UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑Q
(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30, 2018 |
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OR |
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission file number: 001‑35403
Verastem, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
27-3269467 |
117 Kendrick Street, Suite 500 |
02494 |
(781) 292-4200
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☒ |
Non‑accelerated filer ☐ |
Smaller reporting company ☐ |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☒
As of August 6, 2018 there were 73,592,263 shares of Common Stock, $0.0001 par value per share, outstanding.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2
FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements related to present facts or current conditions or historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. Such statements relate to, among other things, the development of our product candidates, including duvelisib and defactinib, and our Phosphoinositide 3-kinase (PI3K) and Focal Adhesion Kinase (FAK) programs generally, the timeline for clinical development and regulatory approval of our product candidates, the expected timing for the reporting of data from on-going trials, the structure of our planned or pending clinical trials, additional planned studies, our rights to develop or commercialize our product candidates and our ability to finance contemplated development and commercialization activities and fund operations for a specified period. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
Forward-looking statements are not guarantees of future performance and our actual results could differ materially from the results discussed in the forward-looking statements we make. Applicable risks and uncertainties include the risks that approval of our New Drug Application for duvelisib will not occur on the expected timeframe or at all, including by the U.S. Food and Drug Administration’s target action date; that a filing of a European Marketing Authorization Application may not be achieved; that the full data from the Phase 3 DUO™ study will not be consistent with the previously presented results of the study; that the preclinical testing of our product candidates and preliminary or interim data from clinical trials may not be predictive of the results or success of ongoing or later clinical trials; that data may not be available when expected, including for the Phase 3 DUO study; that even if data from clinical trials is positive, regulatory authorities may require additional studies for approval and the product may not prove to be safe and effective; that the degree of market acceptance of product candidates, if approved, may be lower than expected; that the timing, scope and rate of reimbursement for our product candidates is uncertain; that there may be competitive developments affecting our product candidates; that data may not be available when expected; that enrollment of clinical trials may take longer than expected; that our product candidates will cause unexpected safety events or result in an unmanageable safety profile as compared to their level of efficacy; that duvelisib will be ineffective at treating patients with lymphoid malignancies; that we will be unable to successfully initiate or complete the clinical development and eventual commercialization of our product candidates; that the development and commercialization of our product candidates will take longer or cost more than planned; that we may not have sufficient cash to fund our contemplated operations; that we or Infinity Pharmaceuticals, Inc. will fail to fully perform under the duvelisib license agreement; that we may be unable to make additional draws under our debt facility or obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity, debt financing or otherwise; that we will not pursue or submit regulatory filings for our product candidates, including for duvelisib in patients with chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) or indolent non-Hodgkin lymphoma (iNHL); and that our product candidates will not receive regulatory approval, become commercially successful products, or result in new treatment options being offered to patients. Other risks and uncertainties include those identified under the heading "Risk Factors" in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (SEC) on March 13, 2018 and in any subsequent filings with the SEC.
As a result of these and other factors, we may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect our views as of the date hereof. We do not assume and specifically disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
3
Item 1. Condensed Consolidated Financial Statements (unaudited).
Verastem, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
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June 30, |
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December 31, |
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2018 |
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2017 |
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Assets |
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(unaudited) |
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Current assets: |
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Cash and cash equivalents |
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$ |
168,692 |
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$ |
82,176 |
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Short-term investments |
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— |
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4,496 |
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Prepaid expenses and other current assets |
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1,745 |
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1,115 |
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Total current assets |
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170,437 |
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87,787 |
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Property and equipment, net |
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1,270 |
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861 |
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Restricted cash |
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242 |
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162 |
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Other assets |
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969 |
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981 |
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Total assets |
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$ |
172,918 |
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$ |
89,791 |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
8,514 |
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$ |
9,186 |
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Accrued expenses |
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12,234 |
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7,942 |
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Current portion of long-term debt |
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1,384 |
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— |
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Total current liabilities |
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22,132 |
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17,128 |
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Non-current liabilities: |
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Long-term debt |
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23,520 |
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14,828 |
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Other non-current liabilities |
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399 |
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151 |
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Total liabilities |
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46,051 |
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32,107 |
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Stockholders’ equity: |
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Preferred stock, $0.0001 par value; 5,000 shares authorized, no shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively |
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— |
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— |
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Common stock, $0.0001 par value; 100,000 shares authorized, 73,580 and 50,801 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively |
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7 |
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5 |
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Additional paid-in capital |
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469,415 |
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360,823 |
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Accumulated other comprehensive income (loss) |
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4 |
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(2) |
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Accumulated deficit |
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(342,559) |
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(303,142) |
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Total stockholders’ equity |
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126,867 |
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57,684 |
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Total liabilities and stockholders’ equity |
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$ |
172,918 |
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$ |
89,791 |
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See accompanying notes to the condensed consolidated financial statements.
4
Verastem, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands, except per share amounts)
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Three months ended June 30, |
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Six months ended June 30, |
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2018 |
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2017 |
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2018 |
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2017 |
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Revenue: |
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License revenue |
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$ |
10,000 |
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$ |
— |
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$ |
10,000 |
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$ |
— |
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Total revenue |
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10,000 |
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— |
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10,000 |
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— |
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Operating expenses: |
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Research and development |
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12,381 |
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9,042 |
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23,315 |
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17,427 |
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General and administrative |
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15,813 |
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4,425 |
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25,640 |
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9,188 |
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Total operating expenses |
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28,194 |
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13,467 |
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48,955 |
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26,615 |
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Loss from operations |
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(18,194) |
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(13,467) |
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(38,955) |
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(26,615) |
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Interest income |
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343 |
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140 |
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534 |
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295 |
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Interest expense |
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(516) |
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(109) |
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(996) |
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(121) |
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Net loss |
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$ |
(18,367) |
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$ |
(13,436) |
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$ |
(39,417) |
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$ |
(26,441) |
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Net loss per share—basic and diluted |
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$ |
(0.30) |
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$ |
(0.36) |
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$ |
(0.70) |
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$ |
(0.71) |
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Weighted-average number of common shares used in net loss per share—basic and diluted |
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61,256 |
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36,992 |
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56,074 |
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36,992 |
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Net loss |
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$ |
(18,367) |
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$ |
(13,436) |
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$ |
(39,417) |
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$ |
(26,441) |
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Unrealized gain (loss) on available-for-sale securities |
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4 |
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(17) |
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6 |
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(34) |
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Comprehensive loss |
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$ |
(18,363) |
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$ |
(13,453) |
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$ |
(39,411) |
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$ |
(26,475) |
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See accompanying notes to the condensed consolidated financial statements.
