Full Transcript of Medimmune’s 3Q05 Conference Call - Prepared Remarks (MEDI)

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Here’s the entire text of the prepared remarks from Medimmune’s (ticker: MEDI) Q3 2005 conference call. The Q&A is here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.


David Mott, President and Chief Executive Officer

Lota Zoth, Chief Financial Officer

James Young, President, Research and Development

Armando Anido, Head of Sales and Marketing

Edward Connor, Chief Medical Officer

Ed Mathers, Senior Vice President


Ian Somaiya, Thomas Weisel Partners

Jeff Roger, Stanford Bear Stearns

Lee Zong, Banc of America

Joel Sendek, Lazard Capital Market

Craig Parker, Lehman Brothers

Elise Wang, Citi Group

Mark Schoenebaum, Bear Stearns

Mack Tufee, Black Diamond Research

Steven Harr, Morgan Stanley

May-Kin Ho, Goldman Sachs

Philip Nadeau, Sg Cowen

Laine Holman, Sigma Capital



Ladies and Gentleman and welcome to the MedImmune 3rd Quarter Earnings Conference Call. My name is Ann Marina I will be your coordinator for today. At this time all participants are in a listen only mode. We will be facilitating a Question and Answer sessions after the presentation of today’s conference. If any time during the call require any assistance please “*” followed by “0” and a coordinator will be happy to assist you. I would now like to turn the presentation over to Mr. Peter Vozzo, Director of Investor Relations. You may proceed.

[Peter Vozzo, Director of Investor Relations]

Good morning and welcome to MedImmune’s Quarterly Conference Call of Investors. This call is being electronically recorded and the copyrighted by MedImmune. No reproductions, transmissions or copies of this conference call may be made without written permission of MedImmune. In this call, members of our senior management will discuss MedImmune’s financial results for third quarter of 2005, as-well-as the Company’s business outlook going forward.

Please note that any statements for the Company’s prospects or future expectations are forward-looking statements. As you know forward-looking statements involve, substantial risks and uncertainties and actual results may differ a materially from expectations. Please refer to the press release issued earlier today that is related to this call and to our filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ.

Today’s press release describing our third quarter 2005 results, may be found at our website at www.medimmune.com in the box marked news, or with the archived press releases on investor relations page. And now, I will handle the call over to the David Mott, MedImmune’s President and Chief Executive Officer.

[David Mott, President and Chief Executive Officer]

Good morning everyone, thanks for joining us again. Let me begin by just remarking, what a quarter! The past quarter and frankly, the entire first nine months of 2005 have been a period of tremendous accomplishment and productivity across all areas of our business, commercial product development, operations, and corporate development. I actually have our entire Executive Committee here with me for the call today, and I must say this is the team I am proud to be part of. We have James Young, President and Research and Development, Armando Anido, head of Sales and Marketing, Edward Connor, Chief Medical Officer, Lota Zoth, Chief Financial Officer and I specifically asked Ed Mathers, who runs our corporate development function to join us this morning to take a figurative bow, because his group has really been bringing home the bacon for us during 2005. After Lota and I review the details of the quarter in our usual fashion for you, the whole team would be available for any questions you might have.

During the quarter, we continued to make progress on many fronts toward our 2009 goals of generating approximately $2 billion in revenues and $2.0 of earnings per share before stock option expense. Worldwide sales of Synagis in the 2005 third quarter increased 66%, from the third quarter of 2004, due to a significant increase in Ex-US inventory stocking by Abbott international in anticipation of the season of strong growth.

Domestic sales of Synagis increased, modestly during the same period as our US distributors built their inventories for the coming RSV season. We entered into an agreement Abbott, to buy them out of their US co-promotion rights for Synagis following the 2005, 2006 RSV seasons. This transaction provides us with substantial strategic operational and financial benefits in the future. We received regulatory approval in Japan for the use of the Synagis in children with hemodynamically significant congenital heart disease, at 8:00 o clock in the morning. We submitted a supplemental biological license application with the US Food and Drug Administration for approval to use our refrigerator stable formulation of FluMist, known as CAIV-T, in preventing influenza in healthy individual 5 to 49 years of age and we submitted an application for a new bulk manufacturing facility in the United Kingdom.

