FluMist's maker expects big loss

MedImmune to spend more than $100 million to gain control of vaccine

April 28, 2004|By William Patalon III | William Patalon III,SUN STAFF

Conceding that last flu season's launch of the FluMist nasal-spray influenza vaccine was mishandled, MedImmune Inc. said yesterday that it will spend more than $100 million to take sole control of the troubled product.

Wyeth announced late Monday that it was bailing out of its FluMist collaboration with MedImmune.

Yesterday, the Gaithersburg biotechnology company discussed what had gone wrong and the financial impact of Wyeth's decision.

In a conference call with investors and analysts, MedImmune's top executives said it has become clear that for FluMist - and a successor product - to succeed, one company had to take control.

Despite a $25 million advertising campaign and a virulent early flu season that increased demand for vaccine, FluMist experienced a disastrous rollout, largely because its $46 wholesale price tag made it uncompetitive with the $10 cost of a conventional flu shot. Wyeth and MedImmune said they produced 4 million doses but ended up selling less than 1 million.

"Both Wyeth and MedImmune probably underestimated the complexity of the product, not only underestimating the competitive situation, but also in underestimating the complexity of what it took to launch it," said David M. Mott, MedImmune's president and chief executive officer.

"In hindsight ... the $46 price was probably very difficult to support in the marketplace," he said.

Regaining all rights to FluMist will cost MedImmune $90 million to $105 million in 2004, according Jamie Lacey, a company spokeswoman. As part of that outlay, the Maryland company will pay Wyeth an upfront fee of $25 million, and up to $10 million more in so-called "milestone" or progress payments during this year.

Transition-related activities could have MedImmune pay Wyeth an additional $30 million to $40 million, Lacey said. MedImmune will have its own outlays related to the transaction, too -as much as $30 million.

Wyeth will have the chance to earn royalties, which MedImmune declined to quantify yesterday.

The deal will reduce MedImmune's second-quarter financial results. When the company reported its first-quarter results a week ago, MedImmune said it expected its second-quarter revenue to be $93 million to $98 million, and said the quarterly loss per share would range between 13 cents and 16 cents.

Yesterday, after detailing the charges it would be taking as part of the Wyeth transaction, MedImmune said it would likely incur a second-quarter loss per share of 48 cents to 52 cents.

The loss would be 17 cents to 21 cents after factoring out $27 million in nonrecurring costs for in-process research and development, $18 million in nonrecurring transition expenses and $73 million in one-time charges associated with the termination of the partnership.

Because MedImmune's responsibilities and oversight will increase as the sole maker and marketer of FluMist - and an improved version, CAIV-T, which isn't projected to debut until 2007 - the local company will have to build up its organization, at a cost of $20 million to $25 million, the firm said. Another $5 million in actual cash costs will be incurred because of transitional activities within MedImmune, the company said.

Shares of MedImmune gained $1.64, or 6.8 percent, to close at $25.71 yesterday.

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