5
Verastem, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
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Six months ended June 30, |
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2018 |
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2017 |
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Operating activities |
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Net loss |
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$ |
(39,417) |
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$ |
(26,441) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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792 |
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290 |
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Stock-based compensation expense |
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2,867 |
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2,410 |
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Amortization of deferred financing costs, debt discounts and premiums and discounts on available-for-sale marketable securities |
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178 |
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105 |
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Gain on sale of fixed assets |
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(79) |
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— |
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Changes in operating assets and liabilities: |
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Prepaid expenses, other current assets and other assets |
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(457) |
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(1,479) |
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Accounts payable |
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(1,436) |
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2,730 |
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Accrued expenses and other liabilities |
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4,785 |
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(2,748) |
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Net cash used in operating activities |
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(32,767) |
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(25,133) |
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Investing activities |
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Purchases of property and equipment |
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(677) |
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— |
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Sales of property and equipment |
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82 |
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— |
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Purchases of investments |
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— |
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(6,461) |
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Maturities of investments |
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4,500 |
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24,580 |
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Net cash provided by investing activities |
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3,905 |
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18,119 |
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Financing activities |
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Proceeds from long-term debt, net |
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9,900 |
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2,386 |
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Proceeds from the exercise of stock options |
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262 |
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— |
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Proceeds from the issuance of common stock, net |
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105,457 |
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(138) |
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Net cash provided by financing activities |
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115,619 |
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2,248 |
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Increase (decrease) in cash, cash equivalents and restricted cash |
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86,757 |
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(4,766) |
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Cash, cash equivalents and restricted cash at beginning of period |
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82,338 |
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32,511 |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
169,095 |
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$ |
27,745 |
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Supplemental disclosure of non-cash financing activities |
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Purchases of property and equipment in accounts payable |
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$ |
527 |
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$ |
— |
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Common stock issuance costs included in accounts payable and accrued expenses |
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$ |
316 |
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$ |
— |
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See accompanying notes to the condensed consolidated financial statements.
6
Verastem, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Verastem, Inc. (the Company) is a biopharmaceutical company focused on developing and commercializing medicines to improve the survival and quality of life for cancer patients. The Company’s operations to date have been limited to organizing and staffing the Company, business planning, raising capital, identifying and acquiring potential product candidates and undertaking preclinical studies and clinical trials of its product candidates.
The Company is subject to a number of risks similar to other life science companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, inability to obtain marketing approval of product candidates, competitors developing new technological innovations, market acceptance of the Company’s products and protection of proprietary technology. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate product revenue or achieve profitability and may need to raise additional capital.
The Company has historical losses from operations and anticipates that it will continue to incur losses for the foreseeable future as it continues the research and development and clinical trials of its product candidates, and seeks marketing approval for its lead product candidate, duvelisib. During the quarter ended June 30, 2018, the Company raised in excess of $125.0 million through a number of strategic financings and a license arrangement. As of June 30, 2018, the Company had cash and cash equivalents of $168.7 million and accumulated deficit of $342.6 million. The Company expects that its cash and cash equivalents outstanding at June 30, 2018 will be sufficient to fund its obligations for at least twelve months from the date of issuance of these condensed consolidated financial statements.
2. Summary of significant accounting policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2018. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (SEC) on March 13, 2018.
Significant Accounting Policies
The significant accounting policies identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 that require the Company to make estimates and assumptions include accrued research and development expenses and stock-based compensation. During the six months ended June 30, 2018, there were no material changes to the significant accounting policies, except for the adoption of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board (the FASB), as well as significant accounting policies over revenue recognition and collaborative arrangements, each of which is detailed below.
7
Revenue Recognition - Effective January 1, 2018, the Company adopted ASC 606. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines which goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company may enter into collaboration and licensing arrangements for research and development, manufacturing, and commercialization activities, which have components within the scope of ASC 606, with collaboration partners for the development and commercialization of therapeutic candidates. The arrangements generally contain multiple elements or deliverables, which may include (1) licenses, or options to obtain licenses, to the Company's intellectual property, (2) research and development activities performed for the collaboration partner, (3) participation on joint steering committees, and (4) the manufacturing of commercial, clinical or preclinical material. Payments pursuant to these arrangements typically include non-refundable, upfront payments, milestone payments upon achieving significant development events, research and development reimbursements, sales milestones, and royalties on future product sales. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period. The contracts into which the Company enters generally do not include significant financing components.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract within the scope of ASC 606; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use significant judgment to determine: a) the number of performance obligations based on the determination under step (ii) above; b) the transaction price under step (iii) above; c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above; and d) the measure of progress in step (v) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below.
Exclusive Licenses - If the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other elements, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of its associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining elements, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress of each reporting period and, if necessary, adjusts
8
the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, is subject to estimates by management and may change over the course of the agreement. Such a change could have a material impact on the amount of revenue the Company records in future periods.
Customer Options - If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services such as research and development services or manufacturing services, the goods and services underlying the customer options are not considered to be performance obligations at the inception of the arrangement; rather, such goods and services are contingent on exercise of the option, and the associated option fees are not included in the transaction price. The Company evaluates customer options for material rights or options to acquire additional goods or services for free or at a discount. If a customer option is determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the estimated probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until, at the earliest, the option is exercised.
Milestone Payments - At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the respective milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
Royalties - For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.
Collaborative Arrangements - Contracts are considered to be collaborative arrangements when they satisfy the following criteria defined in ASC 808, Collaborative Arrangements: (i) the parties to the contract must actively participate in the joint operating activity and (ii) the joint operating activity must expose the parties to the possibility of significant risk and rewards, based on whether or not the activity is successful. Payments received from or made to a partner that are the result of a collaborative relationship with a partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction or increase to research and development expense, respectively.
