil was still being tested in clinical trials, three shifts of employees now work around the clock producing the vaccine. So far, at least 750,000 doses have been shipped since Gardasil's June launch, contributing to sales of more than $80 million so far.
"We are prepared to run this facility all out" to meet demand for the vaccine, said Mark Michalik, Merck associate director of biotechnology manufacturing.
In a tour of the Gardasil plant Monday, Michalik and colleagues showed off various steps in the making of the vaccine. The yeast is fermented in large metal tanks to generate proteins needed for the vaccine. The yeast cells are genetically engineered, with small sections of DNA inserted into them to produce "virus-like particles."
The batch is stored at minus-70 degrees Celsius to stabilize it, then sent through an elaborate maze of pipes, pumps, tanks and filters spanning several large rooms. The virus-like particles are inactive proteins derived from strains of the human papillomavirus, or HPV, the virus that causes cervical cancer. The particles are purified and assembled so that the finished dose will induce an immune response against strains of HPV that are responsible for about 70 percent of cervical-cancer cases.
Much of the manufacturing process is automated. Workers wear hair coverings, goggles and plastic suits, to prevent contamination. Air quality is monitored closely, and no worker comes into actual contact with the vaccine.
It's not the easiest time to be a Merck employee. A year ago, the company said it would eliminate about 11 percent of its worldwide work force by the end of 2008 to cut costs in a difficult period. One challenge was the June expiration of the U.S. patent for Merck's cholesterol-lowering pill, Zocor, which was its best-selling product. Generic competition has dramatically reduced Zocor sales.
Meanwhile, Merck is battling its way through costly litigation for its Vioxx painkiller, which it pulled from the market in 2004 after a study showed it elevated risk of heart attacks. Also, this week Merck disclosed that tax authorities in the United States and Canada are seeking an additional $5.58 billion in taxes, which Merck is fighting.
Despite these challenges, Merck shares are up about 35 percent year-to-date, trading recently around $43 a share, buoyed by changes in company management, cost-cutting, its pipeline of new products and the preservation of its stock dividend.
Those involved in launching the new vaccines have had to make some adjustments amid the cost cuts.
"There are no plans to slow down manufacturing for vaccines," said Richard Haupt, executive medical director with Merck's vaccines unit. "We're trying to make sure we're more efficient."
On the marketing side, Merck hasn't had to go on a huge hiring spree for sales representatives to promote the new vaccines. Instead, the company has shifted about 1,500 salespeople into vaccines who previously promoted other products such as Zocor. Consumer marketing has included television ads with the theme "Tell Someone," which provide information about HPV.
Merck will try to boost Gardasil sales by expanding the target population for the vaccine. The Food & Drug Administration approved Gardasil for vaccination of females 9 to 26 years old, and a Centers for Disease Control & Prevention panel recommended routine vaccination for girls 11 and 12 years old. Merck may also seek regulatory approval for marketing Gardasil to women older than 26, and in males. HPV can cause genital warts and rare cancers in males.
Gardasil, which sells for $360 for a 3-dose regimen, is now covered by most managed-care plans for females in the approved age range, according to Margaret McGlynn, president of Merck Vaccines.
Some state legislatures are considering whether to require Gardasil for girls entering middle school. McGlynn expects such laws to include opt-out provisions, which Merck supports. She doesn't see opt-outs presenting any significant roadblocks for Gardasil sales. "We do not believe that we need to rely on state laws to have a positive uptake of Gardasil," McGlynn said.
Reimbursement challenges for vaccines do loom, however. Most childhood vaccines are covered by either private or public insurance programs. But coverage for vaccines for older people can be spottier, which could be a problem as Merck and its rivals pursue more such vaccines.
The launch of new products demonstrates Merck's "re-committment" to vaccines, McGlynn said. She cited a third-party projection that the vaccine market will grow to $18 billion in 2009 from $8 billion in 2004, and said Merck expects to contribute to that growth.
Merck's 2005 sales of vaccines and biologicals were $1.1 billion, up 6 percent from 2004. But vaccines are expected to generate a bigger chunk of Merck sales in the future. For Gardasil alone, Deutsche Bank analyst Barbara Ryan predicts 2009 sales of more than $1.5 billion.
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