Biopharmas sink or swim based on their successes in the clinic and in getting drugs through the regulatory process. MedImmune (NASDAQ:MEDI) has proven its ability to get new drugs to the market in the past, but with sales growth slowing, it is imperative that it continues this clinical and regulatory success. So let's take a look at how 2006 has treated it.

The first quarter of 2006 was a slow one for MedImmune, with revenues flat year over year at nearly $500 million because of sales disruptions for its respiratory infection treatment Synagis. Earnings shrank as well, to $0.23 a share, as a result of higher R&D and SG&A costs.

In the second quarter, MedImmune ramped things up on the clinical trial and regulatory fronts by initiating a phase 1 trial for its potential lupus treatment, as well as presenting positive phase 3 data on its next-generation flu vaccine. MedImmune also received a $170 million contract from the U.S. Health and Human Services Department to research and develop novel vaccines against the flu.

In a big win, the FDA also approved Merck's (NYSE:MRK) Gardasil as a vaccine against several strains of the human papillomavirus. MedImmune will receive a low single-digit royalty from this.

MedImmune started the third quarter with the receipt of an approvable letter for its application to market a more convenient form of FluMist; it then submitted a response to this approvable letter. Revenues also began to pick up again, rising 15% year over year as Synagis sales resumed growing and milestone and royalties from Gardasil started to come in.

In the fourth quarter, MedImmune announced positive preliminary phase 3 results for Numax, a product which is expected to take over Synagis' market if it comes to market (expected in 2008). Guidance is for revenues to come in at roughly $550 million for the quarter.

On the financial side of things, 2006 has not been a great year for MedImmune. Revenues are expected to grow a measly 4% to $1.3 billion, compared with the $1.2 billion brought in last year. Luckily, with all its progress in the clinic, the future looks safe for MedImmune. Royalties from Gardasil are starting to ramp up, and final approval of the next-generation FluMist and Numax will be profitable.

Despite all the regulatory and clinical successes in the past years, MedImmune isn't ranked highly in our Motley Fool CAPS database, only garnering two stars out of five.

CAPS Rating


Total Bulls


Total Bears


Bull Ratio


Bear Ratio


One of the highest-ranked CAPS players, Gumpster, sums up his reasoning for being a bull on MedImmune:

"I think the company has several interesting attributes in the years ahead:
(1) the royalty inflow from Merck and GlaxoSmithKline's (NYSE:GSK) HPV vaccines
(2) the ability to improve profitability of their Synagis/Numax platform by self-marketing them
(3) Leverage the company's pediatric-focused sales force once its fully established
(4) FluMist
(5) Applying the company's vaccine and delivery technology to other products
(6) Benefiting from the investments made over the past few years in MedImmune Ventures (their venture cap arm)"

Will the years ahead continue to be positive for MedImmune? Next year's guidance is for revenue to grow 15% over the $1.3 billion that is expected in 2006. By the end of 2009, the company expects to have reached $2 billion in revenue from all sources. Thanks to the magic of scale, overall earnings are expected to grow roughly 10 times to $2 a share in this time frame. With guidance for revenue growth to substantially outpace expenditures, investors should pay close attention to making sure that MedImmune can stay fiscally conservative in its spending if it is going to achieve this level of earnings growth on the back of such slow revenue gains.

If you'd like to read more Foolish biotech commentary, as well as get some of our best biotech picks, take a free trial subscription to the Fool's Rule Breakers newsletter.

Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Merck is a former Income Investor selection, while GlaxoSmithKline is a current pick. The Fool has adisclosure policy.