Merck KGaA Highlights Mavenclad Advances In Tough Quarter
Executive Summary
Merck KGaA's brace of new products started to garner sales in the third quarter, but the big pharma maintained its 2017 guidance at the lower end of the forecast range in the face of increasing competition to its established pharmaceutical products and to its liquid crystal materials, and currency headwinds.
Sales of Merck KGAA's new short-course oral multiple sclerosis therapy, Mavenclad (cladribine), amounted to €3-4m in the third quarter, and sales of the company's second new product, the anticancer checkpoint inhibitor, Bavencio (avelumab), are expected to have sales in 2017 of around €20m, reported the company's Chief Financial Officer Marcus Kuhnert.
Mavenclad may have taken years to gain regulatory approval – it was rejected by European regulators in 2010 and 2011 – but a positive NICE recommendation was highlighted by Kuhnert, speaking during the company's third-quarter 2017 financial results presentation on Nov. 9.
"Having a NICE recommendation so soon after approval is a pretty unique thing," Kuhnert said. The European Commission granted a marketing authorization for cladribine at the end of Aug. 2017, and NICE responded swiftly, issuing a positive final appraisal determination (FAD) in early November. The rapid recommendation bodes well for further reimbursement and patient access clearances in other European markets. (Also see "Merck KGaA's MS Drug Mavenclad May Defy Doubters" - Scrip, 25 Aug, 2017.)
The UK's National Health Service has entered a commercial deal with the company allowing immediate patient access ahead of final NICE guidance expected in early 2018.
The German-headquartered big pharma is also now close to deciding whether to file Mavenclad for US approval. "We are consulting with the FDA, and we expect to make a decision by the end of the year whether we are going to file in the US," Kuhnert said. (Also see "Merck KGaA Rules Out Major M&A, Says MS Pill Mavenclad Will Be Major Earner" - Scrip, 28 Sep, 2017.)
Declining Sales Base
Merck KGaA is seeing sales of its major marketed pharmaceutical products slowly declining due to competitive pressures, and its earnings in the third quarter were affected by currency headwinds caused by the strength of the euro.
However, overall pharmaceutical sales should pick up in the future as Mavenclad and Bavencio (with which Merck is partnered with Pfizer Inc.) are launched in more countries in Europe.
The MS drug, Rebif (interferon beta-1a) recorded a sales decline of -6.9% in the third quarter to €389m (€436m in the 2016 Q3), and the anticancer Erbitux (cetuximab) had sales of €207m (€219m). The fertility treatment Gonal-f (follitropin alfa) had sales of €169m (€182m).
Merck KGaA's 2017 Q3 Financials
Groups sales: €3.7bn (+0.1%)
Healthcare sales: €1.7bn (+1.2%)
Net income: €645m (+41.1%)
EBITDA pre-exceptionals: €1.1bn (-8.3%)
EPS: €1.48 (€1.05)
Net Financial Debt: €10bn (down by €1 bn)
The consumer health business that Merck has earmarked for sale recorded an 11% sales growth in the quarter. "It is nice when the business is now performing well, but does not change our strategic intent to explore options for the business," Kuhnert commented. He explained the company is prioritizing investment into innovative medicines, and is not able to invest enough in the consumer health business to realize its full business potential.
Merck has been adversely affected by a slowdown in sales of its liquid crystal display materials and an increase in expenses because of product launches and higher R&D expenditure, but Kuhnert said the company will keep its financial forecast for 2017 at the lower end of the ranges previously predicted, that is sales of around €15.3bn and an EBITDA of €4.4bn.
Less Costly Than Others
Cladribine is "less costly than other treatments and needs less frequent dosing and monitoring. It is cost effective compared with all other treatments and can therefore be recommended for rapidly evolving sub-optimally treated relapsing remitting MS," the NICE FAD says. The UK charity, the MS Society, noted it was the 13th drug for multiple sclerosis to be recommended by NICE; 20 years ago, there were no drugs available to treat MS.
NICE recommended the use of Mavenclad in a subgroup of people with highly active relapsing-remitting MS, that is in patients with rapidly evolving severe relapsing-remitting MS that has included at least two relapses in the previous year and at least one T1 gadolinium-enhancing lesions at baseline MRI, in the final appraisal document (FAD).
The product was also recommended for use in patients with highly active relapsing remitting MS that had responded inadequately to treatment with disease-modifying therapies, defined as one relapse in the previous year and MRI evidence of disease activity. The final guidance for the NHS is expected to become available in the coming months.