Infinity Pharmaceuticals Inc (INFI) 2006 Q4 法說會逐字稿

Good day, everyone, and welcome to the Infinity Pharmaceuticals Fourth Quarter and Year End 2006 Financial Results Conference Call. Today's conference is being recorded. And at this time before opening remarks and introductions, I would like to turn the call over to Mr. John Evans, Manager of Investor Relations and Business Development for Infinity Pharmaceuticals. Please go ahead, sir.

Thank you and good morning. This is John Evans. I am joined by Stephen Holtzman, Chair and CEO; Julian Adams, President and Chief Scientific Officer; and Adelene Perkins, Executive Vice President and Chief Business Officer of Infinity.

We would like to thank you for your participation in this call and for your interest in Infinity. Today we'll be discussing some of our 2006 achievements as well as our fourth quarter and year-end financial results. Infinity's earnings release is available on our website at www.ipi.com. Additionally this conference call will be archived on our website for 30 days.

Before we begin I would like to mention that we will be discussing our future discovery and development efforts, our collaborations, our financial position and other future expectations on this call. These remarks constitute forward-looking statements for purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act and it is possible that our actual results may differ from what we project today as a result of a number of factors. These factors are described in the Risk Factor section of our most recent 10-Q, which we filed with the SEC last November. While these forward-looking statements represent our views as of today, they should not be relied upon in the future as representing our then current views. We may update these statements in the future but we are not taking on an obligation to do so. I would now like to turn the call over [technical difficulty].

Thanks John. Good morning and thanks to all of you who've joined us for the call this morning. 2006 was a significant year for Infinity. One in which we achieved several business as well as key product development milestones. We rapidly evolved both our Company and our pipeline. We established significant global alliances to accelerate and expand the developments of our lead anti-cancer programs. Our most advanced drug candidate made substantial clinical progress.

In addition, we smoothly transitioned from a private to a public company. Our route there namely through a reverse merger with Discovery Partners International while not conventional was in fact the right move given the Biotech Capital markets in 2006. It has rewarded the shareholders of Discovery Partners, the shareholders of Infinity and it has provided us the capital required to drive our product candidates aggressively.

And with those few words of introductions, I am now going to turn the floor over to Julian and then Adelene to tell you about 2006 and our exciting plans for 2007.

Thank you, Steve, and good morning, everyone. As Steve said, 2006 was a year of growth for Infinity particularly in terms of Infinity's pipeline. We entered into two significant product-based alliances. Earlier in the year, we established an alliance with Novartis to develop our novel inhibitors of the BCL family of protein. While a target of high interest to our entire industry for the better part of a decade, the BCL family of proteins has proven especially difficult to drug with small molecules. In collaboration with our colleagues from Novartis, we have made significant progress to optimizing potent and selective lead candidates with a potential to treat a broad range of cancers.

Next, in August we entered into a major partnership with MedImmune to develop and commercialize drug candidates in our two most advanced programs--the first reactive to Heat Shock Protein 90 or Hsp90; the second, reactive to Hedgehog signal -- cell-signaling pathway. Just last week we hosted a large group from MedImmune including representatives from their biology, clinical and regulatory groups. We would like to report to you today that MedImmune and Infinity are in complete agreement and alignment on the goal of aggressively moving forward our Hsp90 and Hedgehog pathway programs. Our core strengths and our entrepreneurial cultures complementary. It is a great partnership and we look forward to reporting to you on its progress over the coming months and years.

Let me now turn to our clinical development. We at Infinity believe that our clinical innovation is one of the key differentiators and competitive advantages for Infinity in the development of oncology drug candidates. Getting to market rapidly with the best in class product is paramount to the success of an oncology drug. Therefore, an ability to design and execute smart effective clinical trials is critical.

Traditional phase I studies in oncology have tended to focus on [all comer] trials in which patients with a broad range of tumor types are enrolled in the trial. In recent years the overall response rate in Phase 1 [all comer] trials is in the order of just 3%. Such a low number would suggest that detecting a signal of biological activity in small numbers of patients is quite difficult. By contrast a hypothesis driven trial in a discrete patient population could significantly increase the chance of detecting that signal of biological activity.

