The Little Label Expansion That Couldn't

On Friday, the Food and Drug Administration expanded the label of Merck's (NYSE: MRK) human papilloma virus vaccine, Gardasil, to include the fact that it protects against some vaginal and vulvar cancers. I sure hope Merck wasn't counting on this label expansion to expand the sales of the vaccine, because I just don't see how the addition will increase its usage very much.

Label expansions are useful to expand the population that a drug is used for. It might increase the drug's usage from a second-line treatment to a front-line treatment, as CV Therapeutics (Nasdaq: CVTX) is trying to do with its angina treatment, Renexa. Or it might expand the drug's usage into a new population, as Onyx Pharmaceuticals (Nasdaq: ONXX) has done by expanding Nexavar from just kidney cancer into liver cancer; sales of Nexavar more than doubled year over year last quarter thanks to the label expansion.

But are there that many parents or young woman who would have shunned the vaccine because it only protected against cervical cancer, but will now get the vaccine because it protects against three cancers?

The label expansion could help Merck in a competition with GlaxoSmithKline's (NYSE: GSK) Cervarix if it gains FDA approval with just a cervical cancer indication. Protecting against vaginal and vulvar cancers, which account for about 5,000 cancers per year in the U.S., on top of the 10,000 cervical U.S. cancers per year, could help Merck's sales reps sway doctors in Gardasil's favor.

What could expand Gardasil's usage is if Merck gets label expansions for older women or for men. Expansion into older women, for which Merck received an FDA set back earlier this year, might be a tough sell for insurance companies. But getting it approved for use in young men and boys could be possible, since the vaccine also prevents against genital warts, which affect both sexes.

Merck is expecting to sell between $1.4 billion to $1.6 billion worth of Gardasil this year, so we're not talking small potatoes. However, that is down from bigger potato projections of $1.9 to $2.1 billion earlier this year. Unfortunately, this label expansion isn't likely to contribute much to boost sales back up, in my opinion.