Infinity Pharmaceuticals Inc (INFI) 2016 Q3 法說會逐字稿

Welcome to the Infinity Pharmaceuticals conference call to discuss the Company's financial results for the third quarter of 2016. My name is Carey, and I will be your operator for today's call. (Operator Instructions). Please be advised that this call is being recorded at Infinity's request.

At this time, I would like to introduce your host for today's call, Ms. Jaren Madden, Senior Director of Investor Relations and Corporate Communications at Infinity. Please go ahead.

Thank you, Carey, and good afternoon, everyone. Welcome to today's call to discuss our recent business progress and review our third-quarter 2016 financial results.

With me here today are Adelene Perkins, President and Chief Executive Officer, Julian Adams, President of R&D, Dr. Joe Pearlberg, the Medical Lead for our IPI-549 Program, and Larry Bloch, EVP, Chief Financial Officer and Chief Business Officer. Following our remarks we will open up the call for Q&A. [audio technical difficulty].

Hopefully everyone is still with me. The press release issued earlier today details our results and is available on our website at infi.com. Please note that during this call, we may make forward-looking statements about our future expectations and plans, including clinical development objectives, the therapeutic potential of our product candidates, our strategic plans and strategies, and financial projections. Our actual results may differ materially from what we project today due to a number of important factors, including the considerations described in the Risk Factors section of our quarterly report on Form 10-Q for the third quarter of 2016 and in other filings we may make with the SEC. These forward-looking statements represent our views only as of today, and we caution you that we may not update them in the future, whether as a result of new information, future events or otherwise.

Now I would like to turn the call over to Adelene.

Thanks, Jaren. Good afternoon, everyone, and thank you for joining us on today's call. Infinity begins the fourth quarter as a very different company from the start of the third quarter this year. After determining that IPI-549, our novel immuno-oncology drug candidate, represents our greatest opportunity for value creation, we undertook a number of significant initiatives to focus our resources on the advancement of IPI-549. First, we substantially reduced the size of our organization from a fully integrated team of roughly 220 people to a team of approximately 20 by yearend, who are dedicated to IPI-549 and supportive infrastructure.

Second, we amended our license agreement with Takeda covering both duvelisib and IPI-549. This amendment eliminated milestone payments on duvelisib which was instrumental to enabling an out-license. Importantly, this Takeda amendment and our subsequent duvelisib out-license also reduced our future milestone obligations on IPI-549 by up to $120 million.

Third, we licensed duvelisib to Verastem. This license agreement met two important objectives for Infinity. One was to enable a path forward for duvelisib to serve patients, and the other was to preserve our cash by eliminating ongoing investment in duvelisib and capping our financial obligations for duvelisib shutdown activities.

Fourth, working with Alexandria Real Estate, we completely extricated ourselves from our lease for all of Infinity's lab space.

Fifth, by coupling these initiatives with rigorous financial management, we increased our projected yearend cash balance by $25 million to an anticipated yearend balance of $70 million to $80 million. This extends our cash runway for the ongoing development of 549 into the first quarter of 2018 compared to previous guidance of cash runway into the third quarter of 2017.

Importantly, in the midst of a mass transformation of the company, we maintained momentum with IPI-549, our oral selective PI3 kinase gamma inhibitor, which represents a unique immuno-oncology approach by targeting the tumor microenvironment. We've made progress with this program across several fronts including two recent Nature publications which will publish back to back next week.

We also presented initial monotherapy data from our ongoing Phase 1 study which suggests that 549 is well tolerated at doses that fully suppress PI3 kinase gamma. Additionally, today we announced an agreement with Bristol-Myers Squibb for the supply of Opdivo, a PD1 immune checkpoint inhibitor for the combination portion of our Phase 1 study.

As we near completion of the monotherapy dose escalation portion of the study, we are on track to begin treating patients with IPI-549 in combination with Opdivo this fall. Julian and Joe Pearlberg, our Medical Lead for 549, will review the two Nature publications and the broader IPI-549 clinical development program in more detail.

With the significant reshaping of Infinity behind us, as we look ahead our corporate imperative is to demonstrate the potential for IPI-549 to benefit patients in order to maximize the value of the program for shareholders.

While checkpoint inhibitors have provided benefits for patients with certain types of cancer, there is still a need to provide more durable responses and increase the percent of patients who respond. Additionally, we hope that combining IPI-549 with Opdivo, we may be able to provide benefits to patients with cancer that have not historically responded well to checkpoint blockade.

To demonstrate the potential of 549, our number one near term priority is to generate clinical data from the combination of IPI-549 and Opdivo in several solid tumor types. In parallel with the generation of clinical data, we will explore strategic options to maximize the value of 549 in the Company.

