Verastem, Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Verastem is a late-stage development biopharmaceutical company focused on RAS/MAPK-driven cancers. Its lead candidates are avutometinib, a RAF/MEK inhibitor, and defactinib, a FAK inhibitor. The company is evaluating these candidates in LGSOC, NSCLC, pancreatic cancer, colorectal cancer, thyroid cancer and other solid tumors. This unaudited filing covers the three months ended March 31, 2024, compared with the same period in 2023.
Verastem has no approved product generating current product revenue. Its principal programs include the RAMP 201 registration-directed LGSOC trial, the Phase 3 RAMP 301 confirmatory trial, and combination studies RAMP 203, RAMP 204 and RAMP 205.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Product revenue | None reported | None reported | — |
| Research and development expense | $17.7 million | $12.0 million | +47% |
| SG&A expense | $10.4 million | $7.3 million | +41% |
| Total operating expenses | $28.1 million | $19.3 million | +45% |
| Loss from operations | $(28.1) million | $(19.3) million | Loss increased |
| Net loss | $(33.9) million | $(15.7) million | +115% loss |
| Net loss per share | $(1.26) | $(0.94) | Loss increased |
| Cash used in operating activities | $(28.3) million | $(20.3) million | Use increased |
The filing does not provide a meaningful operating or net margin because the company reported no product revenue. Interest income was $1.4 million, compared with $1.0 million in Q1 2023, while interest expense increased to $1.1 million from $0.8 million.
At March 31, 2024, cash and cash equivalents were $81.3 million, short-term investments were $28.8 million, and total cash, cash equivalents and investments were approximately $110.1 million. Including restricted cash, total cash, cash equivalents and restricted cash was $82.6 million. Cash increased by $3.5 million during the quarter, primarily because $31.0 million of investments matured, offsetting operating cash use.
Total debt included $40.1 million of long-term debt, representing $40.0 million of principal, and a $0.9 million short-term note payable related to insurance-premium financing. The Oxford loan bears interest at a floating rate based on SOFR plus 7.37%, subject to a floor and cap, and matures in March 2027. The company also reported a $10.2 million preferred-stock tranche liability and $21.2 million of Series B convertible preferred stock.
Material changes versus Q1 2023
- R&D expense increased $5.7 million, primarily from higher CRO costs, investigator fees, personnel costs, consulting, clinical supplies and investigator-sponsored trial costs.
- Avutometinib plus defactinib program costs increased $4.3 million, primarily due to RAMP 301, drug metabolism and pharmacokinetics work, investigator-sponsored trials and RAMP 201.
- SG&A increased $3.0 million, including approximately $2.0 million of additional commercial-readiness spending for a potential LGSOC launch.
- Net loss increased by $18.1 million. The principal unusual driver was a $6.0 million non-cash expense from remeasurement of the preferred-stock tranche liability, compared with $3.4 million of income in Q1 2023.
- Operating cash use increased $8.0 million to $28.3 million.
- Investment maturities generated $31.0 million of cash in Q1 2024; Q1 2023 investing cash flow was a use of $0.8 million.
- The company amended its Oxford loan agreement in January 2024, extending the deadline to draw the potential $25.0 million Term C Loan from March 31, 2024 to March 31, 2025, subject to FDA approval and other conditions.
- Verastem completed an option exchange program covering 603,330 options and issued replacement options at an exercise price of $11.44 per share. The company expects approximately $1.7 million of incremental stock-based compensation expense over the applicable service periods.
Guidance, outlook, risks and unusual items
- Management intended to submit an NDA to the FDA in the first half of 2024 for accelerated approval of avutometinib plus defactinib for LGSOC, based on RAMP 201 data and supported by the FRAME trial.
- RAMP 301 is intended to serve as the confirmatory trial for potential conversion of accelerated approval to full approval.
- The FDA granted fast-track designation in January 2024 for avutometinib plus LUMAKRAS in previously treated KRAS G12C-mutant metastatic NSCLC. Management expected data updates from RAMP 203 and RAMP 204 in the second half of 2024 and initial RAMP 205 data at the May-June 2024 ASCO meeting.
- Management stated that operating losses are expected to continue because no product candidate has regulatory approval and the company continues to fund clinical development and commercial-readiness activities.
- The financial statements state that there is substantial doubt about the company’s ability to continue as a going concern for the 12 months following issuance. Management expects to rely on existing liquidity, potential milestones and royalties, additional Oxford borrowings, collaborations, equity offerings or additional debt; these potential sources were not considered probable for the going-concern assessment.
- Failure to obtain additional capital could require the company to delay or discontinue planned preclinical studies, clinical trials or regulatory activities.
- Key operating risks include clinical-trial failure or delays, regulatory uncertainty, safety findings, manufacturing and supply interruptions, dependence on third-party contractors, competition, reimbursement uncertainty, intellectual-property challenges and the ability to commercialize any approved products.
- The company reported no material subsequent events and no legal proceedings. Disclosure controls and procedures were assessed as effective.
Most important facts for investors to verify
- Timing and content of the FDA NDA submission for avutometinib plus defactinib and the FDA’s acceptance and review milestones.
- RAMP 201 mature efficacy and safety data, including the contribution of defactinib, and progress and enrollment in RAMP 301.
- Actual cash runway relative to the stated $28.3 million quarterly operating cash burn and the company’s going-concern warning.
- Availability and conditions of the remaining Oxford borrowing capacity, including the $25.0 million Term C Loan and other milestone-based tranches.
- Potential dilution from Series B preferred stock, pre-funded warrants, stock options and restricted stock units.
- Whether the $10.2 million preferred-stock tranche liability produces additional non-cash earnings volatility or results in the second tranche being issued.
- Clinical and regulatory updates for RAMP 203, RAMP 204, RAMP 205 and the GenFleet GFH375/VS-7375 program.