We formalized a cooperative research and development agreement with the NIH, the development investigational pandemic influenza vaccines. Worldwide sales of Ethyol in the 2005 third quarter grew 15% over the same period a year ago. We announced the acquisition of Cellective Therapeutics, a privately held company that will provide MedImmune with three preclinical antibody programs targeting the B-cell antigens CD19, CD20 and CD22, this acquisition will significantly strengthen our growing capabilities in the area of B-cell biology. As you may have noted from our public announcements we closed this acquisition last week. The licensed worldwide rights from Glaxo SmithKline to develop anti-staphylococcal molecule antibodies of which the lead antibodies in phase II clinical development for the prevention of serious blood stream infections caused by Staphylococcus in low birth weighed infants.

We signed a new collaborative agreement with VasGene Therapeutics and in-license technology from Georgetown University, to develop cancer focus molecule antibodies targeting different tyrosine kinases further building on the expanding expertise we have developed in this area with our FA-2 and FA-4 research programs. We filed in an investigation on new drug application to begin clinical studies of our antibody targeting interferon-alpha, focusing on lupus, which for your record keeping we referred to this product candidate as Medi-545 and as you noticed in our press release issued this morning just after we issued the earnings release, we entered into yet a another licensing in collaboration agreement this time with the company called Avidia to develop anticancer products targeting CMET a receptor tyrosine kinase and develop two additional target using a Avidia’s Avimer technology.

Let’s now, dig a bit deeper in the several of the items that I just highlighted above, starting with a few more details on a product sales during the quarter. For the third quarter 2005 worldwide sales of Synagis increase 66% to a $101 million as Abbott international began to build inventory in preparation for the current RSV season. You will recall the last year AI began to stock ex-US inventory in the second quarter, but waited until the third quarter this year to begin the seasonal bill.

Sales to AI were $58 million in the third quarter of this year compared to $19 million last year’s quarter. In the US sales of Synagis for the 2005 third quarter were $43 million up 2% compared to the third quarter of 2004. As most of you already know sales of Synagis occur primarily during the winter months in the 4th and the 1st quarters when RSV is most prevalent in Northern Hemispheres. As such in the second and the third quarters, when we have relatively low sales of Synagis, our reported results can be unusually impacted by year-over-year variations in the international product shipments and US inventory fluctuations.

Through September 30th of this year, our nine-month results include world wide reported sales of Synagis that increased 16% to $624 million compared to $539 million in the same period last year. This growth rate has been driven by the strong ex-US sales to AI that have grown 46% to $98 million and solid US sales that were up 11% to $526 million.

To continue to increase the support Synagis and further enhance pediatrician awareness of the benefits of FluMist, we added 50 new biotech sales professionals to our sales organization over the summer. We now have a total of almost 300 sales professionals focused on pediatrics. This year we expect to introduce the liquid formulation of Synagis by November, after depleting the existing inventory of the lifeline product. The liquid formulation is the product improvement over the current freeze derived formulation that we believe will enhance the convenience for physicians in administering the drug, and as such has the potential to reduce the amount of time young patients will need to wait in doctor’s offices to get their doses of Synagis, which in turn could help produce their exposure to sick children in physician waiting rooms.

And with the help of Abbott international, our distribution partner outside the US we received approval this week from Japan’s Pharmaceutical and Medical Devices Agency for the use of Synagis as a prevention in pediatric patients with hemodynamically significant congenital heart disease. This further expands the label and opportunity for Synagis in our second largest market. Longer term, we continue to focus intensely on building the value of our RSV franchise.

As I mentioned in my opening remarks, we recently amended our US co promotion agreement with Abbott for Synagis. I believe this transaction has tremendous strategic and financial value for MedImmune. First MedImmune will take full responsibility for sales of Synagis in the United States starting in the 2006, 2007 RSV season. We planned to expand our pediatric sales in marketing organization by approximately 125 professionals in advance of the 2006, 2007 RSV season to replace Abbott’s co promotion efforts, which will provide us with strategic and operational advantages, as we prepare for the continued growth of the pediatric infectious disease component of our business.

