Infinity Pharmaceuticals, Inc.
Q3 2014 Earnings Call Transcript

Published: 7 Nov 2014

[Operator:]

Welcome to the Infinity Pharmaceuticals conference call to discuss the company's third quarter financial results. My name is Shadae, and I'll be your operator for today's call. (Operator Instructions) At this time, I would like to introduce your host for today's conference, Ms. Jaren Madden, Director of Investor Relations and Corporation Communications at Infinity. Please go ahead.

[Jaren Madden:]

Thank you, Shadae, and good afternoon, everyone. Welcome to today's call to discuss our recent business progress and review of third quarter 2014 financial results. With me here today are Adelene Perkins, President and Chief Executive Officer; and Larry Bloch, EVP, CFO and CBO. Julian Adams, President of R&D, is traveling for business this week and joining us remotely. Vito Palombella, Chief Scientific Officer, is also joining us for the question-and-answer portion of our call. 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 milestones, the therapeutic potential of our product candidates and financial projections. It is possible that our actual results may differ materially from what we project today due to the considerations described in the Risk Factors section of Form 10-Q that we filed on August 11. 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 the statements in the future, but are not taking on an obligation to do so. Now, I'd like to turn the call over to Adelene.

[Adelene Perkins:]

Thanks, Jen. Good afternoon, everyone, and thank you for joining us. Our progress during the past quarter provides the foundation required to achieve our goal of brining IPI-145, now known as duvelisib, to patients around the globe in an effort to make a meaningful difference in our lives. We were delighted to announce in September a strategic collaboration with AbbVie for duvelisib in oncology, which enables us to further expand the development program for duvelisib, while establishing a commercial presence in the U.S. We've gotten off to a rapid start, the cross-company, cross-functional teams are up and running and I am happy to report that the partnership is going very well. Most importantly, both companies are aligned on the opportunity for duvelisib to become the first-in-class PI3-kinase delta, gamma therapy, both as a monotherapy and in combination with other treatments. With respect to our monotherapy development, we remain focused on executing a rapid path to approval for duvelisib in indolent non-Hodgkin lymphoma or iNHL and in chronic lymphocytic leukemia or CLL to our DYNAMO and DUO studies, respectively. In addition to these studies, we're planning to combine duvelisib with current standards of care and with novel targeted therapies across both the relapsed/refractory and frontline settings. We're on a track to initiate three additional clinical studies of duvelisib by yearend. One is DYNAMO+R, which will be a Phase 3 study of duvelisib plus Rituxan in patients with relapsed indolent non-Hodgkin's lymphoma. Another will be a Phase 1b/2 study of duvelisib plus Gazyva or Rituxan in treatment-naïve patients with indolent non-Hodgkin's lymphoma. And we plan to initiate a Phase 1b clinical study of duvelisib plus Gazyva in patients with CLL whose disease has progressed following treatment with a BTK inhibitor. Outside of hematology, PI3-kinase delta, gamma inhibition also has therapeutic potential and inflammation. Last month, we reported topline data from our Phase 2a exploratory study in patients with mild allergic asthma. While the primary endpoint of the study was not met, the data demonstrated that duvelisib was well-tolerated and the trial met several important secondary and exploratory endpoints. Taken together, the early proof-of-activity in this allergen challenged study suggest that further development is merited. We also expect to report topline data from the ASPIRA study, our Phase 2 trial of duvelisib in rheumatoid arthritis by the end of this year. The results from both studies will inform our development strategy for our PI3-kinase delta, gamma program in inflammation, which complements our collaboration with AbbVie oncology. As you can see, we expect a busy end of year with topline data from our RA trial and the initiation of three new clinical studies of duvelisib under our collaboration with AbbVie. We also have several presentations, updated clinical data and new translational science on duvelisib at ASH next month, which Julian will describe in more detail. With our new AbbVie partnership accelerating our progress with the development of duvelisib in oncology and as we continue to build our pipeline, we are advancing our mission of building a sustainable fully integrated biotechnology company. We continue to make important additions to the organization, while reinforcing our strong culture, which has enabled us to create really well-integrated team that are more important than ever, as our pipeline and the company mature. We are all very excited about the next stage of growth for Infinity and for duvelisib. I'll now turn the call over to Julian, to review our development programs and the data we'll be presenting at ASH. Julian?

