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MEDIMMUNE, INC. FORM 10-K TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20022003
Commission File Number: 0-19131000-19131

MEDIMMUNE, INC.
(Exact name of registrant as specified in its charter)

35 West Watkins Mill Road
Gaithersburg, Maryland 20878
(Address of principal executive office)
(Zip Code)

Registrant's telephone number, including area code:(301) 417-0770

Securities Registered pursuant to Section 12(b) of the Act:None

Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K oý.

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý    No o

        Aggregate market value of the 249,222,944250,941,192 shares of voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price on June 30, 20022003, was $6.6$9.1 billion. Common Stock outstanding as of February 25, 2003: 251,521,17229, 2004: 248,227,030 shares.

Documents Incorporated by Reference:

        Portions of the registrant's definitive proxy statement for the annual meeting of stockholders to be held May 22, 200320, 2004 (Part II and III).

MEDIMMUNE, INC.
FORM 10-K
TABLE OF CONTENTS

Synagis, CytoGam, Ethyol, RespiGam, NeuTrexin and NeuTrexinVitaxin are registered trademarks of the Company. Numax Vitaxin and FluMist are trademarks of the Company.

FORWARD-LOOKINGFORWARD LOOKING STATEMENTS

        The statements in this annual report that are not descriptions of historical facts may be forward-looking statements. Those statements involve substantial risks and uncertainties. You can identify those statements by the fact that they contain words such as "anticipate," "believe," "estimate," "expect," "intend," "project" or other terms of similar meaning. Those statements reflect management's current beliefs, but are based on numerous assumptions, which MedImmune cannot control and that may not develop as MedImmune expects. Consequently, actual results may differ materially from those projected in the forward—lookingforward-looking statements. Among the factors that could cause actual results to differ materially are: seasonal demand for and continued supply of the Company's principal product, Synagis; whether FluMist receives clearance by the U.S. Food and Drug Administration and, if it does, whether it will be successfully manufactured and launched at a favorable price; availability of competitive products in the market; availability of third-party reimbursement for the cost of our products; effectiveness and safety of our products; exposure to litigation, including claims relating to intellectual property, product liability and government or private pricing or reimbursement; foreign currency exchange rate fluctuations; changes in generally accepted accounting principles; growth in costs and expenses; the impact of acquisitions, divestitures and other unusual items; changes in equity markets affecting the value of the Company's equity investments; andare the risks, uncertainties and other matters discussed below under "Risk Factors" and elsewhere in this annual report and in our other periodic reports filed with the U.S. Securities and Exchange Commission.report. MedImmune cautions that RSV disease occursand influenza occur primarily during the winter months; MedImmune believes its operating results will reflect that seasonality for the foreseeable future. MedImmune is also developing several products for potential future marketing. There can be no assurance that such development efforts will succeed, that such products will receive required regulatory clearance or that, even if such regulatory clearance wereis received, such products wouldwill ultimately achieve commercial success. Unless otherwise indicated, the information in this annual report is as of December 31, 2002.2003. This annual report will not be updated as a result of new information or future events.

        We make available free of charge on or through our internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. Our internet address is http://www.medimmune.com.

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PART I

ITEM 1. BUSINESS

        MedImmune, Inc. (together with its subsidiaries, "MedImmune" or "the Company"the "Company") is a global biotechnology company that uses advances in biological sciences to discover, develop, manufacture and marketcommercialize products that treat or prevent infectious diseases, immune system disorders and cancer. The Company's core competencies are in the areas of monoclonal antibodies and vaccines.

        MedImmune was foundedFounded in 1988, andMedImmune is headquartered in Gaithersburg, Maryland.Maryland and has three primary operating subsidiaries: MedImmune Oncology, Inc., MedImmune Vaccines, Inc. and MedImmune Ventures, Inc. The Company established an oncology subsidiary (MedImmune Oncology, Inc.) following the acquisition of U.S. Bioscience, Inc. in November 1999. In January 2002, MedImmune acquired Aviron, a California-based vaccines company for $1.6 billion, which became the Company's vaccines subsidiary (MedImmune Vaccines, Inc.). In July 2002, MedImmune also created a venture capital subsidiary (MedImmune Ventures, Inc.).

        The Company markets Synagispromotes three main products: Synagis® (palivizumab), Ethyol (amifostine), and CytoGam (cytomegalovirus immune globulin intravenous (human)). Synagis is an antibody that provides the immune system with an increased abilityFluMist™ (Influenza Virus Vaccine Live, Intranasal) to prevent infection withtwo common respiratory syncytial virus ("RSV"), the leading cause of lower respiratory tract infectionsinfectious diseases; and pneumonia in infants and children worldwide. Ethyol is a product that reduces the unwanted impact of certainEthyol® (amifostine) to reduce undesired side effects of chemotherapycertain anti-cancer chemo- and radiation therapy when usedradiotherapies.

        MedImmune operates five facilities in the United States and Europe to treat certain typesmanufacture one or more components of cancer. CytoGam is a blood plasma product that provides the immune system with an increased ability to prevent infection with cytomegalovirus ("CMV"), a herpes virus that contributes significantly to morbidity and mortality in organ transplant patients. MedImmune marketseach of these products and promotes these products in the U.S. through its own U.S.-based specialty sales and marketing organization. To support these efforts,In addition, the Company has also entered into certain co-promotion agreements with other companies to market itsmanufacture certain components of these products, promote these products outside of the U.S. and support the Company's promotional efforts in certain geographical regions, including the United States.U.S.

        MedImmune also has clinical, research and development staff in the U.S., through which it is developing a pipeline of product candidates for potential commercialization. The Company's product candidate nearest to market is FluMist, an influenza vaccine delivered as a nasal mist, which as of February 28, 2003 was under review by the U.S. Food and Drug Administration ("FDA"). In addition to its internal efforts, the Company has established clinical, research, development and developmentcommercialization collaborations with other companies and organizations for the development of potential products.

        MedImmune operates five commercial manufacturing facilities in the U.S. and Europe. These include a biologics facility in Frederick, Maryland (Frederick Manufacturing Center or "FMC"); a fill and finish facility for Ethyol and NeuTrexin in Nijmegen, the Netherlands; a pilot manufacturing facility in Gaithersburg, Maryland; a FluMist fill and finish plant in Philadelphia, Pennsylvania; and a FluMist bulk supply facility in Speke, England.organizations.

Marketed Products

Synagis

        Synagis is a humanized monoclonal antibody approved for marketing in June 1998 by the FDAU.S. Food and Drug Administration (the "FDA") for the prevention of serious lower respiratory tract disease caused by RSVrespiratory syncytial virus ("RSV") in pediatric patients at high risk of acquiring RSV disease.disease, such as premature infants. RSV is the most common cause of lower respiratory tract infections in infants and children worldwide. Healthy children and individuals with adequate immune systems often acquire a benign chest cold when infected with RSV. In contrast, certain high-risk infants such as premature infants and children with chronic lung disease, ("CLD," also known as bronchopulmonary dysplasia or "BPD"("BPD"), are at increased risk for acquiring severe RSV disease (pneumonia and bronchiolitis), often requiring hospitalization.

        Patients In 2003, based on additional clinical trial data, the FDA approved expansion of the definition of high-risk patients to include children with certain types ofheart diseases present at birth (hemodynamically significant congenital heart disease ("CHD") are also believed by the Company to be at high-risk of RSV disease. In 2002, MedImmune completed a four-year, double-blind, placebo controlled, Phase 3 clinical study of Synagis in CHD patients under the age of two. In this study,

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Synagis appeared to be safe and effective in preventing RSV-related hospitalizations in young children with CHD. The study was conducted at 76 centers in North America and Europe and involved 1,287 children who were randomized to receive five monthly injections of either Synagis or placebo during the RSV season. Data from this study were presented at the American Academy of Pediatrics 2002 National Meeting in October 2002 and submitted to the FDA in the form of a supplemental Biologics License Application (sBLA) in December 2002.).

        Synagis is co-promotedmost commonly administered by intramuscular injection once per month during anticipated periods of RSV prevalence in the community. In the northern hemisphere, the RSV season typically commences in October and lasts through April or May. As such, the sales of this product reflect this seasonality and occur primarily in the first and fourth quarters of the calendar year. In the U.S., Synagis is co-promoted by MedImmune and by the Ross Products Division of Abbott Laboratories ("Abbott").

        Outside the United States,U.S., the International Division of Abbott ("AI") has the exclusive right to distribute Synagis. As of January 15, 2003, 50February 29, 2004, 49 countries outside the U.S. had approved Synagis for marketing: Argentina, Austria, Australia, Bahrain, Belgium, Brazil, Canada, Chile, Colombia, Costa Rica, Czech Republic, Denmark, El Salvador, Finland, France, Germany, Greece, Guatemala, Honduras, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Jordan, Kuwait, Luxembourg, Malaysia, Mexico,marketing. In July 2003, AI announced that the Netherlands, New Zealand, Nicaragua, Norway, Poland, Portugal, Qatar, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United Arab Emirates,European Agency for the United Kingdom,Evaluation of Medicinal Products had granted a positive opinion for the United States, Uruguay and Venezuela.use of Synagis in young children born with CHD to prevent lower respiratory tract infection caused by RSV.

        Synagis is administered by intramuscular injection at 15 milligrams per kilogram of body weight and is most commonly given once per month during anticipated periods of RSV prevalence in the community. In the Northern Hemisphere, the RSV season typically commences in October and lasts through April or May. As such, product revenues from the product primarily occur in the fourth and first quarters of the year.2

        In 2003, 2002 and 2001, the Company reported $668$849 million, $672 million and $518 million, respectively in worldwide net revenues from Synagis.Synagis representing 86%, 85% and 89% of the Company's total net revenues in 2003, 2002 and 2001, respectively.

Ethyol

        Ethyol is an intravenous organic thiophosphate cytoprotective agent used to prevent certain unwanted side effects of a specific typetypes of chemotherapychemo- and radiation therapy whenradiotherapies that are used to treat cancer. In the United States,U.S., Ethyol was initially approved by the FDA in 1995 to reduce the cumulative renal (kidney) toxicity associated with repeated administration of cisplatin (a common chemotherapy agent) to patients with advanced ovarian cancer.

        In 1996, the FDA approved MedImmune Oncology'sthe Company's supplemental new drug application under the FDA's Accelerated Approval Regulations to include treatment of patients with non-small cell lung cancer (NSCLC)("NSCLC"). Products approved under the Accelerated Approval Regulations require further adequate and well-controlled studies to verify and describe clinical benefit. The Company completed a post-licensure clinical trial in 2001 showing that Ethyol protected against cisplatin-induced renal toxicity. The Company believed this trial would fulfill the Accelerated Approval requirement and submitted its data to the FDA for review in 2002. In late JanuaryEarly in 2003, the Company met with the FDA to discuss the Agency's conclusiontheir belief that the study did not meet the Accelerated Approval requirement, as well as theirthe FDA's request forthat another trial to be conducted. The Company is currently discussing an appropriate study design with the FDA. If no agreement can be reached on the design of such a study, there can be no assurances that the FDA will not withdraw approval of Ethyol for the NSCLC indication. MedImmune does not believe that the withdrawal of this indication, should the FDA decide to do so, will meaningfully impact the market potential for Ethyol.

        In 1999, the FDA also approved Ethyol'sthe use of Ethyol for the reduction of the incidence of moderate-to-severe xerostomiadry mouth (xerostomia) in patients undergoing post-operative radiation treatment for head and neck cancer, where the major salivary glands (i.e.,when a significant portion of the parotid glands)glands are located in the radiation pathway.treatment field. Xerostomia, (acuteboth acute and chronic, dry mouth) is a debilitating condition wherein which saliva production is reduced due to damage caused to the salivary glands by the therapeutic radiation. Patients with xerostomia are at increased risk of oral infection, dental cavities and loss of teeth and often have difficulty chewing, swallowing and speaking. The Company continues to evaluate the potential of expanding the applicability and usefulness of Ethyol to new indications, such as the ability to reduce mucositis (ulceration of the mucous membranes lining the mouth and throat) caused by combined radiation and chemotherapy in patients with NSCLC.

