AIDS Drug Supply to Fall, Trimeris' Numbers Will Follow

Biotech firm Trimeris(TRMS Quote - Cramer on TRMS - Stock Picks) and Swiss drugmaker Roche warned Wednesday night that manufacturing problems have forced the companies to sharply lower their supply forecasts for the soon-to-be-approved AIDS drug Fuzeon.

The companies did not provide guidance on a potential revenue shortfall. Instead, they said initial Fuzeon supplies will likely be adequate for 12,000 to 15,000 patients by year-end 2003, down from an original estimate of 20,000 to 25,000 patients. Supply forecasts for year-end 2004 were reduced to 32,000 patients from 40,000 patients.

The Food and Drug Administration is widely expected to approve Fuzeon in the first quarter 2003. But Wall Street has been nervous about the drug's complex manufacturing process. It's so hard to make Fuzeon that many analysts and biotech fund managers have been concerned that there won't be enough drug to meet demand. It also costs a lot to make Fuzeon, causing worries about the drug's gross margin and ability to life Trimeris into profitability.

Wednesday night, Trimeris and Roche acknowledged that these concerns are real. Initial commercial scale production yields at Roche's Colorado manufacturing plant were lower than projected, although improvements in efficiency have been made, the companies said. Another issue impacting Fuzeon supply: The companies must keep a six-month "safety supply" of the drug in inventory for each patient.

"In 2003, we will ensure that Fuzeon supplies are carefully managed -- given the potential for demand to exceed supply -- so that people who are initiated on therapy will receive an uninterrupted supply," said George Gemayel, a Roche vice president, in a statement.

Wednesday night, sell-side analysts were in the process of reworking their Fuzeon sales numbers, so it's not yet clear what the new revenue forecasts will be.

Before tonight's warning, analysts were forecasting 2003 Fuzeon sales in the range of about $70 million to almost $160 million. The wide range comes from the fact that exact pricing of the drug hasn't been disclosed by the companies, and analysts have differed on the number of patients who will be able to get the drug in 2003.

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