Verastem, Inc. 2022 Q3 Form 10-Q Summary
Business context and reporting period
Verastem is a late-stage development biopharmaceutical company focused on oncology therapies targeting RAF/MEK and FAK signaling. Its lead candidates are avutometinib (VS-6766) and defactinib, being studied across solid tumors including low-grade serous ovarian cancer (LGSOC), non-small cell lung cancer, colorectal cancer, pancreatic cancer, uveal melanoma and endometrial cancer.
This unaudited Form 10-Q covers the three and nine months ended September 30, 2022, filed November 3, 2022. Verastem sold its COPIKTRA oncology license and related assets to Secura Bio in 2020 and no longer generates product sales from COPIKTRA.
Financial performance and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Total revenue | $0.0 million in 2022 vs. $0.002 million in 2021 | $2.6 million in 2022 vs. $1.5 million in 2021 |
| Research and development expense | $11.3 million vs. $9.3 million | $39.8 million vs. $28.0 million |
| SG&A expense | $6.4 million vs. $5.5 million | $18.9 million vs. $18.5 million |
| Operating loss | $17.7 million vs. $14.8 million | $56.1 million vs. $44.9 million |
| Net loss | $18.1 million vs. $22.8 million | $57.0 million vs. $54.7 million |
| Net loss per share | $0.09 vs. $0.13 | $0.30 vs. $0.31 |
| Net cash used in operating activities | Not separately provided | $47.1 million vs. $43.6 million |
Nine-month revenue primarily comprised a $2.5 million regulatory milestone achieved by Secura’s sublicensee CSPC and approximately $0.1 million of royalties and expected royalties under the Secura agreement. Revenue is non-recurring and does not represent product sales by Verastem.
At September 30, 2022, Verastem reported cash and cash equivalents of $78.2 million, short-term investments of $25.8 million, and total cash, cash equivalents, restricted cash and investments of approximately $105.2 million. Management described cash, cash equivalents and investments as $104.0 million and expects existing resources to fund planned operations for at least 12 months from issuance of the financial statements.
Cash used in operations was $47.1 million for the first nine months. Investing activities provided $53.2 million, primarily from net investment maturities. Financing activities provided $51.8 million, including $27.4 million from the at-the-market equity program and $24.1 million of net proceeds from Oxford debt financing.
Long-term debt had a $25.0 million principal balance and a $24.4 million carrying value at quarter-end. The Oxford facility permits up to $150.0 million of aggregate term loans, subject to milestones and lender discretion. The outstanding loan bears interest at a variable rate based on SOFR plus 7.37%, subject to a floor and cap, and is due March 1, 2027, with scheduled principal payments beginning in 2024 or later depending on milestones.
Material changes versus prior comparable periods
- Nine-month revenue increased 72% to $2.6 million, driven by the $2.5 million CSPC-related milestone; transition services revenue ended after substantially completing in 2021.
- Research and development expense increased 42% to $39.8 million, principally due to higher drug substance and product costs, CRO costs, investigator fees, clinical trial activity and manufacturing costs.
- Quarterly operating expenses increased 19% to $17.7 million, resulting in a larger operating loss.
- Nine-month net loss increased 4% despite lower interest expense, reflecting the higher operating loss.
- Interest expense declined substantially because the prior-year period included approximately $7.8 million of non-cash interest expense associated with the conversion of the 2020 Notes.
- Common shares outstanding increased to approximately 210.1 million at September 30, 2022, from approximately 185.3 million at December 31, 2021, principally due to ATM equity issuance and other equity compensation activity.
- Verastem sold 23.6 million shares under its ATM program during the first nine months for approximately $27.4 million of net proceeds; approximately $65.1 million remained available under the program at quarter-end.
Guidance, outlook, commentary and risks
Management expects continued operating losses and significant expenses as it advances avutometinib and defactinib clinical programs, expands clinical development, maintains intellectual property, and prepares for potential commercialization. The filing does not provide revenue or profitability guidance.
RAMP 201 in recurrent LGSOC continued enrolling across four cohorts. Management reported encouraging confirmed responses in both monotherapy and combination arms, in KRAS-mutant and KRAS-wild-type populations, with no new safety signals in the June 2022 interim analysis. A second interim analysis was reported in October 2022, and management planned a fourth-quarter 2022 FDA meeting to discuss regimen selection and requirements for a potential NDA submission.
RAMP 202 in KRAS G12V and other KRAS-mutant NSCLC did not meet criteria to proceed to expansion based on the planned interim analysis. RAMP 203 with Amgen’s sotorasib was advancing through dose evaluation, while RAMP 204 with Mirati’s adagrasib was open and enrolling. The company expected to open the PanCAN-supported RAMP 205 pancreatic cancer trial in the fourth quarter of 2022.
PanCAN awarded Verastem up to $3.8 million, plus an additional $0.5 million for patient sample collection and analysis. Verastem received $1.0 million in July 2022, recorded as deferred liabilities and restricted for specified research activities.
Key risks include clinical-trial failure or delays, unexpected safety signals, regulatory non-approval, manufacturing and supply interruptions, competition, intellectual-property challenges, dependence on third parties, and the need for additional capital. Additional financing could be dilutive or unavailable on favorable terms.
Future contingent consideration from Secura is uncertain. The FDA issued a June 2022 COPIKTRA safety communication, and the FDA’s Oncologic Drug Advisory Committee voted 8-4 against COPIKTRA’s use in a specified relapsed or refractory blood-cancer population. These developments could reduce COPIKTRA sales, milestones and royalties payable to Verastem.
COVID-19 continued to cause potential clinical-site startup and enrollment delays. The company reported no material subsequent events and no material changes to previously disclosed risk factors other than the COPIKTRA-related risk described above.
Facts investors should verify
- Cash runway relative to the approximately $47.1 million nine-month operating cash burn and the timing of additional clinical-trial spending.
- Availability and conditions for drawing the remaining Oxford facility commitments, including regulatory, revenue and equity milestones.
- RAMP 201 FDA meeting outcomes, go-forward regimen selection and any NDA submission timeline.
- Detailed RAMP 201 response, durability and safety data, including distinctions between monotherapy and combination treatment.
- Implications of the RAMP 202 failure to meet expansion criteria for the NSCLC development strategy.
- Future COPIKTRA milestones and royalties in light of FDA safety concerns and the ODAC vote.
- Further equity issuance, dilution and the remaining capacity under the ATM program.
- Interest-rate exposure and repayment requirements under the floating-rate Oxford debt facility.