Avoid This Biotech Stock

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Stock to Avoid: Infinity Pharmaceuticals (Nasdaq: INFI  )
Submitted by: zzlangerhans
Member Rating: 98.74
Submitted on: 7/18/2011
Stock Price at Underperform Recommendation: $9.00

Infinity Pharmaceuticals Profile

Star Rating (out of 5): *
Headquarters: Cambridge, Mass.
Industry: Biotechnology
Market Cap: $265 million
Industry Peers: Biosante Pharmaceuticals (Nasdaq: BPAX  )
Dendreon (Nasdaq: DNDN  )
Adventrx Pharmaceuticals (NYSE: ANX  )

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This Week's Underperform Pitch:

Sometimes I like to play a mental exercise with biotech stocks. I call it Then and Now. I look at the stock now and a few months ago and try and figure out what justified a massive change in the share price. Let's play Then and Now with Infinity.

Then (March 16, 2011): Share price $5.33. Cash $101M. Controlled phase II trials of oral Hedgehog inhibitor IPI-926 in advanced chondrosarcoma and in metastatic pancreatic cancer have recently been initiated. IPI-926 is partnered with Purdue/Mundipharma with a funding commitment of 85M in 2011 and 110M in 2012. Phase II studies of oral FAAH inhibitor IPI-940 for pain as well as initial clinical trials of oral p3kinase inhibitor IPI-145 are planned for later this year. Phase I data for Hsp90 inhibitor retaspimycin with docetaxel in solid tumors will also be released later this year.

Now (July 18, 2011): Share price $9.00. Cash $91M. Enrollment in phase II trial of IPI-926 and gemcitabine in pancreatic cancer is expected to be complete by the end of 2011. A phase I trial of IPI-926 and Erbitux in advanced head and neck cancer has been initiated at the University of Colorado as part of an investigator-sponsored trial program. The phase II trial of IPI-926 in advanced chondrosarcoma continues to enroll, and a phase II trial of IPI-926 in myelofibrosis will be initiated later this quarter. In 5/11 company initiated a phase II trial of retaspimycin with docetaxel in lung cancer.

As far as I can tell there isn't much in the way of elapsed or upcoming catalysts to explain a 70% increase in share price from recent lows over the last four months. There hasn't even been a coordinated pumping effort on Seeking Alpha. So what accounts for it? Stochastic price movement? Irrational speculation? Low float manipulation? Or a combination of the above? In the spirit of Taco Bell, I'll call it stochirrapulation. Infinity hasn't won my confidence with a series of failures in their Hsp90 inhibitor program and I don't have any strong reason to have faith in their Hedgehog inhibitor program. I'm betting this move is pure stochirrapulation.

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Read/Post Comments (2) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On July 24, 2011, at 8:29 AM, Species3259 wrote:

    Thank you for your thoughts on the company.

    I wonder, if the stock decreased from $9.00 to $5.33 in a few months and you performed the same mental exercise then, would you say that the stock went down for no good reason and the move is pure pessimistic stochirrapulation?

    While I don't fault your analysis, per se, it contains a (possibly unaware) assumption that the stock was properly priced at $5.33 Personally, I don't really know. Drug development companies are notoriously difficult to price.

    Although I know you were limited by space and at the risk of stating the obvious, speculative biotechs are often driven by developments elsewhere, all while the company doesn't have much in the way of elapsed or upcoming catalysts. This information is often very hard to ferret out and some of those times remains speculative as to whether it is really cause of the move or not. As is frequently the warning with investing in drug development companies, either short or long: play at your own risk.

  • Report this Comment On July 24, 2011, at 7:43 PM, retiredpharma wrote:

    langehans,

    u very well could be correct!

    I bought INFI when NO ONE WANTED it and now I SOLD IT WHEN they seem to have lined up to take her higher! Go figure!

    I have 1453 shares now f/c and P=$2645 on the trade! Julian Adams made me money w/ MLNM and I followed him over to INFI and the plan is to repeat, so far the $2645 is made and now I will play w/ House Money on the 1453 shares which are free and clear!

    retiredpharma

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