At Infinity we are testing this principle. Our clinical strategy with IPI-504 has been to initiate diseased focus Phase I trials testing IPI-504 as a single agent in refractory settings where we believe there is a strong scientific rationale for the use of an Hsp90 inhibitor in that indication, a substantial unmet medical need and the potential for accelerated approval.

In addition to choosing targeted disease settings supported by strong science, we have also chosen indications in which we have the potential to observe signals of biological activity using surrogate markers. Markers such as positron emission tomography or PET imaging. Combined, these strategies have the potential to markedly accelerate clinical development testing where there [are drug] is biologically active in a competitively large sample of patients in the same indication and all in Phase I.

In GIST, this strategy has already paid off. In November we announced with MedImmune promising preliminary data from our Phase I trial of 504 inpatients with Gleevec refractory GIST. Because of the observations of biological activity we have seen in the PET images and because IPI-504 has been well tolerated to-date, we initiated a second arm of this trial in December in which we are administering 504 on a twice-weekly schedule over a three-week cycle, effectively a more dose intense treatment. We continue to be encouraged by the results of this trial, and later this year we expect to define the optimal dose and schedule for IPI-504 in Phase II trials.

Based on the strong signal we saw in GIST -- in the GIST trial we are aggressively expanding the clinical program to investigate IPI-504 in additional cancer indications which are likely to be sensitive to Hsp90 inhibition. Non-small cell lung cancer is one such indication that we believe presents an equally compelling scientific rationale for Hsp90 inhibition similar to that seen GIST. In up to 15% of non-small cell lung cancer patients a mutation in the cellular signally receptive kinase called epidermal growth factor receptor or EGFR drive the survival and proliferation of the cancer cell. In preclinical models, inhibition of Hsp90 by IPI-504 has been shown to direct the degradation of the mutant EGFR via the proteasome. The oncogene addiction phenomenon for mutant EGFR when the inhibitor degraded leads to cancer cell death. More importantly resistant forms of this cancer which are no longer responsive to targeted kinase inhibitor such as [Tasiba Ohirasa] are still sensitive to 504 in preclinical models.

Consequently we plan to initiate a trial of IPI-504 in patients with advanced non-small cell lung cancer in the first half of this year in which we will evaluate the safety and tolerability of IPI-504. We will also use CAT scans and PET imaging to look for signs of biological activity. In the second half of this year, we expect to identify a recommended Phase II dose from our ongoing Phase I studies in GIST and non-small cell lung cancer. We are trying to expand clinical trials of 504 as a single agent in one or more Phase II trials. Moreover, we expect to initiate one or more combination studies with the approved oncology therapeutics. Additionally and importantly we anticipate entering the clinic with an oral formulation of IPI-504 in the second half of this year.

As I have described, given our belief in the broad potential of IPI-504, we have set aggressive goals for 2007. However we will continue to make our decisions based on rigorous scientific interpretation of data and the best interests of patients. We are continually informed by our evolving insights into the biology of our targets by the depth of our expertise in cancer cell biology, chemistry and translational medicine and by our relationships with the front leaders and top clinical investigators around the world. Guided by this state of driven approach, we look forward to advancing our pre-clinical and clinical stage programs in an effort to develop new therapies that will have a potential to better the lives of patients. Adelene Perkins will now review our recent quarterly and year-end financials and our business goals. Adelene?

Thanks, Julian. Before jumping into our financials, I would like to put the business and scientific accomplishments of the last year that was summarized by Steve and Julian into a strategic context. One year ago today, as a private company, three strategic partners in conjunction with accessing Infinity's small molecule technologies had financed Infinity through two rounds of venture capital and investments.

