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Medimmune Case Study

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MedImmune Case Study
Background
MedImmune is dedicated to helping patients live better lives through advances in science and medicine. Hundreds of thousands of patients have benefited from their products, which are designed to treat or prevent infectious diseases, cancer and inflammatory diseases (Wikipedia, 2012). Their extensive research and development efforts are focused on these same areas.
MedImmune acquired FluMist when it purchased Aviron in 2002. FluMist is Aviron’s lead product for development and commercialization, it’s a live virus vaccine delivered to the patient as a nasal mist for the prevention of influenza (Wikipedia, 2012).

Key Issues
The board of MedImmune believed that Aviron was a good strategic fit but didn’t …show more content…

The problems can be grouped into two categories: problems with estimating cash flows and problems with estimating discount rates. How long will it take to get a positive earning? What number should the discount rate be?
Secondly, although the company took a long time before the introduction of the vaccine FluMist, the nasal spray flu virus has been unable to obtain FDA approval for the vaccination of young children and the elderly. FluMist also exists the problem of poor sales and difficult storage. MedImmune paid $ 1.5 billion in 2001 after the acquisition of California Aviron in launching of FluMist. At that time, MedImmune predicted that FluMist would become a "blockbuster" drugs. But in fact, FluMist is quite poor performance on the market. Poor estimation on potential customers and market growth should be the main reasons for the failure.

Recommendation
The MedImmune Company expected that the transaction will be completed in the first quarter of 2002. The transaction will write off the company's 2002 earnings levels and reach breakeven point in 2003; then the level of its cash surplus will significantly grow (MedImmune, 2001). But from both MedImmune and Avirons’ statement of operations we can see that huge gap of negative earning will not be covered in 2003. From the news afterwards we know that according to the agreement reached by the two companies, MedImmune used 1.075 shares of outstanding stock in exchange of one

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