Biotech Values

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MedImmune Nears a Big Payday

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http://online.wsj.com/article/SB117729649479978636.html

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AstraZeneca Close to Deal
That May Top $13 Billion;
A Validation for Icahn?

By DENNIS K. BERMAN
April 23, 2007

Britain's AstraZeneca PLC last night was near the purchase of MedImmune Inc. for what could be more than $13 billion, people familiar with the negotiations said last night. Barring any last-minute snags, the transaction could be announced as early as this morning, these people added.

The deal is the most significant for the British pharmaceuticals giant since Astra AB and Zeneca Group combined in 1999. AstraZeneca is trying to replenish its pipeline after several research setbacks.

A transaction would bring to an end a tumultuous ride for MedImmune, which is prized for its collection of drugs for respiratory viruses and influenza, but whose stock faltered during 2006 and came under pressure from investor Carl Icahn.

But Mr. Icahn and a group of other investors proved to be right when they said the company would fetch a steep price from the world's major pharmaceutical companies, who are desperate to bring new growth into their businesses.

MedImmune, of Gaithersburg, Md., is attracting a price of about 50 times its earnings and around 10 times its annual revenue. That represents a premium of more than 15% to where the company's shares finished Friday. In composite Nasdaq Stock Market trading its shares finished at $48.01, a 48% rise since the end of last year. It reached its 52-week high of $48.65 Thursday.

A company spokesman didn't return a request for comment. An AstraZeneca official also didn't return calls.

At least four large companies were involved in the final auction process, said people familiar with the negotiations, including Eli Lilly & Co., which has a deep history of avoiding large M&A transactions. But AstraZeneca prevailed in the end, willing to step up with its large price.

Auctions for companies the size of MedImmune are rare in the health-care world, given that the business is largely divided between a group of giants and much smaller players with just a few drugs under development.

This result is sure to push up valuations for similarly sized companies, while also putting pressure on company boards to explore their own transactions.

In the fourth quarter, MedImmune reported net income of $120.7 million on revenue of $528.7 million. Its results included a $48.5 million gain from an asset sale.

AstraZeneca, which makes the ulcer treatment Nexium and the antipsychotic drug Seroquel, in February reported a 17% rise in fourth-quarter net profit, to $1.43 billion from a year earlier, driven by strong sales of its top five products and by tight cost management. Revenue rose 14% to $7.15 billion.

The pharmaceuticals company also announced restructuring plans that include 3,000 job cuts in the next three years. That reduction represents 4.6% of the company's work force of 65,000. The revamp is aimed at boosting productivity in the face of patent expirations and pricing pressures.
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