These early financing allowed us to build our team, advance our pipeline, and importantly retain full ownership of our product candidates until they reached points of clearly recognized value. Entering 2006, our strategic goal was to leverage the fact that our product candidates had achieved points of recognized value such that we could enter at least one strategic product focused relationship. Overwhelmingly positive response to our partnering initiative enabled us to exceed this goal. We executed two such product-based partnerships around our most advanced program. These partnerships provided near-term cash while at the same time enabling Infinity to participate fully in the value of [technical difficulty] for in development—the development and commercialization of these products.

Furthermore, 2006 financing event was an explicitly stated strategic goal. As Steve mentioned, we achieved this through our reverse merger with Discovery Partners. It is against this backdrop that I speak to Infinity's current cash position and operating runway.

At December 31 of 2006, we had just over $101 million in cash and short-term investments. Importantly this number reflects the retirement of $15.9 million of debt in December. In addition, shortly after we [technical difficulty] for 2006, we received an additional $35 million from MedImmune representing the second half of their upfront payment for our collaboration.

I would like to point out that in addition to our strong cash position Infinity's cash outflow is well controlled as the result of the funding from our strategic alliances, namely our 50-50 cost sharing relationship with MedImmune on the Hsp90 and Hedgehog program and the 100% funding of the Bcl-2 program by Norvartis. As noted by Julian, we have set ambitious goals for our clinical and discovery phase programs in 2007. Because of our alliances we are able to fully pursue these goals while maintaining our strong cash position. In the absence of any additional financing or business development activities, we expect to end 2007 with at least $100 million in cash which we anticipate will be sufficient to support our current operating expense through at least the end of 2009. Let me now provide you with an overview of our fourth quarter and year-end results.

Infinity reported $9 million in revenue for the fourth quarter of 2006 and $18.5 million for the full year. The increase in revenue both the quarter and the year derived primarily out of based alliances with MedImmune and Norvatis and the extension of our technology assets agreement with Amgen.

Infinity's R&D expense was $9 million for the fourth quarter and $35.8 million for the year. It is important to note that any amounts we are reimbursed by MedImmune under the cautionary provisions of our agreement are accounted for as an offset against our R&D expense. Therefore, for instance, the $35.8 million R&D expense for the year reflects total R&D expenditures of $39.8 million offset by MedImmune's reimbursement of $4 million for the work that we have done on the Hsp90 and Hedgehog program since the signing of the collaboration in August.

Our G&A expense was $3.7 million for the quarter and $9.5 million for the year. One of the primary drivers of the G&A expense was personnel-related expenses as well as Infinity's transition into a public company including our compliance with the Sarbanes-Oxley Act.

It is worth noting that although Discovery Partners was [technical difficulty] prior to the merger, the Infinity team focused on bringing the combined Company into compliance with the Act by the end of 2006. Our annual audit is nearing completion, and we are confident that we have achieved our FASB compliance goal just three and a half months after becoming public.

This accomplishment is a true testament to the entire team including some critical additions to the business organization in 2006 of a General Counsel, a Vice President of Finance and a Controller, all of whom bring a wealth experience in SEC reporting and Sarbanes-Oxley compliance.

Finally, Infinity's net loss was $5.4 million for the quarter and $28.4 million for the year. In summary, Infinity has a significant cash balance and ongoing incoming cashflow from partnerships enabling us to aggressively invest in our pipeline in 2007 and beyond.

Thanks, Adelene, and thank you, Julian. As Adelene and Julian have described for you, 2006 was a year of a lot of change for Infinity and we are even more excited about what is going to be happening for us in 2007. But as much as we change, it is important that certain things remain the same and we strive to keep intact our underlying values and the culture that have brought Infinity to this point in our evolution. And we believe that culture to be as critical to our success as good science and business.

We believe that fulfilling our mission to discover, develop and bring to patients novel best-in-class therapies for the treatment of cancer requires that we maintain innovation in our thinking, responsibility in our actions and integrity in our decisions. We believe that these core Infinity values including diversity, citizenship, transparent communication, internally and externally, and mutual respect are essential to creating and sustaining a community filled with passionate, innovative scientists and business people. And we extend these values through our relationship with you. We look forward to our continued interactions with you, our investors, and the other members of the biotech financial community represented by you on this call as we continue in our quest to discover, develop and deliver important new medicines for patients with cancer. Thank you.

