MedImmune To Continue FluMist Development; Wyeth Remains Undecided

MedImmune is confident it can successfully develop FluMist on its own should Wyeth decide to back out of the companies' partnership for the intranasal flu vaccine.

"We are confident in our ability to execute on the plan for FluMist with or without Wyeth, and look forward to their decision," MedImmune CEO David Mott told investors on a conference call March 1.

While MedImmune pledged its continued commitment to building FluMist's market penetration, the company appeared to be preparing investors for the possibility that Wyeth would back out of the deal. Wyeth's decision is expected in the next few weeks.

Mott suggested that the impact of Wyeth pulling out of the deal would be neutral - or potentially positive - to FluMist's development. "We estimate that MedImmune's net present value on FluMist is roughly equivalent with and without Wyeth," Mott said.

"While Wyeth is a capable partner in pediatric vaccines and influenza, the speed and clarity of decision making with one party would certainly be enhanced."

Noting that FluMist will not start to be commercially successful until 2007, Mott suggested that the timeline may not allow for much return on investment for Wyeth. U.S. rights to FluMist will revert back to MedImmune in 2014.

"The equation for them is a much more challenging one, which is to evaluate whether given the additional investment that's required to get the brand positioned properly and moving forward, whether they have enough time in the relationship to then recoup a meaningful return on that investment," Mott said.

"We think it's going to be a good product, [but] we think Wyeth has some contractual constraints that could make it illogical for them to stay in, but that is a decision for them to make."

MedImmune does not plan to seek another U.S. partner for FluMist if Wyeth backs out, Mott noted.

In January, both companies said they were reconsidering whether to go forward with FluMist following a disappointing first season on the market (¹ (Also see "MedImmune FluMist Sales Of $30 Mil. Expected; 50% Return Rate Possible" - Pink Sheet, 2 Feb, 2004.), p. 10). The companies will destroy 4 mil. of about 5 mil. doses produced for the 2003-2004 season.

MedImmune is relying on a refrigerator-stable formulation and an expanded indication for future growth (² , p. 31). The currently approved live, attenuated vaccine must remain frozen and is indicated only for healthy five to 49 year olds (³ (Also see "FluMist 60,000-Patient Phase IV Safety Study To Be Conducted With Kaiser" - Pink Sheet, 23 Jun, 2003.), p. 3).

MedImmune forecasts that the new formulation and broader indication will be in place for the 2007-2008 flu season. Until then, FluMist is not expected to "contribute meaningfully" to MedImmune's revenue growth.

MedImmune expects $45 mil.-$55 mil. in FluMist revenue for 2004, including sales-related revenue from the 2003-2004 season. The firm recorded $46 mil. in non-sales related revenue in 2003.

Although no final decisions on pricing or production levels have been made, "the number of doses we expect to produce in 2004 will be small, which unfortunately makes each dose quite expensive," Mott said. As a result, MedImmune's gross margin on FluMist will be approximately 67%-68% in 2004.

MedImmune plans a fresh start with the vaccine. "We now consider FluMist, in effect, a Phase III project, with a substantial amount of proven safety and efficacy evidence already obtained," Mott told investors.

"Our focus from 2004 through 2006 will be on developing an enhanced product profile and on overcoming the marketplace obstacles that negatively impacted the launch this past season."

Planned studies include (1) a bridging study to compare the frozen formulation with the refrigerator-stable product (CAIV-T); (2) a 2004-2005 season efficacy study comparing CAIV-T to the injectable vaccine; (3) a 2005-2006 season label expansion study for 50 to 64 year olds; (4) and two safety trials in pediatric HIV and chemotherapy patients.

Wyeth also recently completed two pediatric studies, both comparing the refrigerator-stable version of FluMist to the injectable vaccine.

In study 514, FluMist demonstrated a 53% lower incidence of culture-confirmed influenza versus the inactivated vaccine in 2,200 children between six months and 71 months with a history of respiratory infection. Study 515 showed a 35% reduction of flu cases in 2,200 six to 17 year olds with asthma.

There was no statistically significant increase in wheezing episodes in either study, MedImmune said. FDA had expressed concern about exacerbated wheezing in young children in data submitted for the initial indication.

"Over the next several years, we believe FluMist will emerge as a preferred influenza vaccine, particularly in the pediatric population," Mott said.

"Over the next few years, we're going to be able to convert the fact that it's a live, attenuated virus from a negative last season into a positive. Because there are reasons why that makes it a better product."

In addition to the narrow indication, sales during the 2003-2004 season were hampered by misperceptions about the risks of a live vaccine, MedImmune said. The issue is being addressed in additional trials and in clarified regulatory recommendations.

"One of the big issues is this whole transmission issue," MedImmune R&D President James Young, PhD, acknowledged. A study beginning this summer will determine how long the virus continues to replicate in the nose.

The Centers for Disease Control & Prevention's Advisory Committee on Immunization Practices clarified FluMist guidelines during a recent meeting.

Recommendations expected in April will state that individuals receiving the live, attenuated vaccine only pose a threat to severely immunocompromised patients and that FluMist recipients should refrain from contact with these patients for seven days rather than the previously recommended 21 days.

MedImmune also emphasized its pipeline activity outside of FluMist; the company expects to introduce at least two new products by 2009.

Four products are expected to enter Phase III by 2005: the CAIV-T formulation of FluMist; Vitaxin , a monoclonal antibody in Phase II for rheumatoid arthritis, psoriasis, prostate cancer, and metastatic melanoma; a human papilloma virus vaccine licensed to GlaxoSmithKline; and Numax , a follow-on to the anti-RSV product Synagis (palivizumab).