For a complete discussion of the Company’s accounting for its license and collaboration agreement, see Note 11, License and Collaboration Agreement.
Recently Issued Accounting Standards Updates
In June 2018, the FASB issued Accounting Standards Update (ASU) 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. ASU 2018-07 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted, but no earlier than the date on which ASC 606 is adopted. The Company has not elected to early
9
adopt this standard and is currently evaluating the impact the adoption of the standard will have on its condensed consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance under FASB Accounting Standards Codification (ASC) Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. The guidance also eliminates the current real estate-specific provisions for all entities. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoption of the standard will have on its condensed consolidated financial statements and related disclosures.
Recently Adopted Accounting Standards Updates
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after a modification. ASU 2017-09 was effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard prospectively effective January 1, 2018. The adoption of this ASU did not have an effect on the Company’s condensed consolidated financial statements or related disclosures.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 was effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018. Upon adoption of ASU 2016-18, the Company applied the retrospective transition method for each period presented and included approximately $162,000 of restricted cash in the beginning-of-period and end-of-period cash, cash equivalents and restricted cash balance reflected in the condensed consolidated statement of cash flows for the six months ended June 30, 2017. A reconciliation of cash, cash equivalents and restricted cash for each period presented is provided in Note 3 to the condensed consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard was effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018. The adoption of this ASU did not have an effect on the Company’s condensed consolidated financial statements or related disclosures.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) which amends the guidance for accounting for revenue from contracts with customers. This ASU supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. In 2015 and 2016, the FASB issued additional ASUs related to ASC 606 that delayed the effective date of the guidance and clarified various aspects of the new revenue guidance, including principal versus agent considerations, identifying performance obligations, and licensing, and they include other improvements and practical expedients. The Company adopted this new standard on January 1, 2018 using the full retrospective method. There was no change to the Company’s condensed consolidated financial statements as a result of the adoption. The Company’s license and collaboration agreement with Yakult Honsha Co., Ltd (Yakult) was accounted for under ASC 606. See Note 11, License and Collaboration Agreement.
10
3. Cash, cash equivalents and restricted cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):
|
|
June 30, 2018 |
|
December 31, 2017 |
||
Cash and cash equivalents |
|
$ |
168,692 |
|
$ |
82,176 |
Restricted cash (included in prepaid expenses and other current assets) |
|
|
161 |
|
|
— |
Restricted cash |
|
|
242 |
|
|
162 |
Total cash, cash equivalents and restricted cash |
|
$ |
169,095 |
|
$ |
82,338 |
Amounts included in restricted cash represent cash held to collateralize outstanding letters of credit in the amount of approximately $403,000 and $162,000 as of June 30, 2018 and December 31, 2017, respectively, provided as a security deposit for the Company’s office space located in Needham, Massachusetts.
4. Fair value of financial instruments
The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:
Level 1 inputs |
Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date. |
Level 2 inputs |
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
Level 3 inputs |
Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. |
Items Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018 |
|
||||||||||
Description |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
167,710 |
|
$ |
150,741 |
|
$ |
16,969 |
|
$ |
— |
|
Total financial assets |
|
$ |
167,710 |
|
$ |
150,741 |
|
$ |
16,969 |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2017 |
|
||||||||||
Description |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
80,894 |
|
$ |
75,478 |
|
$ |
5,416 |
|
$ |
— |
|
Short-term investments |
|
|
4,496 |
|
|
— |
|
|
4,496 |
|
|
— |
|
Total financial assets |
|
$ |
85,390 |
|
$ |
75,478 |
|
$ |
9,912 |
|
$ |
— |
|
The Company’s cash equivalents and investments are comprised of U.S. Government money market funds and corporate bonds and commercial paper of publicly traded companies. These investments and cash equivalents have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models,
11
including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of June 30, 2018 and December 31, 2017.
Fair Value of Financial Instruments
The fair value of the Company’s long-term debt is determined using a discounted cash flow analysis using current applicable rates for similar instruments as of the condensed consolidated balance sheet dates. The carrying value of the Company’s long-term debt, including the current portion, at June 30, 2018 and December 31, 2017, was approximately $24.9 million and $14.8 million, respectively. At June 30, 2018, the Company estimates that the fair value of its long-term debt, including the current portion, was approximately $26.9 million. The fair value of the Company’s long-term debt was determined using Level 3 inputs.
5. Investments
Cash, cash equivalents, and investments consist of the following (in thousands):
|
|
June 30, 2018 |
|
||||||||||
|
|
|
|
|
Gross |
|
Gross |
|
|
|
|
||
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Fair |
|
||||
|
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and money market accounts |
|
$ |
151,723 |
|
$ |
— |
|
$ |
— |
|
$ |
151,723 |
|
Corporate bonds and commercial paper |
|
$ |
16,965 |
|
$ |
5 |
|
$ |
(1) |
|
$ |
16,969 |
|
Total cash and cash equivalents |
|
$ |
168,688 |
|
$ |
5 |
|
$ |
(1) |
|
$ |
168,692 |
|
|
|
December 31, 2017 |
|
||||||||||
|
|
|
|
|
Gross |
|
Gross |
|
|
|
|
||
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Fair |
|
||||
|
|
Cost |
|
Gains |
|
Losses |
|
Value |
|
||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and money market accounts |
|
$ |
76,760 |
|
$ |
— |
|
$ |
— |
|
$ |
76,760 |
|
Corporate bonds and commercial paper (due within 90 days) |
|
|
5,418 |
|
$ |
— |
|
$ |
(2) |
|
$ |
5,416 |
|
Total cash and cash equivalents |
|
$ |
82,178 |
|
$ |
— |
|
$ |
(2) |
|
$ |
82,176 |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and commercial paper (due within 1 year) |
|
$ |
4,496 |
|
$ |
— |
|
$ |
— |
|
$ |
4,496 |
|
Total investments |
|
$ |
4,496 |
|
$ |
— |
|
$ |
— |
|
$ |
4,496 |
|
Total cash, cash equivalents and investments |
|
$ |
86,674 |
|
$ |
— |
|
$ |
(2) |
|
$ |
86,672 |
|
There were no realized gains or losses on investments for the three and six months ended June 30, 2018 or 2017, respectively. There were two and five investments in an unrealized loss position as of June 30, 2018 and December 31, 2017, respectively. None of these investments had been in an unrealized loss position for more than 12 months as of June 30, 2018 and December 31, 2017, respectively. The aggregate unrealized loss on these securities as of June 30, 2018 and December 31, 2017 was approximately $1,000 and $2,000, respectively, and the fair value was $2.5 million and $9.9 million, respectively. The Company considered the decline in the market value for these investments to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be required to sell these investments before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of June 30, 2018 and December 31, 2017, respectively.
