Synageva BioPharma (GEVA)

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Sell Trimeris to $5 Level
Thursday April 17, 2:37 pm ET
By Grant Zeng, CFA

Trimeris, Inc. (NasdaqGM: TRMS - News) develops therapeutic agents for the treatment of viral diseases based on its fusion inhibition technology that blocks viral entry into host cells. The collaboration amendment with Roche and several management changes have cast a shadow on the company's future.

The company registered a 34 percent year-over-year decline in Fuzeon sales for the first quarter of 2008. We attribute the decline to the withdrawal of the sNDA for Biojector 2000 along with approvals of competitors Selzentry and Isentress. The decline may be steeper going forward.

With the company's top-line shrinking by 27 percent by 2011, we maintain our Sell rating on Trimeris with a $5.00 price target. At this point, it's very difficult to value the stock. We believe qualitative factors prevail currently. There are many uncertainties about Trimeris due to the management change and collaboration amendment with Roche.

As such, we maintain our Sell rating on Trimeris given the lack of visibility on the company's long-term growth prospects. Our $5.00 price target corresponds to a P/E ratio of 21.8x to our 2010 EPS of $0.33, discounted back at 20 percent for 2 years. This is a huge discount to biotech peers, but it is warranted due to the recent corporate developments and changes in the competitive landscape.