Infinity Pharmaceuticals Inc (INFI) 2007 Q1 法說會逐字稿

Good day, everyone, and welcome to the Infinity Pharmaceuticals first quarter 2007 financial results conference call.

[OPERATOR INSTRUCTIONS]

At this time, I'd like to turn the call over to Mr. Steve Kafka. Please go ahead.

Thank you, and good morning.

My name is Steve Kafka, Vice President of Finance for Infinity Pharmaceuticals. Here with me today are Steven Holtzman, Chair and CEO; Julian Adams, President and Chief Scientific Officer; and Adelene Perkins, Executive Vice President and Chief Business Officer.

Thanks for participating in today's call. We'll be discussing our R&D and business progress and review our financial results for the first quarter of 2007. I hope you all had a chance to review our earnings release, which we issued last evening. The release is also available on our Web site at www.ipi.com. Additionally, this conference call will be archived on our Web site for 30 days.

Before we begin, I need 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 Provision 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 Factors section of our most recent 10-K, which we filed with the SEC in March. 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.

So, with that, I'll now turn the call over to our Chair and CEO, Steve Holtzman.

Thanks, Steve, and good morning, everyone. Thank you for being on the call with us today.

As you know, Infinity is a cancer drug discovery and development company. We're dedicated to bringing innovative and important new medicines to patients. We have a pipeline of novel anticancer agents, a fantastic team, led by Julian and Adelene, and a strong financial position.

Before I hand the call over to Julian and Adelene, I'd like to take a few minutes with you to discuss the announcement last week by AstraZeneca of its intention to acquire MedImmune. As you know, last August we entered into an alliance with MedImmune to develop and commercialize our Hsp90 and Hedgehog programs. Under our agreement, we share equally with MedImmune the development costs of the programs and also have a 50/50 worldwide profit-sharing arrangement.

Many of you have asked, what will AZ's acquisition of MedImmune mean for us and the future development of our Hsp90 and Hedgehog programs? First and foremost, contractually, the collaboration survives the change of control. What this means is that all rights and all obligations of both parties, including the world-wide profit share, as well as our U.S. co-promotion rights, remain intact.

We remain equally confident in our ability to execute against our plan. We have in place with MedImmune a three-year R&D plan and budget. As a general rule, these embody Infinity's leadership role in discovery and development activities for both the Hsp90 and Hedgehog programs through human proof of concept studies.

Now, in my recent conversations with Dave Mott, the CEO of MedImmune, Dave has reiterated MedImmune and AZ's enthusiasms for our program and commitment to making the collaboration a success. Assuming the acquisition does proceed, we look forward to working with both MedImmune and AZ to bring these important products to patients.

Bottom line -- it's full steam ahead.

And with that said, Julian will now review our product development efforts, followed by Adelene, who will review our first quarter financial results.

Julian?

Thanks, Steve, and good morning, everyone.

I'm delighted to share with you the exciting progress we've made in the last quarter. I would also like to discuss our innovative approach to drug discovery and development.

Let me begin by highlighting our recent progress. First, in our Hsp90 program, Dr. George Demetri, the lead investigator of our disease-focused Phase I trial in gastrointestinal stromal tumors, or GIST, presented at ASCO GI in January. He reported continued evidence of safety and tolerability of IPI-504. We have also demonstrated evidence of biological activity in the form of PET responses in 44% of evaluable patients. Clinical benefit was also in evidence by 35% of patients who received four or more months of therapy. We continue to enroll patients in this trial, with the goal of collecting further evidence of safety and biological activity and optimizing treatment.

Another highlight was the initiation of a Phase I/II trial of 504 in patients with advanced non-small cell lung cancer. This is another disease-focused trial that will provide us with evidence of safety and also provide the opportunity for observing early signs of biological activity in another important disease.

Next, at AACR, we presented data on our oral formulation of IPI-504. We demonstrated oral bioavailability and in vivo efficacy in several preclinical lung cancer models. One of the models had tumors that are resistant to EGFR inhibitors.

