Healthy Profits at MedImmune

First-quarter earnings should top estimates.
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Updated from 1:21 p.m. EDT

MedImmune

(MEDI)

said its first-quarter earnings should come in well above the Wall Street consensus estimate, owing in part to strong sales of its top product.

The Gaithersburg, Md.-based drugmaker predicted earnings per share would be 62 cents to 67 cents, excluding share-based compensation. Analysts polled by Thomson First Call had forecast 50 cents before items.

The company earned 23 cents for the first quarter of 2006. Formal results are due May 3.

MedImmune attributed the big gain for the three months ended March 31 to a revenue increase of 11% to 12% and substantial improvement in its net margin.

The rise in revenue translates to a range of $553 million to $558 million, or slightly above the analyst estimate of $547 million.

The company expects a year-over-year sales gain of 9% to 10% for Synagis, its biggest drug. Synagis prevents the dangerous lung disease respiratory syncytial virus in infants and young children. Last year, the drug's sales of $1.1 billion accounted for 86% of MedImmune's corporate revenue.

In early trading, the stock rose as high as $37.38, a 52-week high. Recently, shares were up 43 cents to $36.81.

MedImmune's stock has run up in the last four weeks, but at the same time analysts have complained about the company's management, existing drugs and prospects for new offerings. Three months ago, there were 12 buy recommendations, nine neutral ratings and one sell rating. Ahead of the earnings forecast, there were eight buys, 13 holds and one sell.

Some analysts had been predicting a downbeat start to the year due to

a disappointing fourth quarter of 2006, caused by what they said were weaker-than-expected sales of Synagis. The drug's sales last year were the same as in 2005.

At least three analysts cut their ratings, and speculated that the recent stock rise was due more to takeover speculation than to improved fundamentals. MedImmune is a periodic subject of takeover talk on Wall Street, and the latest rumored suitor is

Wyeth

(WYE)

.

"We cannot recommend MedImmune shares solely on the hope that Wyeth or some other pharmaceutical company would surface to acquire" the company, says Hamed Khorsand of BWS Financial in an April 2 research note in which he cut his rating to hold from buy.

On Monday, he reaffirmed his hold rating, saying investors "are likely to chase MedImmune" because of the first-quarter earnings projection. However, once these numbers are published, "there would not be much reason" to own the shares during the second and third quarters.

MedImmune records most of its sales and all of its profit during the first and fourth quarters. In fact, it always reports a loss during the second and third quarters due to the seasonal use of Synagis and another of its products, FluMist, a nasal-spray flu vaccine. Its other drug is Ethyol, which treats the side effects of cancer therapies.

MedImmune receives milestone payments and royalty revenue from licensing vaccine technology for preventing human papillomavirus, a cause of cervical cancer. That makes some analysts think the potential is still there for the company to be picked up by a bigger drug outfit.

"We continue to believe MedImmune represents a compelling acquisition target for global vaccine players," says Jennifer Chao of Deutsche Bank Securities in a research note. Chao, who doesn't own shares, has a buy rating. Her firm says it does or seeks to do business with companies mentioned in research reports.