Why Infinity Pharmaceuticals Inc. Stock Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Infinity Pharmaceuticals (NASDAQ: INFI  ) , a clinical-stage biopharmaceutical company focused on developing therapies that tackle difficult-to-treat diseases like cancer, skyrocketed as much as 55% after announcing a collaborative licensing agreement for its lead compound, IPI-145, with AbbVie (NYSE: ABBV  ) .

So what: Under the terms of the agreement for IPI-145, an oral inhibitor of phosphoinositide-3-kinase that's being tested as a treatment for a number of blood cancers, as well as rheumatoid arthritis and select cases of asthma, AbbVie will pay Infinity Pharmaceuticals $275 million upfront and will be eligible to receive an additional $530 million in development, regulatory, and commercialization milestones. Specifically, $405 million of this $530 can be earned leading up to and including the first commercial sale of the drug.

Within the United States Infinity and AbbVie will split profits right down the middle, while in ex. U.S. countries Infinity will be eligible to receive double-digit royalties (23.5% to 30.5%) on net product sales. The collaboration will also see the two companies essentially splitting development, marketing, and commercialization duties.

Now what: On paper this looks like the perfect symbiotic partnership. Infinity, being wholly clinical-stage, is burning through what cash it currently has on its books. An immediate $275 million infusion is going to sustain Infinity's research and development program for a long time, and it removes the burden of any impending cash crunches. For AbbVie, the deal gives the company another way to broaden its oncology portfolio and provides another stepping stone for the eventual transition in a few years when the world's current best-selling drug, Humira, loses patent exclusivity.

Perhaps my only concern here is that AbbVie is giving Infinity an awful lot of front-end incentives, including a whopping $275 million upfront payment. Although most of the clinical-stage data surrounding IPI-145 to date has been positive, it's also been early stage in nature (i.e., phase 1 studies). Though jumping in early before much of IPI-145's late-stage data is out could net AbbVie a bigger chunk of overseas revenue than if it waited, it's also a much riskier proposition for the company.

IPI-145 may hold plenty of potential for Infinity, but relative to this revolutionary new technology it could wind up being left in the dust! 
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  • Report this Comment On September 04, 2014, at 6:51 PM, jargonific wrote:

    Infinity Pharma (INFI), Roche (RHHBY) also entered a 'Master Supply Agreement'

    http://www.biospace.com/News/infinity-pharmaceuticals-inc-en...

    CAMBRIDGE, Mass.--(BUSINESS WIRE)--Infinity Pharmaceuticals, Inc. (NASDAQ: INFI) today announced that it has entered into a master clinical supply agreement with Roche under which Roche will supply GazyvaTM (obinutuzumab) to Infinity for use in planned clinical studies to evaluate the combination of Gazyva and duvelisib (IPI-145), Infinity’s oral inhibitor of phosphoinositide-3-kinase (PI3K)-delta and PI3K-gamma, in patients with hematologic malignancies, or blood cancers. The companies have also entered into a material transfer agreement under which Infinity is supplying Roche with duvelisib for use in Roche’s preclinical and translational research to evaluate the combination of duvelisib and Gazyva.

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