MedImmune: Pills and Hills

Since 2000, the chart of MedImmune has had more peaks and troughs than a cyclical steel or machinery stock. MedImmune shares have been true to form this year, with plenty of ups and downs. But after taking over full control of its best-selling drug, Synagis, on July 1, MedImmune has won over a number of Wall Street analysts who think that the Gaithersburg, Md., biotech concern has finally gotten its act together. Some now think that MedImmune's stock (symbol MEDI) is worth about 30% more than the current share price of $27.

One such booster is Mark Schoenebaum of Bear Stearns, who wrote Tuesday that the Synagis "franchise" is worth $20 a share alone and that his target for the stock is $35. MedImmune has both a lot of cash and a lot of debt, but, like many speculative drug companies, it's tough to evaluate the shares on current earnings or other basic financial measurements.

The key unknown is what will happen with MedImmune's pipeline of new products. The company is probably best known for FluMist, a drug that sounds wonderful because you spray it into your nose. For most folks, that beats the alternative: a flu shot. But FluMist has never been a blockbuster seller. Synagis, which treats respiratory viruses in babies and young children, has been more successful, though Synagis sales slowed this summer after insurance companies apparently resisted a sharp price increase. That forced doctors and patients to look at alternatives while MedImmune reviews its marketing. The company is researching a new version of its nasal flu drug that would be more stable than FluMist (a problem with FluMist is limited shelf life, which means that unused product must be discarded quickly).

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All this leaves as many questions as answers, but you know you're getting into murky territory whenever you invest in a drug company with so much riding on ideas in development. With more than $6 a share of cash on its balance sheet, however, MedImmune has the resources to conduct significant research for a long time. It has about a half-dozen ideas in some stage of research or clinical trials.

Because of its history of tantalizing then disappointing investors, MedImmune has plenty of skeptics. But even two rather unenthusiastic reports issued recently, by analysts at Thomas Weisel Partners and at Friedman Billings Ramsey, grant that the stock deserves no worse than to sell in the high $20s. If MedImmune nails the flu thing -- even if it takes several years -- that cyclical trading pattern might morph into something more deserving of a growth stock.