[Julian Adams:]

Thanks, Adelene. Since the ASH abstracts were published online earlier today, I will focus my comments on the data being presented at ASH and our ongoing development of duvelisib in hematologic malignancies. We are very pleased to have three oral presentations and two posters on duvelisib accepted for the presentation at ASH in December. These presentations will highlight new data suggesting a benefit of combined PI3-kinase delta, gamma inhibition as well as provide an incremental update on our Phase 1 study in patients with advance hematologic malignancies. In an oral session on Monday, December 8, Dr. Jeff Kutok, Vice President of Biology and Translational Science here at Infinity, will present new preclinical translational research that is enhancing our understanding of the roles of PI3-kinase delta and PI3-kinase gamma, and how they play an important role in the proliferation and survival of malignant B-cells. Our data in a model of CLL will show that PI3-kinase delta is important in CLL cells proliferation. PI3-kinase gamma plays a critical role in the migration and the activation of T-cell and differentiation of myeloid or key support cells within the protective tumor microenvironment. These data taken together suggest that delta and gamma have cooperative effects on malignant B-cell growth and survival. Our hope is that the ability to inhibit both delta and gamma is a differentiating feature and could lead to deeper and more durable responses for patients. Turning now to our clinical abstracts. Duvelisib continues to show promising signs of efficacy, which we believe reflect the clinical benefit of inhibiting both PI3-kinase delta and gamma isoforms. The data we are planning to report next month underscore our enthusiasm for our ongoing and planned studies. Over the course of the meeting, we will present updates on patients with indolent non-Hodgkin lymphoma, CLL and T-cell lymphoma. For data cut off for the abstracts occurred in April, but the actual ASH presentations will have an October data cutoff. On Tuesday, December 9, Dr. Ian Flinn, an investigator from the Sarah Cannon Research Institute, will give an oral presentation of our Phase 1 data in iNHL. The abstract provides updated data on the safety and activity of duvelisib across all doses studied. For the subset of patients being treated at 25 milligrams twice daily or less, the overall response rate was 73%, including complete responses in 27% or 4 out of 15 patients. The safety profile was consistent with our previously reported data, with a majority of adverse events being Grade 1 and 2, reversible and clinically managed. During the poster session on Sunday, December 7, Dr. Susan O'Brien from the MD Anderson Cancer Center in Houston, Texas, will present our maturing Phase 1 data in relapsed/refractory CLL. This abstract reports that among patients who receive duvelisib at doses of 25 milligrams or less twice daily, the overall response rate was 52% as measured by IWCLL criteria. Similar to our iNHL data, the safety profile reported here is consistent with the previous presentations, showing that duvelisib is generally well-tolerated in CLL patients at these doses. During the same poster presentation on December 7, Dr. Pierluigi Porcu of the Ohio State University Medical Center will present data on the safety and activity of duvelisib in patients previously treated with ibrutinib. These data are a subset of 12 patients from our Phase 1 study and is composed of six patients with relapsed/refractory CLL and six patients with aggressive non-Hodgkin lymphoma. Among patients with aggressive non-Hodgkin lymphoma, we reported two partial responses and one patient with stable disease. Among the six CLL patients, the abstract reports one partial response and five patients with fatal disease. In these CLL patients, the median baseline proliferative index was substantially higher than patients who have not been treated with ibrutinib, and is an indicator of the aggressive nature of the disease in patients who relapse following ibrutinib treatment. Given the aggressive clinical phenotype of these patients, we are encouraged by the early clinical activity we've observed. Finally, Dr. Steven Horwitz from Memorial Sloan-Kettering Cancer Center will provide an update on the safety and activity of duvelisib in patients with relapsed/refractory T-cell lymphoma in an oral session on Tuesday, December 9. In addition to our company-sponsored presentation, Ian Flinn will also present data from his Phase 1b investigator responsive study of duvelisib in combination with bendamustine and/or Rituxan. We will also be hosting an analyst and investor luncheon in San Francisco on December 8, and we hope to see many of you there. As Adelene discussed at the beginning of today's call, we have an opportunity to establish duvelisib as the first-in-class PI3-kinase delta, gamma inhibitor. Our goal is to improve outcomes for patients by developing duvelisib as a monotherapy, in combination with today's standards of care and in combination with novel targeted therapies. We're pleased to have generated very encouraging data in indolent non-Hodgkin lymphoma and CLL to hematologic malignancies for which there are no cures. DYNAMO our Phase 2 monotherapy study designed to enable registration is expected to enroll approximately 120 patients with refractory iNHL. The approval of idelalisib, in indolent non-Hodgkin lymphoma on the basis of a Phase 2 single-arm monotherapy study, set a regulatory precedent. And positive data from our DYNAMO study would provide a compelling rationale to seek accelerated approval. We are on track to initiate before yearend DYNAMO+R, a Phase 3 randomized double-blind placebo-controlled study, comparing duvelisib in combination with Rituxan versus placebo plus Rituxan, in patients with relapsed follicular lymphoma. This trial could serve as the confirmatory study for DYNAMO. Also to broaden the potential of duvelisib in iNHL, later this year we plan to initiate a Phase 1b/2 study in treatment-naïve iNHL patients, evaluating duvelisib plus Gazyva or Rituxan. In relapsed/refractory CLL, our DUO study is ongoing. This trial is designed as a registration study, supporting a Phase 3 randomized open-label study in approximately 300 patients, and we'll evaluate the safety and efficacy of duvelisib compared to ofatumumab. Leveraging for data that will be presented at ASH in patients previously treated with ibrutinib, we are also planning to initiate a Phase 1b study of duvelisib in combination with Gazyva and CLL. Patients whose disease has progressed following the treatment with a BTK inhibitor, we believe duvelisib could be an important treatment option for this patient population. We are also more excited than ever about the promise of duvelisib, particularly with the new strategic partner AbbVie collaborating on its development. We continue to work diligently with our investigators to complete patient enrollment in DYNAMO and DUO, and with regulators to ensure an expeditious regulatory path. During the remainder of the year, we look forward to presenting data at ASH and initiating three more studies of duvelisib in hematologic malignancies. And with that, I will turn the call over to Larry to discuss our financials for the quarter.

