Is This Biotech Company an Underdog Or Just Another Dog?

Infinity Pharmaceuticals (NASDAQ: INFI  ) is a classic example of how fast a pre-revenue biotech company can fall. Shares of the company, which specializes in treatments for blood disorders, inflammatory diseases, and cancers, have fallen more than 60% over the past six months.

What went wrong at Infinity, and are there any silver linings on the clouds that are gathering around this company?

INFI Chart

Source: YCharts.

A streak of failures
First, we should understand the bear case against Infinity. The company went public in 2000, and shares soared as high as $100 before crashing to Earth due to the dot-com bust. Thirteen years passed, and the company has yet to gain approval for a single product. That's not to say Infinity didn't try -- it just met with failure at every single turn.

Here are three of the company's biggest failures.

Year

Failed drug

Application(s)

Reason Failed

2009

IPI-504

gastrointestinal tumors

higher mortality rate

2012

saridegib

pancreatic cancer, myelofibrosis

not better than the placebo

2013

retaspimycin HCl

non-small-cell lung cancer

not better than the placebo/competing treatments

Source: Press releases.

Saridegib was the company's former lead drug candidate, and its failure caused Infinity shares to crash 40% in January 2012. The drug was a hedgehog inhibitor, a new class of drugs that target the hedgehog signaling pathway -- which cancer cells can use to survive and proliferate.

To date, only one hedgehog inhibitor, Curis (NASDAQ: CRIS  ) and Roche/Genentech's skin cancer treatment Erivedge, has been approved. Erivedge is marketed worldwide by Roche, and Curis earns 5% to 10% in royalties on total sales. Demand for Erivedge has been high, fueling Curis' 24% year-over-year increase in revenue to $5.4 billion last quarter.

After saridegib's failure, retaspimycin HCI was Infinity's second best hope. The treatment was being tested in combination with two chemotherapy treatments (Sanofi's Taxotere and Novartis' Afinitor) for the treatment of non-small-cell lung cancer. When that trial failed last month as well, Infinity shares tumbled another 14%.

Widening losses and reduced guidance
Last quarter, Infinity's loss widened to $0.68 per share, down from a loss of $0.61 per share in the prior year quarter. It didn't generate any revenue during the quarter -- although in the previous year it reported $21.9 million in collaborative research and development revenue. Infinity currently has $277 million in cash and a clean balance sheet.

For the full fiscal year, the company's expects a net loss between $135 million to $145 million, wider than its prior forecast of $115 million to $125 million. It also increased its operating expenses guidance to $135 million to $145 million, up from its prior guidance of $115 million to $125 million.

An all-in bet on the future
Infinity currently has license agreements with Novartis' Institutes for Biomedical Research and Takeda Pharmaceutical's Millennium oncology subsidiary. With Takeda, Infinity is developing IPI-145, a blood disorder and inflammation treatment which the company is waging its entire future on.

IPI-145 is a treatment being tested on chronic lymphocytic lymphoma (CLL) and indolent non-Hodgkin lymphoma (iNHL). It is also being tested for asthma and rheumatoid arthritis in separate trials. Infinity also believes that IPI-145 could be expanded to treat treatment-naive CLL and mantle cell lymphoma.

However, IPI-145 faces two major challenges in this space.

The first one is Gilead Sciences (NASDAQ: GILD  ) , which is creating idelalisib, another treatment for CLL and iHNL. Idelalisib also works in the same way as IPI-145, by targeting the PI3K signalling pathway. When the PI3K signalling pathway is overactive, cell death is reduced and cancer cells can proliferate more easily. Last month, Gilead submitted a new drug application for idelasilib as a new treatment for iNHL, while Infinity has just started its phase 2 trial for IPI-145.

The second major challenge is ibrutinib, Pharmacyclics (NASDAQ: PCYC  ) and Johnson & Johnson's (NYSE: JNJ  ) potential blockbuster treatment for CLL and MCL. During clinical trials, patients dosed with ibrutinib showed respective response rates of 71% and 68% for CLL and MCL. Those efficacy results -- the highest ever recorded -- earned ibrutinib a breakthrough therapy classification from the FDA, which puts it on the fast track for an approval by early next year. Wall Street is also enamored with ibrutinib, with analysts at William Blair pegging peak sales of the drug at $9.2 billion -- which would make it the fourth best selling drug of all time.

Therefore, even if IPI-145 were eventually approved, it could far too late without any noticeable benefits over these treatments.

The Foolish takeaway
Everyone loves a good turnaround story. Unfortunately, Infinity Pharmaceuticals just doesn't look like one.

The company's streak of failures indicates that its R&D department needs a major overhaul, and its all-in bet on IPI-145 looks like it will be crushed by Pharmacyclics' idelasilib and Gilead's ibrutinib. Therefore, this biotech underdog could just be another dog, and investors should steer clear unless they want to get bitten.

Two other biotechs you should watch instead
The best way to play the biotech space is to find companies that shun the status quo and instead discover revolutionary, groundbreaking technologies. In The Motley Fool's brand-new FREE report "2 Game-Changing Biotechs Revolutionizing the Way We Treat Cancer," find out about a new technology that big pharma is endorsing through partnerships, and the two companies that are set to profit from this emerging drug class. Click here to get your copy today.


Read/Post Comments (3) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2013, at 4:09 PM, Hope4GoodFuture wrote:

    Wow, CRIS has $5.4bn in revenue? Maybe off by about $5.4bn?

  • Report this Comment On October 08, 2013, at 11:10 PM, TMFSunLion wrote:

    My apologies, it should actually be $5.4 million.

  • Report this Comment On October 10, 2013, at 2:47 PM, RLWISH wrote:

    Infinity went PUBLIC; "As of September 12, 2006, Discovery Partners International Inc. was acquired by Infinity Pharmaceuticals, Inc. in a reverse merger transaction." 100K shares of Infinity became 22103 shares. DPII closed at a price of $15.04 and the next day INFI rose to $15.50 after the reverse 1:4 split. The price fell like all others in '08 to a low of $4.15 on Oct 28 2008. In the fall and winter of 2012 it started a Bull induced climb to a high of $50.09 on April 13, 2013 due to the info that Beacon Co. and Rosebay Medical Co. L.P. would sell their approx. 11,500,000 shares at approx. $40.00 a share.

    Just some facts I thought to share with you.

Add your comment.

DocumentId: 2673223, ~/Articles/ArticleHandler.aspx, 7/24/2014 11:45:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement