Trimeris Fortune Tied To Fuzeon

Sales of Fuzeon, the lead drug candidate of Trimeris (TRMS - Analyst Report), have been declining dramatically since 1Q08. Its sales in the U.S. came in at only $10 million in the first quarter of 2009, down 41.2% y-o-y. Ex-U.S. sales of Fuzeon were $17.8 million, down 30.7% y-o-y.

We attribute the steep decline in Fuzeon sales to the approvals of Pfizer’s (PFE - Analyst Report) Selzentry and Merck’s (MRK - Analyst Report) Isentress in the U.S. Selzentry will also compete with Fuzeon in Europe.

Trimeris entered into an agreement with Hoffman-La Roche Ltd. to commercialize Fuzeon around the world. Under terms of the agreement, the two will share profits equally from sales of Fuzeon in the U.S. and Canada. For sales beyond these two countries, Trimeris will receive royalties.

We however fear a further decline in worldwide sales of Fuzeon in the upcoming quarters. Specifically, we expect the drug to post sales of only $110.5 million in 2009 – a significant y-o-y decline of 34%. We expect Fuzeon sales to shrink at a CAGR of 30% in the 2007-11 period.

Unless the company finds a solution to its shrinking top line, shares of Trimeris will continue to be face pressure. From a long-term investment perspective, we think the pipeline build-up is the most important factor impacting the company’s outlook. With Fuzeon sales declining by a CAGR of 30% in the 2007-11 period, Trimeris should look to in-license / acquire clinical candidates for future growth. But we don’t see any positive move by the management in that direction so far.

As such, we maintain our Sell rating on Trimeris given the lack of visibility on the company’s long-term growth prospects.