Tuesday, April 10, 2007

Calls of Note Part 1

Piper Jaffray out with an interesting call on Trimeris (NASDAQ:TRMS), saying that they have learned that French investigators will be initiating a trial this month to study switching of Fuzeon patients to MRK's new integrase inhibitor, Isentress (previously MK-0518). The trial will enroll approximately 170 patients with undetectable HIV levels treated with Fuzeon who will be randomized to either maintain their Fuzeon regimen or switch to Isentress. The primary endpoint will be powered to demonstrate non- inferiority between the two arms on the proportion of virologic failures at week 24. Firm believes that the study may have preliminary data in 2008.

In addition to the risk of declining new patient starts on Fuzeon, this study underscores the potential for direct switching of existing Fuzeon patients to new oral drugs. Firm believes that the side effects and inconvenience of Fuzeon therapy could open the door for switching to create further pressure on future Fuzeon sales. These new oral options could enter the market in 2H07 (PFE's maraviroc and MRK's Isentress).

Firm discusses BMY's Zerit and PFE's Viracept as case studies, both lost significant market share. If Fuzeon suffered a similar rate of market share decline (and they believe it could be worse), the company's current profitability may be unsustainable by 2009-2010. As a result, they are lowering their price target from $7 (16x 2010, disc 30% for two periods) to $5 (12x 2010, disc 40% for two periods) to reflect the low end of the current range of biotech multiples and heightened risk to our profitability assumptions.

Notablecalls: I believe there is additional downside to the stock over the next few days.

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