West Coast Editor

Trimeris Inc.'s plan to shift emphasis for a tighter focus on its marketed HIV drug, Fuzeon, boosted speculation that the company is grooming for a potential acquisition, the likes of which the industry has seen several lately.

The changes, which include saying goodbye to CEO Steven Skolsky as well as other reductions in Trimeris' work force and programs, will let the firm generate earnings in 2007 more than $1 per share, officials said. That would leave Trimeris with about $65 million in cash at the end of next year.

"I don't think anyone is clear as to where this money will come from," said Vinny Jindal, analyst with ThinkEquity Growth Partners in New York, and Trimeris' conference failed to enlighten analysts, but Wall Street added $1.99, or almost 20 percent to the company's stock (NASDAQ:TRMS), which closed Wednesday at $12.03.

Dani Bolognesi, chief scientific officer and co-founder of Trimeris, also will take on CEO duties, and will lead the company with Robert Bonczek, chief financial officer.

The $1 EPS "is an objective that we believe we can achieve," Bolognesi said during the conference call, adding that the firm has "a number of things to do between now and our earnings call in the fourth quarter," when Trimeris will provide more details.

"What we have in the relationship with Roche is activities that are occurring here at Trimeris, as well as activities that are occurring at Roche," Bolognesi said, and Trimeris hopes to "take advantage of the synergy" between the firms to "avoid unnecessary duplication of costs."

The viral entry inhibitor Fuzeon (enfuvirtide), partnered with Basel, Switzerland-based F. Hoffmann-La Roche Ltd., sold $33.6 million in North America during the third quarter, with ex-North America sales of $29.5 million, for earnings per share of 16 cents - well above estimates, thanks to light operating expenses, a higher gross margin and an improved royalty rate outside North America.

But integrase inhibitors and other promising Phase II candidates for HIV, as well as Fuzeon's side-effect issues, could slow growth in the months ahead, wrote Jindal in a research report. Bolognesi, though, noted that using Fuzeon with integrase inhibitors has yielded "rather spectacular" results.

Trimeris' management has said new HIV drugs would only help Fuzeon sales, but after the launch of Johnson & Johnson's protease inhibitor Prezista (darunavir), Trimeris reduced sales guidance for Fuzeon, Jindal pointed out. Tibotec Therapeutics, of Bridgewater, N.J., a division of Ortho Biotech Products LP, developed Prezista.

"If Roche is continuing costs that Trimeris is shedding, then there isn't parity of spending" as the deal requires, Jindal said. "That's not changing, and they haven't changed their timelines for introducing their next-generation fusion inhibitor in 2007," which means continued research and development costs.

"They said all questions will be answered in the fourth-quarter call, but unless the laws of physics or economics change between now and then, they're not going to be able to explain this," Jindal said - or unless Roche simply buys out Trimeris, like Eli Lilly and Co. bought partner Icos Corp., Genentech Inc. bought Tanox Inc. and Amgen Inc. bought Abgenix Inc.

Pharma has been paying premiums of 25 percent to 45 percent in such deals, and with the boost in share price caused by Trimeris' news (however cryptic) Wednesday, the firm could get a handsome sum if Roche wants all of Fuzeon, which would pay for itself over time, Jindal said.

"If this hasn't been resolved by [the fourth-quarter conference call], I'm going back to a sell' rating," said Jindal, who rated Trimeris "accumulate" Wednesday.

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