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WIKI ANALYSIS
Trimeris, Inc. (TRMS) is a biopharmaceutical company that exploits anti-viral fusion technology to discover, develop, and market novel therapeutic agents for the treatment of viral diseases. Fuzeon is its first-generation fusion inhibitor for HIV. It has been approved in the U.S., Canada, and the European Union in combination with other antiretroviral agents for the treatment of HIV infection in treatment-experienced patients. The company has entered into an agreement with Hoffman-La Roche, Ltd. to commercialize Fuzeon around the world. Under the terms of the agreement, the two share profits equally from sales of Fuzeon in the U.S. and Canada. For sales outside these two countries, Trimeris receives royalties. The company also has other collaborative agreements, significantly with Array BioPharma, Inc., Tranzyme, Inc., and with ChemBridge Research Laboratories, Inc. All these agreements allow the company to focus on developing small molecule fusion inhibitors for HIV. In addition, the company, in association with Array BioPharma, Inc., will develop a fusion inhibitor for respiratory syncytial virus (RSV). Based in Durham, NC, the company employs roughly 64 people.
INVESTMENT THESIS
Fuzeon Franchise
With Fuzeon (enfuvirtide) currently on the market, Trimeris is gearing up to benefit from the significant growth opportunity in the treatment of HIV. There are currently about 1.5 million people in the U.S. Canada and E.U. who are infected with the virus. In the U.S., an additional 40,000 people get infected with HIV every year. Globally, about 38.6 million people are living with HIV/AIDS with 2.8 million patients dying of the disease in 2005. The current treatments available for HIV have certain drawbacks. People on these therapies develop resistance after a period of time. In such cases, addition of Fuzeon demonstrated improvement in the effectiveness of treatment. We saw this in the phase III trial of Aptivus (Tipranavir, a non-peptidic protease inhibitor) conducted by Boehringer Ingellheim (BI). The data showed that despite certain side effects, the combination therapy (Fuzeon + Aptivus/Ritonavir) increases effectiveness in the treatment of HIV. Based on this phase III result, the Food and Drug Administration (FDA) approved Aptivus in June 2005 for the treatment of HIV in combination with other anti-HIV drugs like Fuzeon.
Besides Boehringer Ingellheim, Johnson and Johnson is also developing a compound called Prezista (darunavir, TMC-114) in combination with Fuzeon for HIV. New clinical data, presented from a phase IIb trial (POWER 2) conducted on triple-class experienced patients, showed that 64% of patients on Prezista plus Fuzeon achieved undetectable viral load as compared to 30% of patients receiving only Prezista. We were pleased to see these results which were presented at the 45th annual Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC). Additionally, interim results from the BLQ study (Below the Level of Quantification) presented at the 4th International AIDS Society (IAS) Conference in July 2007 showed that almost two-thirds (64 percent) of three-class, treatment-experienced patients achieved undetectable HIV (less than 50 copies per mL of blood) at 24 weeks when treated with the combination of Fuzeon and Prezista, and that baseline sensitivity to Prezista (the amount of resistance to this protease inhibitor prior to the study) did not appear to influence patient response to the regimen. These results support the use of Fuzeon with protease inhibitors. The achievement of undetectable HIV by Fuzeon and Prezista in a high proportion of patients with extensive prior exposure to anti-retrovirals is a very important result which was previously elusive to many such patients. With the concurrent availability of Fuzeon and Prezista, the combination therapy could become a new standard of care. It may now be possible for many long-term HIV patients struggling against resistant HIV to achieve durable viral suppression with this combination. Prezista was approved in June 2006.