[Larry Bloch:]

Thanks, Julian. We're in a strong financial position to execute on our strategic development plan, exploring broad potential duvelisib. As part of our global collaboration with AbbVie to develop and commercialize duvelisib in oncology, we received an upfront payment of $275 million and are eligible to receive up to $530 million in additional payments, with achievement for development, regulatory and commercial milestones, including up to $405 million for the achievement of milestones to the first commercial sale of duvelisib in any indication. Also in September, we amended our Deerfield facility agreement to reduce the maximum principal amount that the company may drawdown under the credit facility from $100 million to $50 million, and decrease the maximum exit fee due to Deerfield in event that we do not drawdown from the facility from $3 million to $1.5 million. To date, we have not drawn down any funds under this facility agreement. I'd now like to provide an overview of our financial results for the third quarter of 2014. At September 30, 2014, Infinity had total cash, cash equivalents and available-for-sale securities of $379.5 million compared to $141.7 million at June 30, 2014. The increase was primarily due to the receipt of an upfront payment of $275 million under our strategic collaboration with AbbVie. Revenue during the quarter was $160.6 million, which is composed of a one-time license fee of $159.1 million associated with strategic agreement with AbbVie for duvelisib in oncology and $1.5 million in R&D services. The remainder of the upfront payment, which corresponds to $114.4 million in deferred revenue, we recognized over the period in which the R&D services are provided. R&D expense for the third quarter of 2014 was $44.9 million, which compare to $26.9 million for the same period in 2013. G&A expense was $8 million for the third quarter 2014, which compare to $7.3 million for the same period in 2013. Net income for the third quarter 2014 was $103.2 million or basic earnings per common share of $2.08 and diluted earnings per common share of $2.03. This compares to a net loss of $33.9 million or basic and diluted loss per common share of $0.71 for the same period in 2013. As a result of entering the strategic alliance with AbbVie for duvelisib in oncology, we're updating our financial guidance for 2014. I'll now briefly review our guidance for the year. We now expect revenue for 2014 to range from $160 million to $170 million. We expect operating expenses to range from $175 million to $185 million compared to prior expectations of $170 million to $180 million. We expect net loss for the year to range from $20 million to $30 million compared to prior expectations of $170 million to $180 million. We expect to end 2014 with cash and investments ranging from $320 million to $330 million compared to prior expectations of $40 million to $50 million. In summary, we have all the key elements in place, as we are building a fully integrated biotech company around our vision to change the treatment paradigm for cancer patients. We have a strong financial position, registration enabling critical studies underway, a validated path to regulatory approval, a committed strategic global partner, and strong IP protection into 2030. With that we'll open the call for Q&A.