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        Since October 1, 2001, MedImmune has been the sole marketer of Ethyol in the United States.U.S. Prior to this date, Ethyol was co-promoted by MedImmune and ALZA Corporation ("ALZA"). Outside the United States,U.S., the Company has various distribution and marketing arrangements for Ethyol, primarily with affiliates of Schering-Plough Corporation ("Schering"). TheThis product has been approved for marketing in 60 countries worldwide.worldwide, including the United States.

        In 2003, 2002 and 2001, MedImmune reported worldwide net salesrevenues for Ethyol of $80 million.$100 million, $81 million and $20 million, respectively, which represented nine percent, ten percent, and three percent of the Company's total net revenues in each of these three years.

CytoGamFluMist

        CytoGamFluMist is a vaccine approved for marketing in June 2003 by the FDA for the prevention of disease caused by influenza A and B viruses in healthy children and adolescents, 5-17 years of age, and healthy adults, 18-49 years of age. FluMist is delivered as a nasal mist and is a live, attenuated vaccine, meaning that it uses live viruses that have been modified and weakened to stimulate the immune system to prevent the flu. Each year in the U.S., the influenza virus infects an estimated 17 million to 50 million people, many of whom are otherwise healthy children and adults. In September 2003, the Advisory Committee on Immunization Practices (ACIP) of the U.S. Centers for Disease Control and Prevention ("CDC") issued a Supplemental Recommendation for the use of live, attenuated influenza vaccine to its annual Recommendations for the Prevention and Control of Influenza.

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        FluMist is the subject of a collaborative arrangement with Wyeth. FluMist is manufactured by MedImmune, distributed in the U.S. exclusively by Wyeth and co-promoted in the U.S. by MedImmune and Wyeth. Outside of the U.S., Wyeth has exclusive rights to FluMist worldwide, excluding Australia, New Zealand, North Korea, South Korea, and some South Pacific countries.

        MedImmune's FluMist-associated revenues are dependent on payments from Wyeth for: transfer of product to Wyeth; achievement of certain milestones; royalties on net sales; and reimbursement for certain expenses. Vaccination against the influenza virus in the northern hemisphere typically commences in October and may last through January. Once the Company has gained some historical experience with respect to the impact of returns and discounting, the timing of when the Company reports revenues attributable to FluMist is expected to reflect this seasonality.

        In 2003, MedImmune reported $46 million in net revenues for FluMist, or about four percent of the company's total revenues. This amount was derived solely from milestone and reimbursement payments from Wyeth. The Company did not record any sales-related revenue in 2003 due to the uncertainty associated with returns and discounts in the vaccine's launch season.

Other Products

        The Company also markets the following three additional products for which it reported a total of $43 million, $38 million, and $43 million in worldwide net product sales in 2003, 2002 and 2001, respectively. These amounts represent four percent of the Company's total reported net revenues in 2003 and 2002 and seven percent of the Company's total reported net revenues in 2001.

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CytoGam®(cytomegalovirus immune globulin intravenous (human))—an intravenous immune globulin product enriched in antibodies against cytomegalovirus ("CMV"), a herpesvirus. The product isherpesvirus, marketed to prevent CMV disease associated with kidney, lung, liver, pancreas or heart transplantation.



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NeuTrexin®(trimetrexate glucuronate for injection)—a lipid-soluble analog of methotrexate, approved for use with concurrent leucovorin administration as an alternative therapy for the transplantationtreatment of kidneys, lungs, livers, pancreases or hearts. CMV contributes significantly to morbidity and mortalitymoderate-to-severePneumocystis carinii pneumonia in organ transplant recipients. CMV can cause severe pneumonia, bacterial and fungal infections, an increase in risk of organ rejection and other organ complications, which, if not successfully treated, can lead to organ failure. MedImmune began marketing CytoGam in the United States in 1993. Outside the U.S., the Company uses various specialty distributors in Argentina, Canada, Turkey and South Korea,immunocompromised patients, such as it does in other countries where the product is available on a named patient basis.

        In 2002, MedImmune reported $31 million in net sales for CytoGam.

AIDS patients.



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RespiGam

        RespiGam (respiratory®(respiratory syncytial virus immune globulin intravenous (human)) is —an intravenous immune globulin enriched in neutralizing antibodies against RSV, indicated for the prevention of serious RSV disease in children less than 24 months of age with BPD or a history of premature birth (i.e., born at 35 weeks or less gestation). RespiGam was the Company's first anti-RSV product and has largely been replaced by Synagis in the marketplace. In 2002, net salesThe manufacturer and license holder for RespiGam is no longer producing this product and has provided the FDA with notice of RespiGam were $3 million.

NeuTrexin

        NeuTrexin (trimetrexate glucuronateintent to withdraw the Biologics License Application for injection) is a lipid-soluble analog of methotrexate, approved for use with concurrent leucovorin administration as an alternative therapy for the treatment of moderate-to-severethis product.Pneumocystis carinii pneumonia ("PCP") in immunocompromised patients, such as AIDS patients. Introduced in 1993 in the U.S. and Canada, NeuTrexin use has steadily declined in recent years due to improvement in drugs to treat AIDS. In 2002, net sales of NeuTrexin were $3 million.

dose escalation of chemotherapy in 2003 plans to initiate clinical testing.elderly patients with newly diagnosed, previously untreated acute myelogenous leukemia, the most common type of leukemia reported in adults.

Product Candidates—Oncology

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Human Papillomavirus VaccineVaccine——Under a strategic alliance withMedImmune and GSK MedImmune isare developing a vaccine against the human papillomavirus ("HPV") to prevent cervical cancer.cancer under a research collaboration. There are over 75 different types of HPV associated with a variety of clinical disorders, ranging from benign lesions to potentially lethal cancers. Two typesstrains of HPV HPV-16(HPV-16 and HPV-18,-18) are generally believed to cause the majority ofmost cervical

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cancer in the world. The Company's strategy for this cancers. MedImmune and GSK's vaccine relies on acandidate uses virus-like particle ("VLP") technology for producingto produce a structurally identical, non-infectious form of the virus. ScientistsIn April 2003, preliminary data from a Phase 2 HPV vaccine clinical trial was presented by GSK at the Company,European Research Organization on Genital Infection and Neoplasia EUROGIN Meeting in collaboration with a teamParis. Final data were presented on the HPV vaccine by GSK in February 2004 at Georgetown University, first demonstrated the effectiveness of a VLP vaccine candidate using a dog model for papillomavirus infection. In 2002,The International Papillomavirus Conference. We expect GSK completed dosing and beganto publish additional data analysis in five clinical trials withon this vaccine including a Phase 1 trial, three Phase 2 trials, and a 3,000-person epidemiology trial. The Company hopes that data from these trials, once analyzed, will help supportin the initiation of Phase 3 clinical testing in late 2003.

near future.



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VitaxinVitaxin——As previously noted,described above, the Company ishas been developing Vitaxin for use in both cancer and rheumatoid arthritis. In oncology, MedImmune completed its initial Phase 1 study withimmunological disorders. Vitaxin in 2002. This study involved 16 patients with advanced solid tumors that were no longer responding to standard therapy. In 2003,functions by blocking the Company plans to complete enrolling patients in its second Phase 1 study involving 24 patients with advanced colorectal cancer. MedImmune expects to initiate a numberfunction of tumor-specific Phase 2 trials with Vitaxin in 2003, including trials in patients withalpha-v beta-3 integrin, which is frequently found on newly-forming blood vessels and certain tumor cells (for example, melanoma, prostate cancer, and tumors with bone metastases.metastases). MedImmune initiated two Phase 2 trials during 2003 in patients diagnosed with melanoma and prostate cancer.



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Siplizumab—Siplizumab—In the field of oncology, monoclonal antibodies have emerged in recent years as an important addition to surgery, radiation and chemotherapy for the management of patients with cancer. As stated earlier, siplizumab is a humanized monoclonal antibody that reducestargets CD2, a molecule expressed on certain white blood cells, and appears to have the numbereffect of depleting T cells and NK cells, leading to its consideration asNatural Killer ("NK") cells. These properties suggest that siplizumab could provide a potential useful tool in fighting diseases where inhibition of proliferating T cells may have positive clinical benefits, such as in T celltreatment for patients with T-cell lymphoproliferative disorders. Animal studies conducted withof T-cell leukemia have indicated that siplizumab involving CD2-positive lymphoma indicated positive survival outcomes for siplizumab-treated mice. As a result, incan increase survival. In 2003, MedImmune plans to initiatefiled an IND for siplizumab with the intention of initiating a Phase 1 dose-escalating trial to examine the clinical safety of siplizumab in patientsindividuals with CD2-positive lymphoproliferative disorders and to determine the maximum tolerated dose of the antibody in suchthese patients.



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EphA2MT-103——In late 2001,June 2003, MedImmune licensed EphA2the North American rights from Micromet AG to MT-103, a bi-specific T-cell engager (BiTE™) molecule that binds to B-cell lymphomas that express the CD19 surface molecule. With its second binding arm, MT-103 recruits and activates T-cells to kill the cancerous B-cells. MedImmune is also evaluating the broader application of Micromet's BiTE technology from Purdue Research Foundation. to other targets of interest.



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EphA2—EphA2 is a protein normally expressed at very low levels on mostnormal epithelial cells. However,cells, but many different cancers significantly over express EphA2, including metastatic melanoma, breast, prostate, colon, lung, ovarian and esophageal carcinomas. Further, when over-expressed, EphA2 acts as a tumor-causing protein. Preliminaryappears to promote metastases. Based on its studies indicateto date, MedImmune believes that it isantibodies targeting EphA2 in animal models may selectively inhibit the over-expressiongrowth and survival of malignant cells, but do not alter the function or survival of corresponding normal cells. In 2003, MedImmune continued its preclinical testing of EphA2 that subverts normal regulation of cell growth, which then leads to tumor cell growth and metastases. Further, these studies show that the introduction of an antibody targeting EphA2 may allow the restoration of this cell growth regulation or induce cell killing. During 2002, the Company continued preclinical development of the project.antibodies.



HAAH—In 2002, MedImmune licensed from Panacea Pharmaceuticals, Inc. exclusive worldwide rights to technology targeting the enzyme Human Aspartyl (Asparaginyl) Beta-Hydroxylase ("HAAH"), which has been found to be over-expressed in a wide variety of primary tumor tissues, including cancers of the pancreas, breast, ovary, liver, colon, prostate, lung, brain and bile duct. Initial preclinical studies have indicated that the over-expression of HAAH induces tumor formation, and that inhibition of HAAH function in the cancer cell limits the growth of the tumor.

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PCDGF—In 2002, the Company licensed from A&G Pharmaceutical, Inc. exclusive worldwide rights to technology targeting PC-cell-derived growth factor ("PCDGF"), which is over expressed by many different types of cancer, for example breast cancer cells that respond to estrogen therapies, and to an even greater extent, by breast cancer cellscancers that have become resistantrefractory to estrogenconventional hormone therapies. Preclinical studies to date demonstrateindicate that inhibition of PCGDFPCDGF expression inhibitsdecreases the growth and survival of aggressive, hormone-refractory breast cancer cell growth,cells. Additionally, studies by MedImmune investigators and others have linked high levels of PCDGF with ovarian and prostate carcinomas as well as reducesmultiple myeloma. In 2003, the ability ofCompany continued its preclinical investigation potentially therapeutic antibodies.



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EphA4—In 2003, MedImmune identified EphA4 as a potential new target on certain breast cancer cells to become hormone resistant. In addition, some reportscells. Preclinical studies indicate that PCDGFhigh levels of EphA4 are found on many different cancers,

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including breast and pancreatic carcinomas and that targeted intervention against EphA4 may play a role in tumor growth in certain ovariandecrease the proliferation and renal cancers.metastatic behavior of these malignant cells.

Collaborations, Alliances and Business RelationshipsInvestments

        To build, advance and promote its product portfolio, MedImmune seeks to augment its own internal programs and capabilities with collaborative projects with a number of outside partners. As part of this strategy,For its marketed products, the Company has established a number of license agreements, co-promotion arrangements, manufacturing, supply and

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co-development alliances with pharmaceutical and other biotechnology companies, academic institutions and government laboratories.

Abbott Laboratories—In December 1997,laboratories to which the Company entered into two agreements with Abbott. The first agreement callscurrently pays royalties. For more information on these collaborations, please see Note 15, "Collaborative Arrangements" to MedImmune's Consolidated Financial Statements. Similarly, for Abbott to co-promote Synagisproduct candidates now in the United States through its Ross Products division in exchange for a percentage of net sales in excess of annual sales thresholds. Each company is responsible for its own selling expenses.

