Yesterday's Briefing coverage on MEDI...
16:25 ET ****** 18-Nov-03
MedImmune (MEDI) 24.41 -1.17: By all accounts, MedImmune (MEDI) grossly overestimated market demand for its novel flu vaccine drug. FluMist was supposed to revolutionize the flu vaccine market, its intra-nasally digested agent offering an appealing alternative to those people with an aversion to needles. The drug's road to approval and subsequent launch, however, dashed those dreams as physicians and users alike were skeptical of FluMist's applicability and price points.
The nasal spray product got off to a rocky start when the FDA granted approval in June, much later than the company and analysts had expected. The delay meant FluMist missed the annual flu vaccine preordering and contracting season, and lost potential customers to its injectable vaccine rival. The late approval also set back the advertising and promotional campaign, and contributed to the slow stocking rate at pharmacies. Management admitted in October that it would not reach its target of 6,000-7,000 pharmacies, having only placed FluMist at 1,500 pharmacies.
MedImmune's distribution efforts were delivered another blow when Wal-Mart (WMT) decided it would not offer FluMist this year. Wal-Mart cited legal concerns over its pharmacists' abilities to administer the product - without a national flu vaccine program in place, most of the company's pharmacists lacked the level of required training. By MedImmune's own admission, the retail giant would have been its largest single customer, with the potential to purchase 500,000 doses for sale in over 1,000 high volume locations.
Thus, the writing was largely on the wall when MedImmune slashed both its Q4 (Dec) and FY03 sales and EPS forecasts today. Q4 revenues were reduced by approximately 13% to $385-445 mln (consensus of $478.7 mln) and net income came down by 31% to $0.28-0.36 (consensus of $0.46) per share, while FY03 revenues were reduced by approximately 5% to $1.04-1.1 bln (consensus of $1.13 bln) and net income came down by 16% to $0.72-0.80 (consensus of $0.90) per share.
Aside from its weak sales channels, Flumist's slow uptake rates lie with its rich price, reimbursement problems, and lack of regard with doctors. Physician response has been tepid to the drug, with several citing its difficult administration and restrictive guidelines that limit its use to ages 5-49. A low reimbursement rate has also hurt use with several insurance companies not convinced of its worth. Finally, pharmacies have marked up FluMist as high as $100/dose, and that fact has highlighted the economic benefit of the injectable flu vaccine - coming in at about $10 a pop.
Management said on its conference call that it is considering a $25 price rebate to drive revenues; however, Briefing.com doubts that this move will significantly improve FluMist's sales picture. MedImmune did not provide guidance beyond 2003, and we expect that analyst estimates for 2004 will come down until the company provides greater clarity on the FluMist situation.
With a major part of the MedImmune story - a new flagship product to join its Synagis drug - diminished, we would advise long-term investors to reduce exposure to the stock. The shares' weakened technical position - trading below their 50 and 200-day simple moving averages - and the company's uncertain sales outlook do not augur well for a reversal of the current bearish trend. -- Heather Smith, Briefing.com |
