Analyst Conference Summary

conference date: February 28, 2020 @ 5:00 AM Pacific Time
for quarter ending: December 30, 2019 (Q4, fourth quarter 2019)

Note: the Feb. 28 call was an update on stategy, with limited Q4 data. The detailed Q4 data was added on March 11, from the press release. No additional conference was held.

Forward-looking statements

Overview: Copiktra revenue did not ramp in Q4, but got a big cash infusion, so continuing development, inlcuding of VS-6766.

Basic data (GAAP):

Revenue was $3.6, down sequentially from $9.0 million, and up from $1.2 million year-earlier.

Net income was negative $38.8 million, down sequentially from negative $30.1 million and down from negative $11.3 million year-earlier.

EPS, diluted, was negative $0.51, down sequentially from negative $0.41, and down from negative $0.37 year-earlier.

Guidance:

Verastem expects that existing cash and equivalents, along with the revenue it from Copiktra, will fund its planned operations into Q4 2021. Lowering full 2020 guidance for Copiktra revenue to $12 to $16 million.

Conference Highlights:

Brian Stuglik, CEO of Verastem, said "With our newly expanded development pipeline and strengthened balance sheet, we believe this new strategic direction will be transformative for Verastem Oncology as we will have the opportunity to rapidly advance the development of the clinical programs that we believe will yield the greatest results for patients, physicians and shareholders."

Verastem Oncology anticipates completing a private placement of approximately 46.5 million shares of its common stock at an offering price of $2.15 per share on March 3, 2020, resulting in gross proceeds of approximately $100 million and net $92 million.

Following the change of strategy, primary focus will be on the development of CH5126766 (VS-6766), its RAF/MEK inhibitor, in combination with defactinib, its focal adhesion kinase (FAK) inhibitor, for the treatment of KRAS mutant solid tumors. Phase 1 data have been submitted for presentation at AACR 2020 [July 26-29, 2020].

Verastem Oncology expects to reduce its operating expenses by approximately 40% for 2020 compared to 2019. Based on its current operating plans, Verastem Oncology expects its research and development and selling, general and administrative expenses for the full year 2020 to be in the range of $70 million to $85 million. Will reduce to about 90 employees.

In October, Verastem partner Yakult Honsha dosed the first patient in a Phase 1b Japanese bridging study evaluating Copiktra in patients with relapsed or refractory CLL/SLL following at least one prior therapy.

Product revenue from Copiktra/duvelisib was $3.6 million, down 10% sequentially from $4.0 million and up from $ million year-earlier. Fulll 2019 sales $12.3 million. "Net sales were impacted by timing of purchases and gross to net adjustments associated with Medicare Part D (donut hole). Demand units increased 20% from third quarter to fourth quarter 2019. Going forward, Verastem Oncology will be reducing the resources directed to the promotion and sale of Copiktra in its current indications, including reducing the size of its salesforce and non-core clinical research. Verastem Oncology plans to shift its Copiktra promotional resources toward large, community-based practices and academic institutions, which represent the majority of the appropriate third-line patients with chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) and follicular lymphoma (FL)."

Non-GAAP net income negative $ million, up sequentially from negative $26.2 million, but down from negative $ million year-earlier. EPS negative $, sequentially from negative $0.25, and down from negative $ year-earlier.

In July 2019, the Company announced its entry into an exclusive license agreement granting Sanofi development and commercialization rights to products containing Copiktra in Russia and CIS (states allied to Russia), Turkey, the Middle East and Africa. Under the terms of the agreement, Verastem Oncology will receive an upfront payment of $5 million and is eligible to receive aggregate payments of up to $42 million if certain development and sales milestones are successfully achieved, plus double-digit percentage royalties based on future net sales of Copiktra in the licensed territories.

Copiktra patents protect it through 2030, plus extenions. Expects to extend to many types of cancer, including solid tumors.

In Q2 2019 Verastem Oncology entered into exclusive license agreements with CSPC Pharmaceutical Group Limited (CSPC) to develop and commercialize Copiktra in China, Hong Kong, Macau and Taiwan. Expects first patient dosing in their bridging study by the end of 2019.

Verastem has exclusive license agreement with Yakult Honsha Co. for duvelisib in Japan. There was a $10 million upfront payment plus another potential $90 million in milestone payments and double-digit royalties.

Updated Phase 1 data was presented for duvelisib for PTCL in June 2019, showing compelling clinical activity.

A Phase 1/2 trial for Copiktra in combination with venetoclax for CLL, initiated by the Dana-Farber Cancer Institute, continued.

Cash and equivalents ended at $111 million, down sequentially from $160 million. Long term debt $104 million.

Cost of good sold was $0.7 million. R&D expense was $12.5 million. G&A was $23.7 million. Total operating expense was $36.9 million. Loss from operations was $33.3 million. Interest and other net expense $5.4 million.

Q&A summary:

AACR data preclinical or Phase 1? Results of Phase 1 portion of dose finding study. Four expansion cohorts, possibly 10 to 15 patients' data from 3 of those cohorts, plus some biomarker data.

Phase 1 to pivotal study transition for PTCL? High unmet need plus data, but need to agree on a plan with the FDA.

Demand increase components? About 50/50 CLL/FL.

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