Verastem, Inc. (NASDAQ: VSTM), or Verastem Oncology, is a biopharmaceutical company focused on developing and commercializing medicines to improve the survival and quality of life of cancer patients.

 

The company had an incredibly strong start to 2018, highlighted foremost by the acceptance of its duvelisib New Drug Application (NDA) by the U.S. Food and Drug Administration (FDA), including the receipt of Priority Review with an assigned target action date of October 5, 2018.

 

Analysts tracking the stock believes that the FDA´s acceptance of their New Drug Application with Priority Review was a significant milestone and now the company is on its way to get its first FDA approval later this year, which is expected to drive a considerable upside in the stock. Also, the company recently made one oral and three poster presentations at the 23rd Congress of the European Hematology Association (EHA) being held June 14-17, 2018 in Stockholm, Sweden. The data presented at EHA this year continue to provide extremely important insights to guide the future clinical development of duvelisib across a wide range of hematologic malignancies, both as a monotherapy and in combination with other agents.

May-02-18         Initiated             Seaport Global Securities            Buy        $14

Mar-08-18         Initiated             B. Riley FBR, Inc.                           Buy        $15

 

Below are the key excerpts of the data that were presented:

• Phase Ib/II study of duvelisib in combination with FCR (dFCR) achieves ORR of 94% and 76% bone marrow MRD negativity in frontline therapy in younger CLL patients
• Duvelisib demonstrates robust clinical activity in CLL with 73% ORR and a median of 15-month PFS in the DUO crossover study of patients who became relapsed/refractory to ofatumumab in DUO™
• Additional data support the hypothesis that duvelisib, a first-in-class dual inhibitor of PI3K delta/gamma, targets malignant B-cells directly and modulates the tumor microenvironment

Other recent announcements:

• On June 14th, the company announced $43.0 Million Offering of Common Stock. The offering is subject to customary closing conditions and is expected to close on June 18, 2018.
• On June 5th, the company announced their entry into an exclusive licensing agreement for Yakult to develop and commercialize Verastem’s duvelisib, a first-in-class oral dual inhibitor of phosphoinositide 3-kinase (PI3K)-delta and PI3K-gamma, for the treatment, prevention or diagnosis of all oncology indications in Japan. Verastem to Receive Upfront Payment of USD 10 Million, then Eligible to Receive Up to USD 90 Million in Future Milestones, Plus Royalties.
• On June 4th, VSTM announced the presentation of five posters highlighting data for its two lead drug candidates, duvelisib and defactinib, at the 54th Annual Meeting of the American Society of Clinical Oncology (ASCO) being held June 1-5, 2018 in Chicago. The presented research continues to provide extraordinary evidence that the dual PI3K-delta/PI3K-gamma inhibitory activity of duvelisib results in beneficial anti-tumor effects on both the cancer cells and their supportive tumor microenvironment (TME) which has the potential to enhance clinical efficacy and improve outcomes for patients battling CLL/SLL and FL.

 

From a liquidity standpoint, Verastem Oncology had cash and cash equivalents of $64.2 million compared to $86.7 million of cash, cash equivalents and investments as of December 31, 2017, and Based on the Company’s current operating plans; it expects to have sufficient cash and cash equivalents to fund operations into 2019. It said another equity raise could not be ruled out for VSTM.

 

VSTM’ scrip continues to be on the rapid growth trajectory, supported by positive clinical results/announcements and successful financing. The market believes that the company is at a critical inflection point right now and 2018 is expected to be an incredible year for the company.

 

Key Pipeline:

Latest Quarter Financial position: 

• Net loss for the three months ended March 31, 2018 (2018 Quarter) was $21.1 million, or $0.41 per share, as compared to a net loss of $13.0 million, or $0.35per share, for the three months ended March 31, 2017 (2017 Quarter). Net loss includes non-cash stock-based compensation expense of $1.3 million and $1.2 million for the 2018 Quarter and 2017 Quarter, respectively.
• As of March 31, 2018, Verastem Oncology had cash and cash equivalents of $64.2 million compared to $86.7 million of cash, cash equivalents and investments as of December 31, 2017. From April 1, 2018, to May 3, 2018, the Company sold 5,903,073 shares of common stock under its at-the-market equity offering program (ATM) for net proceeds of approximately $21.9 million (after deducting commissions and other offering expenses). Giving effect to these sales under the ATM, the Company’s pro forma cash and cash equivalents balance at March 31, 2018, is approximately $86.1 million.

 

Key risk factors and potential stock drivers:

• The company is expected to receive FDA decision for its duvelisib on October 5, the same is likely to be a significant upward trigger for the company.
• VSTM is a clinical-stage company and expects to incur substantial operating losses during the next stages of corporate development.
• Company’s ability to maintain its liquidity and financial flexibility to fund its incremental capital requirements would continue to remain a critical stock sensitivity factor
• The biotech space is a high-risk sector due to uncertainties associated with the novel drug development. Any adversities related with the same could upset the stock performance significantly.

 

Stock Chart:

Comments:

• On Tuesday, June 19th, 2018, VSTM was at $8.21, on volume of 3.4M shares exchanging hands. Market capitalization is $603 million. The current RSI is 75.07.
• In the past 52 weeks, shares of VSTM have traded as low as $2.05 and as high as $8.75
• At $8.21, shares of VSTM are trading significantly above its 50-day moving average (MA) at $4.87 and above its 200-day moving average (MA) at $3.97
• The present support and resistance levels for the stock are at $6.57 & $9.75 respectively.

 

 

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