Business Context and Reporting Period
Verastem, Inc. is a late-stage development biopharmaceutical company focused on oncology therapies targeting RAF/MEK and FAK pathways. Its lead investigational candidates are avutometinib and defactinib, primarily being evaluated in low-grade serous ovarian cancer (LGSOC), KRAS-mutant non-small cell lung cancer, pancreatic cancer, colorectal cancer and melanoma.
This Form 10-K covers the fiscal year ended December 31, 2023. Verastem has no approved commercial product following the 2020 sale of its COPIKTRA (duvelisib) oncology assets to Secura Bio.
Financial Performance and Position
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $0.0 million | $2.6 million | Down $2.6 million |
| Research and development expense | $61.4 million | $50.6 million | Up $10.8 million |
| SG&A expense | $30.7 million | $25.0 million | Up $5.7 million |
| Total operating expenses | $92.1 million | $75.5 million | Up $16.6 million |
| Loss from operations | $(92.1) million | $(72.9) million | Higher loss |
| Net loss | $(87.4) million | $(73.8) million | Higher loss of $13.6 million |
| Basic and diluted loss per share | $(3.96) | $(4.57) | Improved per share due primarily to share issuance |
| Net cash used in operating activities | $(86.5) million | $(63.7) million | Higher use of $22.8 million |
| Cash, cash equivalents and investments | $137.1 million | $87.9 million | Up $49.2 million |
| Long-term debt | $40.1 million | $24.5 million | Up $15.6 million |
With no revenue in 2023, operating and net profit margins are not meaningful. The company remains substantially dependent on financing rather than operating revenue.
Research and development spending increased primarily because of higher CRO costs, the $2.0 million GenFleet upfront payment, increased personnel, investigator, consulting and investigator-sponsored trial costs. These increases were partly offset by lower drug-substance and manufacturing costs. SG&A increased due to personnel, commercial-readiness activities for a potential LGSOC launch, professional fees, financing costs and travel.
Financing activities generated $134.2 million of cash, including approximately $91.4 million from a June 2023 common-stock and pre-funded warrant offering, $28.1 million from Series B convertible preferred stock and $14.9 million from Oxford debt. Investing activities used $44.4 million, primarily for net purchases of investments. Cash, cash equivalents and restricted cash ended at $79.1 million.
Outstanding Oxford term loans had a $40.0 million principal balance at year-end and bear interest at a floating rate based on SOFR plus 7.37%, subject to a floor and cap. Principal payments are scheduled to begin in 2025, with all unpaid principal and interest due March 1, 2027. The company also had $4.2 million of preferred-stock tranche liability and $1.5 million of lease liabilities.
Material Changes Versus the Prior Comparable Period
- Revenue declined to zero from $2.6 million in 2022, when Verastem recognized a COPIKTRA regulatory milestone and royalties from Secura-related arrangements.
- Net loss increased from $73.8 million to $87.4 million, while operating expenses increased 22% to $92.1 million.
- Interest income increased to $6.2 million from $1.2 million because of higher interest rates and larger investment balances, partially offsetting operating losses.
- Interest expense increased to $4.1 million from $2.1 million, primarily because of the additional $15.0 million Oxford debt draw in March 2023.
- Common shares outstanding increased to approximately 25.3 million at December 31, 2023 from 16.7 million at December 31, 2022. Series B preferred stock was issued and is convertible into approximately 4.2 million common shares, subject to ownership limitations; pre-funded warrants cover approximately 1.5 million shares.
- The company completed a 1-for-12 reverse stock split effective May 31, 2023. Historical share and per-share information was retrospectively adjusted.
- Verastem entered into the GenFleet collaboration in August 2023, paid a $2.0 million upfront fee, committed $1.5 million of research support over three years and obtained options covering up to three oncology programs.
Clinical Outlook, Management Commentary and Risks
- The combination of avutometinib and defactinib was selected as the go-forward regimen in the RAMP 201 LGSOC study. In the disclosed interim data set, confirmed objective response rate was 45% (13 of 29 evaluable patients), with higher response in KRAS-mutant patients at 60% versus 29% in KRAS-wild-type patients. Median duration of response and progression-free survival had not been reached in that data cut.
- Verastem initiated the global Phase 3 RAMP 301 confirmatory trial in December 2023. The company intended to submit an accelerated-approval NDA for avutometinib plus defactinib in the first half of 2024 based on mature RAMP 201 and FRAME data. Regulatory approval remains uncertain and would require confirmatory evidence for potential full approval.
- RAMP 203 is evaluating avutometinib with Amgen’s LUMAKRAS in KRAS G12C NSCLC. Preliminary disclosed data showed a 25% confirmed response rate among 12 efficacy-evaluable patients. The FDA granted fast-track designation in January 2024, and Verastem planned to add defactinib to the study.
- RAMP 204 is evaluating avutometinib with Mirati’s KRAZATI in previously treated KRAS G12C NSCLC. RAMP 205 is evaluating avutometinib and defactinib with gemcitabine/nab-paclitaxel in metastatic pancreatic cancer.
- GenFleet selected GFH375/VS-7375, an oral KRAS G12D inhibitor, as its lead program. GenFleet planned to file an IND in China in the first half of 2024 and initiate Phase 1 development in the second half of 2024.
- Management states that existing cash, cash equivalents and investments may fund obligations for the next 12 months only if certain mitigation and financing efforts are achieved. The financial statements and auditor’s report identify substantial doubt about the company’s ability to continue as a going concern.
- Verastem expects continuing operating losses and additional funding needs. Potential funding sources include equity or debt offerings, collaboration transactions, Oxford debt availability and contingent milestones or royalties from Secura, but these sources may be unavailable or dilutive.
- Key risks include unsuccessful or delayed clinical trials, adverse safety findings, regulatory rejection or restricted labeling, patient-enrollment delays, reliance on CROs and contract manufacturers, competition, intellectual-property challenges, debt repayment and dilution from equity, preferred-stock conversion and warrants.
- The company reported no legal proceeding expected to have a material adverse effect and no cybersecurity incident that had materially affected its business, results or financial condition as of the filing date.
Important Facts for Investors to Verify
- Verify the company’s current cash runway, planned financing actions and whether the going-concern uncertainty has been resolved after the filing date.
- Track submission, acceptance and review of the planned LGSOC NDA, as well as enrollment, timing and outcomes for RAMP 301.
- Assess whether RAMP 201 and FRAME response data are confirmed in mature, larger or controlled datasets and whether safety remains manageable.
- Monitor dilution from Series B preferred-stock conversion, pre-funded warrants, stock options and any future equity financing.
- Review Oxford loan covenants, repayment requirements, interest-rate exposure and availability of milestone-based additional borrowing.
- Evaluate the probability and timing of Secura milestone and royalty payments, given COPIKTRA safety and commercial risks.
- Confirm GenFleet’s execution of its IND and clinical-development plans, along with Verastem’s future option-exercise obligations and potential milestone payments of up to $622.0 million.