Furthermore, the combination of Fuzeon with Merck's investigational drug Isentress (MK-0518 / Raltegravir) has demonstrated similar undetectable levels of HIV in treatment-experienced HIV patients. Isentress, an integrase inhibitor, was approved in the U.S. in October 2007. The clinical trail results were presented at the 46th annual Inter-science Conference on Antimicrobial Agents and Chemotherapy (ICAAC) in San Francisco on October 5, 2006. Investigators reported results of a 24-week, phase IIb study of MK-0518 in patients with resistance to protease inhibitors, nucleoside analogues and non-nucleoside analogues. Patients received one of three doses of MK-0518 (200 mg, 400 mg or 600 mg) twice-daily in combination with an optimized regimen of anti-HIV drugs. In the subset of patients who received Fuzeon for the first time in their drug regimen along with MK-0518, approximately 90 to 95 percent of 32 subjects achieved undetectable HIV, compared to approximately 60 to 70 percent of 82 subjects who received MK-0518 without Fuzeon. Overall, Fuzeon increased response rates in the study by approximately 50 percent. These findings are consistent with the recent HIV treatment guidelines, which emphasize undetectability as the goal of therapy in treatment-experienced patients, as well as the need to initiate multiple active anti-HIV agents simultaneously in order to achieve this goal. The most commonly reported study therapy-related side effects were diarrhea, nausea, fatigue, headache and itching.
In July 2007, Trimeris began patient dosing in a new clinical trial, known as AMICI, evaluating the efficacy and safety of Fuzeon in combination with an investigational integrase inhibitor. The trial will also determine whether switching from twice-daily dosing of Fuzeon to once-daily dosing can effectively maintain an undetectable viral load. Trimeris and Roche are also conducting different studies to identify different delivery platforms for Fuzeon. These include the Becton Dickinson 31 gauge, thin-walled syringe/needle (BD Ultrafine II) and the Biojector 2000 (B2000) needle-free delivery system. The BD Ultrafine II syringe is a shorter, insulin-type of needle that may afford more consistent subcutaneous injection dosing, as compared to the currently provided 27 gauge needle the device is currently being evaluated in a Phase IIIb/IV study known as T-20 Qualite. Full data from the study are anticipated in 2007.
However, in October 2007, Trimeris and Roche announced the withdrawal of the supplemental New Drug Application (sNDA) for Biojector 2000. This decision was taken due to a significant delay in receiving approval of Biojector 2000. We remind investors that Roche and Trimeris had filed a sNDA in May 2005 based on data from the T20-405 study, a single-dose pharmacokinetic study of Fuzeon administered by a nurse via the B2000 needle-free device, compared to standard needle-syringe administration. In November 2005, the company received an approvable letter from the FDA requesting additional safety information from the Fuzeon WANT (With A Needle-Free Device, or T20-404) study. The WANT study (initiated in August 2005) was an eight-week trial designed to assess patient acceptance and experience of Fuzeon administration via the B2000 needle-free device compared to the standard needle and syringe. The final results were presented in a late-breaker poster session at the 46th Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) in San Francisco in September 2006. The study met its primary endpoint of demonstrating a significant reduction in the incidence of painful injection site reactions with B2000 administration compared to the standard needle-syringe (36 percent for the device vs. 71 percent for needle-syringe, p < 0.01). In different studies with B2000, a small number of certain adverse events such as hematoma and nerve pain were observed. As such, in October 2006, the FDA requested additional safety information for B2000 from the Fuzeon BOSS (Biojector Open Label Safety Study, ENF407) trial as well as from other data source. The BOSS trial was initiated in early 2006 and has completed enrollment of approximately 330 current or prior Fuzeon patients at 43 trial sites in the U.S. and Puerto Rico in an eight-week study to assess the safety and patient acceptance of B2000 compared to standard needle-syringe administration for Fuzeon.
The Roche Collaboration
The company has a well-established alliance partner in Hoffmann-La Roche (Roche), which has excellent sales and distribution capabilities. Both the collaborating companies have focused on increasing supply of Fuzeon in order to meet patient demands. Roche, which is currently manufacturing Fuzeon at its facility in Boulder, CO, has made significant upgrades to support demand. This facility is currently in a position to generate about 3.7 metric tons per year, which will allow the two partners to meet patient demand. Trimeris and Roche plan to achieve this through an improved distribution network. The companies have already expanded their distribution network by adding retail and specialty pharmacies in 2004. In 2005, the companies initiated a nursing connections program for Fuzeon patients. In September 2006, Trimeris and Roche mutually agreed to extend the research term by an additional two years from January 1, 2007 through December 31, 2008. Research, development and commercialization costs for the NGFI program will continue to be split equally by Trimeris and Roche, as will any profits from the worldwide sale of products covered under the amended research agreement.
