Tar Heel Tattler - May 2007

Profit doesn't heal this drug developer
- Frank Maley

The day Trimeris Inc. announced it was profitable should have been a happy one. But two other announcements that same day left analysts wondering whether the 14-year-old Morrisville drug developer has much of a future.

When it released its annual report in March - it netted $7.4 million last year - Trimeris also revealed that co-founder and CEO Dani Bolognesi (cover story, July 2003) was retiring. This was only six days after he signed a new employment agreement. It also said it was scaling back its seven-year-old research agreement with Swiss drug giant Roche. Trimeris put a positive spin on the news, saying it had gained sole rights to develop its next-generation AIDs drugs, but Wall Street didn't buy it.

The stock dropped nearly $3 to $7.12 the next day. "The fate of the company is impossible to discern, and we see no reason to own the stock right now," wrote Sharon Seiler, an analyst at Punk, Ziegel & Co. Trimeris executives didn't return phone calls, and a Roche spokesman declined comment, but some analysts concluded that Roche had bailed out because it didn't think the next generation of treatments will be worth the investment.

Trimeris' only product was groundbreaking when it hit the market in 2003. Though no cure for AIDS, Fuzeon blocks infection of white blood cells. But sales have suffered, partly because patients don't like having to take injections twice a day. Trimeris' top drug candidate would require only weekly injections, but with new pills becoming available, that might be too little too late, Seiler says. "Although a once-weekly injectable is clearly more attractive than a twice-daily injectable, we think the window of opportunity for injectable antiretrovirals is closing."

Now Trimeris will bear the full cost of developing its drug candidates, unless it finds another partner. Seiler says management is exploring selling or dissolving the company. Vinny Jindal takes a dim view of prospects for selling it. "We believe that any acquisition premium paid is likely to be relatively low due to Fuzeon's limited growth prospects," says the analyst at ThinkEquity Partners, part of London-based Panmure Gordon & Co.

So what should executives do? Dissolving the company and selling the rights to Fuzeon might be best, Seiler says. "I don't know whether they're seriously thinking of taking this second-generation product forward on their own. That seems kind of questionable to me."