As one of the premier medical conferences globally, the annual meeting of the American Society for Clinical Oncology has the potential to create or destroy a great deal of value in the biotechnology sector. Few companies embody this more than Infinity Pharmaceuticals (INFI), which fell sharply due to uncertainty over the safety of its PI3K-delta/gamma inhibitor IPI-145. But for patient investors, the selloff has created what we see as a potentially valuable buying opportunity. ‘145 is an attractive asset as a differentiated PI3 kinase inhibitor, a pathway spotlighted by Gilead’s (GILD) Idelalisib in the last year, and Infinity is well capitalized to continue executing in the clinic. Evidence suggests ‘145 remains a best-in-class contender, and although Infinity’s data presented at ASCO were not received properly by the markets, at under $20 per share, INFI’s valuation doesn’t bake in the upside that it did three months ago. That’s a good thing for investors with patience and some risk tolerance.
What Went Wrong?
Given that shares of Infinity fell by over 39% to $16.41 on June 3 after data for IPI-145 was released (INFI since rebounded to around $18), it’s clear that investors were unnerved by news out of Infinity. The company’s Phase I trial of IPI-145, a PI3K delta/gamma inhibitor, consists of 117 patients across a range of oncology indications including CLL (chronic lymphocytic leukemia), multiple myeloma (MM), iNHL (indolent non-Hodgkin’s lymphoma), aNHL (aggressive non-Hodgkin’s lymphoma), and MCL (mantle cell lymphoma). Infinity structured the trial as a dose-escalation study, with a maximum tolerated dose established at 75 mg BID. But what unnerved investors most were revelations regarding the drug’s safety/tolerability, or at least perceptions of the therapy’s safety.
- Patient deaths: Infinity reported 3 patient deaths within the trial, one due to Grade 5 pneumocytis, one to Grade 5 HSV pneumonitis, and one undetermined cause of death. Naturally, questions were raised as to whether or not these deaths are related to IPI-145. There’s reason to believe that deaths are due to a combination of compromised immune systems and IPI-145’s mechanism of action. As an oral inhibitor of both PI3K-delta and PI3K-gamma, IPI-145 may play a role in weakening a patient’s immune system via gamma inhibition. The structure of Infinity’s Phase I trial, as well as the makeup of patients enrolled in the trial, played a role in these events. Patients that have already undergone immunosuppressive oncology therapies are far more likely to contract infections, and the patients within Infinity’s trial were not given routine prophylactic treatments to ward off these infections (the trial protocol was subsequently amended to include routine prophylaxis). In addition, IPI-145’s overall safety profile isn’t much different from Gilead’s idelalisib. Further commentary from Infinity’s investigators helped clarify the situation. They made clear that managing pre-treated patients is a difficult task, one that may require the additional use of antibiotics alongside IPI-145. In our view, the patient deaths tied to adverse events in Infinity’s Phase I trial are not a strike against IPI-145. However, they do highlight the need for patience. Investor perception of the drug has soured, and Infinity will likely remain in the penalty box until it can release further data showing that IPI-145 should not be assigned sole responsibility (Infinity itself has admitted that, at least within T-cell lymphoma, there is a trade-off between toxicity and efficacy given IPI-145’s inhibition of T-cells). With such data potentially unavailable until the American Society of Hematology’s 2013 meeting (December 7-10), Infinity may be operating under a cloud of uncertainty for some time (investors should be aware that further infections are likely in any data presented at ASH; Infinity will be testing IPI-145 at higher doses and for longer durations).
- Dosing regimens: The Phase I trial of IPI-145 established 75 mg BID as the maximum tolerated dose (however, Infinity’s investigators noted high levels of activity at just a third of this 75 mg dosing level), and Infinity is continuing to test IPI-145 across 5 indications at this dosage level. However, IPI-145 will also be tested at a 25 mg dosing level in 2 trial arms (relapsed/refractory CLL, iNHL, and MCL, as well as treatment-naïve CLL patients). Some investors have interpreted this as a sign that IPI-145 is too toxic at the 75 mg dosing level. On the surface, there may be cause for worry. In CLL patients, a 25 mg dose is below the IC90 for PI3K-gamma, which may call into question the benefits of gamma inhibition, a key differentiating point for Infinity (more on this later). However, this worry may also be overblown. The results presented by Infinity showed no dose-related adverse events in doses ranging from 8 mg BID to 75 mg BID, and even though Infinity is testing IPI-145 at the 25 mg level in CLL, testing at the 75 mg level is continuing as well (as one of the five 75 mg BID indications)
We believe that the drop in share price over IPI-145’s safety profile was overdone based on the existing data. We caution investors, however, that Infinity no longer has the benefit of the doubt; it’s up to management to make clear that IPI-145 has a competitive safety profile, a task that will not be accomplished overnight. For patient investors, there’s meaningful upside if this chapter can be closed.
Differentiating IPI-145
What makes IPI-145 different from the dozens of other oncology assets in development? The answer lies in both its mechanism of action as well as its relation to key peers, including Gilead Sciences (GILD) and Pharmacyclics (PCYC), which is currently viewed as the sector leader for its BTK inhibitor Ibrutinib (here’s why we’re bullish on Pharmacyclics) There’s certainly room for the two companies to coexist, and as noted by Credit Suisse, many of the oncologists the firm spoke with at ASCO indicated that IPI-145 is more potent than Gilead’s idelalisib, which like IPI-145, is a PI3K inhibitor. Idelalisib inhibits only PI3K-delta, however, while IPI-145 inhibits both the delta and gamma isoforms. The inhibition of the gamma isoform allows IPI-145 to prevent the return of abnormal lymphocytes into the lymph nodes, which means that they can be more easily targeted and destroyed.
