Infinity Pharmaceuticals Inc (INFI) 2008 Q4 法說會逐字稿

Good day, and welcome, everyone, to the Infinity Pharmaceuticals fourth quarter 2008 financial results conference. As a reminder today's call is being recorded. At this time I would like to turn the conference over to the Vice President of Finance, Steve Kafka. Please go ahead, sir.

Thanks, Operator, and good afternoon, everyone. Thank you for joining us on the call today. With me this afternoon are Steven Holtzman, our Chair and CEO, Adelene Perkins, our President and Chief Business Officer, and Julian Adams, President of R&D and our Chief Scientific Officer. Before we begin let me remind you that we'll be discussing our recent business and R&D progress and review our financial results for the full year 2008. The press release detailing our results was issued this afternoon and is available on our website at infi.com. The slides that we are using today to accompany this call can be accessed now on the events page in the investor section of our website. A webcast of the call and the slides will be archived there for 30 days.

On the call today we will be discussing our future discovery and development efforts, our collaboration, our financial position and other future expectations. These remarks constitute forward-looking statements for purposes of the Safe Harbor Provisions of the Private Securities Litigation Reform Act. It is possible that our actual results may differ from what we project today due to the factors which are described in the risk factors section of our recent S-3 registration statement filed with the SEC in early January. 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 the obligation to do so. So with that I'll now turn the call over to Steven Holtzman to kick us off. Steve?

Thanks, Steve, and good afternoon, everyone, and thank you again for joining us today. I don't think it really requires me to tell you that 2008 was a difficult year for the world, and it was an especially challenging one for younger, smaller cap discovery based biotech companies, even those that successfully advanced their early stage pipelines. Despite this environment, Infinity finds itself in an extraordinarily fortunate position today. We're not merely surviving, we are in fact thriving and we've arrived at this position even in this difficult market as a result I believe of being innovative, strategic and opportunistic in both our R&D and our business practices. We have an exciting emerging pipeline generated by a world class R&D organization built and led by my dear friend and colleague, our CSO, Julian Adams. Demonstration of this is our industry leading Hsp90 inhibition program which is on track to be the first to market in this space. Equally, our Hedgehog signaling pathway inhibitor program which enters human studies in 2008 continues to gather steam as well as scientific validation.

I believe the strong position we're in today is equally attributable to our business team built and led by my other dear colleague, our President, Adelene Perkins, and its ability to think and act innovatively, strategically and opportunistically as well. As a result of major business transactions accomplished by the team in the second half of 2008, in the teeth of the economic storm, Infinity has emerged both independent and financially strong. We're positioned to develop our products globally as well as to launch and commercialize our oncology products in the US. And as I've said before, I believe that marketing your products at least in the US is the pre-condition of creating exceptional long-term shareholder value. Lastly, our success, whether that success occurred in the past, is occurring in the present or you find it in the future, is entirely attributable to the inspired committment of the people of Infinity, an integrated community of citizen owners passionately dedicated to bringing important new medicines to patients.

Now having said that let me quickly review 2008, because it was in fact Infinity's best year ever. We received from the FDA a special protocol assessment agreement and initiated under it our first pivotal registration trial with our lead product candidate IPI-504. That trial, the RING trial positions Infinity to bring IPI-504 to the market in 2011. We also continue to evaluate IPI-504 in additional cancer indications, both as a single agent and in combination with approved anti-cancer agents. In addition in 2008 we filed two new INDs and put into the clinic two new drug candidates discovered and developed here at Infinity. The first, our oral Hsp90 inhibitor, IPI-493, and the second our oral Hedgehog pathway inhibitor, IPI-926. On the business side we ended the year with full ownership of our Hsp90 program, we concluded a significant alliance with Purdue and Mundipharma, and we ended the year with the strongest balance sheet in our history.

Suffice it to say in 2008 the citizen owners of Infinity nailed it, pegged it, knocked it out of the park. And I think that takes us back to our roots, our bold mission, which is to build the community and Company capable of sustainable discovering, developing and delivering to patients innovative important new medicines that can make a meaningful difference in their health, well being, and lives. We recognize it's an audacious mission and it will be very challenging to realize it. Nevertheless we now have in place the intrinsic characteristics of being innovative, independent, and inspired without which realizing our vision and mission would be unthinkable.