12
6. Accrued expenses
Accrued expenses consist of the following (in thousands):
|
|
|
|
|
|
||
|
|
June 30, 2018 |
|
December 31, 2017 |
|
||
Contract research organization costs |
|
$ |
7,847 |
|
$ |
3,774 |
|
Compensation and related benefits |
|
|
3,225 |
|
|
2,622 |
|
Professional fees |
|
|
472 |
|
|
617 |
|
Consulting fees |
|
|
358 |
|
|
579 |
|
Other |
|
|
332 |
|
|
350 |
|
Total accrued expenses |
|
$ |
12,234 |
|
$ |
7,942 |
|
7. Long-term debt
On March 21, 2017 (Closing Date), Verastem, Inc. (the Borrower) entered into a term loan facility of up to $25.0 million with Hercules. The term loan facility is governed by a loan and security agreement, dated March 21, 2017 (the Original Loan Agreement), which was amended on January 4, 2018 and March 6, 2018 (the Amended Loan Agreement) to increase the total borrowing limit under the Original Loan Agreement from up to $25.0 million to up to $50.0 million (the Term Loan), pursuant to certain conditions of funding.
As of June 30, 2018, the Company has borrowed a total of $25.0 million in term loans, which includes $10.0 million borrowed in June 2018. The availability of the remaining $25.0 million of borrowing capacity under the Amended Loan Agreement is subject to Hercules’ sole discretion, and may be drawn as term loans (each a Term F Loan Advance) in minimum increments of $5.0 million.
The Term Loan will mature on December 1, 2020 (Loan Maturity Date). Each advance accrues interest at a floating per annum rate equal to the greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x) 10.5% plus (y) (A) the prime rate minus (B) 4.5%. The Term Loan provided for interest-only payments until November 1, 2018, which was extended to May 1, 2019 pursuant to the Amended Loan Agreement upon the Borrower’s receipt of a minimum of $20.0 million in cash proceeds from a sale of equity securities in December 2017. Thereafter, amortization payments will be payable monthly in 20 installments of principal and interest (subject to recalculation upon a change in prime rates).
The Term Loan is secured by a lien on substantially all of the assets of the Borrower, other than intellectual property, and contains customary covenants and representations.
The Company assessed all terms and features of the Amended Loan Agreement in order to identify any potential embedded features that would require bifurcation or any beneficial conversion features. As part of this analysis, the Company assessed the economic characteristics and risks of the Amended Loan Agreement, including put and call features. The Company determined that all features of the Amended Loan Agreement were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company’s condensed consolidated financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s original assessment through June 30, 2018.
The future principal payments under the Amended Loan Agreement are as follows as of June 30, 2018 (in thousands):
Remainder of 2018 |
|
$ |
— |
2019 |
|
|
5,984 |
2020 |
|
|
19,016 |
Total principal payments |
|
$ |
25,000 |
13
8. Net loss per share
Basic and diluted net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options and restricted stock units (RSUs), are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.
The following potentially dilutive securities were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Outstanding stock options |
|
11,390,340 |
|
7,573,155 |
|
11,390,340 |
|
7,573,155 |
|
Outstanding restricted stock units |
|
162,125 |
|
— |
|
162,125 |
|
— |
|
Total potentially dilutive securities |
|
11,552,465 |
|
7,573,155 |
|
11,552,465 |
|
7,573,155 |
|
9. Stock‑based compensation
Stock options
A summary of the Company’s stock option activity and related information for the six months ended June 30, 2018 is as follows:
|
|
|
|
|
|
|
Weighted-average |
|
|
|
|
|
|
|
|
Weighted-average |
|
remaining |
|
Aggregate |
|
||
|
|
|
|
exercise price per |
|
contractual term |
|
intrinsic value |
|
||
|
|
Shares |
|
share |
|
(years) |
|
(in thousands) |
|
||
Outstanding at December 31, 2017 |
|
8,719,978 |
|
$ |
5.19 |
|
7.9 |
|
$ |
6,150 |
|
Granted |
|
3,297,891 |
|
$ |
3.54 |
|
|
|
|
|
|
Exercised |
|
(186,206) |
|
$ |
1.40 |
|
|
|
|
|
|
Forfeited/cancelled |
|
(441,323) |
|
$ |
3.40 |
|
|
|
|
|
|
Outstanding at June 30, 2018 |
|
11,390,340 |
|
$ |
4.84 |
|
7.9 |
|
$ |
34,810 |
|
Vested at June 30, 2018 |
|
5,539,332 |
|
$ |
6.48 |
|
6.5 |
|
$ |
13,582 |
|
Vested and expected to vest at June 30, 2018(1) |
|
11,047,340 |
|
$ |
4.90 |
|
7.9 |
|
$ |
33,502 |
|
(1) |
This represents the number of vested options as of June 30, 2018, plus the number of unvested options expected to vest as of June 30, 2018. |
The fair value of each stock option granted during the six months ended June 30, 2018 and 2017 was estimated on the grant date using the Black-Scholes option-pricing model using the following weighted-average assumptions:
|
|
Six months ended June 30, |
||||
|
|
2018 |
|
2017 |
||
Risk-free interest rate |
|
2.51 |
% |
|
2.05 |
% |
Volatility |
|
81 |
% |
|
79 |
% |
Dividend yield |
|
— |
|
|
— |
|
Expected term (years) |
|
6.0 |
|
|
6.4 |
|
During the first quarter of 2018, the Company granted stock options to purchase a total of 582,500 shares of common stock to certain executives that vest only upon the achievement of specified performance conditions. During the quarter ended June 30, 2018, the Company determined that one of the performance conditions had been achieved and that one other performance condition continues to be probable of achievement. As a result, the Company has recognized approximately $158,000 and $508,000 of stock-based compensation expense during the three and six months ended June 30, 2018, respectively related to awards that vest upon the achievement of performance conditions.