Finally, we are making fantastic progress on our Hedgehog program. We have a series of highly potent and selective inhibitors of the pathway and expect to select our development candidate shortly.

Now to turn to some personal reflections on drug discovery and development.

Many of you know me. I've been in the business of developing drugs for more than 25 years, and I can definitely say that drug development is hard, really hard. We have a team of scientists here at Infinity that knows how to solve problems like no other team I've ever worked with. This team is tenacious and adapts to emerging data. The new ground we are breaking on Hsp90 and Hedgehog convinces me that our commitment to innovation provides us with a competitive edge.

Let me give you some examples.

First, I want to highlight the work of the chemists and our formulation scientists on our Hedgehog and our Hsp90 inhibitors. Our lead molecule, IPI-504, is based on the geldanamycin pharmacophore, a structure found in nature. Historically, this class has suffered from both chemical reactivity and insolubility. These problems have prevented it from being turned into a drug. But with our innovative medicinal and process chemistry, our scientists have solved these issues with IPI-504. It is both stable and highly soluble. I truly believe we have a winning molecule on our hands.

Let me dig in a little deeper here. Oftentimes, chemistries get optimized for pure potency, not for drug exposure, a more subtle property. For Hsp90, we need a drug that gets on its target and stays there. That's not easy to achieve, especially with simpler synthetic molecules. But nature has figured it out, and we're taking advantage of that. IPI-504 has the desirable property of fast-on, slow-off binding. It gets into the binding pocket quickly and then clamps on to give us sustained coverage of the target.

In addition, because IPI-504 is water soluble, we have been able to develop a drug substance that is amenable to both intravenous and oral formulations. The flexibility of having both formulations will be important in addressing the broad range of cancers in which Hsp90 may have an impact. On the one hand, the IV product can enable tight dose titration and monitoring in end-stage refractory diseases. The oral product, on the other hand, is essential for chronic and front-line settings, where it is critical for flexible treatment. We are making tremendous progress on our oral Hsp90 program. In addition to IPI-504, we've created a robust backup program of geldanamycin-based molecules.

The second area of innovation that I'm excited to share with you is our clinical development. Treating cancer, as we all know, is very difficult. To ensure that the clinical strategy is focused and fast, we work with the world-class investigators and take an adaptive and creative approach to trial design. Our goal is to rapidly accelerate to Phase II by learning as much as possible about safety, dose and schedule.

In our GIST trial, we are now adding several sites around North America and expanding the enrollment criteria to include other soft tissue sarcomas. This will optimize our ability to initiate Phase II studies in additional indications later this year. I'm very enthusiastic about how much we'll be able to learn from this Phase I trial and how we'll apply this information to rapidly expand our clinical program.

Earlier this year, we initiated a disease-focused Phase I/II trial in patients with advanced non-small cell lung cancer. Our objectives are to determine safety and find the maximum tolerated dose. We are also looking for early signs of activity. We are working with Dr. Tom Lynch and his team at the Mass General, who elucidated the implications of the EGFR mutation for the treatment of lung cancer with kinase inhibitors. We know that mutant EGFR is a client protein of Hsp90. We have designed our trial to enrich for this patient population and to establish the sensitivity to IPI-504 treatment.

This gives us several options for potential registration trial. Consider a setting where patients have relapsed on Tarceva and have no further treatment options. Here we could run a single-agent study based on response rate. Another case may be to focus on an EGFR selected patient population. Here we could run a study in combination with Tarceva in the second-line setting. In this option, we'd look for both a delay in emergence of resistance and time to progression. There's also an option where we focus on patients with specific EGFR-resistant mutations, which we believe could be hypersensitive to Hsp90.

As you can see, the design of our current trial and the data we'll generate from it will give us multiple registration path options. We expect to update you on the status of our lung cancer studies and plans later this fall.

