Trubion Pharma Trims Loss – Analyst Blog

Trubion Pharmaceuticals Inc. (TRBN) posted a loss of 28 cents per share during the second quarter of 2010, narrower than the Zacks Consensus Estimate for a loss of 34 cents and also narrower than the year-ago loss of 37 cents. Higher revenues earned during the quarter helped trim the loss.

 

 

Quarterly revenues increased 39% year over year to $5.7 million, in line with the Zacks Consensus Estimate. Trubion Pharma recognized increased revenues under its partnership agreement with Abbott Laboratories (ABT) during the quarter, thereby boosting total revenues.

 

Trubion Pharma records its entire revenue from collaboration agreements with Pfizer Inc. (PFE) and Abbott Labs. While the agreement with Pfizer is for the development of CD20-directed candidates including SBI-087 (rheumatoid arthritis and systemic lupus erythematosus), the deal with Abbott Labs is for the development of CD37-directed molecules including TRU-016 (chronic lymphocytic leukemia).

 

During the second quarter, Trubion Pharma generated $3.8 million of revenue from the Abbott Labs agreement and the rest came from the Pfizer deal. Revenues from Pfizer declined year over year primarily due to lower reimbursable costs related to the clinical studies of TRU-015 as well as a decrease in the amount of reimbursable legal fees.

 

Operating costs amounted to $11.3 million during the second quarter, reflecting an increase of 5.6%, attributable to elevated research and development costs.

 

 

Although Trubion Pharma reaffirmed its fiscal 2010 revenue expectation range of $19 million to $24 million, it reduced its operating cash requirement guidance range between $29 million and $34 million (from a range of $33 million to $38 million). The revision resulted from a change in the timing of a $6 million milestone payment to be received from Abbott Labs. Trubion Pharma now expects to receive this milestone payment in the first half of 2011, in tandem with the initiation of the mid-stage TRU-016 trial.

 

 

Trubion Pharma recently announced that it has agreed to be acquired by Emergent BioSolutions Inc. (EBS) for an upfront payment of $96.8 million or $4.55 per share. The upfront payment comprises a cash payment of $1.365 per share and 0.1641 shares of Emergent BioSolutions for each share of Trubion Pharma. The shareholders of Trubion Pharma are also entitled to a potential milestone payment of $38.7 million or $1.75 per share over a 36-month time period, following the closure of the deal. This payment will be made only on the achievement of certain predefined milestones. The acquisition is expected to complete in the fourth quarter of 2010.

 

Emergent BioSolutions is a biopharmaceutical company, focused on developing, manufacturing and commercializing vaccines and immune-related therapeutics.

 

 

We currently have a Neutral recommendation on Trubion Pharma, which is supported by a Zacks #3 Rank (short-term ‘Hold’ rating). We find the merger of Trubion Pharma with Emergent BioSolutions as encouraging given Trubion Pharma’s overt dependence on Abbott Labs and Pfizer for revenue generation. Trubion Pharma does not manufacture or market any drug on its own, nor does it have any candidate in late stage trial.