Analyst Conference Summary

conference date: May 9, 2019 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2019 (Q1, first quarter 2019)

Forward-looking statements

Overview: Second quarter of commercial revenue from Copiktra of $1.7 million. Not great, but better than Q4.

Basic data (GAAP):

Revenue was $1.7, up sequentially from $1.2 million, and up from $0.0 year-earlier. Revenue in the quarter was from Copitra sales.

Net income was negative $38.1 million, down sequentially from negative $11.3 million and down from negative $21.1 million year-earlier.

EPS, diluted, was negative $0.52, down sequentially from negative $0.37, and down from negative $0.41 year-earlier.

Guidance:

Product revenue for full year 2019 expected at $10 to $12 million.

Conference Highlights:

Robert Forrester, CEO of Verastem, said "We are now into the second full quarter of the Copiktra launch and sales were up approximately 38% compared to the prior quarter. We have also made substantial progress securing broader reimbursement for our product, with over 92% of targeted health plans now listing and providing reimbursement for Copiktra. We continue to receive positive feedback from physicians using Copiktra for the treatment of patients with relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) after at least two prior therapies or follicular lymphoma (FL) after at least two prior systemic therapies. The commercial team has been diligently working to enhance physician and advocacy group awareness of Copiktra, and to overcome certain historical misperceptions concerning the PI3K class. We believe the groundwork we have laid over the past several months will have an increasingly positive impact through 2019 and into next year. In parallel, we continue to advance duvelisib in additional lines of therapy, both as a monotherapy and in combination, as well as in additional indications like peripheral T-cell lymphoma (PTCL) for which preliminary data are expected by the end of this year."

In September the FDA approved Copiktra (duvelisib), a P13K inhibitor, for treatment of relapsed or refractory CLL/SLL. In mid-March 2019, upon completion of the required 120-day waiting period following receipt of accelerated approval from the FDA, the Company launched its physician education and marketing campaign for Copiktra for the treatment of patients with Folicular Lymphoma after at least two prior systemic therapies. Accelerated approval in FL was based on overall response rate and continued approval may be contingent upon confirmatory trials, the first of which is expected to start in 2019.

Product revenue from Copiktra/duvelisib was $1.7 million, up 38% sequentially from $1.2 million. Expects 2019 revenues to be "modest."e

New data was presented at ICHM in Q2 2019 and published in the Journal of Clincal Oncology in February 2019.

In the U.S. 300,000 people are diagnosed with CLL/FL/SLL each year. A benefit is that Copiktra is an oral monotherapy that can be taken at home. Educating physicians about improved safety profile over older PI3K agents. Getting positive feedback from physicians. Expects a steady build through 2019.

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

In early September 2018, the first patient was dosed in a multicenter Phase 1/2 clinical trial investigating Copiktra in combination with venetoclax, an oral selective inhibitor of BCL-2, in patients with relapsed or refractory CLL/SLL. The Phase 1 portion of the trial will determine the maximum tolerated dose and the recommended Phase 2 dose of venetoclax for this combination regimen

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. Verastem Oncology received an upfront payment of $15.0 million and is entitled to receive aggregate payments of up to $160.0 million if certain development, regulatory and commercial milestones are successfully achieved, plus double-digit royalties on net sales of products containing duvelisib in the CSPC Territory.

Verastem signed an 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.

In April 2019 announced an amendment to the existing Loan Agreement with Hercules Capital changing key terms of the agreement, including a lower overall interest rate, an extended principal repayment timeline, and increasing the borrowing limit from $50 million to $75 million.

Updated data was presented at during the third quarter for duvelisib and defactinib. More data was presented at ASH in December 2018, including for PTCL.

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

Cash and equivalents ended at $212 million, down sequentially from $250 million. Verastem has a $50.0 million line of credit available. Long term debt $25 million plus convertible notes for $97 million.

Cost of good sold was $158 thousand. R&D expense was $9.8 million. G&A was $26.0 million. Amortization $392 thousand. Total operating expense was $36.3 million. Loss from operations was $34.7 million. Other income $1.5 million. Interest net expense $4.9 million.

The SG&A increase of $16.2 million, or 165% y/y, was primarily due to higher personnel and related costs, as well as promotional and consulting costs.

Joseph Lobacki, Chief Commercial Officer of Verastem Oncology will be stepping down from the Company in 2019 to pursue other professional opportunities, including Board of Director roles. Mr. Lobacki intends to continue in his role until the Company identifies and appoints a successor.

Q&A:

Guidance lower than analysts had been thinking? This is our first revenue guidance. There have been headwinds. Estimate is based on traction in the market. Another drug in this indication had $30 million first year, $130 million second year. We think there are 20,000 patients in the label. We believe sales can eventually be $300 million per year.

The main headwinds are lack of clinical experience and prior negative experiences with PI3K drugs. On the positive side we are having good KOL expert engagement.

Ex US plans? We have partners in China and Japan. We anticipate having one other partnership by the end of the year.

Defactinib timeline? It is in four separate programs funded by collaborators. We expect data from one or more programs at medical meetings later this year.

Overall landscape in r/r CLL/SLL? We have 13 to 14 years of patent life with Copiktra. Combinations with standard or care or novel therapies is a way to move foward. We could also move into many different tumor types. In CLL/SLL oral agents are moving up front, there is an opening for a third line agent. A combination with Venetoclax would make sense.

Additional enrollment in Primo trial? We are excited about activity in PTCL. In PTCL early trial we used a higher dose than our approved dose. We are looking to choose a dose for a registrational trial.

Cash use? We are happy with out cash position. The top priority is the launch. Second is development to extend the label for duvelisib. Then defactinib or new drugs.

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