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Stock Analyst Update

MedImmune Looks Lovely, Except for Its Hefty Price Tag

Company delivers solid growth, but its pipeline is immature.

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What Happened?
MedImmune (MEDI) reported fourth-quarter earnings Thursday of $0.36 per share, excluding one-time items, a penny ahead of First Call consensus estimates. Sales growth of Synagis, which helps prevent a common respiratory ailment in high-risk infants and children, was the key number we were watching. The company notched an impressive $211.8 million in Synagis sales, up 40% from the same period a year ago.

What It Means for Investors
We continue to believe that MedImmune is a very strong biotech company, but somewhat too expensive right now, given its dependence on Synagis and its relatively immature pipeline. Fourth-quarter results were just fine, as sales of Synagis were in line with many analysts' estimates. Perhaps the most significant event about this earnings season was MedImmune's decision to hold a conference call: Historically, the company has avoided hosting frequent analyst powwows--a far cry from most of its chatty biotech rivals. On the call, management gave some details on its pipeline of new products, and we were especially interested to hear that the company's human papilloma virus vaccine series--which it is developing with GlaxoSmithKline (GSK)--could move into pivotal Phase III trials in early 2002.

But given that MedImmune's stock suffers from a very high price multiple, and given that the company must continue to wring substantial growth from Synagis for quite a while to justify that multiple, we remain cautious for now.

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