Now, as we'll detail for you in a few minutes, we have a cash runway of at least four years through 2012. Reflecting on this, this provides an appropriate time frame for articulating a set of goals to help us achieve our long-term mission, what we have termed our [eye for] 2012 goals. These are the four major strategic goals whose achievement we will believe will set us apart as we come to the conclusion of 2012. These four goals are as follows. First, that we will have at least one oncology product on the market being commercialized by Infinity in the United States; second, we will have at least three product candidates in global pivotal trials; third, we will have a pipeline of at least five product candidates in clinical development; and fourth, as 2012 and these next four years draw to a close, Infinity will continue to be financially strong, and by virtue of our accomplishments, the ones I've just described, we will have created exceptional shareholder value and be on the path to creating even more benefit for patients and value for shareholders in the future.

With that broad strategic context in place, I'll pass the call over now to my colleagues. Adelene will review the major business development activities that took place in late 2008 and how these reflect our broader business and commercialization strategy. Our Vice President of Finance, Steve Kafka, will review our year-end financial results and provide some guidance for 2009, and then we'll close with Julian, who will describe our recent progress in R&D as well as upcoming milestones. So, thank you, and over to you, Adelene.

Thanks, Steve. I'd like to start by drawing attention to a component of Infinity's mission which is becoming increasingly important as we, the Company, and our pipeline, mature. As you've heard, achieving Infinity's mission requires not only the discovery and development but also the delivery of important medicines to patients. Over the past year, we made two very important strategic moves which enabled the delivery component of our mission, but before describing these moves, let me explain why we believe the delivery of our drugs is such a critical piece of our mission.

The first is that we as an organization are focused on and inspired by patients and our desire to make a meaningful difference in their lives. There is, we believe, no better way to insightfully and sustainably understand how to best meet patient's needs than by being in the marketplace to participate in the decision-making processes and behaviors of patients, their providers, and those that pay for their care. The second is that we believe there is just as meaningful an opportunity to differentiate ourselves in the delivery of our drugs as there is in their discovery and development. In particular, we believe the core values which characterize Infinity and our discovery and development efforts can be brought to and will distinguish us in the marketplace. We're confident, for example, that being unwaveringly data driven and transparent with those data in all of our communications with all of our constituencies will be a welcome form of differentiation in the market.

In addition as the pressure is on and the needs of the healthcare system change, we have a very real opportunity to bring the same level of innovation to meeting customers needs as we bring to our scientific and business endeavors. So, in light of the strategic importance of having a presence in the marketplace, we made two very important moves to enable this at the end of 2008. The first is our global strategic alliance with Purdue and Mundipharma which is a transformable alliance for Infinity. It provides us with significant funding over the next several years to pursue the development of our clinical as well as our early stage program. It leaves us with the operational independence to lead the worldwide discovery and development efforts for each of our products, and very importantly, it enables us to bring our oncology products to the US market.

Additionally, it enables us to leverage the existing Purdue Mundipharma infrastructure in commercializing our product outside of the US, for which we will have a significant return for double digit royalties on ex-US sales. Against the back drop of the Purdue alliance and in looking to accelerate our commercial presence we were also able to reacquire from AZ all worldwide discovery development and commercialization rights to our lead program targeting Hsp90. We were able to seize an opportunity created by AZ's acquisition of MedImmune in that AZ was uncomfortable with the deal structure they inherited from MedImmune from a 50/50 profit share. It became clear that it was not in the best interest of the programs to be divided equally among us, so in a [Solomonesque] fashion, we decided that one party needed to drive the whole program and came to the mutual decision in December of 2008 that Infinity would be that party given the strategic importance of the program to us. So we sit here today, fully owning worldwide rights to both products in our Hsp90 program and with US commercial rights to our entire oncology portfolio. We might well repartner our Hsp90 program down the road, however it will likely be with the explicit strategy that Infinity retains US commercial rights of both candidates in that program.

In addition to building out our commercial capabilities, we intend to maintain a diverse portfolio of innovative product candidates at various stages of clinical developments. We also intend to expand our product portfolio down the road through our internal discovery efforts and through potential in license or acquisition opportunities. We believe that maintaining diversity in our product pipeline increases the probability of our long term commercial success. Lastly, we're in a very strong financial position as Steve Kafka will detail in just a moment. Before he does, let me conclude by saying that 2008 was a great year for Infinity. We're delighted with our current strategic position as the worldwide discovery and development organization with US commercial rights to our entire oncology pipeline. This position is enabled by our pipeline of novel product candidates with near term potential, the financial stability to ride out these turbulent times, our US commercial vision and our ex-US commercial partner to bring our products to global markets. I'll now hand the call over to Steve Kafka to take us through our year-end financial results. Steve?

