Merck's Gardasil blockbuster sales prompt $1B plant expansion

Merck & Co. has been experiencing a surging wave of Gardasil sales that it expects to ride for some time yet. To maintain the momentum, the drugmaker says it will spend $1 billion to expand production.

The drugmaker is adding 120,000 square feet to its 1.1 million-square-foot site in Elkton, Virginia, to increase production of its human papillomavirus (HPV) vaccines. The project is expected to take three years and add about 100 jobs.

"In recent years, HPV vaccine recommendations and goals have changed and countries around the world have enacted new or expanded vaccination programs, which have created an unprecedented increase in global demand for vaccines," spokeswoman Pam Eisele told FiercePharma in an email today. "We are significantly ramping up our production capacity, and as we previously disclosed investing $16 billion in capital projects over the next five years, with a sizable portion dedicated to vaccine expansion. "

The news comes shortly after the drugmaker reported that sales of its Gardasil HPV vaccines soared 31% to $838 million in the first quarter, powered to a large degree by an ongoing commercial launch in China. Worldwide sales for 2018 topped $3.15 billion, far outpacing the previous year sales of $2.31 billion—numbers that executives called "unprecedented."

The announcement provides some balm to the pain from Merck’s announcement last week that it will restructure its global manufacturing operations over the next five years, closing or selling an undisclosed number of plants and shedding an undetermined number of jobs. The Kenilworth, New Jersey-based drugmaker said the revamping will cost it between $800 million and $1.2 billion when it is complete in 2023.

About 55% of the costs are expected to go to severance and separation and 45% to "accelerated depreciation of facilities to be closed or divested," the company said in public filing. Much of the downsizing will happen this year, however, with Merck saying it expects to take about $500 million in charges for the effort this year, including $187 million that were tallied in the first quarter.

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