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Stock Analyst Update

MedImmune Still Packs Some Risk

Pipeline appealing, but valuation remains a concern.


What Happened?
MedImmune (MEDI) announced third-quarter earnings of $0.03 per share late Wednesday, a penny ahead of consensus estimates. Sales of its flagship product, Synagis, were up 30% from the same period a year ago, to $31.6 million.

What It Means For Investors
Earnings announcements for the second and third quarters of the year are basically non-events for MedImmune, because its primary product, Synagis, books most of its sales in the fourth and first quarters.

That said, we believe MedImmune is an appealing biotech pick with one serious flaw: high valuations. The company should continue to deliver solid top- and bottom-line growth over the next couple of years thanks to Synagis. And its strong pipeline of new products holds several promising candidates, including a series of vaccines designed to prevent human papilloma virus, which is a leading cause of cervical cancer in women. However, MedImmune's pipeline is relatively immature, and until the company starts to deliver new products, it will remain highly dependent on Synagis. Given that the company is trading at 100 times 2000 earnings, estimated by Zacks, we believe MedImmune is too pricey for all but the most aggressive investors.

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