Biotech investor calls for its sale

MedImmune says no, `unanimously' favors independence

December 14, 2006|By Tricia Bishop | Tricia Bishop,sun reporter

One of MedImmune Inc.'s major shareholders is urging the state's flagship biotech to put itself up for sale, suggesting management hasn't made the most from its assets, which include four products on the market and about 40 in the pipeline.

David A. Katz, president of New York investment firm Matrix Asset Advisors Inc., released a letter yesterday that he sent to executives of the drugmaker in hopes of persuading other shareholders to join his call. Katz's firm owns about 1.65 million shares of Gaithersburg-based MedImmune, putting it among the top 30 shareholders.

"While the Company has amassed an array of truly world-class products and intellectual property, the best way to realize the intrinsic value of these assets is by selling the company to a motivated strategic buyer," the letter read.

MedImmune spokeswoman Jamie Lacey said last night that the company and its board considered the suggestion, but continue to "unanimously believe" that MedImmune should remain independent.

A similar statement was filed with the Securities and Exchange Commission by MedImmune.

Analysts and industry insiders have speculated during the past few years that MedImmune may be a target for takeover from a larger pharmaceutical business looking to shore up its future.

MedImmune is one of a handful of biotechnology companies with annual sales of more than $1 billion, and its representatives say it has more drugs in development than any other in the industry. Several of the drugs, including new versions of FluMist and its blockbuster infant drug Synagis, are nearing commercialization.

"Acquisition premiums in the biotech industry are at all-time highs," said analyst Geoffrey C. Porges of Sanford C. Bernstein & Co.

In a report issued a year ago, Porges said MedImmune shareholders would benefit from the company's acquisition. He reiterated that sentiment yesterday in an interview.

Porges said there is a shortage of developing drugs and actual products in pharmaceuticals, which makes companies more likely to acquire someone else's assets. Also, MedImmune's products are moving into larger markets that need the muscle of pharmaceutical-sized sales departments, and the company is overspending and underperforming, he said.

MedImmune has spent millions over the past few years hiring staff and acquiring other companies as well as drug candidates across three disease areas. It all has been a concentrated effort to become a bigger player in the industry, executives said in interviews this summer.

"The stock is half of what it was in 2001 and it has done nothing but go sideways since 2002," Porges said. "If things were so rosy there, why doesn't the stock reflect it?"

MedImmune's stock closed down 67 cents yesterday to $32.38 in trading on the Nasdaq stock market. The stock is down 11 percent from a year ago.

MedImmune held its annual analyst and investor day last week, after which at least three analysts issued reports saying MedImmune stock was on track for increases. FBR Research raised its target price for the company to $42, and William Blair & Co. said it continued to "view MedImmune as a favorable risk/reward investment." Thomas Weisel Partners said management has been taking steps to improve sales of its blockbuster infant respiratory treatment.

"Even giving the company the benefit of the doubt about their prospects," it would take two or three years to reach a $40 stock price, Katz said yesterday. "The right thing to do is the bird in the hand" -- meaning sell now.

Yesterday's letter was the second one Katz has sent MedImmune in the past three weeks. The first was a private missive addressed to the board of directors.

Other investors with large holdings in the company could not be reached.

Copies of Katz's letters are posted online at www.baltimoresun. com/medimmune.

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