FluMist maker weighs price cut

MedImmune executive projects $100 million loss

Marketing strategy questioned

May 20, 2004|By William Patalon III | William Patalon III,SUN STAFF

A top executive of MedImmune Inc. told analysts at a health care stocks conference yesterday that the company needs to slash the price of its beleaguered FluMist influenza vaccine by more than half to boost sales for the next flu season, again sparking questions about that firm's marketing strategy for a product it has characterized as important to its future.

James Young, the research and development president of Gaithersburg-based MedImmune, said the company would be looking to slash the per-dose price of FluMist from last year's $46 "probably down into the low 20s" as it repositions the product for the flu season to come.

As a result, Young candidly conceded, the company would almost "absolutely" be looking at a loss from the product in the neighborhood of $100 million this year, and still more red ink over the next several, as it tries to revive the needle-free vaccine.

"Over the next three years, we're looking at pretty significant losses on this product as we reposition and broaden its label" for use by a greater range of consumers than the nasal-spray vaccine is currently approved for, Young said in a presentation at the Banc of America Securities Health Care Conference in Las Vegas.

A recording of his talk was posted on MedImmune's corporate Web site

MedImmune announced April 27 that it would take sole control of FluMist, buying out partner Wyeth, of Madison, N.J. But that divorce has yet to become final.

MedImmune has repeatedly said - at least publicly - that it could make no plans or announcements about pricing or marketing until government approvals were received, and the Wyeth split finalized.

Young repeated some of those caveats yesterday, while also noting that he would be making some "forward-looking statements," about MedImmune.

Young said the price would likely be similar to that charged late in the recently finished flu season, when consumers had been offered a $25 rebate on the vaccine's $46 wholesale price. MedImmune has suggested that the resultant net price of $21 could be a guide for what it would seek to charge this time around.

Asked yesterday to elaborate on Young's remarks, company spokeswoman Jamie Lacey declined comment.

"We are still waiting for the necessary government approvals," Lacey explained. "As we stated on April 27, the best model to look at was the rebate strategy we employed last year."

Yesterday's report caused some analysts to once again question MedImmune's marketing plan for the nasal-spray vaccine, which flopped after it was unveiled at the onset of the recent flu season.

"We're talking about a fundamentally flawed FluMist strategy," said Dennis Harp, a biotechnology analyst who follows MedImmune for Deutsche Bank in New York. Harp has taken the unusual step of rating the company's shares as a "sell."

Pricing remains the biggest marketing obstacle, since a conventional booster shot wholesales for about $6, with a final cost to the consumer of about $10, still less than half the FluMist price projected for the coming flu season.

MedImmune and Wyeth had contended from the start that FluMist could command the huge premium because it was a "shotless" vaccine, sparing anguish and pain to the many consumers who dread booster-shot needles.

But even with benefit of a strong tailwind from an especially difficult flu season - which obliterated inventories of booster shots - the two firms together sold roughly 400,000 of the 4 million FluMist doses that had been produced.

Not even the partnership's late-season rebate was enough to ignite sales.

"In hindsight ... the $46 price was probably very difficult to support in the marketplace," MedImmune President and Chief Executive Officer David M. Mott conceded during the April 27 conference call.

For MedImmune to really see major volume increases in FluMist sales, it would need to cut the price of the vaccine into the low teens, analysts have repeatedly said.

But Deutsche Bank's Harp isn't sure that's what the company really wants at this point.

Since, by his estimates, the company would need to sell perhaps 10 million doses for FluMist to become a profitable product, at volumes well below that, cutting the price to further increase sales will actually cause the firm's losses to balloon, he said.

"They have no growth plans for large-scale sales of FluMist," Harp said.

MedImmune has said it wants to keep FluMist alive, and use it to build market awareness of the nasal-spray vaccine's benefits, until a new version of the product is ready in 2007. The new product, called CAIV-T, is said to be a major improvement over FluMist, which must be kept frozen to stay viable. CAIV-T requires only refrigeration, which makes transportation and storage a much-simpler proposition for both MedImmune and its customers, the firm said.

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