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Stock Analyst Update

Biotech Firms Charge Ahead

MedImmune and Millennium Pharmaceuticals deliver sales growth.

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MedImmune (MEDI) is doing even better than expected.

The biotechnology firm announced Wednesday first-quarter earnings of 80 cents a share, three cents higher than the consensus estimate.

The primary driver of MedImmnue's impressive growth has been sales of its flagship product, Synagis. Designed to prevent a common respiratory infection in premature infants and other high-risk pediatric patients, Synagis offers a unique and efficacious therapy for a large patient population. In the first quarter, sales of the drug surged to $176 million, 52% more than year-earlier levels.

But like many biotechnology companies, MedImmune is highly reliant on a single product for its growth. Synagis sales accounted for 82% of product revenue in 1999. Moreover, although MedImmune's pipeline has a number of promising products, including a series of human papilloma virus vaccines, these drugs are not far along in clinical trials. The company therefore will likely remain highly reliant on Synagis to drive growth for the near term.

Meanwhile, MedImmune's stock remains extremely expensive, even after the recent downturn, trading at about 80 times estimated 2000 earnings.

In other earnings news, Millennium Pharmaceuticals (MLNM) announced Tuesday it lost 47 cents a share on a presplit basis during the quarter, while its revenues grew about 14%. The loss was not unexpected, because the company is spending aggressively to become a leading biopharmaceutical firm.

Millennium's business plan is rather unusual. The company is developing its own drugs--or drugs in partnership with other firms--to bring to market. But Millennium also uses a drug-discovery platform to provide other pharmaceutical companies with possible drug targets. It remains to be seen how successful these efforts will be.

But for a company with no products of its own on the market at present, Millennium's shares are hardly a bargain. The company's stock trades at about 30 times sales--higher than companies with earnings, such as Genentech (DNA).

Emily Hall does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.