Infinity Pharmaceuticals, Inc.
Q3 2016 Earnings Call Transcript

Published: 10 Nov 2016

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Infinity Pharmaceuticals Conference Call to discuss the Company's Financial Results for the Third Quarter of 2016. My name is Kerrie, and I'll be your operator for today's call. [Operator Instructions] At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. 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.

[Jaren Madden:]

Thank you, Kerrie, 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; and Dr. Joe Pearlberg, the Medical Lead for our IPI-549 program; and Larry Bloch, EVP, Chief Financial Officer and Chief Business Officer. Following our remark, we'll open up the call for Q&A. 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 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 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'd like to turn the call over to Adelene.

[Adelene Perkins:]

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 year-end, 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 $220 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 year-end cash balance by $25 million to an anticipated year-end 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 run rate into the third quarter 2017. Importantly in the midst of a massive 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 new Nature Publications, which will publish back to back next week. We also presented initial monotherapy data from our ongoing Phase I 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 PD-1 immune checkpoint inhibitor for the combination portion of our Phase I 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 a broader IPI-549 clinical development program in more detail. With this 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 values of program for shareholders. While checkpoint inhibitors have provided benefit 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 maybe able to provide benefit to patients with cancers that have not historically responded well to checkpoint blockade. To demonstration the potential of 549, our number 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 enhanced 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 worked tirelessly to drive a path forward for 549 and duvelisib. Their belief in the potential of both of 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 this program and our corporate strategy in January. With that I will turn the call over to Julian.

[Julian Adams:]

Thank you, Adelene. I truly 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 am also pleased by the progress we have made with IPI-549, the first and only PI3-kinase gamma inhibitor in clinical development. Through the discovery of 549, we have conducted significant amount of pre-clinical 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 data for IPI-549 that was published online today at Nature. These data in mouse models demonstrates the treatment with IPI-549 leads to a shift in tumor associated myeloid cells from the immune-suppressive state to a pro-inflammatory or anti-tumor state and increases the frequency and production of pro-inflammatory cytokines. These findings lend further support to hypothesis that inhibition of PI3-kianase gamma by 549 leads to an activated and more robust anti-tumor response to its effect on the immuno-suppressive tumor microenvironment. Most importantly, this research also showed that resistance to checkpoint inhibition is associated with increased numbers of myeloid cells. The IPI-549 treatment is able to overcome resistance to checkpoint inhibitors. This past September work by Infinity scientists along with Dr. Judith Varner and her colleagues at UCSD was also published in Nature, supporting the critical role that PI3-kianse gamma signaling plays in controlling immune suppression. This research showed that macrophage PI3-kinase gamma signaling promotes immune-suppression by inhibiting activation of the anti-tumor T-cells. Further blocking PI3-kianase gamma activate the immune response and significantly suppressed growth of implanted tumors in animal models. It also boosts its sensitivity to and synergize with checkpoint inhibitors. This collective body of research represent important contributions to the field of immuno-oncology and provides a strong pre-clinical rationale for our ongoing Phase I study. I will now pass the call over to Dr. Joe Pearlberg, the Medical Lead for IPI-549.

[Joe Pearlberg:]

Thanks, Julian. Immunotherapy in particular checkpoint inhibitor represents important treatment advantage for several cancers including non-small lung cancer, melanoma, immuno cell carcinoma and squamous cell carcinoma of the head and neck. However, not all patients or cancers are responsive to current immunotherapy 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-kianse 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 I study in patients with advanced solid tumors and today announced the clinical trial collaborations with BMS that enables us to evaluate IPI 549 in combination with Opdivo. Overall, this is a robust Phase I study expected to enroll up 175 patients across approximately eight centers in the U.S. The study includes dose escalation phases to evaluate a recommended dose for IPI-549 both at monotherapy and in combination with Opdivo. Once dose escalation for the combination is complete, we are planning the expansion cohort 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 of these cohorts is reserved for patients, who have demonstrated resistance to prior checkpoint treatments. Currently, IPI-549 monotherapy dose escalation is continuing. And we would expect to initiate the first cohorts evaluating combination therapy this fall. At the second International Cancer Immunotherapy Conference in September, we’ve 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 pharmacokinetics and pharmacodynamics 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, low 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 I study in the first half of 2017. With that I will turn the call over to Larry.

