MedImmune loss in '05 quadruples shortfall from '04

Despite record revenue and relatively recent predictions of profitability, MedImmune Inc. yesterday reported a loss of $16.6 million for 2005 - four times higher than in 2004 - which Maryland's largest biotech company attributed to worse-than-expected sales of its inhaled flu vaccine.

FluMist has never done well in the marketplace despite sporadic shortages of traditional flu vaccines.


Gaithersburg-based MedImmune has repeatedly cautioned investors not to expect FluMist to have much impact on the bottom line until a new version is approved and released.

Still, the company had expected FluMist sales to increase over the previous year, when a dismal 2 million doses were sold. Instead, revenue from FluMist fell 56 percent to $21 million from $48 million in 2004.


In an interview yesterday, Chief Executive Officer David M. Mott blamed the decline on Chiron Corp.'s return to the flu vaccine market and the introduction of GlaxoSmithKline as another competitor. Chiron's flu vaccine production had been shut down because of contamination problems in the previous flu season.

"It's always very hard to predict," Mott said.

MedImmune's total revenue, however, was on target with projections given in the company's 2004 annual report, which predicted an increase of 10 percent. Revenue for 2005 was up 9 percent to $1.2 billion overall.

The increase was led by $1.06 billion in sales of Synagis, the respiratory treatment for newborns that is MedImmune's only breadwinner.

For the fourth quarter, which ended Dec. 31, revenue increased 6 percent to $492 million, but the company posted a loss of $22.4 million because of money spent acquiring new technology. That compares with a profit of $50.5 million during the same quarter of 2004.

During a conference call yesterday morning, Mott said hurricane damage slowed Synagis sales last fall. "Frankly, Katrina and Rita were a big deal for us," Mott said in answer to an analyst's question about why financial forecasts were off. MedImmune typically makes its earliest seasonal sales of Synagis in the Southeastern states, particularly Louisiana and Texas, and, Mott said, "those places were really wiped out."

But the figures didn't immediately reflect the sales damage, and some analysts came away believing the company was claiming that hurricanes Katrina and Rita contributed to the company's loss.

"We just try to provide some color, some context around sales performance," Mott said during the interview. "[Hurricanes are] one of the things we struggled with this year."


MedImmune's stock closed down $1.58 yesterday to $32.90 on the Nasdaq stock market.

In guidance issued Aug. 31, the company had lowered its predicted earnings estimates for the year but still expected profits of as much as 10 cents per share. Yesterday, it reported a loss of 7 cents per share - a 13-cent difference.

Chief Financial Officer Lota S. Zoth said during the call that the decreased FluMist sales accounted for 7 cents of the shortfall, with increased research and development and other expenses accounting for 4 cents, and a loss on investments and impairment charges making up the other 2 cents. "While we had a lot of good things happen in 2005, we still have some work to do," Mott said during the call.

MedImmune has spent the past year beefing up its pediatric sales staff and its pipeline of potential new products. It has spent millions to acquire or license 11 research and development candidates; filed three investigational new drug applications with the U.S. Food and Drug Administration; and cut certain distribution ties with Abbott Laboratories that analysts expect to save the company hundreds of millions of dollars over the next few years.

MedImmune also completed late-stage clinical trials of a new version of FluMist. The older version has had limited appeal because it must be frozen and is approved for use only by healthy people between the ages of 5 and 49 - the group in the least danger from the flu.

The new version, tentatively slugged CAIV-T, is a liquid formulation and has recently been shown in studies to be 55 percent more effective than the traditional flu shot. MedImmune is hoping it will be approved for use by a wider range of people.


The company sold just 1.3 million doses of the original FluMist last year and gave away another 300,000 to school systems and hurricane victims - "a tiny percentage of the demand," said Philip Nadeau, a biotech analyst with S.G. Cowen & Co. LLC, an investment firm based in New York.

Nadeau estimates that the flu vaccine market has a 90-million-dose demand, and MedImmune has yet to make much of a dent.

"It doesn't give us confidence that the next generation of FluMist is going to have an easy time of it," Nadeau said. He added that Synagis, which also has a new version set for release soon if approved, has penetrated much of its market and can't earn much more than it already does.

"They need the next generation of FluMist to be successful to drive growth," Nadeau said of MedImmune.

MedImmune said it expects 2006 earnings to be between 40 cents and 45 cents per share before stock option expenses.