Sometimes acquisition rumors turn out to be true. Yesterday, biotech drug developer MedImmune
A deal of this size doesn't come along often in the biotech and pharmaceutical industries. MedImmune, one of the biggest biotechs in the world, is being swallowed by a pharma that has had major clinical trial setbacks with its partners in the past 12 months and is also looking to restock its dwindling drug pipeline.
I have no doubt that AstraZeneca and its larger sales and marketing division will be able to wring out more revenue from MedImmune's top products, like the $1.1 billion respiratory drug Synagis. MedImmune's other main growth driver in the near-term is expected to be the royalties that it receives on sales of the human papilloma virus vaccines from GlaxoSmithKline
MedImmune was guiding for non-GAAP earnings excluding options expenses to come in at the $0.90-per-share range for 2007. At the $58-a-share buyout price, this values MedImmune at a whopping 63 times the midpoint of this year's earnings -- which is rich even for the biotech sector, considering that MedImmune expects revenue growth in the high-teen percentages for the year. Another way to look at it is that AstraZeneca is buying MedImmune for approximately 10 times revenues.
MedImmune investors appear to be getting a pretty sweet deal.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. GlaxoSmithKline is an Income Investor recommendation; Merck is a former Income Investor pick. The Fool has a disclosure policy.
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