Thanks very much, Adelene. We indeed ended 2008 well financed and positioned to pursue our I4 2012 goals. I'll begin by reminding you we started 2008 with $114 million in cash and investments and guided to a net cash burn for the year of $35 million to $45 million. As of December 31, 2008, following the close of the Purdue collaboration and Purdue's first equity investment, Infinity had total cash, cash equivalents and available for sale securities of approximately $127 million. Then in early January, Purdue made a second equity investment in Infinity of $30 million bringing our total cash and investments to over $157 million.

Let me step through the key components of our 2008 results. Revenue for the year was $83.4 million, a majority of which is the recognition of the remaining deferred revenue from the AstraZeneca collaboration following Infinity's reacquisition of the Hsp90 program in December. We have now recognized all remaining revenue associated with the up front license fee and will not recognize any further revenue from that up front fee in future periods. Additional drivers of revenue for 2008 include the $15 million milestone from AZ related to the initiation of the RING trial and the remaining deferred revenue associated with the Novartis collaboration on Bcl-2 from the first quarter of 2008. R&D expense for the year was $47.5 million reflecting aggressive investment in our clinical stage pipeline where we now have three candidates in a total of five clinical trials. Recall that reimbursable amounts from AstraZeneca under the cost sharing provisions of our agreement incurred prior to Infinity's acquisition of the Hsp90 program are recorded as a credit to R&D expense. Therefore, Infinity's R&D expense of $47.5 million for the year reflects total R&D expenditures by Infinity of $64.2 million, less the $16.7 million in AZ reimbursable amounts paid in 2008. G&A expense for the full year was $16.8 million.

Finally, we had net income in 2008 of $23.7 million. Basic and diluted earnings per share were $1.17 and $1.14 respectively. These earnings were driven primarily by non-recurring license revenue related to collaborations with AstraZeneca and Novartis. Looking ahead, I will also remind you that as part of our reacquisition of the Hsp90 program, AstraZeneca was obligated to fund its share of program costs over a six-month residual funding period. We've recently agreed with AZ to settle this residual funding obligations through lump sum payments totaling $12.5 million. This $12.5 million will be recorded in the first quarter of 2009 as income on residual funding in the other income portion of Infinity's statement of operations.

As Steve mentioned earlier, we are reiterating guidance today that we have sufficient capital to fund our current plans through 2012. Let me take a moment to walk through that guidance. With the closing of the second traunch of equity by Purdue in early January we had $157 million in cash and investments. With an ambitious plan to advance our clinical development efforts for both Hsp90 and Hedgehog and our discovery pipeline this year, we expect a gross investment of approximately $75 million to $85 million for the year. However, with Purdue, funding our Hedgehog and discovery efforts, and with the residual funding from AZ for Hsp90, our net burn after Purdue's equity and second equity investment will be just $25 million to $35 million for 2009. We there for anticipate ending the year with between $122 million to $132 million in cash and investments.

Looking out further from 2010 through 2012, we expect to invest aggressively toward our I4 2012 goals including the launch of IPI-504 and the advancement of at least three global pivotal trials. We estimate the total gross investment in this period to be in the range of $375 million to $425 million. However, again, supported by R&D funding from Purdue, we expect our net cash burn will be approximately $140 million to $170 million. Assuming we access the $50 million line of credit from Purdue during this line of period we have sufficient capital today there for to fund this aggressive operating plan toward our I4 2012 goals. We also know there is some additional upside to this cash runway forecast. For one, Purdue could exercise warrants priced up to $40 per share and infuse up to an additional $200 million.

Second, we have the opportunity to partner our Hsp90 program with the potential to bring in additional capital and reduce our net cash burn. And finally, while we expect to launch our first product in this period, and have accounted for those marketing and sales expenses in our guidance, we have not yet included product revenues through 2012. So we are extremely fortunate to be in a strong financial position today, giving us the opportunity to invest both wisely and aggressively in our exciting pipelines. And to bring you up-to-date on the tremendous progress and promise of that pipeline, I will now turn the call over to Julian Adams. Dr. J?

Thank you, Steve. Infinity has built through our own discoveries to date a robust pipeline with product candidates that address the breadth of tumor types. We are in late stage development with our Hsp90 program, with multiple clinical trials ongoing and additional ones poised to start this year. Our Hedgehog program is moving quickly through Phase I and our FAAH and discovery programs are also progressing rapidly. Starting first with our lead program, Hsp90 as an important chaperone protein that is responsible for the survival and proliferation of many cancer types, let me lay out our anti-chaperone therapy strategy. Our lead molecule, IPI-504 is well on its way to be the first in class Hsp90 inhibitor. Behind this, our oral inhibitor, IPI-493, has best-in-class potential. Between these two candidates we have the ability to target a broad range of cancers both as single agents, but also importantly, as in combination with a number of currently marketed therapies.

