Looking for evidence that the media loves negative stories more than positive ones? Take a look at how pharmaceutical company Merck
For the past year and a half, the media has reported any little piece of negativity related to the company's failed Vioxx drug, yet few people reading the news know much about all the positive contributions that the company has made in health care.
Last Friday, Merck made another positive contribution in the health-care arena when it announced the EU has approved the company's Gardasil vaccine for use in preventing some forms of human papillomavirus (HPV), which sometimes leads to cervical cancer in women.
It won't take long for Gardasil to become a multibillion-dollar drug, since cervical cancer is the second most deadly type of cancer for young women and, according to Merck, almost 34,000 women are diagnosed with cervical cancer every year in Europe.
Gardasil has already been approved in the U.S. since June, and in the short time it has been on the market, the drug achieved $10 million in sales in the second quarter. With $3 billion cholesterol drug Zocor off patent since June, and osteoporosis drug Fosamax already facing generic competition, Merck needs revenue-growth drivers like Gardasil to replace the lost revenue from those drugs.
Unfortunately for Merck, it won't be the only pharmaceutical company with an HPV vaccine on the market for long. GlaxoSmithKline
Another negative related to Gardasil is that Merck will be paying royalties to various institutions on the drug in the range of 24% to 26% of sales. This will have a fairly large deleterious effect on the margins that the company earns on the drug. As Gardasil sales rise, this will reduce the company's gross margins on overall sales, which stood at 75% in the most recent quarter.
For Merck, Gardasil represents more than just a drug that will bring the company increased revenues. With at least 14,200 more Vioxx cases to go, investors with shares of Merck can expect many more negative new stories reported in the gloomy media. Hopefully, with Gardasil on the market, Merck will at least get a little more press for the company's positive contributions as well.
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