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What's Infinity Worth Now?

|Includes: Infinity Pharmaceuticals, Inc. (INFI)

Last week, Infinity pharmaceuticals (NASDAQ:INFI) announced negative topline results from its phase II study of its HSP 90 inhibitor in patients with non-small cell lung cancer (NSCLC) who had a history of smoking. The trial did not meet its pre-specified efficacy end points. Importantly, the company announced that it would not invest further resources in this program and would instead focus all of its development activities on its PI3k portfolio.

INFI's lead PI3K asset, IPI-145, is a potent oral PI3K delta and gamma inhibitor and accounts for the vast majority of INFIs current valuation. In the phase I setting it demonstrated significant activity in both B-cell and T-cell lymphomas. Unfortunately, updated results presented at this year's ASCO meeting included three patient deaths (two due to infections: 1 Pneumocystis and 1 HSV pneumonitis), which were likely related to IPI-145.

Safety concerns. How bad is it?

Year-to-date, INFIs stock is down over 50%. This is due primarily to the surprising IPI-145 safety data presented at ASCO. The fact that three of its potential competitors (ibrutinib, idelalisib & ABT-199) released strong data for their compounds at ASCO and IMCL did not help matters. Is it reasonable to expect that INFI can make adjustments to the dosing regimen, inclusion criteria or add prophylactic measures to the protocol? In short, yes, it is very reasonable and given the very high therapeutic index of IPI-145, I think it is likely INFI will be successful with this strategy. We don't have to look back too far to see examples of compounds that experienced deaths in early development (phase I experience) that subsequently have been approved. AbbVie's (NYSE:ABBV) ABT-199 had deaths associated with tumor lysis syndrome. Adjustments have been made to inclusion criteria and dosing regimens and so far the efficacy and safety data look very impressive.

With regards to the IPI-145 experience, changes to the protocol have already been made to include routine prophylaxis. And although the MTD is 75mg BID, IPI-145 is effective at only 25mg BID in indolent NHL, which happens to be the dose for the new phase II iNHL trial. Data updates at ASH in December may provide greater clarity on the safety profile of IPI-145 and allay investor concerns.

How does IPI-145 compare to its closest competitor, idelalisib?

Idelalisib is a PI3K delta inhibitor owned by Gilead (initially developed by Calistoga). It has a number of potential advantages over IPI-145:

1) First mover advantage - Gilead announced they filed an NDA for indolent NHL in September of this year

2) Potentially a cleaner profile - delta inhibitor only

3) Potentially a better safety profile

IPI-145 is not without its own strengths relative to idelalisib:

1) Broader activity - dual delta and gamma isoform inhibition; activity in T-cell lymphoma. IFNI could potentially get accelerated approval (NYSE:AA) in T-cell lymphoma as a fast to market strategy and subsequently get a (2B) NCCN guideline recommendation for iNHL and CLL, which would allow moderate to significant off-label use in those indications. That would be my initial strategy (assuming regulatory guidance suggested T-Cell AA was possible) if I were responsible for the launch. This strategy could potentially help mitigate the first mover advantage of idelalisib.

2) Stronger target inhibition/ higher affinity for the delta isoform than idelalisib (Kd = 23 vs. 273 for idelalisib). This could allow for lower effective doses, potentially improving the safety and AE profile.

Comparable Company Valuation

Is INFI fairly valued at its current enterprise value of $670 million? In trying to answer that, let's look at the metrics of the Gilead purchase of Calistoga as well as a basket of comparable companies. Our metric that we will use is a multiple of estimated peak sales.

Gilead (NASDAQ:GILD) paid $375 million in cash plus another $225 million in milestones to acquire Calistoga and its PI3K delta inhibitor, idelalisib. Peak global sales estimates at the time of the acquisition were $500 million.

For the comparable company basket, I am using oncology companies that are deriving their value primarily from a single asset.


Peaks Sales Estimates

Enterprise Value

EV/PS Multiple


$500M* (Thompson: * at the time of the Gilead acquisition)

$600 M (acquisition price including milestones)


Synta (SNTA)

$480 M (BMO)

$450 M


Pharmacyclics (NASDAQ:PCYC)

$3 B (Goldman Sachs; 50% of $6B)

$8.3 B



$1.2 B (CreditSuisse)

$1.9 B


Average (NYSE:ALL)



Average (w/o PCYC)



Given that there is less risk involved with Pharmacyclics, it stands that it should have a higher multiple than the other comparators. Clovis and Synta are a bit earlier in their development and Calistoga's multiples are based on the peak sales estimates at the time of its acquisition by Gilead. We can remove Pharmacyclics from the mix and use the others as they are likely better comparators.

Peak sales estimates for IPI-145 range from $1 B (Goldman Sachs) to $2.1 B (William Blair). Using the 1.25 multiple, we would value IFNI at $1.3B -$2.6 B, depending on the Peak sales estimate that we use. Given that INFI's current enterprise value is about $670 million, investors are discounting their valuation due to their concerns over the safety of IPI-145. As a result, INFI is likely mispriced and undervalued relative to its peers.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in INFI over the next 72 hours.