Key opportunities in this area include the potential launch of CAIV-T our next generation intranasal influenza of vaccine in the fall of 2007, the potential fall 2008 launch of Numax and the recently announce anti-staphylococcal antibody program we acquired some GSK, currently in phase II development. Abbott will continue to co-promote Synagis in US during the 2005, 2006 RSV season and will in fact have been greater direct financial incentives prior to achievement of our common sales goals for the 2005, ’06 season that Medimmune prior to the amendment. They will continue to be directly compensated based on our US sales of Synagis throughout 2006 to ensure our interest continue to be aligned, with anticipated launch of Numax in 2008 it is MedImmune’s intent to replace Synagis in the market place with Numax, assuming Numax is approved by the FDA, given that Abbott does not have a commercial or financial interest that product in the US. This accelerated termination of Abbott co promotion of Synagis, avoid the divergent of our interest as the launch of Numax gets closer.

Finally the transaction with Abbott get substantially accrued to MedImmune earnings beginning in 2007, driven by the elimination of the co promotion commissions, we pay to Abbott, which over the last 12 months already exceeded $200 million per year. Importantly while we continue to be very optimistic about the prospects of the Numax, we are now positioned to achieve our 2009 earnings per share goal of $2.0 before stock option expense, whether we were selling Synagis, Numax, or both.

Currently we are conducting several trials with Numax, our third generation anti RSV antibiotic. In our Pivotal phase III trial for this drug in which we are comparing at Synagis, our goal is to show that, Numax is at least safe and effective as Synagis in reducing RSV hospitalization in high-risk infants. We completed dosing 2,695 patients in the first Northern hemisphere portion of the trial earlier this year, enrolled 605 additional patients in the Southern hemisphere component of the trial in the second quarter and started enrolling the balance of our overall target of 5,750 infants this week.

We expect to have results from the trial available in the second half of 2006. If all things continue to go well and the FDA approves the drug, we continue to believe that we could be in a position to introduce Numax to the market for the 2008, 2009 RSV season. Now let me turn to the update on other trials with Numax. We initiated dosing by 136 children in a phase II study being conducted in the Southern hemisphere, evaluating the safety of re-dosing children with Numax for a second season and anticipate completing dosing by the end of this month. We are planning to start enrolment of the safety trial on the Northern Hemisphere this month, in which Numax will compared to Synagis for the first time in approximately 600 children with hemodynamically significant congenital heart disease.

And finally, we were initiating dosing for the second year of another late stage trial of Numax that we initiated last November, focused on assessing whether Numax can help produce the incidence of RSV hospitalization in full-term native American infants. We enrolled 329 children during the past RSV season and planned to continue enrolment over the next three to four seasons. In addition the measuring the reduction in RSV hospitalization, the studies designed to measure the incidents of wheezing episodes at three years of age, if an impact on really wheezing is absorbed and evaluation of pulmonary function at age 5, will be assessed.

Synagis has been very successful drug and its ability to help reduce serous RSV disease in infants. If the pharmacy we see with Numax in preclinical studies holds true in children. It may be even better than the Synagis in helping to protect the lower respiratory tract and preventing RSV hospitalization. In addition Numax may be able to protect the upper respiratory tract and decrease the incidents and severity of upper respiratory tract infections such as otitis media.

However as usual, we will remind you again that we cannot rule out problems could arise at any time as we advance for Numax program. Next in our RSV franchise is our combination vaccine against RSV imperial influenza of virus type III. As of the end of September we had fully enrolled the 120 patients targeted in double blind Placebo controlled phase I trails to evaluate the safety, tolerability and immunogenicity of our lead candidate vaccine in healthy adults.

Data from a pre-clinical study have showed that our vaccine candidate may induce the protective immune response against both viruses. Let’s now switch to FluMist and CAIV-T and review our long-term strategy regarding this product and recap some of the recent events. First I‘d like to emphasize again that as I have on previous investor calls, that the current situation for the flu supplying, for this season and in the future years is complex and very difficult to predict. Our long-term plans for FluMist are to establish it as a better influenza vaccine preferred by pediatricians.

