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Md.-based MedImmune considers sale

The Baltimore Sun

MedImmune Inc.'s board of directors said yesterday that it will consider selling the state's flagship biotechnology company to what would likely be a non-Maryland pharmaceutical buyer after facing months of pressure from dissatisfied shareholders to pursue such a move.

The announcement, which contrasts with a commitment to go it alone that the board made two months ago, sent the Gaithersburg-based company's stock soaring and raised questions from Maryland's business community.

MedImmune, which has about 1,700 employees in the state, said it had received inquiries from potential buyers and will consider whether it makes sense to remain independent or to pursue a sale.

Some shareholders think the company can command a premium, but analysts warned that a sale might not materialize given other developments in the industry.

The state has relied on MedImmune's success as one of the world's top 10 biotechnology companies based on sales to bolster local claims to leadership in the coveted industry. Maryland entrepreneurs also look to MedImmune's venture-capital subsidiary to help fund new businesses.

Best known as the maker of the nasally inhaled flu vaccine Flu- Mist and Synagis, a blockbuster respiratory treatment for babies, MedImmune is one of the few biotechs with annual sales of more than $1 billion.

Its representatives say it has more drugs in development - something big pharmaceutical companies sorely need - than any other in the industry.

That, combined with flat 2006 sales, drug-development setbacks and several shareholder surprises have increased speculation this year that MedImmune was a takeover target.

MedImmune shares closed up $5.79 yesterday, or 15 percent, at $43.63 on the Nasdaq stock market, where it was the second-most active stock, with 60 million shares traded, 12 times the usual volume.

At the state's Department of Business and Economic Development yesterday, officials were reluctant to comment on a sale that might never happen. But spokesman David Tillman said if one occurs, "DBED would work aggressively with a new parent company to keep that company and its thousands of employees in Maryland."

Who might buy MedImmune is unclear, but analysts and Matrix Asset Advisors Inc., an institutional shareholder, speculate that three pharmaceutical companies, New Jersey-based Wyeth and Merck, and Switzerland-based Novartis, are potential suitors.

Representatives of those companies said they do not comment on rumors. MedImmune has said only that it has received interest from "major pharmaceutical companies." No such companies have headquarters in Maryland.

MedImmune, which is valued at about $10 billion based on its stock price, has hired the investment banker Goldman, Sachs & Co. and the law firm Dewey Ballantine to evaluate the company's alternatives.

"There can be no assurance that an acquisition of the company will occur," the company said in a statement.

In February, billionaire investor Carl C. Icahn, who has a long history of buying big stakes in supposedly undervalued companies and pressuring their boards to sell, bought 2.8 million, or 1.2 percent, of MedImmune's shares. Icahn has not commented on his investment.

Matrix Asset Advisors, which owns about 1.7 million MedImmune shares, has called repeatedly for the 18-year-old company to be sold.

"There is compelling wisdom in maximizing shareholder value by selling the company now, and if the company has been approached by potential purchasers, it should pursue such overtures," Matrix President David A. Katz wrote in his most recent letter, which was sent to MedImmune's board this month. He has sent at least three other letters to the board urging a sale.

In an interview yesterday, Katz said he expected a selling price of $45 to $50 a share and an announcement in the next four or five weeks.

"We're highly confident that [Goldman Sachs] will garner a very fair price for the company," Katz said. "There are multiple bidders interested and finite assets within the biotech group of company's [MedImmune's] size. It should be a very healthy sale process."

An analyst at Jefferies & Co. estimated a selling price of about $43 a share yesterday, but several others weren't so sure.

"MedImmune offers a mixed bag to potential acquirers. While the company has a blockbuster franchise in Synagis, the franchise is mature and we project that MedImmune will generate average annual revenue growth of only 11 percent through 2009," Joel Sendek of Lazard Capital Markets wrote in a report issued yesterday morning.

"The flu vaccine franchise is not profitable and the pipeline, though promising, is in early stage development, at least three years from generating revenue. Any takeover premium ... is likely to be modest even if there are multiple bids."

Analyst Phil Nadeau of Cowen and Co. said that just because a company says it could be acquired doesn't mean it will be. In the past 18 months, several biotechs have considered selling themselves - including Millenium Pharmaceuticals Inc. and Sepracor Inc. in Massachusetts, and New York's Imclone Systems Inc. - but never reached a deal.

Yesterday's announcement by the MedImmune board "in our opinion, increases the chances that [MedImmune] will be sold only modestly," Nadeau wrote in a report.

Though MedImmune has recently changed its executives' employment contracts, which would boost the payments made to them if the company was sold, the board and Chief Executive Officer David M. Mott have said they weren't looking for the company to be acquired.

As recently as February, the board reviewed operations and concluded that the "best way for MedImmune to maximize value for its shareholders is to aggressively implement its business plan."

In the past two months, board members have reconsidered.

"Indications of interest by major pharmaceutical companies, coupled with recent expressions by certain stockholders of dissatisfaction with the company's short-term stock price performance, have led the board to authorize management to gather information regarding possible strategic interest in acquiring the company," the company said in a statement that was released before financial markets opened yesterday.

MedImmune spokeswoman Jamie P. Lacey said the company was providing no clarification beyond its statements.

Among Maryland business officials, some on the glass-half-full side said a big buyer might bring a much-needed pharmaceutical presence to Maryland. On the glass-half-empty side, some worried that the state could lose a valuable business.

MedImmune has its headquarters and several manufacturing plants in Maryland, and it has big expansion plans in Frederick.

Its subsidiary MedImmune Ventures invests in early-stage biotech companies, particularly those working in areas of infectious and inflammatory diseases, and cancer.

In Maryland, vaccine-developer Iomai Corp. and drugmaker Vanda Pharmaceuticals Inc. - both of which went public last year - received seed money from MedImmune Ventures.

"Clearly, MedImmune is sort of our shining example of biotechnology in Maryland. It would be great to see MedImmune grow as an independent company and acquire other companies. They've already done that to some extent," said Alex Euler, a spokesman for MdBio, the trade association representing Maryland biotechnology companies.

"If they are ultimately acquired by one of the big pharma companies, having a big name in the area, I think, could also be beneficial."

tricia.bishop@baltsun.com

MedImmune at a glance

Founded:

1988

Headquarters:

Gaithersburg

Chief executive:

David M. Mott

2006 revenue:

$1.28 billion

2006 profit:

$75 million

Employees:

2,500 worldwide; 1,700 in Maryland

Venture capital subsidiary:

MedImmune Ventures Inc., which invests an average of $7 million in young biotech companies.

Key products:

Synagis, an infant respiratory treatment, and FluMist, a nasally inhaled flu vaccine. New versions of both products are nearing commercialization.

[Tricia Bishop]

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