However, on March 15, 2007, Trimeris and Roche amended the agreement regarding TRI-1144. Specifically, Roche returned all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides to Trimeris that fall under the Roche-Trimeris 2000 Research Agreement. In return, Trimeris agreed to pay Roche a nominal royalty on future net sales of TRI-1144 up to a specified limit. In addition, Roche agreed to return the rights to all intellectual property that Trimeris originally licensed to Roche under the 1999 Development and License Agreement, with the exception that Roche retains an exclusive license to manufacture and sell Fuzeon worldwide. The commercial arrangement between Roche and Trimeris governing Fuzeon sales remains unchanged. Roche retains the right to conduct research on certain HIV gp41 fusion inhibitor peptides at Roche's cost for a specified period of time. Trimeris retains the right to opt-in and co-develop with Roche any one of these peptides under a 50-50 cost and profit split worldwide. Trimeris now has the sole right to continue development of TRI-1144 and the Company has decided to advance TRI-1144 into human studies, with an IND filing planned in early 2008. However, management did not give any specific reason why Roche amended the agreement and what specific strategic options the company is considering.
In addition to Fuzeon, Trimeris and Roche were also developing two next-generation HIV fusion inhibitor (NGFI) peptide candidates TRI-999 and TRI-1144. The company presented initial data in February 2006 at the Conference on Retroviruses and Opportunistic Infections (CROI). Specifically, both TRI-999 and TRI-1144 demonstrated up to seven times greater antiviral activity than Fuzeon. Both candidates are effective against Fuzeon-resistant viruses and resistance to the two candidates was very difficult to derive in vitro. The company designed pharmacokinetic properties into these molecules that enable them to persist longer in the bloodstream (up to five times longer than Fuzeon). This longer duration of activity will allow once-per-week dosing when combined with an appropriate sustained-release formulation. Based on recently completed preclinical studies, TRI-1144 met the criteria established by Trimeris and Roche for further development. TRI-999 did not satisfy these criteria and will not be further developed. However, post the amended agreement with Roche in March, Trimeris is advancing TRI-1144 as its lead preclinical NGFI candidate and expects to file an Investigational New Drug Application (IND) for the compound in early 2008, with phase I trials expected to be initiated and completed within the first half of 2008. The company has adopted a target product profile of a convenient, low-volume, once per day injection, delivered by a pre-filled auto-injector with minimal to no injection site reactions. In addition, the target product profile for TRI-1144 seeks to retain the excellent systemic safety profile of Fuzeon. Future line extensions or modifications to the current target product profile could include less frequent than once per day dosing.
Financials
Global sales of Fuzeon in the fourth quarter of 2007 were $66.5 million. Fourth quarter sales were $1.8 million lower than our estimate of $68.3 million and were down 9.3 percent compared to the prior year period. U.S. sales of Fuzeon continued to decline on a year-over-year basis, coming in at $31.5 million for the fourth quarter of 2007. However, ex-U.S. sales remain strong and came in slightly below our estimate of $35.5 million at $35.0 million for the fourth quarter of 2007. While U.S. sales declined by 25.3 percent on a year-over-year basis, ex-U.S. sales increased by 12.5 percent compared to the prior year period. On an annual basis, U.S. sales of Fuzeon in 2007 declined by 7.5 percent. However, an increase of 24.1 percent in ex-U.S. sales helped the drug post global sales of $266.7 million in 2007, up 7.1 percent year-over-year.
Trends and Forces
Management Change and Strategic Restructuring
On March 15, 2007, the company announced management change. Effective March 16, 2007, Dr. Dani P. Bolognesi, Chief Executive Officer and Chief Scientific Officer of Trimeris will retire from his executive duties at the company. Dr. Bolognesi will remain a member of the Board of Directors until the next annual meeting of Trimeris stockholders, after which he will be a scientific consultant to Trimeris through October, 2008. In addition, Mr. Robert Bonczek, Chief Financial Officer and General Counsel will retire effective April 30, 2007. Beginning May 1, 2007, Mr. Bonczek agreed to serve as a financial advisor to the Company. On May 7, 2007, the Board of Directors appointed Mr. Bonczek as Interim CFO until a successor is appointed. Mr. Bonczek's interim appointment does not extend beyond May 31, 2007. Mr. E. Lawrence Hill, Jr. has been appointed Acting President and Chief Operating Officer by the Board of Directors effective March 15, 2007. Mr. Hill was formerly C.E.O. of Deltagen, Inc. from 2003-2005. He is currently President of Hickey & Hill, Inc, a management services firm.
