Trimeris Shares Jump on Reorganization
Wednesday November 15, 11:13 am ET
By Damian J. Troise, AP Business Writer
Trimeris Shares Surge on Shift in Research Focus and Change in Leadership
NEW YORK (AP) -- Shares of Biopharmaceutical company Trimeris Inc. surged Wednesday, following the announcement of a reorganization that will cut its work force, refocus resources on research and development and bring in new leadership.
The stock gained $1.76, or 17.6 percent, to $11.81 on the Nasdaq in morning trading, as volume surged more than ninefold. Shares have traded between $7.21 and $14.92 over the last 52 weeks.
Late Tuesday, the company announced the changes and held a conference call to discuss the move. That drove shares higher in after-hours trading.
Chief Executive Steven Skolsky will resign as part of the move and is being replaced by Chief Scientific Officer Dani Bolognesi. He will maintain both titles. Details on the work force reductions were not revealed.
In a conference call, Bolognesi said the company will aim to further develop future versions of its Fuzeon HIV treatment and other drugs based off of that technology. That refocus would mean relying more on its partner Roche Holding Ltd. to handle the marketing and commercialization aspect of Fuzeon.
Fuzeon brought in $63 million in sales during the third quarter and the company is awaiting a decision by the Food and Drug Administration for a needle-less version. More safety data has been requested for that application.
"These changes are designed to significantly increase and sustain earnings from Fuzeon by sharply reducing expenses," Trimeris said in a statement.
Cost reductions and changes are expected to generate a 2007 profit of more than $1 per share, with additional cash flow getting a $20 million boost, the company said. Trimeris posted a loss of 37 cents per share in 2005 and analysts polled by Thomson Financial are looking for a per-share profit of 22 cents in 2006, and 27 cents in 2007.
Morgan Stanley analyst Dr. Steven Harr took a cautious view on the decision, citing the company's lack of detail in exactly how it intends to cut costs or reach its estimated profit target.
"We expect the stock will react positively to tonight's announcement in the short-term, but once long-term implications sink in, more sobering thoughts may prevail," he wrote in a client note Tuesday night.
Potential competition for Fuzeon is a looming factor. That coupled with the need to invest more in a next generation treatment while working on already thin operating expenses will make the goal difficult to reach, he wrote. Harr maintained an "Underweight" rating on the stock.
The same unanswered questions prompted Goldman Sachs analyst Meg Malloy to maintain a "Neutral" estimate with an $11.50 price target. In a Tuesday night note, she said the next generation of the company's fusion inhibitors could be value drivers, but they are in preclinical trials.
The competitive landscape will continue to evolve with HIV treatment entries by Merck & Co., Pfizer Inc., and Gilead Sciences Inc., she noted.
ThinkEquity Partners LLC analyst Vinny Jindal moved the opposite way, upgrading the stock to "Accumulate" from "Sell" saying the company has positioned itself as an acquisition target.
The analyst pointed to several recent deals in the biotech sector, including Eli Lilly's planned $2.1 billion cash purchase of joint venture partner Icos Corp. and Genentech Inc.'s $919 million proposed acquisition of biotechnology company Tanox Inc.
Jindal anticipates a takeout premium of 25 percent to 45 percent, should an offer materialize.
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