In sectors where growth is the first and last word on whether a company is on a pedestal or in the doghouse, the last thing a company wants to do is stall out. Biotech giant MedImmune
Fears of stagnation can be put aside for now, though. This morning, MedImmune reported that first-quarter sales of Synagis hit $472 million, a 12% increase over the same quarter last year. That is not the blazing growth of a newly launched product, but low-double-digit gains from established products are always welcome.
MedImmune needs this performance to continue for a bit longer, though, since it is going to be a few years before new products launch to pick up the slack. The company has been putting forth significant effort in this area and expects to invest 25%-35% of this year's revenues on R&D. That crimps this year's earnings, but I never want to see a company skimp on R&D just to dress up current numbers. That's a recipe for disaster in the long run.
Over the next 18 months, we are going to find out whether the drug pipeline is stocked or bare. Numax and CAIV-T are the follow-up products to Synagis and the failed FluMist, respectively. Numax should be a slam dunk, since it is just a more potent version of Synagis. Whether that translates into expanding the market for respiratory syncytial virus (RSV) drugs and growing the company's top line is another issue.
CAIV-T is a more complicated story. An extensive clinical program is under way to demonstrate its superiority to the standard flu vaccine and to get the product approved for all age groups. Both factors are important for its success. Right now, the company's $1.5 billion purchase of Aviron a few years back to get into the flu-vaccine market looks like a disaster. It will take some serious sales from CAIV-T to make this venture worthwhile. MedImmune wants this drug launched in advance of the 2007 flu season, so we won't see the results for a while.
For additional articles on the biotech industry, see:
- Has Elan Been KO'd?
- Pfizer Pfaces Its Pfuture
- The Best Company I've Never Owned
- Better Times at Biogen IDEC
Fool contributor Charly Travers is the Motley Fool Rule Breakers biotech analyst. He does not own shares of any company mentioned in this article.