Synageva BioPharma (GEVA)

[surf1944]

Trimeris Has Further to Fall
Tuesday August 19, 12:41 pm ET
By Grant Zeng, CFA

Sales of Trimeris, Inc.'s (NasdaqGM: TRMS - News) lead drug Fuzeon -- its first-generation fusion inhibitor for HIV -- has been declining dramatically since 1Q08 due to fierce competition from Selzentry and Isentress. The collaboration amendment with Roche and several management changes further cast a shadow on the company's future. We maintain our Sell rating on Trimeris with a $3.50 price target.

U.S. sales of Fuzeon came in at only $16.1 million in the second quarter of 2008, down 51 percent year-over-year. Ex-U.S. sales of Fuzeon were $22.2 million, down 23.8 percent year-over-year. As a result, Trimeris booked only $4.7 million in revenue in 2Q08, a decline of 48% year-over-year. Net income in 2Q08 was $2.5 million ($0.11 per share) on an adjusted basis compared to net income of $4.6 million ($0.21 per share) one year ago.

The Biojector 2000 was expected to be approved in 2008. The device was expected to make Fuzeon more convenient for intake and drive the drug s sales. However, in October 2007, Trimeris and Roche announced the withdrawal of the supplemental New Drug Application (sNDA) for Biojector 2000 due to a significant delay in receiving approval of Biojector 2000.

Further, we don't think the dividend and the share repurchase program will create value to shareholders unless the company acquires meaningful late-stage drug candidates. We remain clueless as to how the management will drive topline growth in the coming years.