In summary, this has been a year of significant transition for Infinity. Over the past quarter we moved decisively in restructuring the company to focus on the advancement of IPI-549 as our most attractive path for shareholder value creation. Consistent with our focus on 549, we restructured our license from Takeda, licensed duvelisib to Verastem, reduced facility lease obligations, and downsized our organization to reduce expenses and extend our cash runway, all of which enhance our potential to create value with 549. We continue to make progress and look forward to initiating our study of 549 in combination with Opdivo this fall.

I would also like to recognize that repositioning Infinity to enable a path forward for IPI-549 has been challenging on many dimensions and would not have been possible without the extraordinary commitment of the dedicated individuals now at Infinity, previously at Infinity, and those departing soon who have worked tirelessly to drive a path forward for 549 and duvelisib. Their belief in the potential of both these product candidates to provide better treatments for people living with cancer and their commitment to generating the data to prove it has been inspiring. We look forward to providing further updates on our progress with 549 including 2017 guidance on the program and our corporate strategy in January.

With that, I will turn the call over to Julian.

Thank you, Adelene. I, too am gratified that duvelisib will continue to advance and thankful to the Infinity team for their contributions to the program and to Verastem for carrying it forward. I'm also pleased by the progress we have made with IPI-549, the first and only PI3 kinase gamma inhibitor in clinical development.

Since the discovery of 549, we've conducted a significant amount of preclinical research to better understand the role of PI3 kinase gamma in the solid tumor microenvironment. Our ongoing collaboration with Dr. Jedd Wolchok and others at Memorial Sloan Kettering led to an important preclinical translation of data for IPI-549 that was published online today in Nature. These data in mouse models demonstrate that treatment with IPI-549 leads to a shift in tumor associated myeloid cells from the immunosuppressive state to a proinflammatory or anti-tumor state. And increases the frequency and production of proinflammatory cytokines. These findings lend further support to the hypothesis that inhibition of PI3 kinase gamma by 549 leads to an activated and more robust anti-tumor response to its effect on the immunosuppressive tumor microenvironment.

Most importantly, this research also showed that resistance to checkpoint inhibition is associated with increased numbers of myeloid cells and that IPI-549 treatment is able to overcome resistance to checkpoint inhibitors.

This past September, work by Infinity scientists along with Dr. Judy Varner and her colleagues at UCSD was also published in Nature, supporting the critical role that PI3 kinase gamma signaling plays in controlling immune-suppression. This research showed that that macrophage PI3 kinase gamma signaling promotes immune suppression by inhibiting activation of the anti-tumor T-cells, further blocking PI3 kinase gamma, activated the immune response, and significantly suppressed growth of implanted tumors in animal models. It also boosted sensitivity to and synergized with checkpoint inhibitors. This collective body of research represents important contributions to the field of immuno-oncology and provides a strong preclinical rationale for our ongoing Phase 1 study.

I will now pass the call over to Dr. Joe Pearlberg, the Medical Lead for IPI-549.

Thanks, Julian. Immunotherapies and in particular checkpoint inhibitors represent important treatment advances for several cancers including non-small cell lung cancer, melanoma, renal cell carcinoma, and squamous cell carcinoma of the head and neck. However, not all patients or cancers are responsive to current immunotherapies and resistance to checkpoint inhibition can occur.

IPI-549 offers a unique approach by altering the immune-suppressive microenvironment, promoting an anti-tumor immune response that leads to tumor growth inhibition. Our hypothesis is that targeting macrophage PI3 kinase gamma signaling with IPI-549 will be complementary to and potentially synergistic with checkpoint inhibitors and could further improve outcomes for patients.

As Julian mentioned, we are conducting a Phase 1 study in patients with advanced solid tumors and today announced a clinical trial collaboration with BMS that enables us to evaluate IPI-549 in combination with Opdivo.

Overall, this is a robust Phase 1 study expected to enroll up to 175 patients across approximately eight centers in the US. The study includes dose escalation phases to evaluate a recommended dose for IPI-549 both as monotherapy and in combination with Opdivo. Once dose escalation for the combination is complete, we are planning expansion cohorts to evaluate IPI-549 plus Opdivo in patients with select solid tumors including non-small cell lung cancer, melanoma and squamous cell carcinoma of the head and neck. Enrollment to these cohorts is reserved for patients how have demonstrated resistance to prior checkpoint treatment.

Currently IPI-549 monotherapy dose escalation is continuing and we'd expect to initiate the first cohort evaluating combination therapy this fall.