[Larry Bloch:]

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. Over the term 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 III dual study in patients with relapsed or refractory CLL. And 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 will be responsible for the single-digit royalties 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 derivative 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 under the Takeda license, IPI-549 now qualifies for the lower milestone obligations 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 will now provide an overview of financial results for the third quarter of 2016. We did not record any revenue during the third quarter of 2016. Revenue during the third quarter of 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. The 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 for 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 at $112.3 million compared to $146.6 million at June 30, 2016. As a result of the duvelisib license, restructuring activities and other efforts preserved our financial resources, today we are updating our anticipated year-end 2016 cash and investment balance and cash runway. We now expect to end 2016 with a year-end cash and investments balance ranging from $70 million to $80 million, compared to prior expectations of $45 million to $55 million. Infinity expect that our existing cash, cash equivalents and available-for-sale securities at September 30, 2016, will provide cash runway into the first quarter 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 has 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 in 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 a further update on a 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 of months. With that we will open the call for Q&A. Operator?

[Operator:]

Thank you. [Operator Instructions] The first question we have comes from Michael Yee with RBC Capital. Mr. Yee, your line is open.

[Andrew Tsai:]

Hi, guys. This is Andrew Tsai on for Michael Yee. Thanks for the question. I think I heard you say that you provide updated data in the first half of 2017 for IPI-549. Just wanted to make sure that that was indeed true meaning that that possibility to see data at ASCO or even ASMO? Thanks.

[Julian Adams:]

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

[Andrew Tsai:]

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

[Adelene Perkins:]

Today, 549 is not under any partnership. So Infinity fully owns that…

[Andrew Tsai:]

All right.

[Adelene Perkins:]

And we have not licensed it to anyone that we would be receiving milestones on, no. We do expect that we may receive milestone from Verastem on duvelisib that corresponds to a successful dual trial. And Verastem expects to have the data from dual on the first half of next year. So if successful we would be eligible group to receive the $6 million payment from Verastem.

[Andrew Tsai:]

Great, okay, thank you for the clarification. Thanks.

[Julian Adams:]

Thank you for your question.

[Operator:]

Thank you. And the next question comes from Katherine Xu with William Blair. Miss. Xu, your line is open.

[Katherine Xu:]

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

[Adelene Perkins:]

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

[Joe Pearlberg:]

Yes, thanks for that question. So we have some data that we actually presented regarding the CT of IPI-549. I want to emphasis that 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 have also asked that question with regard to combination therapy. We’ve not yet began the combination with Opdivo. We anticipate initiating that shortly this fall, so we have no data on the combination so far.

[Katherine Xu:]

Could you observe any in the animals?

[Joe Pearlberg:]

In animal studies, we saw a very clean profile up until we escalated the dose beyond the inhibition of PI3-kianese 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 lympho-depletion and GI toxicity, which is all on the mechanism. And so we are – being very careful in the clinic given the specificity of 549 inhibiting PI3-kianese gamma that we will not be inhibiting the other isoforms and our dose escalating to maximally inhibit PI3-kianese gamma while sparing inhibition on the other isoforms.

[Adelene Perkins:]

So, Katherine, and switching to your second question with respect to our license of duvelisib to Verastem. I will address the Infinity objective. We determined this summer in the context of our pipeline that we should focus on IPI-549 as the strongest cash 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 heme malignancies. And 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 this 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 in their portfolio. And we were pleased to find that with Verastem. Absolutely that our two objectives they moved very quickly and they also showed the commitment to take the program forward and have the expertise. They are an oncology-focused company and they have expertise in the tumor microenvironment. And so it was a very good fit for our objectives and we believed duvelisib went forward because it satisfies their strategic objectives. We also have some participation in the downstream success of the program through milestones and royalties.

[Katherine Xu:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from Mike King of JMP Securities. Mr. King your line is open.

[Unidentified Analyst:]

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

[Julian Adams:]

So the two branches of the immune system that lead to an immuno-suppressive 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 is the effect of myeloid cells in various cancers to solid 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?

[Unidentified Analyst:]

Yes, and I am just wondering do you know how long the effect of the IPI-549 will last?

[Julian Adams:]

Yes so we haven’t – because IPI-549 did not act on the tumor cells themselves we have not yet determined a mechanism of resistance for IPI-549. IPI-549 is predicted to lead program the M2 macrophage into a pro-inflammatory M1 macrophage. And we have not seen any evidence that there’s a resistance mechanism to this physiological and therapeutic intent for IPI-549.

[Unidentified Analyst:]

Okay, thank you.

[Operator:]

I am 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.

[Adelene Perkins:]

Thank you, Kerrie. 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 time.

[Operator:]

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.