14
At June 30, 2018, there was $12.2 million of total unrecognized compensation cost related to unvested stock options and the Company expects to recognize this cost over a remaining weighted-average period of approximately 3 years.
Restricted stock units
The Company awards RSUs to employees under its 2012 Incentive Plan. Each RSU entitles the holder to receive one share of the Company’s common stock when the RSU vests. The RSUs vest in four substantially equal installments on each of the first four anniversaries of the vesting commencement date, subject to the employee’s continued employment with, or service to, the Company on such vesting date. Compensation expense is recognized on a straight-line basis.
A summary of RSU activity during the six months ended June 30, 2018 is as follows:
|
|
|
Shares |
|
Weighted-average grant date fair value per share |
|
|
Outstanding at December 31, 2017 |
|
|
— |
|
$ |
— |
|
Granted |
|
|
175,000 |
|
$ |
3.00 |
|
Vested |
|
|
— |
|
$ |
— |
|
Forfeited |
|
|
(12,875) |
|
$ |
3.00 |
|
Outstanding at June 30, 2018 |
|
|
162,125 |
|
$ |
3.00 |
|
At June 30, 2018, there was approximately $457,000 of total unrecognized compensation cost related to unvested RSUs and the Company expects to recognize this cost over a remaining weighted-average period of approximately 4 years.
10. Common stock
At-the-market equity offering programs
In March 2017, the Company terminated the at-the-market equity offering program established in December 2013 and established a new at-the-market equity offering program pursuant to which it was able to offer and sell up to $35.0 million of its common stock at then current market prices from time to time through Cantor Fitzgerald & Co. (Cantor) as sales agent. In August 2017, the Company amended its sales agreement with Cantor to increase the maximum aggregate offering price of shares of common stock that can be sold under the at-the-market equity offering program to $75.0 million.
15
During the three and six months ended June 30, 2018, the Company sold 6,314,410 and 6,481,475 shares under this program for net proceeds of approximately $23.7 million and $24.3 million (after deducting commissions and other offering expenses), respectively. Through June 30, 2018, the Company has sold a total of 11,518,354 shares under this program for net proceeds of approximately $47.3 million (after deducting commissions and other offering expenses).
Equity offerings
On May 16, 2018, the Company entered into an Underwriting Agreement with Cantor relating to the underwritten offering of 7,777,778 shares (the Shares) of the Company’s common stock. Cantor agreed to purchase the Shares pursuant to the Underwriting Agreement at a price of $4.31 per share. In addition, the Company granted Cantor an option to purchase, at the public offering price less any underwriting discounts and commissions, an additional 1,166,666 shares of the Company’s common stock, exercisable for 30 days from the date of the prospectus supplement. The option was exercised by Cantor in full on May 23, 2018. The aggregate proceeds from Cantor, net of underwriting discounts and offering costs, were approximately $38.3 million.
On June 14, 2018, the Company entered into a Purchase Agreement with Consonance Capital Master Account L.P. and P Consonance Opportunities Ltd. (collectively, Consonance) relating to the registered offering of 7,166,666 shares of its common stock at a price of $6.00 per share. The aggregate proceeds from Consonance, net of offering costs, were approximately $42.8 million.
11. License and Collaboration Agreement
On June 5, 2018, the Company entered into a license and collaboration agreement (the Agreement) with Yakult, under which the Company granted exclusive rights to Yakult to develop and commercialize products containing duvelisib in Japan for the treatment, prevention, palliation or diagnosis of all oncology indications in humans or animals.
Under the terms of the Agreement, Yakult received an exclusive right to develop and commercialize products containing duvelisib in Japan under mutually agreed development and commercialization plans at its own cost and expense. Yakult also received certain limited manufacturing rights in the event that the Company is unable to manufacture or supply sufficient quantities of duvelisib or products containing duvelisib to Yakult during the term of the Agreement. The Company retained all rights to duvelisib outside of Japan.
Yakult paid the Company an upfront, non-refundable payment of $10.0 million in June 2018. The Company is also entitled to receive aggregate payments of up to $90.0 million if certain development, regulatory and commercial milestones are successfully achieved. Yakult is obligated to pay the Company a double-digit royalty on net sales of products containing duvelisib in Japan, subject to reduction in certain circumstances, and to fund certain global development costs related to worldwide clinical trials conducted by the Company in which Yakult has opted to participate (Global Clinical Trials) on a pro-rata basis.
Unless earlier terminated by either party, the Agreement will expire upon the fulfillment of Yakult’s royalty obligations to the Company for the sale of any products containing duvelisib in Japan, which royalty obligations expire, on a product-by-product basis, upon the last to occur of (a) expiration of valid claims covering such product, (b) expiration of regulatory exclusivity for such product or (c) 10 years from first commercial sale of such product. Yakult may terminate the Agreement in its entirety at any time with 180 days’ written notice. Either party may terminate the Agreement in its entirety with 60 days’ written notice for the other party’s material breach if such party fails to cure the breach. The Company may terminate the Agreement if (i) Yakult fails to use commercially reasonable efforts to develop and commercialize products containing duvelisib in Japan or (ii) Yakult challenges any patent licensed by the Company to Yakult under the Agreement. Either party may terminate the Agreement in its entirety upon certain insolvency events involving the other party.
16
The Company first assessed the Agreement under ASC 808 to determine whether the Agreement (or part of the Agreement) represents a collaborative arrangement based on the risks and rewards and activities of the parties pursuant to the Agreement. The Company accounts for collaborative arrangements (or elements within the contract that are deemed part of a collaborative arrangement), which represent a collaborative relationship and not a customer relationship, outside the scope of ASC 606. For a component of the Agreement, the Company concluded that both the Company and Yakult are exposed to significant risks while developing duvelisib and ultimately would share in the reward upon successful commercialization of duvelisib. The Company then considered each remaining component in the Agreement to determine if ASC 606 should be applied to those components. Generally, the components in the Agreement fall under one of two potential research and development activities: (i) the parties’ joint participation in Global Clinical Trials and (ii) the territory-specific development of duvelisib.