        The second agreement allows Abbott to exclusively distribute Synagis outside the United States. Internationally,development, the Company manufactures and sells Synagis to Abbott at a price based on end-user sales. As of February 28, 2003, Synagis had received approval in 50 countries worldwide. No assurance can be given that any of the remaining applications submitted or any future submissions to any other countries for marketing licensure will be approved in a timely manner or at all. Nor can there be any assurances that if approved in the remaining countries, that the product will be reimbursed by the associated payor systems.

ALZA Corporation—The Company acquired U.S. marketing rights to Ethyol from ALZA, effective October 1, 2001. Previously, ALZA was responsible for sales and marketing of Ethyol in the U.S. under a December 1995 co-promotion agreement between the two companies. In accordance with the original agreement, MedImmune Oncology will pay ALZA a gradually diminishing royalty beginning April 1, 2002 until 2011.

BioTransplant, Inc.—In October 1995, the Company and BioTransplant, Inc. ("BTI") formed a strategic alliance for the development of products to treat and prevent organ transplant rejection. The alliance is based upon the development of products derived from BTI's anti-CD2 antibody, BTI-322, the Company's anti-T cell receptor antibody, MEDI-500, and future generations of products derived from these two molecules (such as siplizumab, or humanized BTI-322). Pursuant to the alliance, the Company received an exclusive worldwide license to develop and commercialize BTI-322 and any products based on BTI-322, with the exception of the use of BTI-322 in kits for xenotransplantation or allotransplantation. The Company has assumed responsibility for clinical testing and commercialization of any resulting products. The Company's clinical development efforts are focused on siplizumab.

Boehringer Ingelheim Pharma KG—In December 1997 the Company entered into a manufacturing and supply agreement with Boehringer Ingelheim Pharma KG ("BI") to produce Synagis for the non-U.S. markets and to provide supplemental production capacity for Synagis sold in the United States. BI also fills and packages the Synagis it produces at its facility. The BI facility is subject to inspection and approval by the appropriate regulatory authorities in connection with maintaining its FDA licensure as well as for obtaining and maintaining approval from certain ex-U.S. countries. While the Company's Frederick manufacturing center was licensed for production of Synagis by the FDA in December 1999, it has not yet been licensed by international regulatory agencies. As such, MedImmune will continue to rely upon BI for production of all Synagis to be sold outside the U.S. for the foreseeable future to meet expected worldwide demand for the product, as well as continuing to rely upon BI as a backup for production of Synagis to be sold in the United States.

CSL Limited—In June 1998, the Company entered into a collaboration with CSL Limited ("CSL") of Victoria, Australia for the development, sale and distribution of FluMist in Australia, New Zealand and some countries in the South Pacific. The Company and CSL are jointly conducting clinical trials in Australia for FluMist. Under the agreement, CSL will sponsor the marketing application with the Therapeutic Goods Administration, Australia's ruling regulatory agency. CSL has exclusive rights to sell and distribute FluMist in these countries, and the Company will share the profits from these sales. The Company also would benefit from expansion of CSL's current flu vaccine in pediatric and healthy adult market segments if and when CSL receives regulatory approval to market FluMist in the territory. In addition, CSL has agreed, under an option agreement, to grant warrants to the Company to purchase CSL common stock upon CSL's attainment of certain milestones.

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Evans Vaccines Limited—In July 1999, the Company entered into an agreement with a division of Celltech Group Plc ("Celltech"), which was later acquired by PowderJect Pharmaceuticals Plc and is now called Evans Vaccines Limited ("Evans"), for the manufacture of key components of FluMist at a manufacturing facility in Speke, U.K., specifically the bulk manufacture of monovalents and diluent, as well as use of the manufacturing facilities. During October 2000, the agreement was restructured with Evans so that the Company would gain direct control over FluMist manufacturing operations, subsequent to Evans' purchase of the facility from Medeva Pharma Limited in September 2000. The new agreement, which runs through 2006, transferred responsibility for bulk manufacture of FluMist, as well as approximately 100 Evans' employees who had been working on FluMist, to MedImmune. The Company also acquired the remaining 24 years of a 25-year lease from Celltech of approximately eight adjacent acres of land in Speke. The Company is using an existing 45,000 square foot structure on this property to build a new FluMist manufacturing facility.

GlaxoSmithKline PLC—In December 1997, the Company entered into a strategic alliance with GlaxoSmithKline PLC to research, develop, manufacture and commercialize therapeutic and prophylactic HPV vaccines. In exchange for exclusive worldwide rights to the Company's HPV technology, GSK provided the Company with an up-front payment of $15 million, research funding of $22.7 million through 2002, potential developmental and sales milestones that together could total up to $48 million, royalties on any product sales and an equity investment of $5 million. Under the terms of the agreement, the companies have collaborated on research and development activities. The Company conducted Phase 1 and Phase 2 clinical trials and manufactured clinical material for those studies. GSK is responsible for Phase 3 clinical trials, as well as regulatory, manufacturing and marketing activities.

        In July 2000, the Company granted GSK a worldwide, exclusive license to itsStreptococcus pneumoniae vaccine technology in exchange for an up-front payment of $10 million and future potential milestones totaling more than $20 million, plus royalties on product sales. Under the terms of the agreement, GSK is responsible for all clinical development, manufacturing and sales and marketing activities for theS. pneumoniae vaccine. The Company completed the technology transfer to GSK in late 2000. The Company originally in-licensed from Human Genome Sciences, Inc. and St. Jude's Children's Research Hospital the technology it out-licensed to GSK.

        In October 1995, the Company signed an agreement with GSK to collaborate on Epstein-Barr virus vaccine technology. Under the terms of the agreement, GSK was granted an exclusive license to produce, use and sell non-live EBV (subunit) vaccines incorporating the Company's technology for prophylactic and therapeutic uses on a worldwide basis, except in Korea, in exchange for an up-front payment, future milestone payments and royalties. In addition, GSK obtained a right of first refusal to an exclusive, worldwide license, excluding Korea, under any intellectual property rights relating to any live EBV vaccine technology developed or controlled by the Company during the term of this agreement. The Company retained the right to co-distribute a monovalent formulation of the EBV vaccine in the United States and to have GSK supply the vaccine. GSK agreed to fund the Company's research and development efforts related to the EBV vaccine in specified minimum amounts during the first two years of the agreement. Unless otherwise terminated, this agreement will expire on a country-by-country basis upon the expiration or invalidation of the last remaining patent covered by the agreement or 10 years from the date of first commercial sale of the vaccine, whichever is later. GSK may terminate the agreement with respect to any country at any time.

Massachusetts Health Research Institute and Massachusetts Biologics Laboratories—In August 1989 and April 1990, the Company entered into a series of research, supply and license agreements with Massachusetts Health Research Institute ("MHRI") and Massachusetts Public Health Biologics Laboratories, then a division of the Massachusetts Department of Public Health ("The State Lab"), covering products intended for the prevention or treatment of CMV and RSV infection and

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other respiratory virus infections by immune globulins or monoclonal antibodies. The Company agreed to pay royalties on all sales using the licensed technology.

Michigan, University of—In February 1995, the Company entered into a materials transfer and intellectual property agreement with the University of Michigan. Pursuant to the agreement, the University of Michigan granted the Company exclusive worldwide rightssecured licenses to certain intellectual property and technology relatingentered into strategic alliances with outside parties for various aspects of research, development, manufacturing and commercialization to the cold-adapted influenza vaccine and proprietary master donor strains of influenza viruses useful in the production of vaccines against influenza and potentially for gene therapy and other uses. Specifically, the Company obtained the exclusive right to develop, manufacture, use, market and sell products incorporating any such intellectual property or using the master strains worldwide. Pursuant to the agreement, the Company was required to grant to the university an irrevocable, royalty-free license for research purposes, or for transfer to a subsequent licensee should the agreement be terminated, to (1) all improvements developed by the Company, its affiliates or sublicensees, whether or not patentable, relating to delivery mechanisms and processes for administration and manufacturing of products, as well as packaging, storage and preservation processes for the master strains and (2) all new technical information acquired by the Company, its affiliates or sublicensees relating to the master strains and products. The agreement terminates upon the later of (1) the last to expire of the university's patents licensed to the Company or (2) 20 years from the date of first commercial sale of a product incorporating the university's technology. The Company has the right to terminate for any reason upon 12 months notice to the university.

Packaging Coordinators, Inc.—In 1998, the Company opened a 34,000 square foot manufacturing suite in Philadelphia, Pennsylvania, where doses of FluMist are blended and filled. This suite is located within a facility owned by Packaging Coordinators, Inc., ("PCI"), a division of Cardinal Health, Inc., with which the Company has contracted forwill owe future royalties if the labelingproduct candidates are licensed and packaging of FluMist for commercial sale until October 2004. In August 2000, the Company extended the term of its original agreement with PCI until December 2004, with options to extend for up to two additional three year terms.

Schering-Plough Corporation—In May 1993, the Company entered into an exclusive marketingcommercialized. These entities and distribution agreement with Scherico, Ltd. ("Scherico"), an affiliate of Schering-Plough, for Ethyoloutside parties are described in the countries comprising the EU and European Free Trade Association (the "European Territories"). Under this agreement, Scherico purchases Ethyol from the Company at a price based on a percentage of the net sales price of Ethyol in Germany, United Kingdom, Spain, Italy and France. Scherico's exclusive rights to market the product will continue through December 31, 2003. Following the exclusive period, the Company may co-promote Ethyol with Scherico for two years, through December 31, 2005. Thereafter, the Company will reacquire sole marketing rights, subject to an obligation to pay Scherico a royalty based on a percentage of net sales, if any, from the European Territories for a period of three years. Scherico may terminate the agreement at any time by providing 180 days written notice.preceding "Product Candidates" section.

        MedImmune also entered into licensing agreements for Ethyol and NeuTrexin with affiliates of Schering-Plough for several additional territories outside the United States.        The licensees are required to pay the Company compensation based on their net sales of the products, and the Company sells the products to the licensees at an agreed upon price.

Wyeth—In January 1999, the Company signed a worldwide collaborative agreement with Wyeth Lederle Vaccines, a subsidiary of Wyeth, for the development, manufacture, distribution, marketing, promotion, and sale of live, attenuated, cold adapted, nasally delivered influenza vaccines ("flu vaccines"). Under this agreement, Wyeth has exclusive worldwide rights to market the flu vaccines, excluding Korea, Australia, New Zealand and some South Pacific countries. The two companies will co-promote the flu vaccines in the United States. Wyeth holds the marketing rights for an initial term of seven years from the first commercial sale of the flu vaccines in the U.S. and an initial term of eight years from the first commercial sale of the flu vaccines outside the United States. Wyeth also has an

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        The Company has additional license agreements with third parties for CytoGam, RespiGam, Synagis, Ethyol and substantially all of its other potential products. Under such license agreementsinvestments, the Company is obligatedwill sometimes be entitled to pay royalties on any salesappoint a member of the board of directors of these products. In addition, theportfolio companies, and in such cases, a Company has also entered into various agreementsemployee is generally appointed to gain access to various technology and intellectual property to advance its pipeline.serve in that role.

Marketing and Sales

        The Company has developed a sales and marketing organization that it believes is responsive to the increased importance of managed care and the needs of the healthcare industry to provide higher quality care at lower costs. The Company now employs approximately 320 people devoted to sales and marketing of its products in the United States. Approximately 6070 sales and managed care representatives cover approximately 500650 hospitals, managed care organizations, and clinics in the United States,U.S., which specialize in pediatric/neonatal care or transplantation for the promotion of Synagis, FluMist and CytoGam, respectively. Approximately 90 pediatric110 biologic sales specialists cover the topapproximately 10,000 pediatric practices in the United StatesU.S. for the promotion and detailing of Synagis. ApproximatelySynagis and FluMist. In addition, approximately 60 oncology/immunology specialists are devoted to sales and marketing of Ethyol to oncologists practicing in cancer treatment centers, large hospitals and private medical practices. In total, the Company now employs approximately 320 people devoted to sales and marketing of its products in the United States.