[Operator:]

(Operator Instructions) Our first question comes from the line of Michael Yee from RBC Capital Markets.

[John Chung:]

This is John Chung on behalf of Michael Yee. So my first question is, we all know Gilead's Zydelig was approved in July and in the past we have discussed how you want that drug to do well. And although it's early, both the scripts and the sales numbers has been modest despite being approved for two indications, CLL and iNHL. So what is your updated thoughts here? And how do think you can differentiate, not just scientifically, but also commercially?

[Adelene Perkins:]

As we mentioned in the script, we believe that at the end of the day duvelisib is a differentiated drug, in that we inhabit both the delta and the gamma isoforms of PI3-kinase and we do believe that that's reflective of the clinical data that's emerging where we're seeing higher response rates and deeper response rates in terms of CR rates. So our DYNAMO and DUO studies are designed to show that we have a best PI3-kinase in that it's the first delta, gamma inhibitor and that with strong monotherapy data, we believe it's the right backbone to fulfill our longer term strategy, which is combining with both today's standards of care and then ultimately with really interesting novel combinations. So our translations team has been doing a lot of work on what are those best combinations and we hope that we will also have a differentiated clinical strategy with the drugs that we combine duvelisib with.

[John Chung:]

So on those novel combinations you mentioned, what are the gating factors to get those started? And when can we start to hear about those?

[Adelene Perkins:]

So we are starting some of those by the end of this year with our combinations with Gazyva. So we have two trials that we'll be starting before the end of the year with Gazyva, that we're very excited about. And then at the beginning of 2015, we will provide guidance for all of the trials that we'll start in 2015. And you'll begin to see our clinical strategy unveiled as we announce our plans for 2015.

[Operator:]

Our next question comes from the line of Jason Kantor of Credit Suisse.

[Roz Sweeney:]

This is Roz Sweeney on behalf of Jason. I have a couple of questions. First, when you announced the CLL trial as a second line to BTK inhibitor. Do you think this is the most appropriate combo for CLL or what other roles do you see? And then I was also hoping to get a little more detail on the Roche supply agreement? How many trials are you allowed to setup? Is Roche supplying the complete drug there? And then finally, if you have any more detail on the accounting of the AbbVie deal. How long the additional $114 million will be amortized over how the expenses will be split and things like that?

[Adelene Perkins:]

With respect to the trial that we're conducting in combination with Gazyva in ibrutinib failures, the data that we'll be presenting at ASH, which shows activity with duvelisib in patients who have progressed on a BTK inhibitor are the basis for us moving forward with that trial. And we're learning for the first time, what we will see in the combination with Gazyva, so that's why that's a very important trial. We do believe that there are different mechanisms and so the patients who have progressed on ibrutinib showed, as we've shown at ASH, response to duvelisib. We're not describing yet the Roche supply agreement beyond the two trials that we've announced this year. So it's focused on those two new trials. And Larry, I'll turn it over to you for the accounting?

[Lawrence Bloch:]

Sure. So the deferred revenue component of the upfront fee is going to be recognized over the service period and that's determined by the period under which it'll take to execute on the trials that are currently contemplated on our global development plan with AbbVie. So it's not a defined term, but you can expect it to be over multi-years. And as Adelene said, you'll start to see sort of the outlines of that global development plan at January when we give our guidance for 2014 clinical trail execution. And then in terms of the cost basis for the AbbVie collaboration, we're responsible for duvelisib trials that we're running up to a cap of $667 million after which the ensuing trials subsequent to that and that cost associated with those would be split 50-50. And in the meantime the trials that AbbVie will run we'll be splitting 50-50.

[Julian Adams:]

I'd like to add the trial in the ibrutinib progressing patients is an extremely important one, because those patients have a very high proliferative index in their CLL. And the majority of those patients were enrolled within weeks of defining their progression on ibrutinib, and seeing single-agent activity with duvelisib was indeed encouraging. And then it's even more compelling to combine it with the best anti-CD20 for CLL, which is week Gazyva. So I think we're excited about an attempt to try to rescue these patients who are in dire need.

[Operator:]

Our next question comes from the line of Brian Klein of Stifel.

[Brian Klein:]

So first just wondering for you, Julian, would you expect to see any synergy between a PI3K inhibitor and a Bcl-2 inhibitor? And do you think we could expect a combination study with ABT-199 in the future?

