Slow sales of FluMist give chills to maker

MedImmune reduces outlook for quarter, year

November 19, 2003|By William Patalon III | William Patalon III,SUN STAFF

MedImmune Inc., maker of the new FluMist nasal spray, expects to miss its sales and profits targets because it and its marketing partner bet wrongly that consumers would gladly pay a huge premium for a flu vaccine that sidesteps a painful injection.

MedImmune reduced its fourth-quarter and year-end guidance on earnings and revenue yesterday, due to "lower than expected product demand for FluMist," while emphasizing that its other businesses remain very strong.

MedImmune, a Gaithersburg biotechnology company, and partner Wyeth , of Madison, N.J., rolled out FluMist this year with a $25 million advertising campaign.

Experts say the two companies have had a tough time persuading physicians and consumers that it was worth spending $46 or more for FluMist when a conventional flu shot can be had for $10 to $15.

"For people who have a fear of needles, it was a battle between the fear that they feel and the frugality that they have," said Eugene H. Fram, a marketing professor at Rochester Institute of Technology in New York. "Frugality won."

MedImmune said earnings per share in the fourth quarter could be as low as 24 cents, down from prior company forecasts of 42 to 47 cents.

The company expects its fourth-quarter revenue to total $385 million to $445 million, down from its previous forecasts of $450 million to $500 million.

Disappointed investors sent shares of Medimmune plummeting more than $2 a share at the opening yesterday. The shares closed at $24.50, down $1.08 on the Nasdaq stock market.

Wyeth's shares fell 16 cents to $39.95 on the New York Stock Exchange.

"We are surprised and deeply disappointed by the commercial aspects of this launch," MedImmune Chief Executive Officer David M. Mott said during a conference call yesterday. "Demand for FluMist has not picked up markedly."

Wal-Mart setback

Medimmune was handed a big setback last month when No. 1 global retailer Wal-Mart Stores Inc., canceled plans to sell FluMist this year after some states, including Maryland, would not let pharmacists administer the vaccine.

MedImmune and Wyeth remain committed to the product, officials with both companies said.

FluMist is a fine product, said Dennis R. Harp, a biotechnology analyst who follows MedImmune for Deutsche Bank AG in New York. But the price is too high to give it widespread appeal, he said.

FluMist costs doctors' offices $46, compared with $8 for a regular flu-shot vaccine.

"I think it's a great product, but it's priced too aggressively," Harp said in an interview.

"An appropriate price is probably closer to the price of a shot" - $10 to $12 - plus a slight premium for the pain-free delivery, he said.

To be able to slash the price that drastically and make a profit, MedImmune would need to ship about 20 million FluMist doses annually, four times its anticipated volume for this year, company officials told analysts during a conference call yesterday, Harp said.

And there would have to be "sell-through," meaning most of those shipped doses would have to be sold and administered to patients.

Harp thinks any repositioning of the product would have to wait until next year's flu season, but Wyeth and MedImmune say they are not beaten this year.

$25 rebates

In addition to the advertising campaign, including TV spots that are being aired, the companies began this week a rebate program in which consumers could get as much as $25 back after receiving the FluMist vaccine, said Wyeth spokesman Doug Petkus.

Rebate coupons were placed within newspapers early this week and are also available from the FluMist.com Web site, Petkus said.

Bloomberg News contributed to this article.

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