The final area of innovation I'd like to touch on is our Hedgehog program.

As I've said before, the Hedgehog pathway is an emerging and very exciting area of cancer research right now. The Hedgehog pathway is turned on and is essential in embryonic development. In contrast, it is largely quiescent in adults. Nevertheless, it is also aberrantly reactivated or expressed in many cancers. Our product candidates, which are based on the natural product cyclopamine, target inhibition of the Hedgehog pathway.

So nature has done it again, giving us cyclopamine, which I can tell you, based on my experience in developing drugs, provides a uniquely exciting starting point for drug development. However, I can also tell you that it requires a team of extraordinarily skilled and fearless chemists to tackle the challenge of getting from this natural product to a drug. Our scientific team has successfully synthesized and formulated multiple drug analogs which are 50 to 100 times more potent than the natural product. These compounds are highly selective and orally available in multiple animal species. We have seen promising preclinical data using these analogs, and later this year we will select a candidate for development.

What is particularly exciting to me about this program is that it represents a completely new way of understanding and potentially attacking the progression of cancer. We know that there are two types of cancer that depend on the Hedgehog pathway. The first are cancers with genetic mutations that cause addiction to the Hedgehog pathway, which is medulloblastoma, a rare childhood brain cancer. The second type involves aberrant expression of the Hedgehog pathway in cancerous tissues. These include some of the most pernicious tumors, such as small-cell lung cancer, pancreatic cancer, ovarian cancer and hormone refractory prostate cancer, to name just a few. We expect to report on preclinical data in many of these settings later this year.

So, in summary, it's been a great quarter. We continue to be confident and excited about our drug candidates and their prospects for changing the lives of patients.

Adelene will now review our recent quarterly financials and progress on our business goals.

Adelene?

Thanks, Julian.

To echo Steve and Julian, I'm very excited about the progress we've made in the past quarter. We have a creative, passionate team that does a great job integrating science and business, and we're in a real position of strength to create tremendous value.

I'd like to start with a brief review of our financial results for the quarter.

As of March 31, we had over $127 million in cash and short-term investments. As a reminder, this number reflects our receipt in early January of $35 million from MedImmune, the second half of their upfront payment from the alliance.

We recorded $6.1 million in revenue for the quarter. The increase in revenue from the first quarter of 2006 was primarily derived from the amortization of the license fees received from MedImmune and Novartis. Also contributing to increased revenues were the delivery of compounds to Novartis under our technology access agreement and increased reimbursement from Novartis for services performed under our Bcl-2 program collaboration.

Our R&D expense was $7.5 million. It's important to remind you that any amounts we are reimbursed by MedImmune under the cost-sharing provisions of our agreement are offset against our R&D expense. So our $7.5 million R&D expense reflects total R&D spending of $10.8 million less the reimbursement due from MedImmune of $3.3 million in the quarter.

Our G&A expense was $3.3 million. The primary drivers of the increase compared to last year were personnel-related expenses and higher patent and tax expenses.

And, finally, our net loss was $2.9 million for the quarter, or $0.15 a share. To put this in perspective, in the fourth quarter of 2006, we had a net loss of $0.28 a share. The higher net loss last quarter was driven primarily by nonrecurring charges, including debt extinguishment and income taxes.

We are reiterating today our guidance that we will end 2007 with at least $100 million in cash. This capital is sufficient to support our operating plan through at least the end of 2009 in the absence of any additional financing or business development activity.

As our Q1 results and outlook show, we are in a strong financial position, with a well-controlled burn rate. As a result, we can aggressively invest in our pipeline of internal candidates. At the same time, we are actively seeking opportunities to augment our pipeline with externally sourced programs that fit our strategy of emerging targeted therapies for cancer. There's no doubt it's a competitive market, but I'm confident we have the business and scientific team in place to identify and execute against some great opportunities.