        The Company has also entered into co-promotion agreements for its products. For the promotion of Synagis in the U.S., the Company has a co-promotion agreement with the Ross Products division of Abbott Laboratories for the promotion of Synagis in the United States.Abbott. Through its 500 sales representatives, the Ross Products division details Synagis to approximately 27,000 office-based pediatricians and 6,000 birth hospitals. In addition, the Company has a co-promotion agreement with Wyeth to market FluMist in the U.S., if and when the product is approved by the FDA and subsequently launched. Through approximately 500 sales representatives, sales managers, and managed care specialists, the Wyeth sales team would detail FluMist to office-based pediatricians and primary care physicians, while MedImmune's representatives would detail the product to leading infectious disease/respiratory care physicians, thought leaders, pharmacies and employers.

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        In the U.S., the Company must also relyrelies upon specialty distributors and wholesalers to deliver Synagis to its currently marketed products to the end users,customers, including physicians, hospitals and pharmacies. During 2003, MedImmune launched the Synagis Distribution Network ("SDN"), which significantly reduced the number of distributors involved in the distribution of Synagis to attempt to ensure high-quality and consistent services for patients. There are a relatively small number of specialty distributors and wholesalers who provide such services. There can be no assurances that these distributors and wholesalers will adequately provide their services to either the end users or to the Company, nor can there be any guarantee that these service providers remain solvent. The Company also reduced the number of wholesalers involved with Synagis to properly manage the SDN.

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solvent. If        For FluMist, the Company has a co-promotion agreement with Wyeth to market the vaccine in the United States. Through approximately 450 sales representatives, sales managers, and when approved,managed care specialists, the Wyeth sales team details FluMist would beto office-based pediatricians and primary care physicians, while MedImmune's representatives detail the product to pediatric infectious disease/respiratory thought leaders, pharmacies and employers. FluMist is distributed directly to the end user through a channel customized for FluMistphysician's offices, pharmacies, and vaccination clinics by Wyeth.

        The Company's products are sold outside the United States through distributors. Abbott serves asAs discussed in Note 4, "Segment, Significant Customer and Geographic Information," of the Company's exclusive distributor for Synagis outsideConsolidated Financial Statements, the Company has four major customers who individually provided over 10% of its total revenue during the United States. Scherico islast three years. Note 4 also contains information concerning the exclusive distribution partner for Ethyolgeographic areas in which the countries comprisingCompany operates. The Company faces risks related to foreign currency exchange rates, as discussed under the European Territories. Scherico and other affiliates of Schering have various other licensing and distribution arrangements for Ethyol and NeuTrexin outside of the United States.caption "Risk Factors—Changes in foreign currency exchange rates or interest rates could result in losses."

Manufacturing and Supply

        MedImmune operates five commercial manufacturing facilities in the U.S. and Europe. In addition, the Company has entered into manufacturing, supply and purchase agreements with other companies to provide certain portions of its production capacity for all of its marketed products and to produce clinical supplies for its development-stage products. Certain materials necessary for the Company's commercial manufacturing of its products are proprietary products of other companies, and in some cases, such proprietary products are specifically cited in the Company's drug application with the FDA such that they must be obtained from that specific, sole source. In addition, certain materials necessary for the Company's commercial manufacturing of its products are only available through one approved single source supplier though it is available from more than one supplier. The Company currently attempts to manage the risk associated with such sole sourced and single sourced materials by active inventory management and, where feasible, alternate source development. MedImmune attempts to remain apprised of the financial condition of its suppliers, their ability to supply the Company's needs and the market conditions for these raw materials. Also, certain materials required in the commercial manufacturing of the Company's products are derived from biological sources. The Company maintains screening procedures with respect to certain biological sources, where appropriate, and is investigating alternatives to them. Raw materials may be subject to contamination and/or recall. A material shortage, contamination, and/or recall could adversely impact or disrupt MedImmune's commercial manufacturing of its products.

        SynagisSynagis——The primary manufacturing facility for supply of Synagis in the U.S. is the Company's Frederick Manufacturing Center.Center ("FMC"). The FMC is a biologics facility containing a cell culture production area for the manufacture of recombinant products. Filling and packaging of final Synagis product is completed by several vendors, including Chiron,two vendors: Sicor, Inc. and Boehringer Ingelheim, or Gensia Sicor. In August 2001, the Company received approval from the FDA to begin selling Synagis manufactured with an improved fermentation process, called the Enhanced Yield ProcessIngleheim Pharma KG ("EYP"BI"), which enables the Company to make over 300 percent more Synagis per run than produced previously. In 2002, the Company began selling product manufactured under the new EYP process, having a positive impact on the product's cost of goods..

        Supplemental supply of Synagis for the U.S. market is manufactured by BI under a manufacturing and supply agreement. BI also fills and packages Synagis produced at its German facility. As the sole supplier of Synagis for all territories outside the U.S., and supplemental supplier for the U.S. market,

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BI is responsible for obtaining and maintaining licensure and approval for making the product at its facility from all appropriate regulatory authorities (includingincluding the FDA).FDA. To provide adequate backup for international supply of Synagis, MedImmune will seek to obtain approval from the appropriate international regulatory agencies to sell Synagis made at FMC outside the United States.U.S. The Company plans to continue to rely upon BI for production of additional quantities of Synagis to meet expected worldwide demand for the product and to diversifyreduce its reliance for supply of its largest product onSynagis outside the U.S. to any one manufacturing site.

        Ethyol and NeuTrexinEthyol——All bulk drug substance for Ethyol and NeuTrexin is produced by contract manufacturers. In 2002,2003, filling and finishing of all product was completed at MedImmune Oncology's productsthe Company's manufacturing facility in Nijmegen, the Netherlands. To backup its own filling and finishing capabilities, the Company has an agreement with Ben Venue to fill and finish Ethyol for sale in the United States.U.S.

        CytoGam—CytoGam and RespiGam—CytoGam and RespiGam areis produced from human plasma collected from donors who have been screened to have high concentrations of antibodies against cytomegalovirus or respiratory syncytial virus, respectively. The collected human plasma is converted into an intermediate raw material known as Fraction II+III paste. This step was completed at MedImmune's FMC for CytoGam from December 2000 until December 2002, when the Company made the decision to outsource the activityprocess to Precision Pharma Services, Inc. The intermediate paste is processed into bulk product, by the Massachusetts State Lab and then filled and packaged by the State Lab or Aventis Pasteur.Massachusetts Biologic Laboratories. The Company is exploring opportunities to use its plasma production suite, formerly involved in the manufacture of CytoGam, in a manner that would support the production of its other marketed and developmental-stage recombinant products.

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        FluMistFluMist——Since 1998, supplies for all FluMist clinical trials have beenis produced at several facilities either owned or leased by the Company. The master virus seeds are prepared at the Company's Mountain View, California facility. The bulk monovalents and diluent are produced at facilities leased from Evans Vaccines, Limiteda wholly owned subsidiary of Chiron Corporation in Speke, the United Kingdom. Blending of FluMist into its trivalent formulation and filling of the final vaccine into the AccuSprayAccuSpray™ applicators, the non-invasive nasal spray delivery system developed and supplied by Becton Dickinson, and the Company, takes place at the Company's Philadelphia, Pennsylvania facility. None of these existing manufacturing facilities have yet been licensed for the manufacture of FluMist, nor have they manufactured FluMist at a sustained level for commercial supply. The Company has begun the initial stages of commercial scale manufacturing of FluMist for sale during the 2003-20042004-2005 influenza season, pending receipt of marketing approval from the FDA.season.

Patents, Licenses and Proprietary Rights

        ProductsThe products and product candidates currently being developed or considered for development by the Company are in the area of biotechnology, an area in which there areis extensive patent filings. The Company relies on patent protection against use of its proprietary products and technologies by competitors. The patent position of biotechnology firms generally is highly uncertain and involves complex legal and factual questions. To date, no consistent policy has emerged regarding the breadth of claims allowed in biotechnology patents. Accordingly, there can be no assurance that patent applications owned or licensed by the Company will result in patents being issued or that, if issued, such patents will afford meaningful protection against competitors with similar technology. The Company currently owns or licensesin-licenses over 100 patents worldwide related to its products on the market or in development.product candidates. The Company also owns or licensesin-licenses at least 100 additional applications for patents currently pending in the United States.U.S. A list of the U.S. patents the Company owns or has licenses toin-licenses is filed as an exhibit hereto as Exhibit 99.1 and is incorporated by reference into this document as Exhibit 99.3.document.

        The Company believes that there are other patents issued to third parties and/or patent applications filed by third parties that could have applicabilityrelate to each of the Company's products and product candidates and could adversely affect the Company's freedom to make, have made, use, have used, sell, or have sold such products or use certain processes for their manufacture. Some of these third parties have contacted the Company claiming patent infringement by the Company. The Company is unable to predict whether it will ultimately be necessary to seek licenses from such third parties or, if such

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licenses were necessary, whether such licenses would be available on terms acceptable to the Company. The necessity for such licenses could have a material adverse effect on the Company's business.

        There has been substantial litigation regarding patent and other intellectual property rights in the biotechnology industry. Litigation may be necessary to enforce certain intellectual property rights of the Company, or to defend against asserted intellectual property rights of third parties. Any such litigation could result in substantial cost to and diversion of effort by the Company. As described in Note 17 to the Consolidated Financial Statements, the Company has chosen to file litigation to challenge certain intellectual property rights of third parties.

Government Regulation

        The production and marketing of the Company's products and research and development activities are subject to regulation for safety and efficacy by numerous governmental authorities in the United StatesU.S. and other countries. In the United States,U.S., vaccines, biologics, drugs and certain diagnostic products are subject to FDA review and licensure. The federal Food, Drug and Cosmetics Act, the Public Health Service Act and other federal statutes and regulations govern or influence the testing, manufacture, safety, labeling, storage, record keeping, licensure, advertising and promotion of such products. No assurances can be given that any products under development will be licensed for marketing by the FDA or, if approved, that the product would be successfully commercialized or maintained in the marketplace. Noncompliance with applicable requirements could result in fines, recall

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or seizure of products, total or partial suspension of production, refusal of the government to approve product license applications, restrictions on the Company's ability to enter into supply contracts and criminal prosecution. The FDA also has the authority to revoke product licenses and establishment licenses previously granted.

Orphan Drug Designation

        The Orphan Drug Act was established to encourage development of drugs for rare diseases and conditions affecting a small patient population (generally fewer than 200,000 people). Orphan Drugdrug designation of a product can potentially provide a company with seven years of market exclusivity if the company is the first to receive FDA product marketing approval for the orphan drug in the designated indication. Additionally, this designation provides a company with tax credits of 50 percent for qualified clinical research expenses and the opportunity for clinical research grants. CytoGam and Ethyol are currently protected from potential market competition under the Orphan Drug Actqualify as orphan drugs for the following indications: (1) CytoGam has market exclusivity for use in lung, liver, pancreas and heart transplants until December 2005; and (2) Ethyol has market exclusivity for its currently licensed radioprotective indication through June 2006. Ethyol, NeuTrexin and siplizumab have all been designated as orphan drugs for potential use in indications that have not yet been approved by the FDA: FDA as follows:

(1)

Ethyol—as a chemoprotective agent for use with cyclophosphamide in the treatment of advanced ovarian carcinoma, as a chemoprotective agent for use with cisplatin in the treatment of metastatic melanoma, for the treatment of myelodysplastic syndromes, and for the reduction of the incidence and severity of cisplatin-induced toxicities;



(2)

NeuTrexin—for the treatment of metastatic colorectal adenocarcinoma, metastatic carcinoma of the head and neck, pharynx and larynx, pancreatic adenocarcinoma and advanced non-small cell carcinoma of the lung and osteogenic sarcoma; and



(3) siplizumab—

Siplizumab—for the treatment of graft versus host disease.disease and T-cell lymphoma.

        If approved for any of the designated orphan indications, each of these products would have market exclusivity for seven years from the date of FDA approval if it is the first product approved by the FDA for treatment of the designated orphan indication. Orphan drug designations for the use of

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Ethyol to prevent side effects of cisplatin in ovarian cancer patients, and the use of RespiGam to prevent RSV disease in high-risk infants recently expired.expired in 2002 and 2003, respectively.