To get there we must first show that refrigerator-stable CAIV-T is biologically equivalent to the currently approved frozen formulation. To that end we successfully demonstrated equivalent immunogenicity of CAIV-T and FluMist in our Bridging Study. And we recently submitted a supplemental biologic license application with the FDA for approval to use CAIV-T in preventing influenza in healthy individuals 5 to 49 years of age. If we obtain FDA approval we can then eliminate the difficult storage conditions that currently hampered the handling of FluMist after it is shipped to customers. We believe that this will provide greater accesses to the product in a currently approves age range of healthy people between 5 and 49. In addition in August we submitted an application to the FDA for a new state of the art bulk vaccine manufacturing facility in the United Kingdom. This facility, which incorporate several improvements to the manufacturing process, will have a capacity of upto 15 million trivalent bulk doses per month, with approximately 90 million trivalent doses per influenza manufacturing season.

Construction and validation were substantially completed in Spring 2005 and the FDA actually completed it’s site inspection this week. Until regulatory approval of this new bulk facility is obtained, MedImmune will continue bulk production and FluMist in nearby leased facility. The Company’s existing blend/fill/finish vaccine production facility in Pennsylvania has undergone improvements and modifications to increase finished product capacity to approximately 35 million trivalent doses for the influence disease. Any decision to further increase blend/fill/finish capacity will be driven by feature product demand.

Next we must expand the label, to include children under the age of 5 and to show that our product is better helping to reduce influenza illness in young children. If the clinical data that support CAIV-T, is better than the shot, pediatricians we’ve spoken with tell us that they would likely recommend the use of the intranasal vaccine, for most of their patients. Towards this goal, we continue to expect unblind our Pivotal phase III study this quarter. This study is designed to compare the safety in efficacy of CAIV-T directly to the injectable flu shot in nearly 8,500 children, between the ages of 6 months and 59 months.

We do know that we have documented more than 600 cases of culture confirmed flu in the overall study population. Once we’ve unblinded the study, we expect to share with you at least top line results, sometimes soon thereafter as we get data ready for submission to the FDA, which we still target to be in the second quarter of 2006.

What we are hoping to show from the study is that CAIV-T is a differentiated flu vaccine, one that would be perceived as better by pediatricians and top(ph) leaders, they are preventing influenza then the traditional injectable vaccine particularly in children. We will look at efficacy against vaccine matched and mismatched strains and balance that against the safety profile of the product, to determine with the recommending bodies in pediatricians would consider better. If it is not a differentiated product, we would not consider it good fit with our portfolio and would evaluate our alternatives, such as out licensing it or selling it.

In addition to our two primary goals of FluMist and CAIV-T we are also strategically planning for the expansion of the label to include adults 50 years of age and older and to collect additional safety data in certain high risks populations, that will hopefully show that the live attenuated influenza vaccine is safe for use and immune compromised individuals and other healthy people beyond the healthy population. Thus far 42 FluMist and CAIV-T trails involving 64,000 subjects have been completed in children down to 6 weeks of age and adults up to 98 years of age and we have seven clinical trials underway involving nearly 70,000 additional subjects.

Ongoing clinical trials include a large multiple season safety surveillance trial being conducted in the Kaiser system. A shedding and immunogenicity trial on the individual ages 5 to 49 years old, a trial designed to study the impact of vaccinating large numbers of school age children, and the affected areas on the community, and a herd immunity trial designed to look at the effectiveness of immunizing large numbers of children to community based mass vaccination outreach efforts.

Our commercial focus of FluMist continues to be and trying to expand the usage of the current formulation of the vaccine during the development cycle of CAIV-T, which we hope to deliver to the market in 2007. We then fine tuned our efforts to built top leaders and public policy support and invested in medical education, addressing the scientific rationale for a live attenuated intranasal vaccine, including the vaccines safety in efficacy as well as potential protection against drifted strains. We believe significant progresses has been made, for example new recommendations from the Centers for Disease Control and Prevention Advisory Committee on immunization practices help and encourage the use of FluMist last season among healthcare workers, allowing it be used in more than 900 hospitals across the US.