Thanks Steve. At this time I would like to invite the participants on this call to join in and ask questions of Steve, Adelene and Julian. I will now turn the call over to our moderator for q-and-a.

Thank you very much, sir. [OPERATOR INSTRUCTIONS]. And our first question will come from Cowen and Company's Phil Nadeau. Your line is open, sir. Please go ahead.

Good morning and congratulations on a successful year. My first question is on IPI-504. When might we see the next data from that program? Do you plan on making any presentations at ASCO, or is there any time in the first half you might see an updated data release?

This is Julian. I will take that question. We do have two abstracts submitted to ASCO and we will essentially be updating our results in GIST and we will -- to report on our continuous schedule particularly the safety and tolerability of IPI-504.

Okay, great. And my second question is actually on non-small cell lung cancer. This may be a naïve question but it seems like the inhibition of the proteasome in non-small cell lung cancer is effective but not overly so based on that data we have seen from VELCADE. What about Hsp90, what about that pathway? Do you think we will improve on the efficacy that we have seen with the proteasome inhibitor?

So they're strikely -- strikingly different hypotheses. For Hsp90 inhibition we have seen pre -- in pre-clinical data particularly effective inhibition of mutant EGFR particularly in the kinase-resistant setting. And we are very encouraged that targeting mutant EGFR and driving it to degradation by the proteasome will afford us a very -- a signal of biological activity. And we will test that hypothesis in the clinic.

You know, Phil, I think it's important to understand where we've evolved in our thinking about Hsp90 inhibition. And that we think that the best settings for the use of this kind of drug are specifically in those cancers where there is, if you will, an oncogene addiction to where the oncogene is a client of Hsp90. That's what we saw in GIST, where Kit is the driving oncogene. We believe it's equally the case in EGFR-dependant non-small cell lung cancer. And then as Julian has pointed out is that when you get mutations in the driving oncogene which render the cancer resistant to direct inhibition with the kinase inhibitor that it still remains reliant on Hsp90 and so we have a [inaudible] approach as an alternative to chasing mutations in kinases.

So it's really not, it's a different driving hypothesis as Julian indicated than just general protein homeostasis.

Okay. Maybe one follow-up question. Do you anticipate then in non-small cell lung cancer, one, enriching the patient population for those people with EGFR mutations and, two, given that we already have EGFR inhibitors -- specific inhibitors, would this be used in combination with them, do you think ultimately or is there a reason to think that this might actually have even better efficacy than those inhibitors?

I'm so-- this is a Phase I trial and what I can tell you is that we will have -- know the mutational status of every patient on the trial. Whether it's EGFR wild type or mutant EGFR. And we do expect that we will be enriching for patients with mutant EGFR given that the [technical difficulty] patients will have already experienced at least 12 weeks on a -- [Argentine] age inhibitor, that is [Tasiba Oriasa]. And so what we think is that patients will either have had a response to Tasiba and have relapsed owing to a drug-resistant mutation and, therefore, are prime candidates to receive IPI-504.

Okay perfect. Thank you.

And I'm sorry I didn't address your combination question. Of course we see that ultimately we'd like to combine IPI-504 with standards of care particularly [kirosine] kinase inhibitors in earlier lines of treatment to prevent the emergence of resistance. So we should add as a very solitary combination.

And again this goes to our overall clinical development strategy of trying to get a setting in which you can have rapid registration requiring medical need. That is particularly the case in the refractory setting where people were initially responsive but then moved on to resistance to a kinase inhibitor. So that's an initial registration strategy, if you will, but you quickly follow-up with the combination therapy in the belief that you can have hopefully enhance efficacy and maybe even more important enhance durability of the earlier line therapy when you use combination.

Perfect, thank you.

