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Infinity Pharmaceuticals: Small Oral Pill, Big Untapped Opportunity

 November 28, 2012 10:23 AM

(By Mani) Infinity Pharmaceuticals, Inc. (NASDAQ: INFI) is a compelling small-cap stock because its lead drug IPI-145 has already shown clear early efficacy in three hematological blood cancers.

Its lead drug IP-145 is an oral PI3 kinase (PI3K) inhibitor for cancer and has already shown clear early efficacy, including numerous responses in multiple patients at low doses, and it is still dosing higher into even more hematologic indications to expand the opportunity further.

Due to its pervasive role in carcinogenesis, PI3Ks are currently one of the most attractive drug targets in oncology with numerous small molecules in clinical development

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In the first data released this month, IPI-145 already showed responses including a complete response across three different cancers:chronic lymphocytic leukemia (CLL); mantle cell lymphoma (MCL) and indolent non-Hodgkin lymphoma (iNHL).

"We believe the stock is "off the radar" because IPI-145 only entered the clinic a year ago, first data was released just this month, and there is a lack of sell-side research coverage," RBC Capital Markets analyst Michael Yee wrote in a note to clients.

At the American Society of Hematology in December, Infinity would present more mature data and new data from expansion cohorts, which could add to investor confidence of the efficacy/safety of IPI-145 in CLL, MCL and iNHL.

"The new data could also be first indications of IPI-145's activity in harder to treat cancers, which would be additional upside not in consensus," Yee noted.

[Related -Good Way To End The Week]

Cancer is a major focus for almost all biopharmaceutical companies today, and within cancer, solid tumors such as lung cancer, breast cancer, and colorectal cancer have received the most attention over the years for their more common and aggressive nature. However, recently there has been an increasing interest among companies and investors into developing targeted therapies for blood cancers.

This trend is due to the growing awareness of the success stories of leading blood cancer drugs such as Rituximab, Gleevec, and Revlimid. These drugs proved blood cancer drugs could have many attractive attributes such as high potency, chronic dosing leading to stacking of revenue and blockbuster potential with over $3 billion worldwide sales.

Meanwhile, the two drugs that have arguably led this recent interest in potential blockbuster blood cancer drugs are Ibrutinib from Pharmacyclics, Inc. (NASDAQ:PCYC) and GS-1101 from Gilead Science's (NASDAQ:GILD) acquisition of Calistoga in 2011.

Infinity has a dual PI3K-d, ? inhibitor versus Gilead, which is just a PI3K-d inhibitor. This may add synergistic or additive efficacy in cancer, and autoimmune and inflammatory diseases.

"The intriguing thing here, in our opinion, is that as they dose higher, they can dial in more gamma-inhibition on top of the complete inhibition of delta," Yee said.

This factor may also help the drug work in ‘harder to treat' cancers like T-cell Lymphoma, Myeloma, etc., where other competitors have not (e.g., Pharmacyclics and Gilead) and thus may suggest that Infinity is even more potent than those other drugs.

Meanwhile, Infinity is not just a cancer story because there is upside in other indications that are not in consensus estimates -- a Phase II program in rheumatoid arthritis (RA) and Phase II in asthma.

"Investors could begin attributing optionality for this program, which could theoretically be a $500M+ opportunity," Yee noted.

Cambridge, Massachusetts-based Infinity currently has $189 million in cash and recently completed an equity offering in the third quarter of 2012 that raised $83 million (at $14.50/share).

"We estimate the current cash burn rate at roughly $18–20 million per quarter. We assume this picks up in the second half of 2013," Yee wrote.

The company is estimated to have $80 million to $100 million in cash at the end of 2013 and would need to consider raising capital going into 2014.

Infinity may have the option at that point to partner out ex-US rights to IPI-145, rights to immunology indications (asthma and RA), which require significant resources to run larger studies, or it could raise equity once more complete Phase II cancer data evolve in 2013.



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