In this season, the ACIP has included in its priority influenza immunization recommendations, that FluMist may be administered at any time for vaccination of non-pregnant healthy persons, age 5 to 49 years including most healthcare personal. Other persons in close contact with groups at high-risks, for influenza related complications and others desiring protection against influenza. FluMist is therefore not subject to the cheer recommendations for prior use of trivalent inactivated influenza vaccine prior to October 24th.

Another aspect of our commercial focus, is to increase the use of FluMist among school age children by expanding the number of pediatric practices utilizing FluMist. Towards this end a few things are new for the 2005, 2006 influenza season. First FluMist has been included in the federal governments of vaccines with children program. For healthy children aged 5 to 18 years who lack sufficient healthcare coverage. Second, as the part of FluMist for schools, public health initiatives, MedImmune is providing the vaccine to several school districts across the country. And thirdly, at least one state, New Jersey has seen the importance associated with vaccinating all school age kids, with its recently issued public health recommendations, that all children in this age range should be protected against the flu.

We began shipping FluMist in the August, actual I think it was August 31st and sold approximately 800,000 doses during the 2005, third quarter resulting in revenues of about $10 million. As you may recall we did not begin shipping FluMist last year until the beginning of the 4th quarter. I mentioned earlier that the Flu business is full of complicities that seemingly change with each new season. At the beginning of this year, we gave guidance that we would expect a modesty increase in product sales for 2005 has comparative to 2004 product sales of $48 million.

Our forecast was based on Chiron not being a factor in the market place, assuming that if they back it all, they would be back late in the year and with a relatively small amount of product. But, we don’t know right how Chiron’s recent announcements will impact over all flu vaccines supply or demand for FluMist, we do have 2.5 to 3 million doses of available for commercial supply of this season.

Now let me briefly mentioned, our recently finalized agreement with the National Institute of Health to develop pandemic influenza vaccines and the intellectual property we had assembled around reverse genetics. As we announced in September, under a cooperative research and development agreement we will work together with the leading researches of the NIH to produce and test versions of MedImmune’s attenuated live intranasal influenza vaccine for use against different types of potential pandemic influenzza of strains, including one based on H5 and 1. In fact, an initial clinical trial with our vaccine technology has already been conducted with the vaccine against another Avian Flu strain H9 and 2 and results are currently been analyzed.

We will use our propriety reverse genetic technology to develop the pandemic vaccines. This technology allows us to alter potentially harmful portions of influenza viruses, such as the hemoglobin protein of the H5 and 1 virus strain and rapidly produce attenuated vaccines strains, thereby accelerating the vaccine production. In the interest of public health, we’ve offered licenses for reverse genetic technology to US and international health authorities and other vaccine manufactures, developing pandemic influenza vaccines. It is important to note that MedImmune owns an exclusively licenses certain patterns and technology in the field of common influenza production and reverse genetics.

Lets move to Ethyol. In the third quarter of 2005, worldwide sales Ethyol were $25 million up 15% compared to $21 million reported in the third quarter of 2004. Wholesaler and distributor inventory levels at the end of the third quarter 2005, were down 42% compared to the year ago period and we continue to anticipate that sales would be returning to growth consistent with underlying demand. As I mentioned on previous conference calls, a number of market conditions and disruptions negatively impacted sales of Ethyol in 2004, both in the US and the rest of world. We continue to build on our efforts started last year and we are still anticipating returning to an annual growth pattern in 2005. On the clinical development front for Ethyol, we are progressing on two clinical studies that possible expand which gives a new indication.

The first is the phase II trial evaluating Ethyol’s ability to help reduces esophagitis in patients with non-small cell lung cancer. We’ve enrolled 127 patients in this study and expecting annualized data from the first 100 patients shortly. If the data demonstrate positive trends in absence of any safety issues, we planned to expand enrolments to approximately 300 patients.