And we will now move on to Ted Tenthoff from Piper Jaffray for our next question. Your line is open, sir. Please go ahead.

Great. Thank you very much. Thanks for taking the question and congratulations on a very exciting year.

Thanks, Ted.

Just had two questions if I may. Firstly, you know in the Phase I just studied, just refresh me, what were some of the side effects that you were seeing and obviously not too, too much, since you went on to the new regiment but -- what do you expect is potential side effects there? And also can you remind me sort of what the phasing schedule looks like for the second arm of that trial?

Ted, I'd be happy to refresh the Phase 1 just experienced. So, first of all we started with a schedule that was twice weekly for two weeks with a 10-day holiday period, constituting a cycle of treatment. And what I can tell you is from the side effect profile, the drug was extremely well tolerated. We have seen no signature of any particular toxicities. So we have a smattering of Grade 1 and Grade 2 toxicities reported but there's no particular signature for that toxicity.

We started the trial at 90 milligrams per meter squared and escalated the dose to 400 milligrams per meter squared on that schedule and again the drug was tolerated through the entire dose escalation. When we saw that the drug was so well tolerated and we saw that the PET responses included a response while on drug but a re-emerging metabolic activity in the holiday period, we decided in December to amend the protocol to a continuous treatment. So that's twice weekly, uninterrupted for 3 weeks constituting a cycle. And any patient that developed -- that experienced clinical benefit can go on to take subsequent cycles.

And so-- we've backed-off on the dose, from 400 back to 150 and are escalating through that regimen on the uninterrupted schedule to -- in an effort to determine the recommended Phase II dose.

And then we stopped the phase -- the first schedule at the completion of 400 without having reached the maximum tolerated dose. Right Julian?

That's correct Steve. Yes, rather than pushing the dose to discover treatment emergent toxicities on an irrelevant schedule, we elected to drop the dose and go to a more drug-intensive and schedule-intensive treatment.

Alright. That's very, very helpful. Thanks so much.

[OPERATOR INSTRUCTIONS]. And we will now move on to Rodman & Renshaw's Mike King for our next question. Please go ahead, sir. Your line is open.

Thank you. I like the introduction. Good morning, guys. Thanks for taking the question. Can you help us to understand how we in the investment community will hear more about your other potential indications we've discussed? Is it primarily a lot of other tumor types where there is a clear-cut genetic addiction that have not been mentioned on the call this morning. So I'm wondering if you can give us some insight into your thinking about how you will decide whether to move IPI-504 into other solid tumor types. What are the pre-clinical criteria that you need to see and then how are you going to communicate that to the investment community?

It's a great question, Mike. And Steve, Adelene, join me. I think -- our analysis of indication will follow the hypothesis of, as Steve said, the oncogene addiction hypothesis -- of hypothesis. Particularly in the phase where you-- there is receptive thyrosine kinase which is initially susceptible to direct inhibitors of the kinase, but eventually mutations arise evading the drug's effectiveness and then we will be very interested and are testing pre-clinically those hypotheses with IPI-504.

So one can imagine that wherever there is a receptive thyrosine kinase as a standard of care we would be exploring those indications. And, the real issue for us is while all of these receptive thyrosine kinases appear to be clients of Hsp 90, not all clients are created equally. So we need to test the -- the particular sensitivity in a number of cell lines before we make the clinical investment to test that hypothesis.

I think also is the case because we have really broad pre-clinical evidence at this time for a number of cancers. In fact it doesn't make sense to be jumping into all of them now. Right? We now have one -- the longest up and running two Phase I's, if you will, looking for the right schedule and the right dose. Once you have the recommended Phase II dose or when you have a good feel for it, that is the time to start to expand into additional indications and also be able to start to look at the combination therapies as well. So the way we look at it, your question will be answered in a very rich manner in the second half of this year by an announcement and by also launching a number of additional trials in a variety of different settings, so stay tuned.

Okay, always. And then if I may follow up, just a question on GIST. Can we get any kind of a trial update in terms of enrollment or will you only update those when they have become fully enrolled? And what's going to be the process by which we'll be alerted to the status of that trial?

