West Coast Editor
Although a takeover still seems possible, Trimeris Inc.'s appeal dipped sharply with the retake of rights to its next-generation HIV fusion inhibitor peptides from Fuzeon partner F. Hoffman-La Roche Ltd. - just six months after the deal was renewed - as well as major changes in top management.
Investors didn't much like the news, trimming Trimeris' shares (NASDAQ:TRMS) by 29.3 percent Friday, when the stock price ended at $7.12, down $2.95.
"We actively did negotiate to get all rights back, and we're very pleased to get them back," said management consultant Larry Hill, appointed Thursday as acting president and chief operating officer for Trimeris. He acknowledged during a conference call that, "while there may be risks on the downside in owning it all, we're now in a position to control that."
In September, the two firms agreed to extend the research agreement by two years, through 2008. Now, Morrisville, N.C.-based Trimeris has the sole right to continue development of the lead compound in the program, and Roche would pay a "nominal" royalty on TRI-1144, if it reaches the market.
Trimeris still is finalizing the preclinical program, and Hill said officials must "re-think everything" after getting full rights back. Meanwhile, Dani Bolognesi, Trimeris' CEO and chief scientific officer, has retired and Robert Bonczek, chief financial officer and general counsel, will do the same April 30. Through October 2008, Bolognesi will serve as a scientific consultant.
"We're not looking for a new CEO at this time," Hill said, adding that a member of his consulting firm, Hickey & Hill, "will most likely step in as CFO, as soon as Bob brings him up to speed."
Hill said there is "no term to my engagement," adding that he has spent his career helping firms through transitions. "My expertise is in right-sizing companies," he said. Hill came aboard Thursday after serving as advisor for a week, and pledged to "stay around as long as I'm adding value."
The conference call came as Trimeris disclosed earnings. For the fourth quarter of 2006, the firm earned $4.7 million, a 25 percent hike over the same period the previous year. Revenue rose 57 percent to $12.5 million. For the full year, profits reached $7.9 million, compared to 2005's $8.1 million loss. Revenue totaled $12.5 million, up 57 percent from the year before.
Credit for the increase went mainly to Roche's strong global sales of Fuzeon (enfuvirtide), which hit $73.3 million in the fourth quarter, 16 percent higher than the same period the year before. But Wall Street was more interested in why the Roche research changed, and what the management picture might become - especially given that Fuzeon's growth potential might be "limited," as ThinkEquity analyst Vinny Jindal pointed out in a research report.
"Overall, the changing of the company's top executives leaves us scratching our heads, and calling into question the company's future strategy," Jindal wrote.
Trimeris' cash, cash equivalents and investment securities available for sale totaled $48.6 million at the end of 2006, compared to $36.9 million when the previous year finished.
"Right now, we're fairly comfortable with our liquidity and the future cash flow prospects from Fuzeon," Hill said, and if the company must take TRI-1144 forward alone, "our cash is significant [to] get a fair distance into it."
Asked whether the company is exploring in-licensing, Hill said he was "aware we are in discussion on one other project."
Jindal, who questioned "the timing and reasoning behind both actions" by Trimeris, was "left with little sense of confidence as to [the company's] future." He downgraded his rating from "accumulate" to "sell," with a price target of $7.
Analysts at First Albany in New York also downgraded Trimeris, from "buy" to "neutral." Stifel Nicolaus & Co., though, maintained its "hold" rating and raised the earnings per share estimate to 59 cents from 8 cents.