The second study is a phase I, II trial of evaluating Ethyol’s effectiveness in reducing toxicities to certain increase chemotherapy regiments on patient’s with acute myelogenous leukemia in order to improve tumor outcomes. Switching over to Bitoxin (ph) I would like to update you on our progress in our studies and melanoma and prostate cancer patients. During the third quarter we were due to the full one year data from a 112 patient melanoma trial with our oncology advisory board, as well as the ongoing analysis from additional preclinical and biomarket studies with Biotoxin. The advisory board concluded that while there is evidence of biological activity, it is uncertain whether these results can be confirmed in phase III trial.

Further we’ve also tried to balance the cost of the large phase II trial in melanoma against what we view is a relatively small market opportunity for this particular cancer. Therefore we have decided to wait for the final data from the phase II pro-state cancer trial and completion of bio market study in melanoma to make a more informed decision regarding further studies in melanoma patients. We completed enrollment in 126 patients phase II prostate cancer study in April under the amended protocol and anticipate annualizing the primary end point data from the study by the second quarter of 2006. Before I turn the call of the Lota I would like to briefly mention a few other projects in our pipeline.

During the third quarter of 2005, we continued to enroll patient’s in second phase I study with subcutaneous administration with our anti IO-9 antibody, that we hope to develop that as an asthma therapy. We completed a phase I safety in pharmacokinetic study with this antibody intravenously administered the healthy adult volunteers earlier this year. We recently announced that, we closed in the fourth quarter the acquisition of Cellective Therapeutics, this transaction provide us with pre clinical antibody program is targeting important B-cell antigens and expands our capability in B-cell biology an area we expect to generate significant new therapeutic opportunities in the future.

During the third quarter, we announced that we license worldwide rise from GSK to develop certain staphylococci molecule antibodies. The lead antibodies in phase II clinical development for the prevention of serious blood stream infection cause by staphylococcus in low birth weight infants. In addition we in-licensed technology from George Town University for the development of molecular antibodies targeting, anaplastic lymphoma kinase, a member of the insulin receptor family of tyrosine kinases, we initiated the collaborated agreement with VasGene Therapeutics that developed cancer progress antibodies targeting in normal member of the subfamily of receptor tyrosine kinases FB-4, as well as Ligand F, B2. And we announced this morning that we entered into a licensing and collaboration agreement with the Avidia to develop anticancer products targeting cMET a receptor, tyrosine kinesis and to develop additional targets using a Avidia’s Avimer technology.

Last week we filed an investigational new drug application to begin clinical studies for MEDI 545 or fully human antibody targeting interferon-alpha. Preclinical data indicate that levels of interferon-alpha are elevated in many patients with active systemic lupus and other autoimmune disorders and may be associated with disease activity.

And finally we are excited to about the results that Merck presented at the Infectious Disease Societies of America annual meeting earlier this month, from their ongoing phase III study with their HP candidate vaccine showing 100% success against cervical pre cancers and noninvase of cervical cancers. We believe those results along with the results from GKSs program validity the research that was conducted at MedImmune in the mid to late 1990’s. We look forward to LA filings from both Merck and GKS for the HPV vaccine candidates in 2005 and 2006. And expect these important new vaccines begin to contribute to a significant stream of royalty and milestone income MedImmune in the future. This time I will hand over the call to Lota for more detail discussion of our financial results.

[Lota Zoth, Chief Financial Officer]

Thank you David and good morning to all. Now at the time in our call today to discuss the financial results for the company, for the third quarter of ended September 30th. As usual David will take you through the highlights of our product sales, so let just recap couple of points. Our worldwide sales of Synagis were $101 million in the third quarter of 2005, compared to $61 million in the third quarter of 2004. As David mentioned, with relatively low seasonal sales for the quarter, the underlined trends were impacted, by the timing of the international product shipment. Reported sales of Abbott international were $58 million in the quarter up from $19 million in the last year’s quarter. Sales of Synagis in the US increased 2% in the quarter to $43 million.

