Aviron's FluMist Coughs (Fool Plate Special) November 15, 1999

An Investment Opinion

Aviron's FluMist Coughs

By Dave Marino-Nachison (TMF Braden)
November 15, 1999

Further delays for a much-awaited developmental product meant further damage to the balances of investors in Aviron (Nasdaq: AVIR), the company's stock down more than 20% in morning trading.

Shares of Aviron have been hot in 1999 on optimism about the potential of FluMist, a nasal-spray flu vaccine expected to be the company's first product. Although several companies are developing flu-prevention products that could compete with FluMist, Aviron's product differs in that it is an actual vaccine, and the potential for such a product that could simply be spritzed up the nose rather than injected is obvious.

But highly publicized setbacks in the company's filing of a biologics license application (BLA) with the FDA for FluMist have reversed much of those gains.

Aviron yesterday said it won't file a BLA with the government before the end of the year, citing inconsistent information arising from what were thought to be "routine" tests. The company also said Medeva PLC (NYSE: MDV) division Medeva Pharma, which makes parts of the vaccine, reported problems at a facility in Liverpool, England that could affect FluMist manufacturing. Aviron is co-developing FluMist with the Wyeth Lederle vaccine unit of American Home Products (NYSE: AHP).

"Even though we have made tremendous progress towards manufacturing consistently at commercial scale," said Aviron Chairman and CEO J. Leighton Read, "we are not yet satisfied that all of the pieces are in place to support a successful BLA application."

The bottom line for Aviron investors is that the company is now targeting the 2001-2002 flu season -- bitter medicine for some who were holding on to hope following the company's mid-September announcement that it was having trouble answering some of the FDA's questions concerning the drug's manufacturing process.

Those questions have dogged the company since early September when the government first turned down Aviron's marketing application, citing a need for more information about how the drug was made -- and a look at an Aviron chart cements the impression that news has had on investors.

The FluMist news greatly overshadowed Aviron's third-quarter earnings announcement, also made yesterday. Though per-share net losses were narrower than anticipated by First Call's four-analyst panel at a loss of $1.43 vs. a projected $1.50, what investors should be more concerned with is the company's balance sheet.

With just under $50 million in cash, cash equivalents, and investments, and $100 million in long-term debt, the picture doesn't look great at first. But investors should remember that Aviron scored a $17 million credit line from Finova Group's (NYSE: FNV) Finova Capital Corp. and also filed to sell up to $100 million in securities in mid-September, so funding doesn't appear to be a pressing near-term concern.

Still, Aviron looks more and more like a long-term investment. The company's other products in development -- including an interesting developmental vaccine for mononucleosis -- are all several years behind even a delayed FluMist, so patience and close attention are warranted where this company's progress is concerned.

Related Links:
Aviron Web Page
Aviron Message Board