Patterned on Roche's longstanding deal with Genentech, Infinity Pharmaceuticals' innovative strategic alliance with the specialty pharmaceutical group Purdue Pharmaceutical Products and its European affiliate Mundipharma International is designed to ensure the biotech's independence from the capital markets until well into the next decade. It also protects the biotech from the overtures of potential opportunistic buyers.

Under the terms of the global joint development and commercialization agreement, Mundipharma gains access to Infinity's highly regarded R&D group, led by R&D President and CSO Julian Adams. The deal includes Infinity's entire currently unpartnered oncology-focused discovery and development pipeline for an initial term of three years, with options to extend for two additional one-year terms.

As part of the deal, Mundipharma will pay all of Infinity's R&D expenses until at least the end of 2013. Costs associated with Phase III studies beginning in 2014 and beyond will be split equally.

Purdue "appreciates and respects our desire for independence" and "embraced a deal structure that enables us to continue to do what we do well" in terms of keeping the small biotech's culture and discovery engine intact, Adelene Perkins, Infinity president and chief business officer said in an interview.

Moreover, the deal gives Infinity a projected cash runway through to 2013. By then, says Perkins, Infinity hopes to have launched its first product.

A complex deal

Like the Roche/Genentech agreement reached in the late 1990s, the Purdue/Infinity deal is a complicated transaction that outlines the rights and responsibilities of both companies to the other party. Just as Genentech retained U.S. rights to its products, Infinity will retain U.S. commercialization rights to its oncology compounds, paying Mundipharma a double digit royalty on U.S. sales. In return, Mundipharma gains rights to these programs ex-U.S. and will pay Infinity a commensurate double-digit sales royalty.

Purdue and Mundipharma also have the right to option worldwide rights to Infinity's lone non-oncology project, a discovery-stage neuropathic pain program directed to fatty acid amide hydrolase (FAAH), once it completes Phase I studies. Should the companies exercise their option they will foot the program's development bill and pay Infinity a royalty on sales.

Any program that Infinity in-licenses for the duration of the deal triggers an opt-in right - at set terms - for Mundipharma. The pharma can also opt-out of any programs on an annual basis.

"This kind of a relationship is one that I've aspired to put in place since I came to Infinity more than six years ago," Perkins said.

"It's a beautiful model of how larger, better-capitalized companies can work with smaller discovery and development biotechs to enable them to flourish" while at the same time tapping into and capitalizing on what makes those more nimble firms successful.

It may be beautiful, but it won't be cheap for Purdue and Mundipharma. The funding - which is not milestone-based - may total as much as $200 million over the initial three-year period of the deal. Should Mundipharma exercise its two, one-year options, that funding may exceed $400 million over the five-year span, according to Perkins. Even if Mundipharma decides to opt out of any particular program, it remains on the hook for an additional year's worth of funding.

Taking a stake

The spec pharma firms' other financial commitment comes as a series of share purchases. Purdue has bought four million shares of Infinity common stock at $11.25 per share (totaling $45 million, a 112 percent premium over the stock's previous close on November 19).

A second share purchase is subject to the approval of both Infinity shareholders and regulators. Barring objection from one of those groups, Purdue will invest a further $30 million in return for two million additional shares of common stock plus warrants to purchase six million more shares between the second close of the deal and June 30, 2012. Those warrants are exercisable in three tranches of one, two and three million shares each, at prices ranging from $15- to $40-per-share.

"Purdue was very interested in establishing a strong equity position in Infinity," said Perkins, but it was important to Infinity that those share purchases down the road were pegged to prices that would reflect the biotech's expected growth, she explained.

Infinity has also limited just how much of the firm Purdue can own. Between the share buys, the warrants, and any stock Purdue buys on the open market, the pharma cannot exceed a 33.3 percent stake in Infinity without triggering a so-called poison pill, a shareholder rights plan designed to prevent an unwanted takeover.

The second equity purchase would top-up Infinity's cash to around $115 million in mid-January 2009, and triggers the final financial component of the deal: a $50 million line of credit extended by Purdue, the principle and accrued interest repayable in stock or cash for ten years after the second equity purchase.

"All we could ask for"

Infinity's HSP90 inhibitor compounds are already partnered with AstraZeneca's MedImmune and are thus outside the Purdue/Mundipharma alliance ("¹ Also see "MedImmune Bolsters Oncology Pipeline Under Agreement With Infinity" - Pink Sheet, 28 August, 2006.). Likewise excluded are Infinity's Bcl discovery programs, which are exclusively licensed to Novartis (² [See Deal]).

The first jointly developed program in the queue is now Infinity's Phase I Hedgehog pathway inhibitor IPI926, which was reacquired in 2007 from AstraZeneca as part of a settlement related to the Big Pharma's acquisition of Infinity's original partner, MedImmune (³ [See Deal]).

Purdue or Mundipharma - long pain-focused, closely held private specialty pharma companies - aren't at first glance likely partners for an innovation-driven oncology-focused biotech company.

But beyond the obvious commercial reach of the organizations, particularly in Europe, the companies have indicated a firm commitment to building a presence in oncology, a process led by Mundipharma. Both firms already market pain medications to oncologists, among other oncology supportive care products.

Perhaps more importantly, the two firms' ownership structure has given them the flexibility to enter into the kind of alliance that might put an undue burden on the P&L of a similarly sized public firm.

Infinity Chairman and CEO Steven Holtzman summed up the transaction from the biotech's perspective. "We retain material commercialization rights to create exceptional long-term shareholder value," he said on a Nov. 20 conference call announcing the deal. Infinity now has "all that any young biotech company could ever ask for - the opportunity to succeed or fail based on our own efforts," he said.

-Chris Morrison (c.morrison@elsevier.com)

With Innovative Purdue Deal, Infinity Finds Shelter From The Storm

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