More Downgrades for MedImmune

MedImmune ( MEDI) lost more friends on Wall Street Tuesday, as three more investment banking firms downgraded the shares of the maker of FluMist, the nasal spray flu vaccine.

Lehman Brothers, First Albany Capital and Friedman, Billings, Ramsey all cut their ratings on the MedImmune, joining CIBC World Markets and Deutsche Bank Securities, which issued stock downgrades on Monday. Excluding Lehman Brothers, which lowered its rating to equal weight from overweight, all of the downgrades used terms such as underperform, underweight or sell.

MedImmune's stock absorbed much of the bad news Monday, when the company issued earnings and revenue projections for 2004 and financial guidance for much of the decade. After MedImmune fell $1.59, or 6.2% Monday, the stock was down 20 cents, or 1%, at $23.90 in late morning trading.

Analysts who didn't downgrade their stock rating scrambled to adjust earnings predictions and stock price targets after MedImmune on Monday said 2004's earnings per share would be 50 cents to 60 cents a share, well below the Wall Street consensus of 94 cents a share, according to Thomson One Analytics.

The analysts are concerned about FluMist's future; the uncertainty of the FluMist marketing deal between MedImmune and Wyeth ( symbol); and the slowing growth rates of the drugs that are now driving the company while it tries to resuscitate and improve FluMist.

Of MedImmune's $1.05 billion in sales last year, $849 million came from Synagis, a respiratory disease treatment for infants, and $100 million came from Ethyol, a drug to treat kidney problems caused by chemotherapy for certain types of cancer.

Although the company hasn't provided sales figures, it has made it clear that FluMist was a major disappointment that won't come close to achieving the $120 million to $140 million in sales it had predicted for the 2003-04 flu season.

MedImmune said FluMist will be available for the next flu season, but it hasn't revealed how much vaccine will be available or at what price. And there is still no word whether Wyeth will continue to co-market the vaccine, although many analysts believe MedImmune will go it alone.

MedImmune did make it clear Monday that FluMist will be a minor product for several years as the company conducts tests on a second-generation vaccine whose clinical trials, so far, appear encouraging. David M. Mott, the company's president and chief executive, said Monday that FluMist still could become a $500 million-a-year U.S. product in the future.

Still, FluMist won't make a meaningful contribution to the company until at least the 2007-08 flu season, and that guidance cooled analysts' views of the stock.

"We see limited near-term upside in Medimmune shares," said Craig C. Parker of Lehman Brothers, in a Tuesday report to clients. "After a 35% reduction in EPS guidance and only a 6% decline in share price, we think MedImmune's valuation is now pricing in upside to earnings as well as upside from its pipeline."

Parker said MedImmune's financial guidance is "a mix of conservatism and uncertainty," and he suggested that the company might even be "low-balling" Wall Street with its financial guidance. (Parker doesn't own shares, but his firm is a MedImmune market maker and it intends to receive or expects to seek investment banking-relating compensation in the next three months.)

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