After Long Resistance, MedImmune Seeks Buyer
Friday, April 13, 2007
MedImmune, the region's most successful biotechnology firm, said yesterday that it is exploring options to sell itself, perhaps to a major pharmaceutical company, marking an abrupt shift in strategy in response to growing pressure from investors and analysts.
The Gaithersburg firm hired Goldman Sachs and the Dewey Ballantine law firm to manage the effort, which it described in a news release as being "well under way."
MedImmune shares rose $5.79 yesterday, to $43.63, which is in the ballpark of what some analysts think the company is worth to a buyer.
"The inevitable has finally come to pass and some justice is likely to be restored," said Geoffrey C. Porges, an analyst with Sanford C. Bernstein & Co. who has been critical of MedImmune's performance and management.
MedImmune sells one of the biotech industry's most successful drugs, Synagis, which prevents some respiratory infections in children. Despite signs of slowing sales, the drug generated $1.1 billion in revenue last year and could be a decent cash generator for a big drug company looking to shore up its bottom line. MedImmune is also known for its nasal-spray flu vaccine FluMist, which hasn't caught on in the marketplace for reasons the company says it is getting closer to resolving. Many analysts still think there is significant potential for the product.
Though there has been speculation for several years that MedImmune could be an attractive buyout target, pressure on the company to entertain such thoughts increased in the past few months -- first from letters to the board by Matrix Asset Advisors, a dissident shareholder, then by the specter of agitation from billionaire investor Carl C. Icahn, who recently disclosed a 1.16 percent stake in MedImmune. Matrix argued that MedImmune was worth more to a drugmaker willing to pay a premium for its current and future products.
The MedImmune board stood firm, publicly saying twice that it was best to remain independent and "aggressively implement its business plan." With MedImmune apparently digging a trench -- or perhaps playing hard-to-get to attract a bigger offer for the company -- yesterday's sudden shift caught many in the region's biotech community off guard, particularly because the firm's founder and chairman, Wayne T. Hockmeyer, is something of an elder statesman to the cluster of companies along Interstate 270 known as DNA Alley.
More than half of MedImmune's workforce of 2,500 is based in Maryland. MedImmune has a large corporate and research campus in Montgomery County and manufacturing operations in Frederick. State officials said it was too early to say what a change in ownership would mean to the region's economy and workforce.
What transpired between MedImmune's most recent disavowal of interest in selling, in February, and yesterday is unclear. The company declined to comment, except to say in the statement that "indications of interest by major pharmaceutical companies, coupled with recent expressions by certain stockholders of dissatisfaction with the company's short-term stock price performance, have led the board to authorize management to gather information regarding possible strategic interest in acquiring the company."
David A. Katz, the Matrix president, who wrote several letters to the company pressuring it to sell, said: "We clearly were willing to be public and visible about this, but our strong understanding is that a number of large institutional shareholders were sending a strong and similar message privately. We think at the same time the company was probably approached by one or more large pharmaceutical companies."
He added, "We think the board is doing right by shareholders."
The list of possible suitors seemed endless yesterday. Speculation by analysts and investors centered on Wyeth, Merck, Pfizer, Novartis and others, with the idea that acquiring MedImmune could bolster their presence in sales of flu vaccines or in pediatrics. MedImmune also has several potential products in its pipeline, including a bird-flu vaccine and treatments for cancer and lupus.
Wyeth seemed to many to be a logical contender, given its history with MedImmune, which dates to their partnership in the launch of FluMist in 2003. However, sales of the vaccine were disappointing and the partnership ended in 2004, and not entirely happily.
MedImmune chief executive David M. Mott, who joined the company in 1992, four years after its founding, stands to profit significantly from a sale, with some estimates topping $100 million. He owns more than 605,000 shares of MedImmune, which at current prices would be worth more than $26 million. He also has nearly 6 million stock options that would immediately vest if the company were sold.
Mott has not been free of criticism. An investment of $10,000 when his appointment as chief executive was announced on June 6, 2000, would now be worth $6,751, a 32 percent loss. MedImmune's share price fell to a 52-week low of $24.87 last summer, not long after the company reported a wider second-quarter loss.
Porges, the Sanford Bernstein analyst, said, "There was clearly a sentimental attachment on the part of the board to the company's management and independence. That attachment probably persisted longer than good sense dictated."
Staff researcher Richard Drezen contributed to this report.