Coverage Initiated on MedImmune (MEDI)
We finally went ahead and did it.We're now following MedImmune (MEDI) and initiating coverage with a Neutral Rating.
If it wasn't for the upcoming flu season, this stock wouldn't be even close to our radar.
But the First Republic Group, LLC in New York -- where I know three of the senior VPs and portfolio managers -- likes it so we thought what the hell.
Obviously, companies like MEDI are working day and night -- we hope -- to make sure they avoid a repeat of the flu vaccine shortage experienced last year.
Along that line, Glaxo (GSK) recently got the green light to begin production of its Fluarix vaccine.
The nation's Centers for Disease Control optimistically reports that the US may have as many as 97 million doses available this winter, which sounds just about right.
Sanofi (SFY) is the player here.
Sanofi will administer close to 60 million doses, while Chiron, still recovering from 2004's manufacturing debacle, hopes to provide another 30 million (if they're lucky).
Another 3 million doses will come from -- you guessed it -- MedImmune, whose FluMist nasal spray has been a hit with kids but less so with shareholders.
Flumist never got the clout MedImmune (and the rest of Wall Street) thought the drug had in the bag.
For one, FluMist is currently approved only for ages 5 to 49 - the group with the lowest vaccination rate.
Second, the price tag: FluMist costs at least 2 times what a simple $10 or $20 needle injection costs.
The flu is serious "business" but only where victims are concerned.
The CDC estimates 36,000 people a year die from influenza.
Ever since a deadly combination of government regulation and pricing pressures put the once booming vaccine industry on flatline, the companies have been eking out whatever profits they can.
As it stands, it is hard for companies like MEDI to make "real money"; worse, more competitors with newer drugs are encroaching the playing field.
In short, too many companies chasing the vaccine pie.
And the government is still playing chaperone.
The CDC is proposing rationing the vaccines again -- at least until the end of October.
As the flu season marches toward us, it's clear one or two companies will come out of the fences swinging.
Unfortunately, MedImmune will not be one of them.
We're Neutral until we feel it's time to slap them with a downgrade, which we expect will be sooner rather than later.
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