Environmental and Safety Regulations

        The Company is also subject to regulation by the Occupational Safety and Health Administration ("OSHA") and the Environmental Protection Agency ("EPA") and to regulation under the Toxic Substances Control Act, the Resources Conservation and Recovery Act and other regulatory statutes, and may in the future be subject to other federal, state or local regulations. OSHA and/or the EPA may promulgate regulations concerning biotechnology that may affect the Company's research and development programs. The Company is unable to predict whetherAt any time, any agency willmay adopt any regulationregulations that would have a material adverse effect on the Company's operations.operations and the Company is unable to predict when or whether this might happen. The Company voluntarily attempts to comply with guidelines of the National Institutes of Health regarding research involving recombinant DNA molecules. Such guidelines, among other things, restrict or prohibit certain recombinant DNA experiments and establish levels of biological and physical containment that must be met for various types of research.

Foreign Regulation

        Sales of pharmaceutical and biopharmaceutical products outside the United StatesU.S. are subject to foreign regulatory requirements that vary widely from country to country. Whether or not FDA licensure has been obtained, licensure of a product by comparable regulatory authorities of foreignother countries must be obtained prior to the commencement ofbefore marketing the product in those countries. The time required to obtain such licensure may be longer or shorter than that required for FDA approval, and no assurance can be given that such approval will be obtained.

Competition

        The biotechnology and pharmaceutical industries are characterized by rapidly evolving technology and intense competition. The Company's competitors include pharmaceutical, chemical and biotechnology companies, many of which have financial, technical and marketing resources significantly greater than those of the Company. In addition, many specialized biotechnology companies have

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formed collaborations with large, established companies to support research, development and commercialization of products that may be competitive with those of the Company. Academic institutions, governmental agencies and other public and private research organizations are also conducting research activities and seeking patent protection and may commercialize products on their own or through joint ventures.venture arrangements.

        The Company is aware of certain potentially competitive products targeting areas of medical interest to the Company, including influenza, respiratory syncytial virus ("RSV"),RSV, psoriasis, human papillomavirus ("HPV")HPV infections, influenza infections, and organ graft rejection. In the prevention of CMV disease, the Company's CytoGam competes with several products including other antiviral drugs, such as intravenous and oral ganciclovir marketed by Hoffmann-La Roche Inc., and standard immune globulin preparations. The Company is aware that a number of physicians have prescribed CytoGam in combination with ganciclovir for the prevention of CMV disease in certain patients.

        The Company believes that for the prevention of RSV disease, Synagis and RespiGam are the only products currently available.available for the prevention of RSV disease. However, the Company is aware of one product in the United States,U.S., ribavirin, which is indicated for the treatment of RSV disease. The existence of this product, or other products or treatments of which the Company is not aware, or products or treatments that may be developed in the future, may adversely affect the marketability of products developed by the Company.

        In relation to flu vaccines, in the past, the Company has been aware of three main distributors of inactivated, injectable vaccines (Aventis-Pasteur, Medeva/Evans and Wyeth).vaccines. From these three distributors, approximately 80 million doses of these inactivated vaccines have traditionally been sold annually in the United States.U.S. In 2002, Wyeth announced its

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intent to no longer produce the inactivated, injectable vaccine after the completion of the 2002-2003 influenza season. The Company is also aware that Merck has licensed a Russian live virus intranasal vaccine, currently available in Russia, and that ID Biomedical Corporation is developing an intranasal, inactivated flu vaccine that is in the early stages of clinical testing. Any of the products listed here, as well as other products of which the Company is not aware, may adversely affect the marketability of FluMist.

        Many companies, including well-known pharmaceutical companies, are marketing anticancer drugs and drugs to ameliorate or treat the side effects of cancer therapies, and are seeking to develop new products and technologies for these applications. Many of these drugs, products and technologies are, or in the future may be, competitive with the Company's oncology products. In the United States,U.S., the Company believes that Bristol-Myers Squibb CompanyAventis SA holds the largest share of the chemotherapy market both in terms of approved products and annual sales, and therefore dominates the marketplace. OtherTo the Company's knowledge, other companies maintaining ana significant active oncology marketing and sales presence include Schering-PloughAmgen, Inc., AstraZeneca, Bristol-Myers Squibb Company, Chiron Corporation, Pharmacia & Upjohn, AstraZeneca,Eli Lilly and Company, Genentech, GSK, Hoffmann-La Roche, Inc., Johnson & Johnson, Amgen, Inc., Chiron Corporation, Aventis SA, Eli LillyPfizer, and Company, Genentech and GlaxoSmithKline p.l.c.Schering-Plough Corporation. Many of these companies have substantially greater financial, technical, manufacturing, marketing and other resources than the Company and may be better equipped than the Company to develop, market and manufacture these therapies. No assurance can be given that the oncology drugs developed by the Company will be able to compete successfully against therapies already established in the marketplace or against new therapies that may result from advances in biotechnology or other fields which may render the Company's oncology drugs less competitive or obsolete. In addition, the Company's oncology drugs may become subject to generic competition in the future.

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        The Company expects its products to compete primarily on the basis of product efficacy, safety, patient convenience, reliability, price and patent position. In addition, the first product to reach the market in a therapeutic or preventive area is often at a significant competitive advantage relative to later entrants to the market. The Company's competitive position will also depend on its ability to attract and retain qualified scientific and other personnel, develop effective proprietary products, implement product and marketing plans, obtain patent protection and secure adequate capital resources.

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Officers and Key Employees of the Company

        Wayne T. Hockmeyer, Ph.D.——Dr. Hockmeyer founded MedImmune, Inc. in April 1988 as President and Chief Executive Officer and was elected to serve on the Board of Directors in May 1988. HeDr. Hockmeyer became Chairman of the Board of Directors in May 1993. He relinquished his position as Chief Executive Officer in October 2000 and now serves as the Chairman of the Board of Directors and President of MedImmune Ventures, Inc. Dr. Hockmeyer earned his bachelor's degree from Purdue University and earned his Ph.D. from the University of Florida in 1972. In 2002, Dr. Hockmeyer was awarded a Doctor of Sciencehonoris causa from Purdue University. From 1966 to 1986 he served as a commissioned officer in the United States Army. From 1980 to 1986 he was Chairman of the Department of Immunology at the Walter Reed Army Institute of Research. In 1986, Dr. Hockmeyer joined Praxis Biologics as Vice President of Research and Development and was there until founding MedImmune, Inc. in 1988. Active in other leadership roles, Dr. Hockmeyer is a member of the Maryland Economic Development Commission and the Maryland Technology Development Corporation.Commission. He is also a member of the Board of Directors of Advancis Pharmaceutical Corp., Diversa Corporation, GenVec, Inc., InterMune Pharmaceuticals, Inc., Idenix Pharmaceuticals, Inc., Tercica, Inc., and TolerRx Inc. Dr. Hockmeyer is also a member ofdoes not intend to seek re-election to the Board of Directors of the Biotechnology Industry Organization.InterMune Pharmaceuticals, Inc. or Diversa Corporation when his current term on those boards expires in May 2004.

        David M. MottMott——Mr. Mott was appointed Chief Executive Officer and Vice Chairman in October 2000.2000 and was also appointed President in February 2004. He joined the Company in April 1992 as Vice President with responsibility for business development, strategic planning and investor relations. In 1994, Mr. Mott assumed additional responsibility for the medical and regulatory groups, and in March 1995 was appointed Executive Vice President and Chief Financial Officer. In November 1995, Mr. Mott was appointed to the position of President and Chief Operating Officer and was elected to the Board of Directors. In October 1998, Mr. Mott was appointed Vice Chairman. Prior to joining the Company, he was a Vice President in the Health Care Investment Banking Group at Smith Barney, Harris Upham & Co., Inc. Mr. Mott is

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Chairman of the Board of Directors of Conceptis Technologies, a member of the board of the Biotechnology Industry Organization (BIO), and also serves on the Board of Trustees of St. James School and on the Board of Governors of Beauvoir, the National Cathedral Elementary School. He holds a bachelorBachelor of artsArts degree from Dartmouth College.

Melvin D. Booth—Mr. Booth joined the Company in October 1998 as President and Chief Operating Officer and was elected to serve on the Board of Directors in November 1998. Prior to joining the Company, Mr. Booth was President, Chief Operating Officer and a member of the Board of Directors of Human Genome Sciences, Inc. from July 1995 until October 1998. Prior to that time, Mr. Booth was employed at Syntex Corporation from 1975 to 1995, where he held a variety of positions, including President of Syntex Laboratories, Inc. from 1993 to 1995 and Vice President of Syntex Corporation from 1992 to 1995. From 1992 to 1993, he served as the President of Syntex Pharmaceuticals Pacific. From 1991 to 1992, he served as an area Vice President of Syntex, Inc. From 1986 to 1991, he served as the President of Syntex, Inc., Canada. Mr. Booth is a past Chairman of the Pharmaceutical Manufacturers Association of Canada, and is currently a board member of NovaScreen Biosciences Corporation, Focus Technologies, Inc., and Spacehab, Inc. Mr. Booth graduated from Northwest Missouri State University and holds a Certified Public Accountant Certificate.

        James F. Young, Ph.D.——Dr. Young was promoted to the position of President, Research and Development, in December 2000. HeDr. Young joined MedImmune in 1989 as Vice President, Research and Development. In 1995, he was promoted to Senior Vice President and in 1999 he was promoted to Executive Vice President, Research and Development. Dr. Young received his doctorate in

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microbiology and immunology from Baylor College of Medicine in Houston, Texas, and bachelorBachelor of scienceScience degrees in biology and general science from Villanova University. Dr. Young is a member of the Board of Directors of Iomai Corporation.

        Franklin H. Top, Jr., M.D.Armando Anido, R.Ph.——Dr. Top became the Company's Medical Director in 1990. Dr. Top joined the Company in June 1988 as Executive Vice President andMr. Anido was elected to the Board of Directors in July 1988. Prior to joining the Company, Dr. Top served asappointed Senior Vice President, for Clinical and Regulatory Affairs at Praxis Biologics from 1987 to 1988. Prior to 1987, Dr. Top served for 22 yearsCommercial Operations in the U.S. Army Medical Research and Development Command, where he was appointed Director, Walter Reed Army Institute of Research in 1983. Dr. Top holds a doctorate of medicine cum laude and a bachelor of science degree in biochemistry from Yale University.

Armando Anido—Mr. AnidoFebruary 2004. He joined the Company in 1999 as Senior Vice President, Sales and Marketing. Prior to joining the Company, Mr. Anido was Vice President of CNS Marketing at Glaxo Wellcome, Inc. from 1996 to 1999. Prior to this time, Mr. Anido served in various positions at Lederle Laboratories from 1989 to 1995, culminating in his service as the Vice President of Anti-Infectives Marketing. Mr. Anido is a registered pharmacist, and holds a Bachelor of Science in pharmacy and a Master of Business Administration degree from West Virginia University.

        Edward J. Arcuri, Ph.D.——Dr. Arcuri was appointedpromoted to the position Senior Vice President, Manufacturing Operations in February 2002 followingSeptember 2003. Previously, Dr. Arcuri served as Senior Vice President, Manufacturing, MedImmune Vaccines, since joining MedImmune as a part of the Company's acquisition of Aviron.Aviron in January 2002. Dr. Arcuri was Senior Vice President, Operations, of Aviron since May 2000. He joined Aviron as Vice President, Manufacturing, in July 1999. Prior to joining Aviron, Dr. Arcuri served as Vice President, Manufacturing Operations and Process Development for North American Vaccine, Inc., or NAVA, from January 1995 to July 1999. Prior to joining NAVA, Dr. Arcuri served as Senior Director, Biological Manufacturing, at Merck & Co., Inc. from 1991 to 1994. Dr. Arcuri holds a B.S. degree in Biology from the State University of New York at Albany and a master's degree and Ph.D. in Biology from Rensselaer Polytechnic Institute.

        Edward M. Connor, M.D.——Dr. Connor was promoted toappointed Senior Vice President, Clinical Development,Chief Medical Officer in 1999.February 2004. He joined the Company in 1994 as the Director of Clinical Studies and was promoted in 1995 to Vice President of Clinical Development and in 1999 to Senior Vice President, Clinical Development. Dr. Connor holds a bachelor's degree in biology from Villanova University and a medical degree from University of Pennsylvania School of Medicine. He is board certified in pediatrics and is a consultant in pediatric infectious diseases.