I'd like to finish by summarizing several important milestones we expect to achieve in the second half of the year. By this fall, we expect to complete and provide an update to the data from our Phase I study of IPI-504 IV in GIST and other soft tissue sarcomas. In the same time frame, we expect to complete and provide an update to the Phase I portion of our trial in non-small cell lung cancer. With our recommended Phase II dose in hand, we expect to initiate at least one Phase II trial and one combination study with 504 IV. We will also begin human clinical testing for the oral formulation of IPI-504.

As Julian mentioned, we're making exciting progress on our Hedgehog program and expect to select a development candidate and begin IND-enabling work later this year.

And, with that, I turn it back to Steve.

Thanks, Adelene and Julian.

I'll wrap up this morning with a few final observations.

What we've described for you today is our belief that we continue to evolve and grow by relying on innovation as a core value and strength. You heard about our scientific and business achievements and innovations and how we're focused on turning those into important new medicines for cancer patients.

Infinity is now six months into its life as a public company. We just published our first annual report, and I recommend you look at it. I think it'll give you a good feel not only for what we're doing, but also, perhaps more importantly, for who we are. It's also worth mentioning that at our upcoming annual meeting we will also be voting on a corporate governance initiative to eliminate the classification of our Board of Directors. This change, which did not come from shareholder pressure but internally -- was internally generated, reflects our ongoing commitment to a strong alignment among our stockholders, our Board, management and our entire band of citizen-owners.

We continue to focus on maintaining our values and entrepreneurial culture. Our core values of diversity, citizenship, transparent communication and mutual respect are essential to our success as a company, and therefore to achieving our mission of creating important new medicines for patients and thereby long-term value for stockholders.

We're on track to achieve our milestones in the second half of this year. We see an exciting future, and we look forward to continuing to discuss our progress with you on future calls.

With that, we'd be glad to answer any questions you may have.

Thank you.

Thank you.

[OPERATOR INSTRUCTIONS]

And we'll go to Michael King, Rodman & Renshaw.

Good morning, guys. Thanks for taking my question. I had one for Julian and one for Steve.

Steve, I'm just wondering, will it be necessary for you guys to meet with AZ at some point? I imagine you would want to, and I'm just trying to see if you can help us understand how -- have you thought about -- you know, you're sort of -- to use an analogy from the auto industry, you're one of the car models for the company, you've got to get on the production line -- what kind of criteria do you guys have to bring to the party to get a priority in the AZ production line in the cancer space?

Thanks for the question, Mike. First off, I think you made an important observation in your very first sentence where you switched from "is it necessary for you to meet with them," "do you want to meet with them." Assuming that the merger of AZ and MedImmune goes forward, we look forward to meeting with the AZ people. They are a major force in cancer in the world, and we see potential benefits long term for them bringing to the party worldwide registration capabilities and marketing.

Having said that, as Julian indicated, it's a feature of the collaboration we have with the structure with MedImmune, which carries over to AZ, that it was envisaged that, while there's collaboration, the real lead in early stage discovery and development through proof of concept in man is taken -- the leadership role is taken by Infinity. That will not change. So we don't face some of the obstacles that I think you might have been pointing to that some companies have run into of, "Geez, have I met the 36 criteria some company has for being a development candidate or what?" None of that's in play. We have a three-year, as Julian said, a three-year plan. That's already codified. It's a rolling three-year plan. It's well defined. And so we really don't see any issues of the type you're pointing to.

Now, I'm not being naïve about this. Longer term, our products will have to pass muster, and if they don't work, they don't deserve the attention of any company. But we expect they will show great proof of concept in man and that, on that basis, on their value, potential value for patients, that any partner, including AZ, would be delighted to take them in and drive them across their goal line broadly.

Maybe I could add something to that, Steve. You know, I think that Infinity has done a very masterful job of doing clinical development and preclinical development in North America. So I'm actually eager to meet with the eventual partners at AZ to augment our capabilities abroad. I know we were working on such a plan with MedImmune, but I think both MedImmune and we agree that, if anything, that AZ brings us even more capabilities working outside the United States.