Last year, we initiated our first registration trial of IPI-504, the RING trial. This global pivotal trial enables 504 to be fast and first to market. You'll recall that the RING trial is a double-blind placebo controlled trial with approximately 200 patients in refractory GIST and that its patients were refractory to both Gleevec and Sutent. This trial is being conducted globally under a special protocol assessment from the FDA and with the European authority's scientific advice. The primary end point is progression free survival. The trough has been opened for a few months and is going very well. We are on track to complete the study by the end of 2010. We are also poised for an NDA filing and a market launch for IPI-504 in 2011. We now have had three investigator meetings across the globe and have met with over 100 physicians coming from 24 countries. In fact just last week I attended the meeting with our European and Israeli investigators in Paris. At the kickoff of the meeting, I pledged that Infinity would be the most responsive sponsor they had ever worked with to enable the efficient enrollment in treatment of patients. We have over 15 active sites in the US, three in Australia, and expect additional sites to come on Board around the world in the coming weeks and months. The most up-to-date information on the RING trial can also be found on our trial website at ringtrial.com.

As we've said in the past, 504 is more than just a GIST drug. We strongly believe in the potential for anti-chaperone therapy in treating many cancers. We are actively enrolling patients in the expansion phase of our non-small cell lung cancer study. These are patients with mutant EGFR, as well as patients with wild type EGFR. We expect to present mature data from this study at the upcoming ASCO meeting this summer. Our study of 504 in combination with Taxotere is also ongoing. We recently added an expansion arm in that study to evaluate patients with non-small cell lung cancer and we expect to report preliminary data from this study at ASCO as well. Oral IPI-493 is advancing through its Phase I dose escalation trial and from what I've seen so far, while early days, this one has got legs. It's showing great oral bioavailability, favorable PK properties and has been very well tolerated. We anticipate data from this study by the end of the year.

And lastly, in our Hsp90 program, we anticipate launching additional studies this year, particularly one in combination with Herceptin in patients with HER2 amplified metastatic breast cancer. Breast cancer is an exciting area for us to move into as HER2 is highly sensitive to Hsp90 and there's a strong clinical rationale and a potential across a number of treatment settings. Stay tuned for more in our anti-chaperone reason program.

Our next most advanced program targets the Hedgehog signaling pathway. Our lead inhibitor is IPI-926 which is in a Phase I study and has demonstrated very compelling pharmaceutical properties in a number of pre-clinical models. Just last week one of our collaborators at the mass general published impressive data in a primary tumor model of ovarian cancer showing the anti-tumor effects of the natural product cyclopamine from which IPI-926 is derived. We are embolded by the data, since 926 has excellent pharmaceutical properties including potency that is 30 to 50 times that of the national product, significant oral bioavailability and a long half life. Last year we published data demonstrating the favorable properties of IPI-926 in a number of pre-clinical models.

Let me summarize. We showed data in a model of medula blastoma, where there's a genetic reason driving the tumor. We showed significant activity in a model of small cell lung cancer where we demonstrated after mice were taken off chemotherapy, treatment of IPI-926 delayed the recurrence of the cancer, and we also showed very interesting data in our pancreatic model in which 926 down-regulates Hedgehog signaling in the tumor stroma, there by destructing the communication process between the tumor and the stromal microenvironment ultimately leading to tumor growth inhibition. We anticipate presenting adoptional groundbreaking data in a genetic mouse model of pancreatic cancer at the upcoming AACR meeting in April. Simply put, I love this target and what it can mean for the changing landscape -- and changing the landscape of cancer therapy.

The last program in our pipeline that I'd like to discuss today is our newly announced program in neuropathic pain. We have recently selected our lead candidate, IPI-940, an inhibitor of fatty acid amide hydrolase, or FAAH. FAAH degrades anandamide, which is the endogenous cannabinoid that produces the analgesic effect in response to pain and nerve injury. FAAH inhibition increases the duration of ananamides analgesic effect prolonging pain relief at the site of relief. IPI-940 is now an IND enabling GLP tox study that we anticipate being IND ready by the end of 2009. As a reminder, Infinity will take this candidate through Phase I development at which time Purdue has the option to assume further development on a worldwide basis.