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Gregory S. Patrick—Mr. Patrick joined the Company in February 2001 as Senior Vice President and Chief Financial Officer. Prior to joining the Company, he was Chief Financial Officer for Ventiv Health, Inc., a spin-off of global marketer Snyder Communications, from 1999 through 2001. Prior to this time, Mr. Patrick was employed by Merck & Company, Inc. from 1985 to 1999. During this period, Mr. Patrick held a series of positions, including Vice President and Group Controller in 1999, and Vice President and Controller of the manufacturing division from 1991 to 1999. Mr. Patrick received a master of business administration degree in finance from New York University, and a master of engineering degree and a bachelor of science degree in environmental engineering with a minor in chemical engineering from Rensselaer Polytechnic Institute.

        Gail Folena-Wasserman, Ph.D.——Dr. Folena-Wasserman was promoted to Senior Vice President, Development in February 2002. She joined the Company in 1991 as Director, Development and was promoted to Vice President, Development in October 1995. Prior to joining the Company, she spent nine years in natural products isolation and biopharmaceutical process development at SmithKline Beecham Pharmaceuticals. Her responsibilities currently include oversight of all cell culture and purification process development, clinical manufacturing, analytical methods development, and quality control for investigational products. Dr. Folena-Wasserman holds a bachelor's degree in biology and chemistry from Montclair State College in New Jersey, and has a master's degree in biochemistry and a doctorate in chemistry from Pennsylvania State University.

Bernardus N. Machielse, Drs.—Drs. Machielse was appointed Senior Vice President, Quality, in September 2003. Drs. Machielse joined MedImmune in May 1999 as Vice President, Quality. Prior to joining MedImmune, Drs. Machielse was Vice President of Quality Control and Quality Assurance for Xoma Corporation of Berkeley, California. He also spent several years in various manufacturing and quality positions at Centocor BV of the Netherlands. Drs. Machielse holds a Bachelor of Science degree in Medical Biology and a Master of Science degree in Biochemistry from the University of Utrecht, The Netherlands.

Lota S. Zoth, C.P.A.—Ms. Zoth became Acting Chief Financial Officer of MedImmune in January 2004. She joined the Company in August 2002 as Vice President and Controller. Prior to joining MedImmune, Ms. Zoth was Senior Vice President and Corporate Controller for PSINet, Inc, who filed a petition for bankruptcy on May 31, 2001. Between 1998 and 2000, Ms. Zoth was Vice President, Corporate Controller and Chief Accounting Officer of Sodexho Marriott Services, Inc. Prior to Sodexho Marriott, Ms. Zoth was Vice President, financial analysis, for Marriott International, Inc.'s food and management services division. Ms. Zoth is a CPA, and holds a B.B.A. in accounting from Texas Tech University.

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Employees

        The Company considers relations with its employees to be good. As of December 31, 2002,2003, the Company had 1,505approximately 1,650 full-time permanent employees and approximately 100 temporary employees.

        Approximately 100 of the Company's employees in EnglandThe United Kingdom are members of a labor union, with which the Company renegotiates annually.employment terms periodically. There can be no guarantee that the annual negotiations will lead to an outcome that is favorable to the Company. If negotiations wouldwere to break down between the Company and the union, there can be no guarantee that the Company would be able to manufacture an adequate supply of FluMist.

Risk Factors

        In addition to the other information included in this report, you should consider the following risk factors. This report contains forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may affect ourthe Company's business and prospects. MedImmune's results may differ significantly from the results discussed in the forward-looking statements as a result of certain factors that are listed below or discussed elsewhere in this report and ourthe Company's other filings with the Securities and Exchange Commission.

The Company's revenues are largely dependent on sales of Synagis.

        Sales of Synagis accounted for approximately 86% of the Company's total product sales in 2003 and the Company's revenues will continue to be largely dependent on sales of Synagis for the foreseeable future. Any perceived or actual event or series of events that have an effect on sales of Synagis will have a detrimental impact on the Company. Events which would affect sales of Synagis include, but are not limited to, any product liability claims (whether supported or not), any manufacturing or supply delays, any sudden loss of inventory, any inability to satisfy product demand, any unsuccessful sales or marketing strategies and any change in the reimbursement rate for Synagis by private or public insurance carriers or programs. In addition, Synagis is a biological product regulated and approved for marketing in the U.S. by the FDA and any adverse change in the marketing approval or label for Synagis required by the FDA will have a detrimental impact on the Company. The Company has also created an exclusive network for distribution of Synagis, which will have the effect of preventing certain entities from obtaining Synagis and may have the effect of changing the reimbursement rate for Synagis by private or public insurance carriers or programs, any of which could result in reduced sales.

The seasonal nature of thea significant portion of Company's business can exaggerate the consequences of any factor that adversely affects its sales and may causecauses significant fluctuations in quarterly operating results.

        Synagis accounted for approximately 85%Sales of three of the Company's total productproducts, Synagis, FluMist, and RespiGam, are seasonal in nature. Synagis and RespiGam sales in 2002. Synagis is used to protect high-risk infants from serious lower respiratory tract disease caused by RSV. Because RSV occursoccur primarily during the winter months, the major portion of Synagis sales occurs duringin the first and fourth quarters of the calendar year and FluMist sales occur primarily in the fourth quarter of the calendar year. This high concentration of product sales in a portion of the year exaggeratescauses quarter-to-quarter operating results to vary widely and would exaggerate the adverse consequences on the Company's profitsrevenues of any manufacturing or supply delays, any sudden loss of inventory, any inability to satisfy product demand, the inability to estimate the impact of returns and rebates, or of any unsuccessful sales or marketing strategies during the RSV season and may cause quarter-to-quarter operating results to vary widely.applicable sales season. Furthermore, the Company's current product base would limit its ability to offset in the second and third quarters any lower-than-expected sales of Synagis sales during the RSV season,first and fourth quarters.

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The Company may not be able to successfully commercialize FluMist.

        There can be no assurance that FluMist will achieve commercial success. There are a number of factors which could cause annual financial resultsmake the commercialization of FluMist difficult. These factors include, but are not limited to, be below expectations. In addition, this seasonality

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will be relevantsignificant competition in the marketplace by other influenza virus vaccines, the higher cost of manufacturing FluMist relative to FluMist, which, if approvedcompeting vaccines, perceived or actual risks related to the use of a live virus vaccine, lack of acceptance by the FDA,targeted patient population of the need for vaccination against influenza, lack of reimbursement coverage by private or public insurance carriers or programs, lack of product accessibility by potential consumers, an inability to develop alternative channels for sales, such as pharmacies, due to state or federal regulations or for other reasons and difficult storage requirements for the transport and storage of the product. Furthermore, commercialization is expecteddependent upon successful manufacturing of the product, which may be adversely affected if the Company is unable to be sold primarilyperform the complex annual update of the FluMist formulation for new influenza strains, if there are problems or difficulties in the thirdcomplex manufacturing process or if there is a sudden loss of inventory. There can also be no assurance that the Company could successfully manufacture a quadravalent vaccine, should such a vaccine ever be required. The Company's FluMist product sales revenues are dependent to a large extent on the price at which doses are sold (which is set by Wyeth) and fourth quartersthe number of returned doses (which is governed by Wyeth's return goods policy). Since these values are not within the year, which isCompany's control, there can be no assurance that the most common timeCompany's cost of goods will not exceed its revenues for yearly influenza vaccines.

this product. If the Company is unable to successfully commercialize FluMist, the anticipated benefits of its acquisition of MedImmune Vaccines willAviron may not be realized.realized, and the Company's results of operations would be negatively impacted by impairment charges for the write-down of manufacturing and intangible assets related to FluMist.

The Company may not be able to bring its product candidates to market.

        In January 2002,Research and development activities are costly and may not be successful, and there can be no assurance that any of the Company acquired MedImmune Vaccines for approximately $1.6 billion. The principal asset of MedImmune Vaccines was its leadCompany's product candidate, FluMist, which is a vaccine delivered as a nasal mist for the prevention of influenza. FluMist is not currentlycandidates will be approved for marketing by the FDA or the equivalent regulatory agency of any other country. A significant portion of the Company's annual operating budget is spent on research, development and clinical activities. Currently, numerous products are being developed that may never reach clinical trials, achieve success in the clinic, be submitted to the appropriate regulatory authorities for approval, or be approved for marketing or manufacturing by the appropriate regulatory authorities. There can also be no assurance that the Company will be able to generate additional product candidates for its pipeline, either through internal research and development, or through the in-licensing of products or technology. Even if a product candidate is approved for marketing by the applicable regulatory agency, there can be no assurance that the Company will be able to successfully manufacture the product on a commercial scale or effectively commercialize the product.

A significant portion of the Company's business is dependent on third parties.

        The Company licenses a significant portion of the technology necessary for its business from third parties and relies on third parties for a significant portion of the clinical development, supply of components, manufacturing, distribution, and promotion of the Company's products. The actions of these third parties are outside of the Company's control and the failure of these third parties to act in accordance with their obligations to the Company would have a material adverse effect on the Company's business. Even if the Company is legally entitled to damages for a failure of a third party to fulfill its obligations to the Company, there can be no assurance that such damages will adequately compensate the Company for indirect or consequential losses such as the damage to a product brand or the Company's reputation. If a third party does not fulfill its obligations to the Company, the Company may have to incur substantial additional costs, which could have a material adverse effect on the Company's business.

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        FluMist inventories have required a significant amount of judgment since the estimated impact of four "key" factors: price per dose; dose volume; launch date; and the potential failure of the frozen or liquid formulations of the influenza vaccine. Based on current information, management believesAcquisition in January 2002. One reason is that the estimates and assumptions underlying the fair value analysis are reasonable.

Inventory Reserves—finished FluMist product has a shelf life of nine months. Most of the inventory components for FluMist have expiration dates that range from 9nine to 24 months. Through September 2002,The annual FluMist production cycle begins in October of the year prior to the influenza season in which the product will be consumed. For example, the production cycle for the 2002/2003 season began in October 2001. All production costs for the 2002/2003 season were fully reserved as we produced inventoryassessed the probability of approval by the FDA in anticipation of atime to commercialize the product for the 2002/2003 season was

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possible launchremote. During 2003, we disposed of FluMist for$18.7 million of fully reserved inventory related to the 2002/2003 flu season.

        Beginning in October 2002, production costs incurred for the 2003/2004 season were partially reserved based on management's assessment of the probability of approval and net realizable value. Approval was received from the FDA on June 17, 2003. At that time, we recognized that FDA approval would not be received in time for a launch forapproximately one-half of the 2002/2003 flu season, and we recorded a full reserve for the inventory components we believed would not be used prior to reaching their expiration dates. In the fourth quarter of 2002, we beganannual production of certain inventory components in anticipation of a possible launch of FluMistcosts for the 2003/2004 flu season as FDA approval is expected to be receivedhad already been fully reserved, $22.3 million in Q4 2002 and $19.6 million in Q1 2003. The production cycle for the second quarter of 2003 if not sooner. With respect to2003/2004 season ended in mid-October 2003.

        The production cycle for the 2004/2005 season began in mid-October 2003. For all inventory components on hand as of December 31, 2002,2003, we reviewed the following assumptions to determine the amount of any additionalnecessary reserves: the expected date of approval; the expected sales volume; the concentration of viral material in our vaccine;expected price to be received for the product; potential changes in the influenza strains recommended by the Centers for Disease Control and Prevention for each season's vaccine; and anticipated changes in the manufacturing processprocess. During the fourth quarter of 2003, we determined that additional reserves of approximately $37.5 million were required to reflect total FluMist inventories at estimated realizable value. These reserves are comprised of the following: raw materials and other variables associated with product launch efforts. Aswork-in-process components—$13.3 million; 2003/2004 finished goods inventory—$13.3 million; and 2004/2005 finished goods inventory—$10.9 million.

        The table below summarizes the activity within the components of December 31, 2002, we have $62.5 million of inventory against which we have a reserve of $47.5 million, resulting in a net inventory balance of $15.0 million. Should FluMist be approved for the 2003/2004 flu season and sales levels are higher than expected, we may be able to utilize more inventory than anticipated, and as such, our margins would be favorably impacted in these periods when the inventory is sold. Conversely, should FluMist not be approved, or if sales levels are lower than expected, we may have further reserves or writedowns for obsolete inventory.inventories:

        For our other products, we periodically assess our inventory balances to determine whether net realizable value is below recorded cost. Factors we consider include expected sales volume, production capacity and expiration dates. No significant inventory adjustments were recorded for the other products.

