GlaxoSmithKline Agrees to Virus Vaccine Deal With Merck & Co.

Two drug majors, the UK's GlaxoSmithKline (GSK) and US-based Merck & Co., have agreed a royalties deal on a vaccine for the human papillomavirus, the leading cause of cervical cancer. GSK and Merck have thus resolved their related intellectual property issues, with GSK to receive undisclosed royalties on Merck's sales of the prospective vaccine.

Both companies had been conducting clinical trials on the vaccine, although GSK's development work is understood to be some 18 months behind Merck's. However, GSK's royalties will arise from the company's licensing of the compound from a US pharmaceuticals firm, MedImmune, in 1997. The British drugmaker is also likely to pay a portion of royalty earnings to CSL, an Australian drug producer involved in the early stages of the vaccine's development. Analysts expect royalties to be between 5 percent and 10 percent of the vaccine's sales, which have been forecast to reach well over US$1bn annually.

It is now considered likely that Merck will file for its version of the vaccine with the US FDA in the second quarter of this year, while GSK is expected to seek a European approval in 2006, with a US submission likely in early 2007. Although Merck is expected to obtain its approval first, GSK is confident that there will be room on the market for two vaccines, in view of its large potential. GSK's management estimates the product's eventual users at some 400mn women in developed markets. However, some observers caution that, to achieve such spectacular sales, the two companies will first have to convince health authorities of the need for a mass inoculation programme.