Efficacy for IPI-145 is robust across various indications. Data presented by Infinity show that within CLL there was a 55% partial response rate (12 out of 22 patients that are evaluable for clinical efficacy; 34 patients are evaluable for safety) and a fairly rapid median response time of 1.9 months, with the most common adverse events in this arm of the Phase I trial being neutropenia. Most neutropenia cases did not require dose reductions, and 65% of patients within this arm of the trial continue to receive IPI-145. Infinity also provided an update on one particular patient that presented with tumor lysis syndrome at ASH. The same patient also showed symptoms of a “Stevens Johnson-like syndrome”, according to Infinity. However, these symptoms presented after treatment with IPI-145 had been stopped and after the receipt of a variety of other drugs, including antibiotics, which are the leading cause of true Stevens Johnson syndrome. Within the CLL arm, Infinity stated that 15% of patients had infectious SAE’s, and 12% non-infectious respiratory SAE’s. Of note, Gilead posted a 17% pneumonia infection rate in its own trial of idelalisib in CLL. The CLL arm of the trial also included a subset of patients with 2 genetic mutations (four evaluable patients with a deletion of the short arm of chromosome 17 (known as a 17p del mutation) and six patients with p53 mutations. CLL patients with these mutations respond poorly to chemotherapy, and have a worse prognosis than CLL patients without these mutations. Within the 17p del arm, there were 2 partial responses, one case of stable disease, and one case of CLL progression due to Richter’s transformation (a complication in which a CLL patient’s leukemia transforms into B-cell lymphoma; this complication occurs in around 5% of CLL patients). Within the p53 arm, there were 4 partial responses, and 2 cases of stable disease, suggesting IPI-145 may have a role to play in the treatment of this subset of the CLL patient population. Within other indications, IPI-145 also posted solid results, and the following table breaks down response rate across non-CLL indications.
IPI-145 Response Rates
| Indication | Evaluable Patients | Overall Response (%) | Complete Response (%) | Partial Response (%) |
| iNHL | 19 | 13 (68.4%) | 3 (15.8%) | 10 (52.2%) |
| MCL | 6 | 4 (66.7%) | 1 (16.7%) | 3 (50%) |
| T-Cell Lymphoma | 9 | 3 (33.3%) | 1 (11.1%) | 2 (22.2%) |
| Hodgkin’s Lymphoma | 3 | 1 (33.3%) | 1 (33.3%) | 0 (0%) |
| aNHL* | 10 | 0 (0%) | 0 (0%) | 0 (0%) |
*Note: based on Infinity’s list of IPI-145 expansion cohorts, it does not appear that IPI-145 will be further developed for aNHL treatment.
A Phase II trial of IPI-145 in CLL is progressing, and enrollment in a Phase II iNHL trial is ongoing, with response rate serving as the primary endpoint. As noted above, Phase I trials are ongoing in multiple indications, and data will be presented at ASH in December.
Financials & Valuation: The Pharmacyclics Factor
Evaluating Infinity can be done best via the prism of Pharmacyclics, which is widely seen as the sector leader in “next-generation” oncology therapeutics, particularly in CLL. From early last year until just a few months ago, Infinity rose in parallel to Pharmacyclics as optimism over Ibrutinib, alongside positive early data for IPI-145, increased confidence in Infinity’s prospects.
But beginning in March, INFI began to fall. Little has changed with regards to IPI-145, and as the noise surrounding its safety profile dissipates, INFI should begin to recoup. Infinity is well positioned to secure the number two spot in the sector behind Pharmacyclics. As noted by Jefferies, sales of IPI-145 could be as high as $3 billion. Although well below expectations for Ibrutinib (forecasts call for $5 billion and higher at peak) Infinity’s market capitalization of less than $900 million doesn’t bake in the same upside as Pharmacyclics’ $6.5 billion.
Like Pharmacyclics’ deal with Johnson & Johnson (JNJ), Infinity’s partnership with Millennium-Takeda contains a number of highly favorable elements. In exchange for the receipt of $15 million, late in 2012 Millennium-Takeda waived its option to opt into a 50-50-expense/profit split for IPI-145 and any other PI3K inhibitors, and Infinity is maintaining full global rights to IPI-145. Millennium-Takeda will be entitled to up to $450 million in milestone payments for IPI-145 (these payments cover IPI-145 indications outside of oncology; the compound is also being tested in asthma and rheumatoid arthritis), and a 7-11% royalty on any sales of Infinity’s PI3K inhibitors. In exchange for bearing the costs of developing IPI-145, Infinity has retained much more of the upside potential for the compound than Pharmacyclics has for Ibrutinib. And, Infinity’s balance sheet is strong enough to sustain development through the next two years. The company ended Q1 2013 with just over $290 million in cash & investments, net of $12.81 million in remaining payments to Millennium-Takeda. Infinity’s cash burn was $80.135 million for 2012, and $25.3 million in Q1 2013, meaning that at present burn rates, Infinity has enough capital to fund operations for more than two years.
At around $18, shares of Infinity Pharmaceuticals are attractive based on the ‘145 asset alone. The company is well positioned both financially and operationally, and its amended agreement with Millennium-Takeda offers meaningful upside from the success of IPI-145. Bear in mind, ‘145 is still early-stage, and if the therapy fails to impress in further studies or safety remains an issue, INFI lacks a robust pipeline to fall back on. Its HSP90 inhibitor retaspimycin may have issues of its own given ganetespib’s (Synta Pharmaceuticals (SNTA)) poor showing at ASCO, and IPI-443 has yet to move into the clinic. Overall, however, we believe the reaction to ‘145’s safety was overdone, creating a buying opportunity for those with risk tolerance; it remains to be seen whether Infinity can alleviate investors’ concerns before more data at ASH.