Sales Allowances and Other Sales Related Estimates—

Reductions to Gross Product Sales

        SalesThe Company records allowances for discounts, returns, chargebacks and otherrebates due to government purchasers as reductions to gross product sales. The timing of actual returns, chargebacks and discounts taken, and rebates paid to government purchasers can lag the sale of the product by several periods and varies by state. As such, a significant amount of judgment is required when estimating the impact of sales related estimates—allowances on gross sales for a reporting period. Our starting point for estimating each of these is our historical experience by product, updated for changes in facts and circumstances as appropriate. Because of the seasonal nature of our largest product, Synagis, our sales discounts, returns, chargebacks and rebates fluctuate throughout the year. If our historical trends are

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        We estimate the level of bad debts as a percentage of gross trade accounts receivable balances outstanding at the end of the period, based upon our assessment of the concentration of credit risk, the financial condition and environment of our customers, and the level of credit insurance we obtain on our customers and the expected impact of current reimbursement issues our customers experience. We estimate the aggregate amount of government reimbursements, recorded as a reduction to gross product sales, based upon historical experience and our best estimate of the proportioncustomers' balances. Because of the seasonal sales that willnature of our largest product, Synagis, our accounts receivable balances fluctuate significantly. Accordingly, our allowance for doubtful accounts also fluctuates. Our accounts receivable balances tend to be subject to this reimbursement, largely comprisedhighest at the end of Medicaid payments to state governments. IfDecember and March, while the September balances are somewhat lower as our historical trendsselling season is just beginning, and the June balances are not indicativenegligible, reflecting the close-out of the future, or our actual seasonal sales are materially different from projected amounts, or if our assessments prove to be materially different than actual occurrence, our results could be affected. Duringprior season. For the fourth quarter of 2002,year ended December 31, 2003, we recorded an additional chargea $3.8 million reduction in bad debt expense, largely based on our current assessment of $2.1 million to co-promotionthe factors above. For all periods presented, we have reclassified bad debt expense resulting from the final reconciliationas selling, general and administrative expense in our Consolidated Statements of gross to net sales for the 2001/2002 contract year. During 2001 and 2000, the adjustments were not material.Operations.

        TaxesIncome Taxes——We record a valuation allowance to reduce our deferred tax assets to the amount that is anticipated to be realized. We consider future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance. Should we determine that we were able to realize more than the recorded amounts of net deferred tax assets in the future, our net income would increase in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, our net income would decrease in the period such determination was made. A tax reserve is recorded when the Company cannot assert

Investments—We regularly enter into collaborative research and development agreements with strategic partners. As part of the agreements, we may obtain common stock, preferred stock or other equity securities in these strategic partners. These companies may be public or privately held companies. At the time the securities are obtained, we determine if the investment should be accounted for under the cost method, equity method, or consolidation method based upon multiple factors

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including: percentage ownershipthat it is probable that a tax position claimed on a return will be sustained upon challenge by the tax authority. Any change in the balance of a tax reserve during the year is treated as an adjustment to current year tax expense.

Intangible Assets—We have recorded and valued significant intangible assets that we acquired as a result of the company; representation on board of directors; participationAcquisition. We engaged independent valuation experts who reviewed our critical assumptions and assisted us in policy-making processes; technological dependency; veto rights of partners; our role on key technical or product development committees; revenue dependence; and other extraordinary voting rights. Investments accounted for under the equity method are adjusted quarterlydetermining a value for the Company's proportionate shareidentifiable intangibles. Of the $129.4 million of acquired intangible assets, $90.0 million was assigned to the investee's gains or losses, which may fluctuate significantly from quarter to quarter. Each quarter, we evaluate allworldwide collaborative agreement with Wyeth for the development, manufacture, distribution, marketing, promotion, and sale of our investments, and recognize an impairment charge in the consolidated statements of operations when a decline inFluMist. The Company estimated the fair value of an investment falls below its cost valuethe Wyeth agreement using the sum of the probability-adjusted scenarios under the income approach. In applying this method, the Company relied on revenue assumptions, profitability assumptions and is judgedanticipated approval dates. The remaining $39.0 million was assigned to be other than temporary. We consider various factors in determining whether we should recognize an impairment charge, including the length of time and extent to whicha contract manufacturing agreement with Evans Vaccines Limited. The Company estimated the fair value has been less than our cost basis, the financial condition and near-term prospects of the issuer, fundamental changes toEvans agreement using the business prospectscost approach, which is based on the theory that a prudent investor would pay no more for an asset than the amount for which the asset could be replaced. In its analysis, the Company reduced replacement cost for such factors as physical deterioration and functional or economic obsolescence. We review intangible assets for impairment annually or when an event that could result in an impairment occurs. As of December 31, 2003, we have not identified any impairment of the investee, share pricesintangible assets, of subsequent offerings, and our intent and abilitywhich $96.7 million remain unamortized.

        During 2003, we reduced goodwill recorded in the Acquisition by $2.4 million, reflecting additional deferred tax assets for adjustments relating to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.pre-acquisition items.

RESULTS OF OPERATIONS
2002 Compared to 2001

        To present our results in the same manner as we view the performance of the business and the resulting underlying trends, we have presented certain expense categories with and without certain Acquisition-related amounts, including: the acquired in-process research and development charge; amortization of intangible assets, compensation expense associated with the assumption and vesting of unvested stock options, retention and severance payments; and the amortization of the premium on convertible subordinated notes. Inclusion of such Acquisition related expenses is consistent with generally acceptedacceptable accounting principles. Where we exclude such expenses, we use the term "adjusted."

Comparison of 2003 to 2002

Revenues—Product Sales

        Product sales grew 25% in 2003 to $992.6 million as compared to $790.9 million in 2002, primarily due to increased sales of Synagis. Of the overall increase in product sales, approximately 16 points of the 25 percentage points were due to an increase in domestic sales volumes, while price increases, net

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of increases in sales allowances contributed five points to sales growth. The remaining four points of growth are due to an increase in our international sales.

Synagis—Synagis accounted for approximately 86% and 85% of our 2003 and 2002 product sales, respectively. We achieved a 21% increase in domestic Synagis sales to $777.1 million in 2003, up from $641.3 million in 2002. This growth was largely due to increased sales volume in the United States, which resulted in a 16% increase in domestic units sold. Also aiding growth was a price increase that took effect in June 2003, partially offset by an increase in sales allowances, which are accounted for as a reduction of product sales. Our reported international sales of Synagis to AI, our exclusive distributor of Synagis outside of the United States, more than doubled to $72.2 million in 2003 compared to $30.4 million in 2002, driven primarily by a more than two-fold increase in unit volumes over 2002 levels. The increase in unit volume was offset by an decrease in the realized per unit sales price recognized upon delivery of product to AI under the terms of our international distribution agreement. We record Synagis international product sales based on AI's sales price to customers, as defined in the agreement.

Ethyol—Ethyol accounted for approximately 10% of our product sales in both 2003 and 2002. Domestic Ethyol sales increased 25% to $94.4 million in 2003, up from $75.5 million in 2002. This 25% increase is the result of a 15% increase in domestic units sold in 2003 compared to 2002 and a price increase which occurred in August 2003. Our 2003 international sales of Ethyol to our distribution partner, Schering, were consistent with 2002 sales of $5.7 million. We record Ethyol international product sales based on a percentage of Schering's end-user sales, as defined in our agreement.

FluMist—During 2003, we shipped 4.1 million doses of FluMist to Wyeth and received payments totaling $51.9 million. Wyeth is contractually responsible for distributing the product to third parties. At the end of the influenza season, actual net sales for the season will be used to calculate the final transfer price per dose and the amount of product royalties due to MedImmune. Actual net sales consists of any amounts actually received by Wyeth for the sale of FluMist less agreed-upon amounts paid or credited by Wyeth related to the sale of the product such as for returns, promotional discounts, rebates, sales taxes and freight. Prior to the calculation of actual net sales, our ability to recognize revenue is dependent upon our ability to estimate the sales volume for the season and the expected impact of the reduction to sales. As of December 31, 2003, we concluded that the variables associated with the product transfer price were not determinable, largely due to low sales volume and the lack of returns history and comparable redemption rates for rebates for this new product. As a result, we have not recognized the revenue associated with the 4.1 million doses shipped to Wyeth during 2003. We believe the transfer price will be determinable when actual net sales are calculated in 2004, at which time we will record the associated product sales and cost of goods sold.

Other Products—Sales of other products in 2003, which include sales of CytoGam, NeuTrexin, RespiGam, and by-products that result from the CytoGam manufacturing process, increased $5.1 million, or 13% compared to last year. The increase was largely due to a 10% increase in our sales of CytoGam.

Revenues—Other Revenues

        Other revenues for 2003 remained consistent with 2002 at $61.8 million. Other revenues in 2003 are largely comprised of contractual payments received from Wyeth under our collaborative agreement for FluMist. The payments, which amounted to $45.9 million, related to milestone payments, supply goal payments, and funding for clinical development and marketing programs. We also received $7.5 million in 2003 from AI for achieving a milestone related to international sales levels of Synagis and we recorded $3.1 million in revenue under other collaborative agreements. Other revenues in 2002 are comprised largely of $32.7 million in payments from Wyeth for compensation of 2002 FluMist manufacturing costs and funding for clinical development and marketing programs In 2002, we also

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received $17.2 million from the sale of excess production capacity to a third party and $8.7 million in revenue recorded under other collaborative agreements.

        We have accounted for major collaborative agreements entered into before January 1, 2002 using the contingency-adjusted performance model and have deferred a portion of the up front and milestone payments received. Based on current estimates, we expect to record the remaining revenues from our collaboration with Schering-Plough Corporation of $0.8 million ratably over 2004 and 2005.

Cost of Sales

        Cost of sales for 2003 increased 44% to $289.8 million from $201.8 million for 2002. Excluding Acquisition-related adjustments in both periods, cost of sales for 2003 increased 42% to $287.1 million from $201.8 million in 2002, mainly due to increases in product sales volumes and inventory valuation adjustments for FluMist of $37.5 million. Gross margins on product sales for 2003 were 71%, down three percentage points from last year, largely due to the valuation adjustments for FluMist inventory. Partially offsetting this decrease were lower costs for CytoGam, and a favorable impact of a value-added tax refund for transfers of Synagis manufactured in Europe.

Research and Development Expenses

        Research and development expenses of $156.3 million in 2003 increased 6% from $147.9 million in 2002. Excluding Acquisition-related adjustments in both periods, research and development expenses for 2003 were $153.7 million, up 11% over 2002. The increase is due largely to payments made in 2003 associated with gaining access to new data and technologies including a $10.0 million payment to Critical Therapeutics, Inc. as part of a new collaboration to co-develop biologic products to treat severe inflammatory diseases. Additionally in 2003, the Company initiated four Phase 2 studies for Vitaxin and agreed to pay $10.0 million for data from the completed international Phase 3 studies for a liquid formulation of the live, attenuated influenza virus vaccine. This data may have the potential to accelerate the evolution of MedImmune's long-range plans for its intranasally delivered flu vaccine program in the United States.

        In 2002, the Company completed several late-stage clinical trials, including Phase 2 clinical trials with siplizumab, and the Phase 3 Synagis clinical trial in congenital heart disease patients that led to approval of an expanded indication by the FDA in September 2003.

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        During 2003, we incurred significant costs related to the development of various products and product candidates. A summary of our more significant research and development efforts is as follows:

        Additionally, we have multiple programs in preclinical development.

Selling, General, and Administrative Expenses

        Selling, general and administrative ("SG&A") expenses increased 14% to $340.9 million in 2003 compared to $299.6 million for the 2002 period. Excluding Acquisition-related amounts relating to retention payments, stock option acceleration and stock compensation for unvested stock options assumed and amortization of intangibles, SG&A expenses were $332.7 million, up 16% over 2002. The increase is largely attributable to increased co-promotion expense, reflective of the increase in Synagis sales. As a percentage of product sales, adjusted SG&A expense decreased to 34% of product sales in the 2003 period from 36% in the 2002 period, due to product sales growing at a faster rate than expenses.