For the parties’ participation in the Global Clinical Trials, the Company concluded that the research and development activities and payments related to such activities are not within the scope of ASC 606 as Yakult is not a customer of the Company with regards to these activities in the context of the Agreement. As such, costs incurred to execute the Global Clinical Trials will be recorded as research and development expense and payments received from Yakult related to such will be recorded as a reduction of research and development expense.
For Territory-specific activities, the Company concluded that Yakult is a customer with regard to this component in the context of the Agreement. As such, the Territory-specific component and all related payments are within the scope of ASC 606.
The Company determined that there were two material promises associated with the territory-specific activities: (i) an exclusive license to develop, manufacture and commercialize duvelisib in the territory and (ii) the initial technology transfer. The Company determined that the exclusive license and initial technology transfer were not distinct from another, as the license has limited value without the initial technology. Therefore, the exclusive license and initial technology transfer are combined as a single performance obligation. The Company evaluated the option rights for manufacturing and supply services to determine whether they represent material rights to Yakult and concluded that the options were not issued at a significant and incremental discount and therefore do not represent material rights. As such, they are not performance obligations at the outset of the arrangement. Based on this assessment, the Company concluded one performance obligation exists at the outset of the Agreement: the exclusive license combined with the initial technology transfer.
The Company determined that the upfront payment of $10.0 million constituted the transaction price as of the outset of the Agreement. Future potential milestone payments were fully constrained as the risk of significant revenue reversal related to these amounts has not yet been resolved. The achievement of the future potential milestones is not within the Company’s control and is subject to certain research and development success or regulatory approvals and therefore carry significant uncertainty. The Company will reevaluate the likelihood of achieving future milestones at the end of each reporting period. As all performance obligations have been satisfied, if the risk of significant revenue reversal is resolved, any future milestone revenue from the arrangement will be added to the transaction price (and thereby recognized as revenue) in the period the risk is relieved.
The Company satisfied the performance obligation upon delivery of the license and initial technology transfer and recognized the upfront payment of $10.0 million as license revenue during the three months ended June 30, 2018. There was no deferred revenue as of June 30, 2018.
12. Commitments and contingencies
On April 15, 2014, the Company entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts. Effective February 15, 2018, the Company amended its lease agreement to relocate within the facility to another location consisting of 27,810 square feet of office space (the Amended Lease Agreement). The Amended Lease Agreement extends the expiration date of the lease from September 2019 through May 2025. Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $660,000, which increases during the lease term to $1.1 million for the last twelve-month period. The
17
deferred rent obligation is included in accrued expenses (current portion) and other liabilities (noncurrent portion) in the condensed consolidated balance sheets. The Company has also agreed to pay its proportionate share of increases in operating expenses and property taxes for the building in which the leased space is located.
The minimum aggregate future lease commitments as of June 30, 2018 are as follows (in thousands):
Remainder of 2018 |
|
$ |
220 |
|
2019 |
|
|
716 |
|
2020 |
|
|
971 |
|
2021 |
|
|
1,020 |
|
2022 |
|
|
1,041 |
|
Thereafter |
|
|
2,600 |
|
Total |
|
$ |
6,568 |
|
In conjunction with the execution of the Amended Lease Agreement, the Company increased its security deposit by increasing its existing letter of credit to approximately $403,000. The amount is included in prepaids and other current assets and restricted cash on the condensed consolidated balance sheets as of June 30, 2018.
13. Subsequent events
The Company reviews all activity subsequent to the end of the quarter but prior to issuance of the condensed consolidated financial statements for events that could require disclosure or that could impact the carrying value of assets or liabilities as of the balance sheet date. There are no material subsequent events to the three and six months ended June 30, 2018.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10‑Q. The following discussion contains forward‑looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward‑looking statements as a result of certain factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for our fiscal year ended December 31, 2017. Please also refer to the sections under headings “Forward‑Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for our fiscal year ended December 31, 2017.
OVERVIEW
We are a biopharmaceutical company focused on developing and commercializing medicines to improve the survival and quality of life of cancer patients. Our most advanced product candidates, duvelisib and defactinib, utilize a multi-faceted approach designed to treat cancers originating either in the blood or major organ systems. We are currently evaluating these compounds in both preclinical and clinical studies as potential therapies for certain cancers, including leukemia, lymphoma, lung cancer, ovarian cancer, mesothelioma, and pancreatic cancer. We believe that these compounds may be beneficial as therapeutics either as single agents or when used in combination with immuno-oncology agents or other current and emerging standard of care treatments in aggressive cancers that are poorly served by currently available therapies.
Duvelisib targets the Phosphoinositide 3-kinase (PI3K) signaling pathway. The PI3K signaling pathway plays a central role in cancer proliferation and survival. Duvelisib is an investigational oral therapy designed to attack both malignant B-cells and T-cells and disrupt the tumor microenvironment to help thwart their growth and proliferation through the dual inhibition of PI3K delta and gamma. Duvelisib is being developed for the treatment of patients with hematologic cancers including chronic lymphocytic leukemia and small lymphocytic lymphoma (CLL/SLL) and indolent non-Hodgkin lymphoma (iNHL), which includes follicular lymphoma (FL), and other subtypes of lymphoma, including peripheral T-cell lymphoma (PTCL). Duvelisib has U.S. Food and Drug Administration (FDA) Fast Track Designation for patients with CLL or PTCL who have received at least one prior therapy and for patients with FL who have received at least two prior therapies. In addition, duvelisib has orphan drug designation for patients with CLL/SLL and FL in the United States and European Union.