Sir, we are very mindful of enrollment and trying to be efficient and even though it is a Phase I setting which requires a lot of monitoring but we will update enrollment probably at ASCO.

At ASCO. Okay. And then finally, the goals for the Bcl-2 program. Is that still an '08 event or might we see something in '07?

So in our Bcl program, we are in the stages of lead optimization. We have the advanced potent molecules and we will update that in '08. Just as you stated.

Well, I think we have said that our goal is what we call a developing candidate this year.

Okay.

Which means you discuss essentially a molecule ready to initiate a GOP tox or any enabling kinds of studies and that...

Adelene, would that be an announceable event in terms of our Norvartis relationship?

Yes. When we do pick development candidates, there is a milestone associated so we will be announcing that.

And is the same true about Hedgehog?

No. That's not. Again, I think you will appreciate when you are in partnerships what you can and can't disclose. It tends to be partly guarded or tied to when there's of milestone events. Development candidate is not a milestone in the Hedgehog program with MedImmune.

What you are to hear about in terms of the milestone for Hedgehog is when we file the IND.

Okay.

But we will probably provide updates -- that we're on the way as well.

Alright, thank you.

And at this time we have one question remaining in the queue. [OPERATOR INSTRUCTIONS]. And we will now hear from Robert Baird's Chris Raymond for our next question. Please go ahead.

Thanks for taking the question. Just maybe more of a strategic question in stepping back and thinking about the Hsp90 competitive landscape; you know there are several different approaches. There -- we have encountered pockets of opinion that sort of say that a [non- galvanamizing] approach might be the better way to take knowing that your drug, IPI-504 is really a pro-drug of a derivative somewhat removed from that backbone. I wonder if you could maybe just sort of give your take on how IPI-504 maybe stacks up in the grand scheme of things?

So, first of all, we are strong believers in the [Insomicin Pharmaca 4]. IPI-504's advantage is that it's all water soluble and not only can be delivered in a patient-friendly way in saline with short infusion times but it had the added advantage of, owing to its water solubility, to come up with a very creative formulation to administer orally. So as far as the chemistry of the drug, we believe that the very nature of how the [Insomicin] class of drugs binds the Hsp90, namely -- and forgive me if I am getting a little too technical, slow-type binding inhibition with very slow off rates is an ideal way to inhibit an enzyme. So I can't speak to all of the non-Insomicin class inhibitors. We have not yet seen data that address the kinetics of inhibition, but certainly IPI-504 has ideal drug properties both as an IV product and we are very encouraged, as an oral product and that's why we are proceeding with our strategy going forward.

I think it is important to remember that 40% of our pharmacopia available to us derive from natural products. And nature has crafted molecules that are highly potent and highly selective, and the only experimentation with the [Godanamycins] show that was a highly selective, highly potent inhibitor with the kind of end -- kind of kinetics Julian just articulated which are indeed ideal.

The wrap on the Godanamycins was two-fold. First, that they were chemically reactive and second that they were insoluble. Alright? [17AEG] remove the chemical reactivity issues associated with the original Godanamycin; it didn't overcome the solubility issue. 504 is not chemically reactive and is soluble and with very innovative formulation is now in the process of moving towards an oral administration in man. So, if you will, the wraps on this class supposedly now necessary to overcome through synthetic chemistry approaches have all been overcome. And finally the other wrap on natural products of cost of good sell -- of cost of goods for manufacture is actually irrelevant here. It is a very low easy manufacturing process.

That's very great. Very nice. Thank you.

And at this time there are no further questions in the queue. I would like to turn the call back over to our speakers for any additional or closing remarks.

Thank you all for your participation in this call. We look forward to updating you in future calls on our progress in 2007, and as always we are available to answer any additional questions you may have at any time throughout the year. Thank you for your continued interest in Infinity.

Thank you, everyone, for your participation. That does conclude today's conference. Everyone have a good day.