Analyst Conference Summary

conference date: October 29, 2019 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2019 (Q3, third quarter 2019)

Forward-looking statements

Overview: Copiktra revenue continues to ramp, but not out of the woods yet. Still has $160 million in cash.

Basic data (GAAP):

Revenue was $9.0, up 190% sequentially from $3.1 million, and down 42% from $15.5 million year-earlier.

Net income was negative $30.1 million, up sequentially from negative $42.2 million but down from negative $21.7 million year-earlier.

EPS, diluted, was negative $0.41, up sequentially from negative $0.57, and down from negative $0.29 year-earlier.

Guidance:

Reiterated Copiktra sales for full year 2019 in range of $12 to $14 million. $110 to $115 million full year 2020 operating expenses.

Conference Highlights:

Brian Stuglik, CEO of Verastem, said "In the third quarter, we achieved $9.0 million in revenue, including $4.0 million in net product revenue from Copiktra, a 33% increase over the prior quarter, and we remain on track to achieve the revenue that we have guided for this year. We continue to make progress with Copiktra sales as the intent to prescribe and new prescriber base grows week over week due to solid progress across our commercial efforts, including physician education and contracting. We also believe in the long-term potential for our current Copiktra indications. We are deeply committed to our long-term strategy to achieve sustainable growth and progress our mission on behalf of patients. In order to achieve these ambitious goals and provide us with greater financial flexibility going forward, we are streamlining our organization and reducing operating expenses, which will result in approximately $25 million in annualized cost savings next year."

Recognizes the sales ramp has been slower than expected, but believes can peak at $200 to $300 million per year for currently approved indications. Believes will have an 18 to 25 month cash runway.

6-2-5 plan aims to narrow the gap between revenue and commercial spend by year end 2019, achieve cash flow break-even for both the commercial and clinical Copiktra program by mid-2021, and broaden the indications for Copiktra, with at least one additional marketed product, along with a pipeline of assets in development by mid-2024. Should save about $25 million in 2020. Has eliminated 40 employee positions.

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 $4.0 million, up 33% sequentially from $3.0 million and up from $0.5 million year-earlier.

Non-GAAP net income negative $26.2 million, up sequentially from negative $35.7 million, but down from negative $19.4 million year-earlier. EPS negative $0.25, sequentially from negative $0.48, and down from negative $0.26 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.

In September 2018 the FDA approved Copiktra (duvelisib), a P13K inhibitor, for treatment of relapsed or refractory CLL/SLL. In mid-March 2019 received accelerated approval Folicular Lymphoma after at least two prior systemic therapies. Expects to file in the EU by the end of the year.

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 June at ASCO data was presented for CLL showing dosing could be adjusted to manage adverse events and keep patients on therapy.

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

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.

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 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 $160 million, down sequentially from $187 million. Long term debt $35 million plus convertible notes for $101 million.

Cost of good sold was $0.8 million. R&D expense was $12.2 million. G&A was $22.2 million. Total operating expense was $35.1 million. Loss from operations was $26.1 million. Interest net expense $4.0 million.

Q&A summary:

40 positions eliminated, by type? 14 were in sales. We had 50, we believe we can cover the high value offices with the current force.

EU strategy? We are doing the filing ourselves. We are in discussions with potential partners, but have not made a decision on whether to partner or not.

Primo enrollment? No guidance on timeline, but ahead of internal projections.

Implied Q4 guidance? Committed to delivering on $12 to $14 million for 2019. this will be our first substantial Q4, we are not certain as to seasonality. We are confident we will see continued growth in Q4 and into 2020.

Growth expectations v. shrinking sales force? More focus on large accounts. We have changed some roles within the team. We did not have prior relations with the sites, it was easier to get access at the small sites, took longer to get into the large volume sites. We are also expanding digital efforts.

Headcount reductions, many took place this week, so they will have an impact on Q4, and more on Q1 2020.

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