As a reminder, in November 2006, Trimeris announced that it will shift its strategic emphasis and reorganize to focus tightly on Fuzeon and its next generation fusion inhibitor. As a result, Trimeris plans to reduce programs and cut jobs especially in the research and development division. Trimeris will leverage synergies with Roche and will reduce the redundancy within the company. Trimeris will rely on Roche to promote and market Fuzeon. With the change in direction, Trimeris had appointed Dani Bolognesi as the new CEO who was also the chief scientific officer.
As a result of the management change, the company could not uphold previously stated 2007 earnings guidance although management reiterated the guidance of moderate top line growth. Therefore, we remodeled our 2007 and 2008 financials. Specifically, we lowered our estimate for both the top line and bottom line numbers from the original ones. On November 15, 2007, the company announced the appointment of Martin A. Mattingly to the post of Chief Executive Officer (CEO). Dr. Mattingly will also join the company's Board of Directors.
Following the announcement of the appointment of a new CEO, the company also undertook a strategic restructuring program in December 2007 under which the company will aim to maximize shareholder value in 2008 and beyond. The company plans to file an IND application for TRI-1144 and plans to initiate and complete a single ascending dose (SAD) phase I clinical trial for TRI-1144 in the first half of the year. Following the completion of the phase I SAD trial, the company will stop all research and development functions. As a result, total operating expenses, excluding restructuring costs, are expected to be in the range of $10.0 million to $14.0 million in 2008, down from approximately $21.0 to $23.0 million in 2007.
Competitive Landscape
Approved in 2003, Fuzeon (enfuvirtide) is the first in a class of anti-HIV drugs called fusion inhibitors. Its mechanism of action is completely different from existing anti-HIV drugs. Instead of working on the inside of T cells to stop virus replication, Fuzeon works on the outside of T cell to block HIV entry into the host cells. This unique function gives Fuzeon the potential to treat resistant strains of HIV. Additionally, fusion inhibitors are considered less likely to cause unwanted side effects and interfere with other drugs in an anti-viral regimen.
However, the price of one year of therapy with Fuzeon is much higher than any of the other approved anti-HIV drugs. Additionally, anti-HIV/AIDS market is competitive and crowded with big players like GlaxoSmithKline, Pfizer, Schering-Plough and Gilead Sciences. Although we believe Fuzeon will carve a niche market due to its unique action of mechanism and first in class status, direct competition may come from CCR5 inhibitor and integrase inhibitor. CCR5 inhibitor inhibits HIV entry into host cells by blocking the virus binding into CCR5 co-receptor and integrase inhibitor inhibits HIV entry by blocking integrase. Pfizer's CCR5 inhibitor, Selzentry, received FDA approval in August 2007 and E.U. approval in September 2007. The drug was launched in the U.S. in September 2007. Schering-Plough is currently working on a CCR5 inhibitor called vicriviroc in a phase III trial in combination with Combivir for both treatment-na ve and treatment-experienced HIV patients. Vicriviroc demonstrated sustained effects through 48 weeks of therapy in a phase II study with treatment-experienced patients. These results represent the longest follow-up data reported to date.
At the same time, Merck and Gilead Sciences are developing integrase inhibitors. Merck's Isentress received FDA approval in October 2007. Gilead s Elvitegravir (formerly GS9137) is also an integrase inhibitor and is currently in a phase III "head-to-head" trial vs. Isentress. We are very concerned about the competition since Pfizer's Selzentry received FDA approval in August 2007 and Merck's Isentress was approved in October 2007. Pfizer's Selzentry, Merck's Isentress and Schering-Plough's vicriviroc have all been granted fast track status by the FDA. When the new drugs reach the market, Fuzeon patients can stop using that painful drug and switch to new medicines that are easier to use, and in many cases, more effective.
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