At the Second International Cancer Immunotherapy Conference in September, we reported initial clinical data from nine patients who had received oral doses of 549 ranging from 10 milligrams to 20 milligrams once daily. We reported pharmacokinetic and pharmacodynamic data which showed sustained suppression of PI3 kinase gamma over the 24-hour dosing period and therefore support once-daily dosing of IPI-549.

Additionally, we reported that at these levels of sustained PI3 kinase gamma inhibition, no dose limiting toxicities and no serious drug related adverse events had occurred. At the time of analysis, six of nine patients remained on study with a maximum exposure of 24 weeks. Overall, we are pleased with the progress we have made and look forward to reporting updated data from the Phase 1 study in the first half of 2017.

With that, I will turn the call over to Larry.

Thank you, Joe. Before reviewing our third quarter 2016 financial results, I'll provide a brief overview of key financial elements of the Verastem license and Takeda amendments. Under the terms of the Verastem license agreement, Infinity is eligible to receive up to $28 million across two milestone payments. The first is $6 million upon positive data from the Phase 3 DUO study in patients with relapsed refractory CLL. The second is $22 million upon the first regulatory approval in any territory.

Verastem will also pay tiered mid to high single digit royalties on duvelisib net sales and be responsible for the single digit royalty on net sales of duvelisib owed by Infinity to Mundipharma and Purdue.

Now turning to Takeda, we amended our license agreement for duvelisib and IPI-549 in September which was a critical requisite for completing the duvelisib out-license. Under the amended Takeda agreement, upon out-licensing duvelisib, our milestone obligations for our first licensed compound, in this case duvelisib, were terminated and deemed satisfied. In exchange, we and Takeda will share equally in potential future royalties on net sales of duvelisib.

More importantly, by eliminating milestone obligations on duvelisib with the Takeda license, IPI-549 now qualifies for the lower milestone obligation of the second licensed compound. The key takeaway is that our potential regulatory milestone payments to Takeda related to IPI-549 have now been reduced by up to $120 million from up to $170 million to up to $50 million. Development milestones of $5 million, as well as potential commercial milestones, remain unchanged.

I'll now provide an overview of financial results for the third quarter of 2016. We did not record any revenue during the third quarter, 2016. Revenue during the third quarter 2015 was $90.7 million for R&D services associated with the former collaboration with AbbVie. R&D expense for the quarter was $12.8 million compared to $37.7 million for the same period last year. This decrease in R&D expense was primarily related to a decrease in clinical and development activities for duvelisib and a decrease in compensation as a result of our restructuring earlier this year.

G&A expense for the quarter was $7.1 million compared to $9.8 million for the same period last year. This year-over-year decrease was primarily related to a decrease in commercial readiness activities for duvelisib. Net loss in the quarter was $19.5 million or basic and diluted loss per common share of $0.39 compared to net income of $42.5 million or basic earnings per share of $0.85 and diluted earnings per common share of $0.84 for the same period last year.

As of September 30, 2016, we had total cash, cash equivalents, and available for sale securities of $112.3 million compared to $146.6 million at June 30, 2016. As a result of the duvelisib license, restructuring activities and other efforts to preserve our financial resources, today we are updating our anticipated yearend 2016 cash and investment balance and cash runway.

We now expect to end 2016 with a year-end cash and investment balance ranging between $70 million and $80 million compared to prior expectations of $45 million to $55 million.

We expect that our existing cash, cash equivalents, and available-for-sale securities at September 30, 2016, will provide cash runway into the first quarter of 2018 compared to previous guidance of cash runway into the third quarter of 2017.

This updated cash runway guidance is in the absence of additional funding or business development activities and duvelisib expenses beyond November 1, 2016 capped at no more than $4.5 million. Additionally, our cash runway expectation does not include potential milestone payments related to duvelisib.

In closing, we have made major transformations at Infinity over the last few months. As we look ahead, we are focused on managing our financial resources and advancing IPI-549 in the clinic. We look forward to providing further update on our corporate strategy along with our 2017 program and financial guidance in January. We hope to see many of you in person in San Francisco in just a couple months.

With that, we will open the call for Q&A. Operator?

(Operator Instructions) Michael Yee, RBC Capital.

Hi, guys, this is Andrew Ty on for Michael Yee, thanks for the question. I think I heard you say that you'd provide updated data in the first half of 2017 for IPI-549. I just wanted to make sure that that was indeed true, meaning that we could possibly see data at ASCO or even ASMO? Thanks.

Yes, that is true. We expect to have data to present in the first half of 2017 at any of a number of venues at peer reviewed conferences. And that would include both an update on our monotherapy data as well as initial combination data with Opdivo.