As we mentioned before last years preseason inventory bill in resulting international sales to AI occurred principally in the second quarter while this year’s stocking occurred largely in the third quarter. I would also I like to point out that other revenues of $8 million in the third quarter of 2005 included revenue from AI in consideration for the ex-US Numax distribution rights under the terms of our amended distribution agreement. I would now like to briefly comment on our bottom line results. Our third quarter 2005 net loss was $ 64 million or $0.26 per share. This is comparable to last year’s reported third quarter results, which was a net loss of $65 million or $0.26 per share. We recently exclude the charges taken in both years associated with the termination of the Voice agreement, as described in our press release issued earlier today, the net loss for the 2005 third quarter, will be $61 million or $0.25 per share, compare to a net loss of $55 million or $0.22 per share in the 2004 third quarter.

I do admit if I did not remind you that historically our quarterly results to reflect the seasonality of Synagis, with the first quarter being the most profitable quarter. Further our quarterly spreads of earnings per share are also impacted by the timing of R&D expenses, and the impact of FluMist on overall gross margin. I’ll now walk you through our expenses for the third quarter of this year.

Let’s begin with gross margin, as the press release today describes, our overall gross margins on product sales for the third quarter was 67%, compare to 56% in the third quarter of 2004. Excluding the impact of FluMist gross margin of 72% in the 2005 third quarter were higher than gross margin of 69% in the 2004 third quarter, primarily due to the impact of higher international sale of Synagis in 2005. Also aiding margins in the third quarter was the impact of reducing approximately $5 million in past royalty overpayment on Synagis. And while FluMist is currently continuing to exert downward pressure on overall gross margins, the impact was lessened for the 2005 third quarter due primarily to reduce production cost and our expectations for being able to utilize bulk inventory produced this season for next year’s production. For the first nine months of 2005, gross margin excluding FluMist was 75%, compared to 74% for the first nine months of 2004.

Let’s move on to the Research and Development. R&D expenses for the third quarter of 2005 increased to $119 million up 63% compare to the third quarter of 2004 and driving year-to-date R&D expense to $266 million. That’s for this year-to-date R&D stand is approximately 36% of year-to-date product sale. The growth in R&D expenses, in this year’s third quarter compare to last year is due to a higher level of activity from both new and ongoing collaboration agreement and clinical and pre-clinical research and process development activities.

Included in the third quarter of this year, were up fronties and milestone payments under licensing agreement and research collaborations totaling approximately $36 million. Compared to up frontiers and milestone payments, of approximately $1 million in last year’s third quarter. The 2005 third quarter, includes collaboration for GSK for the Antisep antibody and VasGene Therapeutics for the EphB4 and EphrinB2. In addition we had ongoing expenses related to the continuation of several later stage Numax studies including the Pivotal Phase III studies David had discussed earlier.

SG&A expenses for the third quarter of 2005 increased $81 million from $68 million in the third quarter of 2004, primarily due to higher selling cost largely driven by the expansion of the pediatric commercial organization. Income taxes for MedImmune are a complex area, given our tremendous growth including acquisition and the seasonality of our business. That complexity was clearly demonstrated in the effective tax rate in the third quarter and for the nine-month period. Let us start with the quarter. The effective tax rate used to calculate the benefits from income taxes on the pre-tax laws reported for the third quarter of 2005 was 29%, compared to 37% in last year third quarter. As outlined in our press release today, the Company identified and made a correction to the prior accounting for the reversal of valuation allowances that occurred in relatively small amount since 2002. The total amount of the correction was $5 million. Tax related evaluation allowances are reversed, if it is determined that they are no longer needed, as this was the case when we were able to utilize, certain income tax carry forwards acquired from Aviron in 2002 to offset taxable income in the company’s tax return.

The proper treatment for the reversal of these particular evaluation allowances would have been to reduce goodwill, rather than to reduce income tax expense. Therefore the $5 million correction made during the third quarter, had the impact of lowering the effective tax rate for the quarter and also reducing goodwill.

Remember that while we had a taxable loss for the third quarter, the seasonality of our results are such that for the nine months ended September 30th we had comparatively lower amount taxable income, reflecting a strong first quarter of earnings followed by seasonal losses in both the second and third quarters. As such, the $5 million correction actually had a more significant impact on the effective rate for the nine-month period driving it up to 65%, compared to 34% last year.

