The Outlook For Merck’s Anti-Infectives Drug Business

by Trefis Team
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Anti-infective drugs are important to Merck (NYSE:MRK), constituting nearly 35% of its value, according to our estimates. Most of this value can be attributed to four drugs – Gardasil, Zepatier, Isentress and Proquad/MMR II/Varivax – with the rest coming from the phase 3 pipeline and other drugs. The company has 14 key drugs in its anti-infectives portfolio. We expect that Merck’s anti-infectives franchise will remain strong throughout our forecast period, primarily led by growth in Gardasil and Zepatier.

While Isentress and Proquad/MMR II/Varivax sales may top out soon, Gardasil and Zepatier will likely see a ramp up in sales. Gardasil sales have increased from a little under $1 billion in 2010 to over $2.1 billion in 2016, and we expect the drug’s sales to peak at around $2.8 billion in 2019. Zepatier, which is a combination therapy for Hepatitis C, was approved by the FDA in early 2016 for the treatment of genotypes 1 and 4 of the disease. This puts it in direct competition with Harvoni, which is an oral interferon and ribavarin free drug developed by Gilead Sciences. Zepatier saw sales of $555 million in the first year of its launch and we estimate it could garner nearly $2.6 billion in annual sales at its peak.

Beyond these two drugs, Merck has a solid pipeline, with five programs in its phase 3 anti-infectives pipeline, and one of them is under regulatory review. New compounds in the pipeline include Relebactum, and Doravirine, among others. We expect the combined annual peak sales (attributable to Merck) of new compounds to reach as high as $6-7 billion.

The chart below shows the historical and expected revenue trajectory of Merck’s anti-infectives portfolio.

While the overall anti-infectives portfolio looks solid for Merck, with estimated sales of close to $14 billion by the end of our forecast period in 2024, there are certain risks to our estimates. Some of Merck’s anti-infectives drugs, including Cancidas,  Primaxin, Cubicin, Ivanz and Zostavax, have already lost patent exclusivity, and we expect their sales to continue to decline going forward. Also, two more drugs will lose their patent exclusivity in 2019. Furthermore, some of Merck’s anti infective drugs, including Isentress, are facing competitive pressure, which is impacting sales growth.

We currently have a price estimate of $65 for Merck, which is more than 15% ahead of the current market price.

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