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Verastem CEO details pipeline, potential upside for stock

July 17, 2017

Verastem Inc VSTM 3.63% stock had a relatively flat month in June despite the firm’s presentation of positive follow-up data for its DYNAMO study of Duvelisib, its PI3K-delta and gamma inhibitor for patients with follicular lymphoma (FL), small lymphocytic lymphoma (SLL), and marginal zone lymphoma (MZL).

The firm reported a 47-percent response rate in indolent non-Hodgkin lymphoma patients. But investors didn’t get excited until early July when the stock started its 114 percent run to a near two-year high.

CEO Robert Forrester said he was encouraged by the data, especially considering the drug was a sort of last-chance treatment for patients unaided by conventional methods.

“As you look at this patient population, probably the most important thing to remind you about is that this is a relapsed refractory patient population, so they are refractory to both [Biogen Inc BIIB 0.66%’s] Rituxan and chemotherapy,” Forrester told Benzinga. “That means these patients are progressively evolved and have now failed on two standard therapies that are used in earlier lines of treatment. So to see the kind of response rate, 47 percent, across all the subtypes was very encouraging.”

Its profile as an oral monotherapy administered without hospitalization was no less exciting to Forrester.

“If you think about convenience for this patient population, it’s really great that they can just take the pill twice a day, with or without food,” he said. “It’s easy to take.”

The Downside

But the treatment revealed adverse effects resulting in an overall discontinuation rate of 17 percent, disproportionately seen among the FL and SLL subgroups. Severe diarrhea and opportunistic infections were of particular concern.

“Those [infections] can become very serious because this is a patient population that is immunocompromised in its nature,” Forrester said, noting that all patients in the study received preemptive prophylaxis. “They are susceptible to infections. This is a problem that we see throughout this patient population regardless of therapy.”

About 20 percent of FL patients and 36 percent of SLL patients developed severe infections, rates the research team attributed more to “incredibly low” sample sizes rather than the treatment’s medical profile.

Fortunately, the risks ultimately paid off with 83 percent tumor reduction among FL and 100 percent among SLL subgroups.

“The perception by the KOLs [key opinion leaders] that we talk to is that the drug is safe, well tolerated, and the fact that the side effects are predictable and manageable is really important,” Forrester said. “There is always tradeoff between the level of activity and the safety, and the fact that the safety can be managed is really important.”

Disrupting The Space

Verastem, at this point, is convinced that its product and strategy position it to win the partnership of industry experts and draw them away from competitors.

“One of the things that I don’t think should be overlooked, and I’ve heard this directly from many of them [doctors], is they are looking for a partner to help them develop these PI3 kinase inhibitors,” Brian Sullivan, director of corporate development, said. “Every single drug when it’s first in class as Duvelisib was, you have to learn how to use it and the doctors are on the learning curve with you, too. The fact that Gilead Sciences, Inc. GILD 0.82% basically pulled out of many of the clinical development left them in a situation where it’s a bit more difficult to try to figure out how to utilize the drug. So they’re really excited to be working with us to do additional clinical studies and preclinical studies.”

Tip Of The Iceberg

It appears shareholders are equally optimistic. Verastem stock is up 78 percent from last month, which Forrester attributes largely to institutional investors.

“We think this is just the tip of the iceberg,” he said. “We don’t feel like we’re fully valued yet to reflect the opportunity that we have.”

The upcoming release of phase 3 data from the completion of the DUO study this summer is expected to drive additional upside. If positive, it would lead to an NDA filing, commercialization in the U.S. and partnership with ex-U.S. firms for European marketing.

Verastem owns global rights to the drug and sees great opportunity in partnerships.

“That’s something that will probably happen the first part of next year, but that could be a source of capital both in terms of upfronts and milestones, of course, but also cost reimbursement because I’m sure the partner will want to share in the clinical studies that we’ll be running,” Forrester said.

Equity sales are currently off the table, though.

“Selling equities at today’s prices is very far from attractive to us, so it’s not something that we are keen to do,” he added.

For now, Forrester and his team are comfortable with the firm’s present balance sheet, which posted $72.6 million at the end of the first quarter. They also are positioned to draw from a $25 million debt facility with Hercules, but Forrester said they will not dip into anything beyond the already drawn $2.5 million until the DUO study reports positive data.

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