Merck on Tuesday missed earnings estimates, lowered its guidance for this year’s earnings, and withdrew a target for sales of its HPV vaccine, Gardasil, to reach $11 billion by 2030. The result: a 10% haircut for Merck shares.
But while the changed guidance represents part of the explanation for the dip in Merck’s shares, which have been drifting downward over the past six months over worries about Gardasil, the reaction also seems due to two questions that have nothing to do with the vaccine: How much should investors expect sales of Keytruda, the best-selling drug in the world, to decline in the coming years? And can they trust Merck’s guidance on that decline?
The problems with Gardasil relate entirely to sales of the vaccine in China, where Merck had been forecasting robust growth but where results have recently been disappointing. The company said its partner in China, Chongqing Zhifei Biological Products, has stocked up more Gardasil than it can sell. As a result, Merck will stop shipping Gardasil to Zhifei at least until the middle of the year.
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