Was MedImmune worth $15.6 billion?


Ralph Dorotheo, R+D Associate, takes a sample from bio-reactor to see how cells are growing, in the lab at MedImmune, a large bio-tech firm located in Gaithersburg. (Jeffrey MacMillan/JEFFREY MACMILLAN)

The region’s biotechnology industry hit a fever pitch five years ago this summer after a series of acquisitions, none of them more staggering than when British drugmaker AstraZeneca shelled out $15.6 billion for Gaithersburg-based MedImmune.

The deal at the time left some in the industry, especially locals, celebrating the hefty sticker price and others scratching their head — was MedImmune really worth more than the gross domestic product of many developing countries?

Five years later, the jury may still be out. While AstraZeneca has made MedImmune the hub of its biologics division, plying it with additional scientists and resources, a blockbuster drug that could justify, and recoup, the purchase price has yet to come to market.

A PERIOD OF GROWTH

MedImmune today is much larger than the company of five years ago.

President Peter Greenleaf said MedImmune had roughly 1,700 employees on its payroll at the time of the 2007 acquisition. Today, it counts 2,600 in Maryland alone and 4,000 globally.

But the company also announced last month it would shutter two California offices in an effort to streamline its vaccine operations. The result is the loss of 200 jobs, with 100 more shifted to other sites.

“It was more of a focus decision,” Greenleaf said. “The benefit to Maryland is we actually took some jobs from the West Coast and brought them here to Maryland.”

Bahija Jallal, executive vice president of research and development, added that MedImmune has expanded its drug development pipeline from approximately 27 compounds to 150 over the past five years. Of those, 30 are in clinical-stage development, including 13 in second-phase trials.

MedImmune was first to market with a swine flu vaccine in 2009. This year, it won approval for the first intranasal flu vaccine that contains four strains of the disease. Most vaccines contain three.

But those successes are tempered by the decision in 2010 to abandon a drug for respiratory syncytial virus that had languished for years before the Food and Drug Administration.

What’s more, none of the firm’s current drugs under development have entered third-phase trials, though Jallal said one is expected to later this year. As a result, a new drug candidate is unlikely to come before the FDA for at least a couple years.

“If they do come to the market and become major blockbusters, you can kind of see the price justified,” said Damien Conover, director of pharmaceutical research at Morningstar. “But it’s probably pretty accurate at this point to say it was an overpayment.”

Greenleaf contends the acquisition of MedImmune, along with the similarly timed purchase of Cambridge Antibody Technology, allowed AstraZeneca to make a much-needed foray into biologics, the practice of developing medicine from living organisms.

“I personally believe those are the future of drug development in our industry, they just need time to continue to germinate,” Greenleaf said.

THE COMMUNITY BENEFIT

As MedImmune’s footprint has grown in Maryland, so has its role as a community anchor. The firm has inspired spinoff companies and brought additional skilled workers and venture capital to the area.

The acquisition of any firm by an outside player creates uncertainty about the future of jobs and local operations. Maryland is facing that issue now following the $3.6 billion acquisition of Human Genome Sciences by Britain-based GlaxoSmithKline.

Many of MedImmune’s top executives have departed the firm since its purchase. Former chief executive David Mott, for example, is now a general partner at venture capital firm New Enterprise Associates.

Other executive departures have given rise to other biotechnology shops, including Amplimmune and Zyngenia.

MedImmune’s growing workforce also brings scientists to the Washington region who could go on to found their own firms or staff others.

Jallal said the firm has “more than doubled R&D, hiring a number of people that we were able to attract to this really great area. We were able to attract people from the [San Francisco] Bay Area, from the East Coast, from everywhere.”

MedImmune also invests in promising local ventures through its venture capital arm. The company added $100 million to the fund’s coffers last year, bringing total capital under management to $400 million. Greenleaf also heads the Maryland Venture Fund Authority, which will help oversee the distribution of $84 million the state raised through its InvestMaryland initiative.

Doug Doerfler, chief executive at MaxCyte and vice chairman of the Tech Council of Maryland’s MdBio division, said the firm fully embraces the surrounding biotech community.

“You can sense that when you meet them and interface with them,” Doerfler said. “They really try to be a bigger part of growing the community.”

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
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