Duvelisib was evaluated in late- and mid-stage clinical trials, including DUO™, a randomized, Phase 3 monotherapy study in patients with relapsed or refractory CLL/SLL, and DYNAMO™, a single-arm, Phase 2 monotherapy study in patients with double-refractory iNHL, including FL, SLL, and marginal zone lymphoma (MZL). Both DUO and DYNAMO achieved their primary endpoints. Our New Drug Application (NDA) requesting the full approval of duvelisib for the treatment of patients with relapsed or refractory CLL/SLL and accelerated approval for the treatment of patients with relapsed or refractory FL was accepted for filing by the FDA with Priority Review and a target action date of October 5, 2018. We are currently building our U.S. commercial capabilities for our potential product launch in 2018, have entered into a license and collaboration agreement with Yakult Hoksha Co. Ltd. (Yakult), under which we granted Yakult exclusive rights to develop and commercialize products containing duvelisib in Japan for the treatment, prevention, palliation or diagnosis of cell oncology indications in humans and animals, and we intend to enter into additional partnerships or collaborations for the potential commercialization of duvelisib outside of the United States.
Duvelisib is also being evaluated through a number of investigator-sponsored trials in combination with other therapies. In a Phase 2 trial in collaboration with the Sarah Cannon Research Institute, duvelisib is being evaluated in combination with Rituxan or Bendamustine/Rituxan in relapsed/refractory CLL/SLL & iNHL. Duvelisib is also currently being evaluated in two Phase 1 studies in collaboration with the Dana Farber Cancer Institute, first in combination with Fludarabine, Cyclophosprride and Rituximab (FCR) as a first-line treatment for younger CLL/SLL patients and additionally in combination with venetoclax in relapsed/refractory CLL/SLL patients. Finally, duvelisib is being evaluated in relapsed/refractory T-cell lymphoma patients in combination with Romidepsin or Bortezomib in collaboration with Memorial Sloane Kettering Cancer Center.
19
Defactinib is a targeted inhibitor of the Focal Adhesion Kinase (FAK) signaling pathway. FAK is a non-receptor tyrosine kinase encoded by the PTK-2 gene that is involved in cellular adhesion and, in cancer, metastatic capability. Similar to duvelisib, defactinib is also orally available and designed to be a potential therapy for patients to take at home under the advice of their physician. Defactinib has orphan drug designation in ovarian cancer in the United States and the European Union, and in mesothelioma in the United States, the European Union, and Australia.
Defactinib is currently being evaluated in a Phase 1b study in combination with Merck & Co.’s PD-1 inhibitor pembrolizumab and gemcitabine in patients with advanced pancreatic cancer, a Phase 1/2 study in collaboration with Cancer Research UK and Merck & Co. for the combination of defactinib with pembrolizumab in patients with non-small cell lung cancer (NSCLC), mesothelioma or pancreatic cancer, a Phase 1b study in collaboration with Chugai and Royal Marsden Hospital for the combination of defactinib with RO5126766 (RAF/MEK inhibitor) in patients with advanced solid tumors, and a Phase 1 study in collaboration with UCSD Moores Cancer Center for the combination of defactinib and platinum and taxane in patients with carboplatin resistant ovarian cancer.
Our operations to date have been organizing and staffing our company, business planning, raising capital, identifying and acquiring potential product candidates and undertaking preclinical studies and clinical trials for our product candidates. To date, we have not generated any revenues. We have financed our operations to date through private placements of preferred stock, public offerings of our common stock, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules Capital, Inc. (Hercules) in March 2017, as amended, and the upfront payment under our license and collaboration agreement with Yakult.
As of June 30, 2018, we had an accumulated deficit of $342.6 million. Our net loss was $18.4 million, $39.4 million, $13.4 million and $26.4 million for the three and six months ended June 30, 2018 and 2017, respectively. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as we seek marketing approval for our lead product candidate, duvelisib, and continue the research and development and clinical trials of all of our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we may need to obtain additional funding in connection with our continuing operations. Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or any commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.
The critical accounting policies we identified in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2017 related to accrued research and development expenses and stock-based compensation. During the six months ended June 30, 2018, there were no material changes to the significant accounting policies, except for the adoption of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board (the FASB), as well as significant accounting policies over revenue recognition and collaborative arrangements, each of which is detailed below.
20
Revenue Recognition - Effective January 1, 2018, we adopted ASC 606. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations; and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
We may enter into collaboration and licensing arrangements for research and development, manufacturing, and commercialization activities, which have components within the scope of ASC 606, with collaboration partners for the development and commercialization of therapeutic candidates. The arrangements generally contain multiple elements or deliverables, which may include (1) licenses, or options to obtain licenses, to our intellectual property, (2) research and development activities performed for the collaboration partner, (3) participation on joint steering committees, and (4) the manufacturing of commercial, clinical or preclinical material. Payments pursuant to these arrangements typically include non-refundable, upfront payments, milestone payments upon achieving significant development events, research and development reimbursements, sales milestones, and royalties on future product sales. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period. The contracts into which the Company enters generally do not include significant financing components.
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of our agreements, we perform the following steps: (i) identification of the promised goods or services in the contract within the scope of ASC 606; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must use significant judgment to determine: a) the number of performance obligations based on the determination under step (ii) above; b) the transaction price under step (iii) above; c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above; and d) the measure of progress in step (v) above. We use judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below.
Collaborative Arrangements - Contracts are considered to be collaborative arrangements when they satisfy the following criteria defined in ASC 808, Collaborative Arrangements: (i) the parties to the contract must actively participate in the joint operating activity; and (ii) the joint operating activity must expose the parties to the possibility of significant risk and rewards, based on whether or not the activity is successful. Payments received from or made to a partner that are the result of a collaborative relationship with a partner, instead of a customer relationship (such as co-development activities) are recorded as a reduction to or an increase in research and development expense, respectively.
21
RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 2018 and 2017
License revenue. License revenue for the three months ended June 30, 2018 (2018 Quarter) was $10.0 million and was related to an upfront payment received in connection with the license and collaboration agreement executed between ourselves and Yakult in June 2018. We had no revenue during the three months ended June 30, 2017 (2017 Quarter).