Okay. And -- go ahead, I'm sorry.

That was it.

Oh, okay, sorry. Just maybe to follow up, the -- is there any provision in the agreement -- let's -- as we know, pharmaceutical companies don't always do things that appear to be logical, and for -- let's say for some reason AZ decides, "You know, we're not going to do anything with targeted therapy," are there any penalties or other compensatory clauses in the contract that would be payable to Infinity if they decided to opt out?

Yes, Mike, this is Adelene. I'll take that one.

Hi.

There are provisions in the agreement that if either of us were -- lost interest in one of the programs there are provisions to opt out. And the party that opts out would be paid a royalty from the party that stays with the program based on the stage of development at which time the other party opted out.

Sorry. I don't know if that was me or you guys. Okay, so the later they opt out the higher the royalty they get paid.

That's exactly right.

Okay. And then, Julian, I had a question on just in general you had made a distinction between natural -- or analogs of natural products versus synthetic. But does that mean that Infinity would never work on synthetic analogs of either geldanamycin, Hedgehog antagonists or any other compound, for that matter?

Mike, you know me better than that.

Okay.

We'll work on the best chemical matter available. I think it's just an interesting feature that nature has provided us with incredibly good starting points, with highly elaborated, sophisticated, three-dimensional, highly stereochemically complex molecules which are easily accessed from nature, and that's allowed us to do our analoging program and shorten the time of lead optimization for both of those programs.

We have other programs at Infinity that deploy the more traditional medicinal chemistry approaches, and we're making tremendous progress, for example, in our Bcl program, which is part of the collaboration with Novartis.

Mike, let me -- this is Steve -- let me jump back to a question you asked earlier about the AZ, just to fit it -- round it out. One of the concerns young companies often have when they get into a relationship with a partner is, will their molecule be competing with an internal program --

Right.

-- and eventually get buried? Important to recognize that the relationship we established with MedImmune is for both parties, Hedgehog and Hsp90. In other words, there's -- no competition is possible. That carries over into any acquisition. Consequently, if AZ currently has competitive programs in Hsp90 or Hedgehog, the agreement provides that they will either have to divest those programs -- shut them down -- or bring them forward to us for consideration for inclusion in the collaboration.

Okay. And just -- well, let me get back in queue. Thanks very much for taking my questions.

And we'll go next to Leland Gershell, with Cowen and Company.

Hey, good morning. Thanks for taking my questions. First wanted to ask on the lung cancer trial how the enrollment progress is going in that?

It's actually going very well. We opened the trial in late February, and we have patients essentially lining up both at the Mass General and at the Farber. Because it's a dose-escalation program, I mean, we're limited in how quickly we can enroll, because we need to enroll three patients per cohort and need to have that cohort fully evaluated before escalating the dose. But literally we have patients in the queue. So it's going extremely well.

Okay. Can you disclose which dose you are up to today?

We've not disclosed the dose escalation scheme. We'll update that later this year. But suffice it to say that we're going through the various cohorts as planned, with no delays.

Okay, great. And might we see any data from this or other programs at the upcoming ASCO meeting?

At the upcoming ASCO meeting I think we had two abstracts, primarily focused on the GIST trial. The lung cancer data will not be mature enough, and we will probably talk about that at a major meeting probably later this fall.

Okay, great.

You might think about the EORTC meeting as such a meeting.

Okay. And then one last question, any updates on 504 development in liquid tumors?

We are currently examining a protocol to consider leukemias. We have not yet made a definitive decision. We're still looking at the preclinical data and trying to make a decision how best to run such a study.

And, Julian, I think it's fair to say you'd wait for having a recommended Phase II dose before diving into that.

That's correct.