[Julian Adams:]

That's indeed a forward-looking question. I would defer to answer that question when we announce our future plans combining duvelisib with novel therapies. Certainly, it's obvious that the mechanisms are different and potentially complementary that's from first principals. But the specifics of our strategies for combining with novel therapies, as Adelene mentioned, we'll announce that when we announced our goals for 2015.

[Brian Klein:]

Maybe a second question in terms of the inflammatory disease landscape, maybe if you can give us some of your thoughts about why you really only started to see some efficacy at the highest dose of duvelisib in asthma?

[Julian Adams:]

Yes. So we saw activity at the 25 milligram dose, and that is the dose where we're beginning to really inhibit gamma, and so we're seeing the inhibition of delta, it's a higher level of inhibition of delta, and importantly starting to see inhibition of gamma. And perhaps for this model of allergic asthma, this challenged model, where cell influx is important, it's important to inhibit both the delta and gamma isoforms.

[Vito Palombella:]

It actually followed nicely with our preclinical data, where we actually had very real complete inhibition of the delta isoform in addition to inhibiting gamma and our preclinical models of asthma. So it really lined up nicely and the effect on late asthmatic response with something we expected that we would see. So we felt really good that it lined up in that way.

[Julian Adams:]

I think we're also very excited to see how duvelisib performs on a background methotrexate in our upcoming ASPIRE study.

[Brian Klein:]

And then just one final question for Adelene. Is it fair for us to assume that you will exercise your option to buy back the royalties from Millennium next year at this time?

[Adelene Perkins:]

So Brian, that's a decision that we'll make at the time that we need to, which is towards the end of February. So we haven't made that decision yet, but I think given our expectations for duvelisib and the structure of that it could present a very attractive opportunity, but we just haven't made the decision yet.

[Operator:]

Our next question comes from the line of Matthew Andrews of Wells Fargo Securities.

[Matthew Andrews:]

I guess for Julian, so can you discuss the rationale for the dosing duration in DYNAMO? Clinicaltrials.gov note, notes that in order to dose beyond 12 cycles you have to have a PR or higher. And similarly for DUO, I think dosings capped at 18 cycles, so can you just walk us through the rationale for structuring the two studies that way?

[Julian Adams:]

Yes. I think that was a logistical decision that we made. And frankly, it's subject to review as we look at the data of the ongoing study. On the one hand, for indolent lymphoma, if we're not seeing clinical activity that's helping patients at 12 months, we suspect that perhaps there is not a great rationale for continuing treatment. Obviously, patients with any kind of response or stable disease that would be still a viable approach to continue treating those patients. And the similar argument could be made in CLL.

[Operator:]

Our next question comes from the line of Eun Yang of Jefferies.

[Eun Yang:]

Can you give us a patient enrollment status for DUO and DYNAMO study? And also do you anticipate the regulatory filing for 145 based on two studies at the same time?

[Adelene Perkins:]

Julian you want to take it?

[Julian Adams:]

Sure. We have never provided enrollment updates. Enrollment, as you know, is a function of how many sites get open and it's always a moving target. So enrollment, it's not our practice to give enrollment update. But in the year where we expect to complete enrollment, we usually announce that we're going to have enrollment completed in topline data. And that's what we've done for the inflammation studies this year. So I think we'll continue in that way. As a function of our regulatory strategy, it could turn out that DUO and DYNAMO read out in the same timeframe. But we haven't made any formal decisions and we're not prepared to announce a regulatory strategy for filing, because we don't have yet -- we're not also providing the guidance of when those studies would be complete, but it's certainly possible, but we're not making any commitment to do so.

[Operator:]

And our next question, looks we have a follow-up from Matthew Andrews of Wells Fargo Securities.

[Matthew Andrews:]

Just following-up I guess on Eun's question, for DYNAMO is the primary endpoint for response rate at 12 months similar to this idyllic study or is it longer say at two years? The wording on the ClinicalTrials.gov website is a little obscure so can you clarify when the endpoint would be read out?

[Julian Adams:]

The endpoint is best overall response rate and that can happen at any time. So it's not a landmark analysis at 12 months or anything like that. Secondary endpoints would be progression free survival, duration of response, and so forth.

[Operator:]

Thank you. At this time, I'm showing no further questions in the queue. I would like to turn the call back over to Adelene for closing remarks.

[Adelene Perkins:]

Thanks everyone for joining us today. And we look forward to seeing many of you at ASH.

[Operator:]

This concludes the Infinity conference call. You may now disconnect.