Overview
Infinity lead drug candidate, INI-145, is currently the only dual Delta-Gamma P13K inhibitor in the clinic. P13K is an enzyme which regulates important cellular functions. The Delta form plays an important role in B cells, and overexpression of it is linked to hematologic cancer and inflammation. The Gamma form is important in T cells, and overexpression may be linked to T cells hematologic cancer and maybe play a role in inflammation as well.
Idelalisib from GILD is the direct competitor of INFI in the hematologic space. It is a Delta only inhibitor unlike INI-145 which is dual inhibitor. It is ahead of INFI in the clinic, had very good results in combination studies and GILD is planning for NDA in Q4-13 for iNHL. Idelalisib can be on the market by mid-2014.
Pharmacyclics (PCYC) is another competitor. Their drug, ibrutinib, has shown very strong results in CLL/MCL and is expected to be approved in a few months. Ibrutinib has different mechanism of action, and so is not considered a direct competitor. It is likely that most patients will use combinations of effective treatments. PCYC is partnered with J&J for 50/50 WW sales. The drug is expected to make, at peak, more than $5B in annual sales.
INI-145 is more potent than GILD drug. It has better Delta inhibition (100% at 25mg) and also partially inhibits the Gamma (50% at 25mg). Unlike GILD drug, which did only okay as mono therapy and thus went ahead with combination trials, INI-145 has shown strong single agent activity.
Problem is that INFI was always 2 years behind GILD, and now that GILD drug is expected to get approval by mid-2014, the street has become more wary of INI-145 prospect.
Specifically, the street is wary of:
a) Increased cases of severe side effects, especially pneumonia, as shown at ASCO. GILD had similar percentage of severe cases and was adding antibiotics. INFI started to mandatory add antibiotics too.
b) The medical community is still unsure about the advantage of the Gamma inhibitor versus increased side effect. The dual inhibition was one of the selling points for INFI.
c) INI-145 has shown very good activity at 25mg dose, but the maximum tolerated dose was reached at 75mg. INFI has mature data in the 25mg and very little to show in the 75mg cohort. Due to the need to play catch-up with GILD, and be able to enroll patients to pivotal studies before GILD drug gets approval, INFI has moved ahead with the 25mg, which has just 50% of the Gamma inhibition versus >75% for the 75mg.
INFI is conducting a phase 2 registry trial mono therapy in iNHL and will start a phase 3 mono therapy in CLL in the fourth quarter. Results are expected by end of 2014-early 2015, and with robust results, approval is likely in late 2015.
Partnership- Very few companies have full rights to a potential blockbuster drug. INFI would have liked to make WW partnership in Inflammation, get royalties for cancer outside of US and retain full rights in the US. However, significant inflammation trial results will not available till end of 2014 and partner would like to get a piece of the US market for cancer. Much depends on INFI financials next year. If INFI is able to raise $200M in cash in 1H-2015, it would be much less likely to get into unfavorable partnership deal.
Buyout- If the drug is effective in Inflammation, phase 3 expensive trials and large experienced sale force will be needed. Buyout may be good choice then.
INFI is in pre-clinical studies for another P13K dual Delta-Gamma inhibitor- IPI-443. 443 will probably have more robust Gamma inhibition, and will give the company more flexibility.
In inflammation, IPI-145, has shown excellent results in animal models. Currently, the company is testing 145 in mild asthma patients, with results expected soon. If good, the company will commence trials of 145 in moderate-severe patients. The company is in early, but robust, trial for RA patients with data expected by late 2014.
INFI completed phase 2 trial of its HCI drug for lung cancer patients, with results expected soon. The street does not expect much here, following lukewarm results presented from another company SNTA for a similar drug, in lung cancer. Since then, SNTA presented early phase 1 results for breast cancer, and the stock was able to recover some. This may open another opportunity for INFI HCI drug.
The stock
Current Cash Position - $277M
Burn Rate - $30-40M/ Per Quarter
Recent Secondaries:
Institutions are practically holding all the shares, with major purchases in Q2-13 and specifically in the 4/13 secondary.
INFI would like to hold at least 1Y worth of Cash. A secondary is likely in the 1H of 2014, probably in Q1-14, following a favorable IPI-145 ASH presentation in December (at least this is what INFI has in mind).
Points to make:
1. INFI will need to raise money in 1H-2014
Options:
a) Secondary (@>= $40 ; possible if good data is presented at ASH in December (likely) or success in
lung cancer drug or INI-145 in Asthma.
b) Partnership with big Pharma
2. Institutions already invested heavily in IPI-145 prospects, and last bought at $40
3. IPI-145 little behind GILD drug;but more potent;similar side effect;robust activity.
4. PCYC is trading at $9B with their soon to be approved drug, already partnered with J&J; peak sales > $5B; INFI peak sales is expected to be $3B for cancer; Not partnered yet; Attractive valuation.
5. valuation: sales $1.5B in 2020 (after partnership)* 5 (multiply) = $7.5B . discounted at 20% per year = $2.1B divided by 60M shares (now 47M) = $35 + 5$ (Cash) + 3$ (IPI-443) + $2 (low probability of success in HSI for lung cancer) = $45
6. Risk: 145 side effects prevent it from getting approved for blood cancer (15%), Not effective (5%), approved but disappointing sales (30%) ; Upside: works in Inflammation (30%) ; Not taking into account Inflammation revenue and using discount rate of 20% seems prudent.
7. Interesting to see PCYC milestones.
6/11: Secondary 6.5M shares @ $8.85
12/11: Collaboration with J&J : Stock price $12.39
Up to $975M milestone payment including $150M upfront , 50/50 partnership.
ir.pharmacyclics.com
3/13: Secondary 2.2M shares @ $95.2
6/13: NDA for CLL/MCL
9/13: Stock price: $120
12/13: Expected approval |
