MedImmune Inc. on Monday agreed to buy vaccine maker Aviron in a bid to add FluMist, Aviron's promising treatment for influenza, to its own portfolio of drugs for infectious diseases.

Gaithersburg, Maryland-based MedImmune will exchange 1.075 of its shares for each Aviron share. Based on MedImmune's closing stock price of $38.83, the offer values Aviron at $41.74 a share, or about $1.3 billion. 

The transaction is one of the largest ever between two biotechnology companies and signals the strength biotechs are gaining at the expense of pharmaceuticals companies, which can no longer cherry pick hot new products from cash-starved biotechs. 

"I think you're going to see more of these biotech-to-biotech kind of mergers and acquisitions," said Bill Tanner, an analyst at S.G. Cowen Securities. "They're at the stage where they can put some real horsepower behind their commercial operations." 

MedImmune's offer originally valued Aviron at $1.5 billion, based on MedImmune's closing share price of $44.10 on Friday. But MedImmune's shares fell $5.27, or 11.95 percent, to close at $38.83 on Nasdaq, after the company said the acquisition will hurt earnings in 2002. 

MedImmune said it expects to earn 65 cents to 70 cents a share in 2002. That compares with an average estimate of $1.02 by analysts polled by Thomson Financial/First Call. 

"It's tough for the market to react positively when it's dilutive in the short term," said Bill Tanner, an analyst at S.G. Cowen Securities. "But we look for this to provide earnings in the out years that we didn't see coming in our earlier models." 

MedImmune said that over the long term, it expects annual growth of 25 percent for revenues and 30 percent for earnings. 

For the nine months ended in September, Aviron reported revenues of $11 million, while MedImmune's revenues were $326 million for the same period. 

Aviron shares rose $4.37, or 11.79 percent, to $41.42 on Nasdaq, buoyed by MedImmune's statement that it expects FluMist to rake in more than $1 billion in annual sales in the United States alone. 

Aviron and MedImmune hope FluMist will be on the market in time for the 2002 flu season — that is, by September 2002. If not, they think it 90 percent certain it will be on the market by 2003. 

The nasal spray still has to be approved by regulators. In July an advisory committee recommended the U.S. Food and Drug Administration reject the drug based on concerns over its safety. Aviron says it expects to file a letter responding to the concerns by the end of this year. 

"We would expect them to review it over the first two quarters of next year," said Aviron Chief Executive C. Boyd Clarke. "We do not believe we will have to do additional clinical trials." 

MedImmune wants FluMist to complement its main product, Synagis, the first artificial antibody successfully developed to combat infectious diseases. The drug helps prevent respiratory tract diseases in children. 

The idea, MedImmune Chief Executive David Mott said, is to boost MedImmune into "the elite group of biotechnology companies that have more than one product with greater than $1 billion in annual sales potential." 

Aviron is in a co-promotion pact with American Home Products Corp.'s Wyeth-Lederle Vaccines division for FluMist in the United States. The pact calls for Wyeth to record all sales of the product, and Aviron to record manufacturing revenues, milestones and royalties on Wyeth's sales.