Gardasil misses targets, drags CSL down

July 22, 2008

CSL, which earns royalties from sales of Merck & Co.'s Gardasil vaccine for cervical cancer, had its steepest drop in five years in Australian trading after Merck's sales of the shot missed estimates.

The shares slumped $3.40, or 9.3%, to $33.30, their biggest decline since May 2003. The Melbourne-based drugmaker was the biggest drag on Australia's benchmark S&P/ASX 200 Index.

CSL slumped on concern earnings in the year ending June 2009 will suffer after Merck booked $US326 million ($334 million) from the vaccine in the second-quarter, 9% less than in the same period last year and less than the $US350 million expected by analysts.

''What we saw today would suggest that 2009 is going to be softer than our numbers,'' said Dan Hurren, a health-care analyst at USAG, referring to his estimates.

Merck's result shows CSL met its full-year forecast of $161 million in Gardasil royalties in the business year just ended, Hurren said. Investors may be concerned that the vaccine's sales are slowing in the US, where less than 20% of girls and women aged nine to 26 have received the shot, he said.

Global sales of Gardasil in the second quarter, including those in Europe through its joint venture with Sanofi-Aventis SA, increased 28% to $US560 million, Merck said in its earnings release yesterday. The Whitehouse Station, New Jersey-based drugmaker expects the shot to bring in $US1.4 billion to $1.6 billion in the year ending December 2008.

The shots prevent infection from the sexually transmitted human papillomavirus virus, or HPV, the main cause of cervical cancer, that can also cause head and neck tumors in both sexes.

The vaccine, which uses technology developed by University of Queensland scientists Ian Frazer and Jian Zhou, is approved in 100 countries, Merck said in March. Cervarix, a new shot made by GlaxoSmithKline Plc, has been released in 27 markets and isn't yet available in the US

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