Verastem, Inc. — 2015 First-Quarter Form 10-Q
Business Context and Reporting Period
Verastem is a clinical-stage biopharmaceutical company developing cancer therapies intended to target cancer stem cells. Its principal programs were VS-6063 (defactinib), VS-4718, and VS-5584, focused on FAK and PI3K/mTOR pathways. The filing covers the three months ended March 31, 2015. The company had no product revenue and reported an accumulated deficit of $156.2 million.
Financial Performance and Liquidity
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $10.5 million | $8.4 million |
| General and administrative expense | $4.7 million | $4.7 million |
| Total operating expenses | $15.2 million | $13.1 million |
| Net loss | $15.2 million | $13.1 million |
| Net loss per share | $0.46 | $0.51 |
| Cash used in operating activities | $11.7 million | $9.3 million |
- At March 31, 2015, cash and cash equivalents were $30.1 million, short-term investments were $101.9 million, and long-term investments were $4.0 million, for total cash, cash equivalents, and investments of $136.1 million.
- Total assets were $142.0 million and total stockholders’ equity was $131.9 million. Current liabilities were $9.5 million. The filing does not identify outstanding debt financing.
- Cash declined by $3.8 million during the quarter, as operating and investing uses of cash were more than offset by equity financing proceeds.
- Net cash used in investing activities was $47.4 million, primarily reflecting net purchases of investments. Net cash provided by financing activities was $55.4 million.
- The company stated that existing cash, cash equivalents, and investments were expected to fund its current operating plan and capital expenditures into the first half of 2017, subject to assumptions and clinical-development outcomes.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased $2.1 million, or approximately 25%, primarily from a $2.9 million increase in contract research organization costs and approximately $770,000 of higher personnel costs. These increases were partly offset by lower license fees and stock-based compensation.
- VS-6063 program spending increased to $5.2 million from $2.9 million; VS-4718 spending decreased to $0.5 million from $1.5 million; and VS-5584 spending increased to $0.9 million from $0.5 million.
- Net loss increased $2.1 million, although loss per share decreased because the weighted-average share count increased to 33.3 million from 25.5 million.
- Cash used in operations increased $2.5 million, reflecting higher clinical-trial and development spending.
- The company completed a January 2015 public offering of 8.34 million shares for approximately $50.9 million of net proceeds and received approximately $4.4 million from its at-the-market program during the quarter.
- Stock-based compensation expense decreased to $3.1 million from $4.0 million.
Guidance, Outlook, Risks, and Unusual Items
- Management expected an interim analysis of the COMMAND trial of VS-6063 in mesothelioma during the third quarter of 2015, assuming the trial was not futile.
- Management expected to report additional VS-6063 ovarian cancer and non-small-cell lung cancer data, as well as Phase 1 results for VS-4718 and VS-5584, during the second half of 2015. Preliminary data from an extended mesothelioma treatment cohort were expected in the first half of 2016.
- Operating losses and cash requirements were expected to increase as the company continued clinical trials, pursued potential regulatory filings, expanded its intellectual-property portfolio, and prepared for possible commercialization.
- Management stated that substantial additional funding would be required. Potential sources included equity or debt financings, collaborations, strategic alliances, and licensing arrangements; no committed external funding source existed.
- Key risks included failure or delay in clinical trials, patient-enrollment challenges, unexpected safety events, regulatory uncertainty, inability to obtain additional capital, reliance on third parties, intellectual-property risks, competition, and potential dilution from future equity financing.
- There were no material changes to previously reported contractual obligations, no off-balance-sheet arrangements, and no legal proceedings reported in the filing. Management concluded that disclosure controls were effective as of March 31, 2015.
Investor Verification Checklist
- Verify the COMMAND interim-analysis timing, futility assessment, patient population, and subsequent clinical results for VS-6063.
- Assess whether the stated cash runway into the first half of 2017 remains adequate after updated clinical-trial costs and financing activity.
- Review the pace of cash burn, contract research organization commitments, and additional capital needs.
- Confirm the status, enrollment, safety, and efficacy data for VS-6063, VS-4718, and VS-5584.
- Monitor further at-the-market equity sales and related dilution, including the additional $3.8 million raised after March 31, 2015.
- Evaluate regulatory, intellectual-property, partnering, and commercialization risks before assigning value to potential product approvals.