We ended the third quarter 2005 with cash and marketable securities at $1.4 billion, compared to $1.7 billion at December 31st 2004. It’s important to know that the third quarter is the seasonal low point in cash balances, prior to the ramp up of correction related to Synagis and FluMist. This decreases also due to payment related the average to the amended Abbott agreement up front payments related to collaboration activities and the purchase of approximately $106 million of our common stock including 1.4 million shares purchased at the cost of $38 million in the third quarter. To the end of the third quarter 2005, we’ve repurchased $366 million of common stock under our $500 million share repurchase program that was authorized in July of 2003.

I would also like to point out that our fitness disclosures in the press release, we issued this morning has information related to the amended US co-promotion agreement with Abbott for Synagis. In connection with its transaction the company recorded an intangible asset of $360 million, which represents the estimated fare value of the co-promotion rights as determined by the sum of probable additional payments to be made under the amended agreement. The intangible asset will be amortized into SG&A proportionally with Synagis sale, while active sales and marketing programs continue Synagis in the United States, intangible anticipated launch of Numax. Included in SG&A for the 2005 third quarter, is amortization expenses of approximately $4 million associated with the intangible assets.

In the third quarter MedImmune made cash payments totaling $70 million to Abbott. As we enter into the fourth quarter, let me comment a bit on our full year guidance. As a remainder on February 3rd 2005 MedImmune provided its overall financial guidance for 2005. On August 31st the company reduced its earnings per share guidance by $0.10 to $0.11 to a range of $0.24 to $0.30 based upon the revised co-promotion agreement with Abbott that had the impact in 2005 of primarily increasing SG&A cost.

On September 14th 2005 the Company further updated its earnings per share guidance with the acquisition of Cellective Therapeutics. This transaction, which closed last Friday will result in a one time non-detectable IPR&D charge in the fourth quarter that is expected to reduce, our 2005 diluted earnings per share by approximately $0.20 to range of $0.4 to $0.10. The effective tax rate for the year is expected to be approximately 94%. So, while we see to exclude the impact of the non-detectable IPR&D charge for Cellective the effective rate would be approximately 43%. Today MedImmune is reconfirming the guidance given in February 2005 for revenues, gross margin and R&D expenses and reconfirms the revised guidance given in September 2005 for earnings per share.

Let me mention the couple of other items that had the potential to negatively impact our outlook for the remainder of the year. The first is, that we are continuing our aggressive business development efforts, which may result in upfront payment as we seek ordnance or own internal capabilities with external investments in our pipeline for the goal of bringing Numax, CAIV-T and two additional products to market over the five-year planning horizon through 2010. Secondly to reiterate a point David made earlier the current Flu environment makes it difficult to estimate demand and predict with certainty the financial impact of FluMist sales in the fourth quarter, with that I’ll turn the call back to David for his closing comments.

[David Mott, President and Chief Executive Officer]

I would like to close by emphasizing that we’ve had an extraordinarily productive quarter and year thus far in 2005. We’ve made substantial progress toward achieving our long-term goals. The buyout of Abbott, US co-promotion rights for Synagis, the increased economics we receive to our expanded Ex-US distribution agreement with Abbott and the out-licensing of our HPV vaccine technology to both Merck and GSK, together have the potential to substantially drive the growth in our financial results over the next several years. The maturation of our late stage R&D pipeline and the substantial expansion of our overall R&D portfolio, promises to drive our long return growth. And we are clearly making the investments required to build a solid foundation for year business, as evidence by the recruitment more than 30 new Directors and Vice Presidents over the past 12-months, the construction of the new pilot lab and a new bulk vaccine manufacturing facility and the implementation of new technology initiatives, such as the corporate wide electronic document management system and a web based performance management system.

We are intensely focused on building a world-class biotechnology company and I am pleased to report to you that, thus far in 2005 we are succeeding. I would like to thank our employees for their dedication and excellence and thank our shareholders for their continued support, now we will be happy to field your questions, please limit yourselves to one question each out of courtesy for those in the queue behind you, operator.

Question-and-Answer Session



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