Drug maker predicts 3Q loss

MedImmune to take charge for regaining rights to drug Ethyol

September 11, 2001|By Julie Bell | Julie Bell,SUN STAFF

MedImmune Inc. said yesterday that it will reacquire U.S. rights to its drug Ethyol next month, six months earlier than planned, resulting in $20 million in expenses and worse-than-expected results in the third quarter.

But analysts and the Gaithersburg pharmaceutical company said the move should benefit MedImmune in the long run, allowing it to more quickly book U.S. sales of the drug, which is designed to reduce certain toxic effects of chemotherapy and radiation cancer treatments.

Until Oct. 1, MedImmune will continue booking only a percentage of the sales of Ethyol, under its co-promotion agreement with Alza Corp. of Mountain View, Calif. Under the reworked agreement, the company will pay Alza a gradually diminishing royalty on sales of the drug.

MedImmune also said it now expects Canadian government approval of its top-selling drug Synagis in the fourth quarter, rather than in the third quarter.

That and the reacquisition of Ethyol rights from Alza caused the company to lower its estimate of third-quarter results by 11 cents a share.

MedImmune projects its third-quarter loss at 8 cents to 10 cents a share on revenue of $44 million to $48 million. The company said its projections for the fourth quarter remain the same, with earnings of 44 cents to 46 cents per share. For the year, the company projects earnings at 69 cents to 71 cents per share.

The company's revenue and earnings are heavily weighted to the fourth and first quarters, thanks to the seasonal nature of Synagis sales. The drug is for an infant respiratory virus that strikes in the winter months.

Synagis contributed $427 million of MedImmune's $495.8 million in product sales last year. By comparison, Ethyol booked $21.4 million in revenue last year.

Annual worldwide sales of Ethyol now run about $65 million, including about $45 million in the United States, the company said. But MedImmune believes it quickly can increase those numbers and is adding 50 people to its 30-person staff devoted to promoting cancer drugs.

"Ethyol is sensitive to sales promotion and we are looking forward to putting our own expanded oncology commercial team behind Ethyol in the fourth quarter," said Armando Anido, MedImmune's senior vice president of sales and marketing.

"Our objective is to achieve in excess of 20 percent growth in Ethyol sales in each of the next three to five years, enabling us to more than double Ethyol's worldwide sales by 2005."

Dennis R. Harp, an analyst for Deutsche Banc Alex. Brown, said moving up the date on which U.S. Ethyol rights return to MedImmune allows the company "to control the destiny for Ethyol."

Alza Corp., he noted, has been acquired by Johnson & Johnson, an even larger company for which a $65 million product like Ethyol would not get that much attention. MedImmune currently gets about 35 percent of Alza's U.S. sales of the drug, Chief Financial Officer Gregory S. Patrick said.

Ethyol's foreign sales are primarily marketed by affiliates of Schering-Plough Corp. Last year, those sales meant $6.5 million for MedImmune.

The $20 million in third-quarter costs associated with the reacquisition include payments to Alza for the projected profit it would have made from Oct. 1 through March 31, the repurchase of Ethyol inventory previously sold to Alza, and financing for expanded marketing.

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