Other Operating Expenses

        Other operating expenses, which reflect manufacturing start-up costs and other manufacturing-related costs, were $26.1 million in 2003 compared to $100.0 million in 2002. Adjusted other operating expenses were $23.0 million for 2003, compared to $79.2 million in 2002. The decrease is principally due to the shift in the costs of FluMist manufacturing that are capitalized in inventory beginning in the second quarter of 2003, but were expensed as other operating costs in the prior year. Additionally, 2002

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other operating expenses include impairment charges of $12.9 million relating to the write-off of certain plasma manufacturing assets, as the Company outsourced its production of CytoGam during 2002.

In-Process Research and Development

        We incurred charges of $1,179.3 million in the first quarter of 2002 for the write-off of purchased in-process research and development in conjunction with the Acquisition. The write-off represented the fair value of purchased in-process technologies at the acquisition date, calculated as the sum of probability-adjusted commercial scenarios. This method was based upon management's estimates of the probability of FDA approval and commercial success for FluMist.

Interest Income and Expense

        We earned interest income of $56.9 million for 2003, compared to $49.4 million in 2002, reflecting higher cash balances available for investment, partially offset by a decrease in interest rates, which lowered the overall portfolio yield. Interest expense for 2003, net of amounts capitalized, was $10.3 million, up from $9.1 million for 2002. Excluding the Acquisition-related amounts of $2.4 million in 2003 and $1.8 million in 2002 for the amortization of premium on the 5¹/4% Convertible Subordinated Notes ("the 5¹/4% Notes"), adjusted interest expense increased to $7.9 million in 2003 from $7.3 million in 2002, due to interest expense generated by the 1% Notes issued in July 2003.

Gain (Loss) on Investment Activities

        We incurred a gain on investment activities of $3.4 million for 2003, compared to a loss of $14.1 million for 2002. The 2003 gain consisted of gains on the sale of our publicly traded equity investments, net of declines in fair value of other investments that were judged to be other than temporary. Investment losses in 2002 consisted primarily of impairment charges on investments related to declines in fair value that were judged to be other than temporary.

Income Taxes

        We recorded income tax expense of $108.0 million for the year ended December 31, 2003, based on an effective tax rate of 37.1%. Excluding items not deductible for tax purposes, principally the write-off of purchased in-process research and development, the resulting effective tax rate for 2002 was 37.2%.

Net Earnings / (Loss)

        Net earnings for 2003 were $183.2 million, or $0.73 per share basic and $0.72 per share diluted, compared to a net loss for 2002 of $1.1 billion or $4.40 per share. Excluding the after-tax impact of the Acquisition-related amounts totaling $9.2 million in 2003 and $1.2 billion in 2002, adjusted net earnings were $192.4 million in 2003, or $0.77 basic and $0.76 diluted earnings per share and $106.6 million, or $0.43 basic and $0.42 diluted per share in 2002.

        Shares used in computing basic and diluted earnings per share in 2003 on a historical basis were 250.1 and 253.8, respectively. Shares used in computing net loss per share on a historical basis for 2002 were 249.6 million. On an adjusted basis, shares used in computing basic and diluted earnings per share

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in 2003 were 250.1 and 253.8, respectively, while shares used in computing basic and diluted earnings (loss) per share for 2002 were 249.6 million and 252.7 million, respectively.

        We do not believe inflation had a material effect on our financial statements.

2002 Compared to 2001

Revenues—Product Sales

        Product sales grew 36% to $786.0$790.9 million, as compared to $579.5$581.5 million in 2001, primarily due to increased sales of Synagis and the impact of reacquiring the domestic marketing rights to Ethyol from ALZA as of October 1, 2001.

        SynagisSynagis——Synagis accounted for approximately 85% and 89%, respectively, of our 2002 and 2001 product sales. We achieved a 33% increase in domestic Synagis sales to $637.4$641.3 million in 2002, up from $479.7$481.3 million in 2001. This growth was largely due to increased demand in the United States, and resulted in a 30% increase in domestic units sold. Also aiding growth was a 3.5% price increase that took effect in June 2002, partially offset by an increase in sales allowances, which arewere accounted for as a reduction to product sales. Our reported international sales of Synagis decreased 17% to $30.4 million in 2002 compared to $36.7 million in 2001, due to a 40% decrease in units sold to AI, our exclusive distributor of Synagis outside of the United States. We believe that the decrease iswas due to reductions in the inventory stocking levels of AI, rather than reduced product demand by end users. The decrease in unit volume was offset by an increase in the per unit sales price recognized upon delivery of product to AI under the terms of our international distribution agreement. Based on information received from AI, we believe that end-user sales have increased over lastthe 2001 year. We recordrecorded Synagis international product sales based on AI's sales price to customers, as defined in the agreement. We have been working with AI to expand the number of countries where we are licensed to sell

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Synagis. As of February 28, 2003, Synagis had been approved for marketing in 50 countries, (including the United States), the most recent of which was Canada in May 2002. There can be no assurance that approvals by the appropriate regulatory authorities will continue to be granted or that we will receive pricing and reimbursement approvals in countries where we have received regulatory approval.

        EthyolEthyol——Ethyol accounted for approximately 10% and 4% of our product sales in 2002 and 2001, respectively. On October 1, 2001 we reacquired domestic marketing rights to Ethyol from ALZA and have since recorded all revenues from domestic sales of Ethyol to wholesalers and distributors. As part of this agreement, no third quarter 2001 supply sales were made to ALZA, and we purchased ALZA's remaining Ethyol inventory at their original purchase price, which was recorded as a reduction to product sales. Beginning April 1, 2002, we pay ALZA a declining royalty through 2011 based on net sales of Ethyol in the United States. Domestic Ethyol sales were $74.7$75.5 million in 2002, as compared to $14.3$14.4 million in 2001. The increase iswas primarily attributable to a three-fold increase in domestic units sold in 2002 versus the 2001 year, which included nine months of revenues generated under our product supply agreement with ALZA and three months of sales to wholesalers and distributors. Further, two domestic price increases occurred during 2002, including a 9% increase in April 2002 and a 6% increase in September 2002. In addition, 2001 included net returns of $2.3 million, relating to our assumption of Ethyol marketing rights. Prior to October 1, 2001, we recorded Ethyol domestic product sales based on ALZA's net unit selling price as defined in the agreement. Our international sales of Ethyol to our distribution partner, Schering, were $5.7$5.6 million for 2002, down 5%7% from the prior year sales of $6.0 million. We record Ethyol international product sales based on a percentage of Schering's end user sales, as defined in our agreement.

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        Other ProductsProducts——Sales of other products in 2002, which includeincluded sales of CytoGam, NeuTrexin, RespiGam, and by-products that resultresulted from the CytoGam manufacturing process, decreased $5.0 million, or 12% compared to last year.2001. The decrease was due to marginal declines in all of our other product lines.

Forward-looking commentary—We believe that the growth rate of our product sales, while still at double-digit levels, will decelerate in 2003. However, the level of future product sales will depend on several factors, including, but not limited to, the timing and extent of future regulatory approvals of our products and product candidates, receiving reimbursement pricing, availability of finished product inventory, approval and commercialization of competitive products and the degree of acceptance of our products in the marketplace.

        We continue to make progress in the FDA review process for FluMist. On January 29, 2003, we received a CRL from the FDA containing five questions, to which we responded in early February 2003. We anticipate that we will receive FDA approval for FluMist during the second quarter of 2003, if not sooner.

Revenues—Other Revenues

        Other revenues increased 58% to $61.8 million for 2002 compared to $39.2 million in 2001. The increase iswas largely attributable to $25 million received from Wyeth, our marketing partner for FluMist, for compensation of 2002 FluMist manufacturing costs under recent amendments to the collaborative agreements. An increase of $9.7 million in revenues from the sale of excess production capacity to a third party and $7.7 million in funding for FluMist clinical development and sales and marketing activities from Wyeth also contributed to the growth over 2001. Partially offsetting these increases iswas a decrease of $15.5 million in revenue recorded under collaborative agreements, including a $2.7 million decrease in clinical funding received for our HPV vaccine candidate as we arewere nearing completion of Phase 1 and 2 clinical trials and our preparation of clinical material.

Forward-looking commentary—We anticipate the level of other revenues to increase in 2003 largely due to milestone and royalty payments associated with the approval and commercialization of FluMist.

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The level of contract revenues in future periods will depend primarily upon the extent to which we enter into other collaborative contractual arrangements, if any, and the extent to which we achieve certain milestones provided for in existing agreements. Future revenues from the sale of excess production capacity will vary depending upon the extent to which we enter into these types of arrangements, and are not expected to be significant for 2003 or thereafter.

        The expected timing of annual revenues to be recognized through 2005 under major collaborative agreements entered into before January 1, 2002, which we have accounted for using the contingency adjusted performance model and deferred a portion of the up-front and milestone payments received, based on current estimates of costs to complete, is as follows (in millions):

Cost of Sales

        Cost of sales for 2002 increased 45%46% to $200.9$201.8 million from $138.7 million in 2001, due to the increase in sales volumes and additional royalties owed for Synagis, partially offset by manufacturing cost reductions following implementation of an improved manufacturing process at the FMC which enhancesenhanced the yields for Synagis. As a result, gross margins for 2002 were down two percentage points to 74% from 76% for the year ended December 31, 2001.

Forward-looking commentary—We expect that gross margins may vary significantly from quarter to quarter, based on the product mix. We expect that on an annual basis, our gross margin percentage for 2003 should be lower than 2002, as a result of the anticipated launch of FluMist.

Research and Development Expenses

        Research and development expenses of $144.2$147.9 million in 2002 increased 74%78% from $83.0 million in 2001. Excluding Acquisition relatedAcquisition-related amounts of $9.4 million in 2002 for retention payments, stock option acceleration and stock compensation expense for unvested options assumed, adjusted research and development expenses were $134.8$138.6 million, up 62%67% over 2001. This increase was largely due to the on-going activities of MedImmune Vaccines and payments of approximately $19.0 million to gain access to various technologies and intellectual property to advance our pipeline. TheseThe increases were offset by decreases in clinical trial expenses, as several of our clinical trials were either completed, cancelled or delayed during 2002. During 2002, we completed several important clinical trials, including a successful Phase 3 trial for Synagis in children with congenital heart disease and three Phase 2 trials for siplizumab.

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        During 2002, we incurred significant costs related to the development of various products and product candidates. A summary of our more significant research and development efforts is as follows:

        As indicated in the table above, we completed the preliminary analysis of three Phase 2 trials for siplizumab involving almost 700 psoriasis patients. While the drug appeared to be generally well tolerated and some patients exhibited an improvement in their psoriatic disease, an anti-antibody response (also known as immunogenicity) was observed in the laboratory tests of over 50 percent of the patients. This anti-antibody response did not appear to cause any clinical complications. In 2003, we plan to conduct retreatment Phase 2 studies to further assess the potential clinical impact of the immunogenicity. We also completed two Phase 2 trials of ourE. coli urinary tract infection vaccine, and have determined that there iswas not a sufficient level of efficacy in prevention of urinary tract infections to proceed with additional trials. Our ongoing clinical program also includesincluded several product candidates in various phases of evaluation, including a Phase 1 trial in adults using a liquid formulation of Synagis and certain trials for FluMist. Additionally, we havehad multiple programs in preclinical development.

Forward-looking commentary—We expect research and development expenses to be up slightly in 2003 compared to 2002. This is largely due to the impact of the conclusion of trials and studies as described above offset by the anticipation of post-marketing commitments, additional trials associated with FluMist and the continued progress of our pipeline candidates.

        During 2002, we entered into the several research collaborations and licensing agreements, which commit us to future payments of $186.7 million, should certain events or milestones occur.

        The development-stage efforts listed above and other research and development projects may never reach clinical trials, achieve success in the clinic, be submitted to the appropriate regulatory authorities for approval, or be approved for marketing or manufacturing by the appropriate regulatory authorities. Further, we rely on numerous third parties to assist us in various stages of the development process. Should they be unable to meet our needs, we may incur substantial additional costs. Any of such uncertainties, if they should occur, could have a material adverse effect on our financial condition and results of operations.

Selling, General, and Administrative Expenses

        Selling, general and administrative ("SG&A") expenses increased 54%52% to $299.3$299.6 million in 2002 compared to $194.8$196.8 million for the 2001 period. Excluding Acquisition-related amounts of $11.9 million

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