So we've set aggressive goals for 2009 and these are detailed in the press release we issued this afternoon. In order to achieve this though, it all comes back to the people. At Infinity we've assembled a team that has a dedication and tenacity that enables us to set and achieve our difficult goals. We have a community of citizen owners who work collaboratively across all disciplines with a singular focus in mind, developing new medicines that will make a difference in patient's lives. It is a remarkable team and it is a pleasure and honor to work among them.

So to wrap up and get to your questions, I'll finish where Steven Holtzman started. We are financially strong and in a great position to execute on our goals for both the year and for the longer term future. I am confident that we'll achieve our I4 2012 goals, that is marketing our first oncology product in the US, with three oncology products in pivotal trials, five product candidates in the clinic, and lastly, significant value for shareholders, and more importantly, clinical benefit for patients. With that I'll pass the call back to the Operator to open it up for Q&A. Operator?

Thank you, sir. (Operator instructions) We'll take our first question from Phil Nadeau, Cowen & Co.

Good afternoon. Thanks for taking my questions. My first is just a financial question, just to make sure I heard you right. Steve, did you say that the $25 million to $35 million in cash burn includes the investment from Purdue that you already received? Did I hear that correct?

It does not, Phil, so the $25 million to $35 million is separate from the $30 million so we basically are guiding to the year-end cash of $122 million to $132 million, which is about where we're starting.

Okay. Second is on the Hsp90 program. Do you have any will or wish to partner that in the future, or are you perfectly happy taking that to the market yourself given your current cash position?

Yes, so we do plan to take it to the market in the US which is very consistent with our strategic position right now, as a Company that's responsible for the global discovery and development of our product and the commercialization in the US. We will likely look for a partner to partner the program outside the US and we've been approached by several parties who are interested, so we're just beginning those discussions now.

Okay, and any preference to partnering it prior to the Phase III data or after the Phase III data, or does that just depend on the type of terms you get from the partners?

That has to be determined.

Okay. And then last, this is for Julian and that's on the neuropathic pain compound. Is there any reason to believe that an endomide is specific to neuropathic pain, or could that agent have broader utility in other types of neurotrauma?

It's a great question. There are data published in animal models that show antagonists of FAAH and blocking the CB1 receptor may in fact be also useful in inflammatory pain. There are also data that suggests that in mild osteoarthritis it could work in that setting, there are also published again in animal models, not yet again in patients, that there may be an effect on anxiety it as well -- in reducing anxiety it.

Oh, that's interesting. That's helpful, thank you.

Next we'll hear from Blake Arnold, Robert W. Baird & Company.

Hi, guys, thanks for taking my question. Just real quick on 2009 cash burn guidance of $25 million to $35 million. I was wondering if you could walk through the different components of the cash burn maybe to help give us a better sense of how to look at R$D and SG&A for the year?

So Blake, thanks for the question. Just to clarify again, the way to think about the burn is that we ended '08 with $127 million. We took in $30 million from Purdue in their second equity investment, and we'll end the year with $122 million to $132 million, so it gets you the $25 million to $35 million burn. Recall that Purdue is funding essentially everything that is not Hsp90 related, and so that $25 million to $35 million net burn is focused on Hsp90 development for the full year 2009. We haven't provided further guidance in breaking down sort of the components of that, our G&A focus versus R&D focus.

Okay, thanks.

(Operator instructions) And again we'll pause for just a moment. Next we'll hear from Lou Nge, Jefferies & Company.

Hi, guys. It's Lou Nge for Eun. Just a quick question on your share count for 2009, I notice you guys ended '08 with a diluted count of 22 million. And just wondering, you guys gave Purdue about six million in warrants. Would that be recognized in the diluted share count in '09, would it be showing up in '09?

Let me just walk you through that, if I could, Lou Nge. So where we were at the end of before the Purdue transaction took place, it was about 20 million shares outstanding and 24 million on a fully diluted basis. We then issued a total of six million shares to Purdue across the two equity investments and an additional six million warrants, so we have now on an issued and outstanding basis, a total of 31 million shares. That's right. 31 million shares on a fully issued and outstanding basis including options issued to employees.

All right, thank you very much.

I show no further questions at this time. I would like to turn the conference back over to the speakers for any additional or closing comments.

We will actually wrap it up there. Thank you, Operator. We do appreciate everyone's participation in our call today and for your continued attention to Infinity. Thanks again, and have a great evening.

Again that does conclude today's conference. We thank you all for joining us.