MedImmune shares fall after downgrade

$5 drop, to $115, follows `overvalued' conclusion from analyst

August 26, 1999|By Mark Guidera | Mark Guidera,SUN STAFF

Shares in MedImmune Inc. fell $5.0625, or 4 percent, to $115 yesterday after a top Merrill Lynch & Co. analyst lowered his ratings for the stock, saying the recent run-up in its price had made it overvalued. Earlier in the day, the shares were down as much as $14.125.

Since mid-May, shares in the Gaithersburg-based biotechnology company, which split 2-for-1 Jan. 1, have more than doubled. MedImmune shares closed at a 52-week high of $120.625 Tuesday.

Merrill Lynch biotechnology analyst Eric Hecht, whose industry ratings are closely watched, also lowered his ratings on Amgen Inc., Biogen Inc., Genzyme Corp. and Idec Pharmaceuticals Corp.

Hecht said in a report that the big biotechnology stocks had experienced "recent dramatic price appreciation" that was too high based on their earnings. MedImmune posted an $18.4 million profit on revenue of $138 million for the first six months of the year.

In his report, Hecht said the promise of sales and products in development at each company were unchanged, that his move was based strictly on a comparison of the companies' stock prices and projected earnings-growth rates. In that report, he dropped his "buy" recommendation on MedImmune.

Other analysts disagreed.

Salomon Smith Barney biotechnology analyst Meirav Chovav said yesterday that she expects MedImmune to trade at $150 a share within the next 12 months.

Eric Ende of Lehman Brothers said he expects strong growth for MedImmune and the biotechnology sector in general. His 12-month price target: $169 a share.

"This has been a sector that has promised a lot over the years but really has underdelivered," he said. "Now, finally, they are bringing not only products to the market, but bringing great products to the market."

Ende projects that MedImmune's shares will rise an average of 49 percent a year over the next five years, driven in part by strong sales for Synagis, its drug to treat a serious lung infection in premature infants.

The drug, which generated $117 million in sales in the first six months of this year, is approved for use in treating premature infants in the United States. The company hopes to have obtained European Union approval by the end of the year.

Ende said the company could see more upside to the drug if it can get approvals to expand its use to older infants and the elderly.

Bloomberg News contributed to this article.

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