Thanks, and maybe just another quick housekeeping question. For 2017, could we -- is there any reason to believe that you will receive any milestones for 549?

Today 549 is not under any partnership, so Infinity fully owns that and we have not licensed it to anyone that we would be receiving milestones on, no. We do expect that we may receive a milestone from Verastem under duvelisib that corresponds to successful DUO trial and we expect -- and Verastem expects to the have the data from DUO in the first half of next year. So if successful, we would be eligible to receive the $6 million payment from Verastem.

Right. Okay, thank you for the clarification. Thanks.

Katherine Xu, William Blair.

Great. Good afternoon. With regards to IPI-549, can you comment on the safety profile so far and also the combo and toxicity? And also, on the Verastem deal for duvelisib, can you just comment on the rationale there a little bit more and on what Verastem, which is also a small company, can do that you cannot do except for the cash requirements? Thank you.

Sure, so Joe will start with your question on 549, then we can come back to Verastem.

Yes, thanks for that question. So we have some data that we actually presented regarding the safety of IPI-549. I want to emphasize that's in monotherapy and we actually have seen no DLTs so far in the dose escalation portion of the study. And there have been no serious drug-related adverse events so far. So overall, the drug is well tolerated. I believe you also asked that question with regard to combination therapy. We've not yet begun the combination with Opdivo. We anticipate initiating that shortly this fall, so we have no data on the combination so far.

Did you observe any in the animals?

In animal studies we saw a very clean profile up until we escalated the dose beyond the inhibition of PI3 kinase gamma. So if we increase the dose, we achieve a pan inhibition across alpha, beta, delta and gamma isoforms and we see the expected toxicities which is lymphodepletion and GI toxicity, which is all on mechanism.

And so we are being very careful in the clinic, given the specificity of 549 for inhibiting PI3 kinase gamma, that we will not be inhibiting the other isoforms and are dose escalating to maximally inhibit PI3 kinase gamma while sparing inhibition on the other isoforms.

So, Katherine, then switching to your second question with respect to our license of duvelisib to Verastem, I'll address the Infinity objectives. We determined this summer in the context of our pipeline that we should focus on IPI-549 as the strongest path for value creation. And at the same time, we believe duvelisib is a drug that may play an important role in the treatment of patients with key malignancies. So we set out to license the program with two objectives. One was to ensure that it would go forward for patients. And the second was to move very quickly in selling the program so that we could stop Infinity's ongoing investment and limit our expenses related to the program.

So we embarked, which we discussed on our second quarter call, to find a licensor for the program and to look for someone for whom duvelisib was a very good fit within their strategic goals and their portfolio. And we were pleased to find that with Verastem. They absolutely met our two objectives. They moved very quickly and they also showed the commitment to take the program forward and have the expertise. They're an oncology focused company and they have expertise in the tumor microenvironment and so it was a very good fit for our objectives and duvelisib went forward because it satisfied their strategic objectives. We also have some participation in the downstream success of the program through milestones and royalties.

Thank you.

(Operator Instructions). Mike King, JMP Securities.

Hi, this is Patrick for Michael King. Congrats on the paper. In the human, there are multiple mechanisms of resistance in the immune system. Can you tell us why you have conviction that they will be repeated in the human system? And also, do you know how long the effect of the 549 would last and what is the eventual mechanism of the resistance would be? Thank you.

So the two branches of the immune system that lead to an immunosuppressive state include both the T-cell, which are suppressed due to checkpoint inhibition, and what we believe is also the case of the tumor microenvironment which effect is the effect of myeloid cells in various solid cell cancers. And so we think that the two mechanisms, both relieving checkpoint blockade as well as inhibiting myeloid cell tumor microenvironment through inhibition of PI3 kinase gamma should work in concert to potentially have enhanced responses and more durable responses in patients. Was there another part of your question?

Yes. Just wondering, do you know how long the effect of the 549 will last?

Yes. So we haven't -- because 549 does not act on the tumor cells themselves, we have not yet determined a mechanism of resistance for IPI-549. IPI-549 is predicted to reprogram the M2 macrophage into a proinflammatory M1 macrophage and we have not seen any evidence that there's a resistance mechanism to this physiological and therapeutic intent for IPI-549.

Okay, thank you.

I'm not showing any further questions at this time. I would now like to turn the call over to Ms. Adelene Perkins for any further remarks.

Thank you, Carey. And thanks everyone for joining us on the call. Infinity is a very different company today following the completion of several important initiatives over the last quarter that enable us to now focus on IPI-549 and we look forward to updating you in January. Have a nice night.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Thank you and have a great evening.