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Roche-Trimeris Change TRI-1144 Deal
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Trimeris falls after Roche deal change, exec departures
Fri Mar 16, 2007 12:40pm ET
By Varsha Tickoo
BANGALORE, March 16 (Reuters) - Shares of Trimeris Inc. (TRMS.O: Quote, Profile , Research) fell more than 25 percent on Friday, a day after it said F. Hoffmann-La Roche Ltd. returned an experimental compound and that two of its top executives left the company.
Shares of the company, which developed the HIV drug Fuzeon with Roche AG (ROG.VX: Quote, Profile , Research), fell $2.56 to $7.51 in afternoon trade, making it the top percentage loser on the Nasdaq.
Trimeris said Roche would return rights to joint patents and intellectual property related to next-generation HIV fusion inhibitor peptides, including TRI-1144, a drug Trimeris and Roche were developing under a 2000 agreement.
Stifel, Nicolaus & Co. analyst Edward Nash said this amendment hinted that Roche expected this class of drugs, which needs to be injected, to not fare well in the future, as physicians and patients may prefer oral drugs.
"We believe this is an astute assessment of the HIV therapy field," Nash said in a note, adding that physicians may be interested in replacing Fuzeon with oral HIV drugs from Merck (MRK.N: Quote, Profile , Research) and Pfizer (PFE.N: Quote, Profile , Research).
Fuzeon, which is already marketed, also belongs to the class of anti-HIV injectible drugs called fusion inhibitors.
Trimeris will pay Roche a "nominal" royalty on future net sales of TRI-1144, it said. Trimeris said it is reviewing its options regarding this program.
EXECUTIVE CHANGES
Trimeris also announced that Chief Executive Dani Bolognesi and Chief Financial Officer Robert Bonczek will retire effective March 16 and April 30, respectively.
The departure of two key executives signaled that they realized they did not have the skills needed to turn the company around at this point, Nash said by phone.
The company, which appointed E. Lawrence Hill Jr., as acting president and chief operating officer, reaffirmed that it expects total worldwide net sales of Fuzeon to show modest top-line growth in 2007.
Nash, who has a "hold" rating on the stock, did not expect the company to find a partner for TRI-1144, as a potential partner would have the same reservations as Roche regarding competition for this class of HIV drugs.
The company probably needed an in-licensing deal at this juncture, he added.
The Fuzeon sales agreement between Roche and Trimeris remains unchanged, the company said.
Raleigh News & Observer:
The emerging competition is raising questions about whether there will be demand for the next-generation Fuzeon that Roche and Trimeris were working on, Nash and Seiler wrote. Terminating the research and development agreement for next-generation Fuzeon was a smart move on Roche's part, Nash wrote in his research note. From physicians, "we have learned that doctors are inclined to prescribe Fuzeon less frequently now that superior, noninjectable drugs are available," Nash wrote.
Trimeris has projected demand for Fuzeon to slow this year. The company expected worldwide sales to rise 7.3 percent, compared with a 19.6 percent increase last year.
Trimeris replacing two top execs
Dani Bolognesi, who had been chief executive and chief scientific officer, will retire immediately, according to the Morrisville company, which specializes in AIDS treatments. Chief Financial Officer Robert Bonczek will follow April 30.
"It's a total shake-up," said Sharon Seiler, a Punk Zeigel analyst who tracks Trimeris.
The company announced the changes, including the termination of a research-and-development agreement with Roche, as part of its fourth-quarter financial report after the markets closed Thursday.
Trimeris reported its first profitable year on strong sales of its AIDS drug Fuzeon. But the restructuring put into question whether the company can remain profitable this year, Seiler said. It also remained unclear who will lead its research-and-development efforts and whether the company is up for sale, she said.
"I'm mystified," she said.
Company spokesmen, who said Bolognesi will remain on the board of directors, were unclear on when the restructuring decision was made and why.
Trimeris has struggled since lackluster Fuzeon sales disappointed high expectations three years ago.
The company revamped its drug development pipeline and overhauled management twice -- the last time five months ago.
Marketing efforts and a change in treatment guidelines boosted Fuzeon sales, and a few months ago the company renewed its extensive partnership with Roche. The renewal included an agreement under which Roche would have shared research-and-development costs for a next-generation version of Fuzeon, TRI-1144.
Management consultant Larry Hill, who was named acting president and chief operating officer, conducted Trimeris' conference call with analysts Thursday. He said he had been on the job about a week.
Trimeris will continue the part of its relationship with Roche that allows Roche to manufacture and market Fuzeon, Hill said. But Roche will return all rights to work on TRI-1144, which Trimeris plans to develop on its own, Hill said. Trimeris initiated the negotiations to scale back the partnership with Roche a few weeks ago, he said.
But he left unanswered how much the development of TRI- 1144 would cost Trimeris and whether the company would be looking for a new partner. "Now that we have it back," he said, "we have to think over everything."
He also left unanswered how long he would stay with Trimeris.
Meanwhile, a colleague from Hill's consulting firm, Hickey & Hill, will replace Bonczek as chief financial officer. A search for a new management team is not planned, Hill said.
For the three months ended Dec. 31, Trimeris said it earned $4.7 million, up 25 percent from the same period a year ago. Revenue rose 57 percent to $12.5 million.
For the full year, the company reported $7.9 million in profits, compared with a loss of $8.1 million in 2005. Revenue for the full year was $12.5 million, up 57 percent from a year earlier.
In after-hours trading, Trimeris shares fell as much as 13 percent before recovering. The shares closed at $10.07, up 6 cents.
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