If by liquid tumors you were also referring to multiple myeloma, I think we reported at the last call that we have escalated the dose to 400 mg/m2, and we saw very modest activity, essentially only stable disease. We've seen no significant responses. And so we've suspended activity in multiple myeloma for now.

Right. Okay, great. Thanks very much for taking the questions.

And we'll go to Michael King, Rodman & Renshaw.

Thank you for taking the follow-up. Can you guys let us -- give us an update on the GIST trial enrollment and when we -- will we get a full read-out on the data there?

We'll get a full read-out at ASCO.

Full read-out, okay.

So what -- just to briefly summarize, we have opened up a number of new sites around North America. In addition, we are escalating the dose on an interrupted treatment with no drug holiday, what we call Schedule B, and we are escalating both on Schedule A and Schedule B, the idea being Schedule A, which has a drug holiday, and Schedule B, to determine the maximum tolerated dose on both of those schedules and make decisions going forward on which would be the best schedule for patients.

And A -- Julian, A is 21 out of 28 days, is that how that works?

It's two weeks on followed by 10 days off.

Okay.

So it's a [21]-day schedule. Let me just remind you, you know, in Phase I, this is the time to get the dosing schedule right. This is the most critical time in drug development, where if we're not careful, and we're not rigorous about establishing the dosing schedule, you know, we may take an irrelevant dose and schedule forward into Phase II, and that would not serve patients well at all. So we are actually being quite rigorous about exploring different schedules and -- in the disease-focused population. So bear with us, because I think this is very rigorous science that we're doing.

Also, Julian in his prepared remarks mentioned that we've recently expanded the entrance criteria in the GIST trial to include soft tissue -- additional soft tissue sarcomas. Julian, why don't you give a little flavor on our thinking there?

Well, the thinking -- thank you, Steve, for that question -- Mike, I'm sure it was on the tip of your tongue.

Feel -- right. Feel free to jump in.

So what we established is that based on the PET responses, we've convinced ourselves that there's a real biological activity in GIST. And we've been following other sarcomas, including synovial sarcoma, Ewing's sarcoma and dermatofibrosarcoma, that have other fusion proteins and potential client proteins [from] Hsp90. We've also had some preclinical data suggesting that these would be sensitive tumors as well. So in collaboration with George Demetri, we've expanded the enrollment criteria to include other soft tissue sarcomas to look for additional signs of activity but also to augment the rapid escalation of our two schedules in the trial.

So I take that means that your PET scans don't give you the same read-out that you got in myeloma, and that's why you're staying with Schedule A, or would we -- can we assume that's not true and you might be moving from Schedule A to Schedule B?

I think there's a bit of confusion here. Myeloma doesn't, of course, use PET scans. What we've used in Schedule A and Schedule B, we continue to use PET scans for both those schedules --

And Schedule A and B are both in GIST.

And both in GIST.

But I thought in myeloma in the drug holiday you saw disease recurrence, which is why --

No. No, no.

Okay.

That is a mistaken understanding of the data. In myeloma, we really never saw any kind of response as measured by M-protein, or paraprotein. It was in the GIST trial on Schedule A with the drug holiday we saw resurgence of metabolic activity of the tumor as measured by PET during the drug holiday, so we began to investigate Schedule B with the removal of the drug holiday. What you're hearing here, for clarity, is that, having initiated Scheduled B, it is our intent to bring to maximum tolerated dose in GIST and other soft tissue sarcomas both Schedule A and B.

Okay.

And, you know, just to run the mechanics of the trial, we've added additional sites, so we can both -- escalate on both schedules.

Okay. Understood. Thank you.

And this will conclude our Q&A session. I'd like to turn the conference over to Steve Kafka for any additional or closing comments.

Thank you, operator, and thanks to everyone for joining us today. As always, we are available to answer any additional questions you may have, and we appreciate your continued interest in Infinity.

Thanks again, and have a great day.

This does conclude today's conference. Thank you for your participation. You may now disconnect.