Research and development expense. Research and development expense for the 2018 Quarter was $12.4 million compared to $9.0 million for the 2017 Quarter. The $3.4 million increase from the 2017 Quarter to the 2018 Quarter was primarily related to an increase of $1.6 million in contract research organization (CRO) expense for outsourced biology, development and clinical services, which includes our clinical trial costs, an increase of approximately $999,000 in personnel related costs, an increase of approximately $386,000 in stock-based compensation, and an increase of approximately $380,000 in occupancy and other costs.
We allocate the expenses related to external research and development services, such as CROs, clinical sites, manufacturing organizations and consultants by project. The table below summarizes our allocation of research and development expenses to our clinical programs, including duvelisib and defactinib, for the 2018 Quarter and the 2017 Quarter. We use our employee and infrastructure resources across multiple research and development projects. Our project costing methodology does not allocate personnel and other indirect costs to specific clinical programs. These unallocated research and development expenses are summarized in the table below and include approximate personnel related costs of $2.1 million and $1.1 million for the 2018 Quarter and the 2017 Quarter, respectively.
|
|
Three months ended June 30, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Duvelisib |
|
$ |
7,492 |
|
$ |
5,478 |
|
Defactinib |
|
|
875 |
|
|
911 |
|
Unallocated and other research and development expense |
|
|
3,390 |
|
|
2,416 |
|
Unallocated stock-based compensation expense |
|
|
624 |
|
|
237 |
|
Total research and development expense |
|
$ |
12,381 |
|
$ |
9,042 |
|
General and administrative expense. General and administrative expense for the 2018 Quarter was $15.8 million compared to $4.4 million for the 2017 Quarter. The increase of $11.4 million from the 2017 Quarter to the 2018 Quarter primarily resulted from increases in consulting and professional fees of $5.2 million, including $3.6 million related to commercial launch preparation activities, an increase in personnel related costs of $4.4 million, occupancy costs of approximately $736,000, travel related costs of approximately $395,000, and stock-based compensation and other costs of approximately $616,000.
Interest income. Interest income increased to approximately $343,000 for the 2018 Quarter from approximately $140,000 for the 2017 Quarter. This increase was primarily due to higher investment cost basis and higher interest rates on investments.
Interest expense. Interest expense related to our loan and security agreement executed with Hercules in March 2017 was approximately $516,000 for the 2018 Quarter compared to approximately $109,000 for the 2017 Quarter. The increase was due to a higher principal balance and interest rates in the 2018 Quarter compared to the 2017 Quarter.
Comparison of the six months ended June 30, 2018 and 2017
License revenue. License revenue for the six months ended June 30, 2018 (2018 Period) was $10.0 million and was related to an upfront payment received in connection to our license and collaboration agreement with Yakult. We had no revenue in the six months ended June 30, 2017 (2017 Period).
22
Research and development expense. Research and development expense for the 2018 Period was $23.3 million compared to $17.4 million for the 2017 Period. The $5.9 million increase from the 2017 Period to the 2018 Period was primarily related to an increase of $2.7 million in CRO expense for outsourced biology, development and clinical services, which includes our clinical trial costs, an increase of $1.9 million in personnel related costs, an increase of approximately $591,000 in stock-based compensation, an increase in occupancy costs of approximately $357,000, and an increase in consulting and other fees of approximately $308,000.
We allocate the expenses related to external research and development services, such as CROs, clinical sites, manufacturing organizations and consultants by project. The table below summarizes our allocation of research and development expenses to our clinical programs, including duvelisib and defactinib, for the 2018 Period and the 2017 Period. We use our employee and infrastructure resources across multiple research and development projects. Our project costing methodology does not allocate personnel and other indirect costs to specific clinical programs. These unallocated research and development expenses are summarized in the table below and include approximate personnel related costs of $4.6 million and $2.7 million for the 2018 Period and the 2017 Period, respectively.
|
|
Six months ended June 30, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Duvelisib |
|
$ |
13,484 |
|
$ |
9,525 |
|
Defactinib |
|
|
1,316 |
|
|
1,519 |
|
Unallocated and other research and development expense |
|
|
7,443 |
|
|
5,902 |
|
Unallocated stock-based compensation expense |
|
|
1,072 |
|
|
481 |
|
Total research and development expense |
|
$ |
23,315 |
|
$ |
17,427 |
|
General and administrative expense. General and administrative expense for the 2018 Period was $25.6 million compared to $9.2 million for the 2017 Period. The increase of $16.4 million from the 2017 Period to the 2018 Period primarily resulted from increases in consulting and professional fees of $7.7 million, including $5.4 million related to commercial launch preparation activities, an increase in personnel related costs of $6.5 million, an increase in occupancy costs of approximately $813,000, an increase in travel related costs of approximately $806,000, and an increase in stock-based compensation and other costs of approximately $615,000.
Interest income. Interest income increased to approximately $534,000 for the 2018 Period from approximately $295,000 for the 2017 Period. This increase was primarily due to higher investment cost basis and higher interest rates on investments.
Interest expense. Interest expense related to our loan and security agreement executed with Hercules in March 2017 was approximately $996,000 for the 2018 Period compared to approximately $121,000 for the 2017 Period. The increase was due to a higher principal balance, higher interest rates, and an increase in the number of days outstanding in the 2018 Period compared to the 2017 Period.
LIQUIDITY AND CAPITAL RESOURCES
Sources of liquidity
We have financed our operations to date through private placements of preferred stock, public offerings of our common stock, sales of common stock under our at-the market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, and the upfront payment under our license and collaboration agreement with Yakult.
As of June 30, 2018, we had $168.7 million in cash and cash equivalents.
23
Cash flows
The following table sets forth the primary sources and uses of cash for the 2018 Period and the 2017 Period (in thousands):
|
|
Six months ended June 30, |
|
||||
|
|
2018 |
|
2017 |
|
||
Net cash (used in) provided by: |
|
|
|
|
|
|
|
Operating activities |
|
$ |
(32,767) |
|
$ |
(25,133) |
|
Investing activities |
|
|
3,905 |
|
|
18,119 |
|
Financing activities |
|
|
115,619 |
|
|
2,248 |
|
Increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
86,757 |
|
$ |
(4,766) |
|
Operating activities. The use of cash in both periods resulted primarily from our net losses adjusted for non-cash charges and changes in the components of working capital.
Investing activities. The cash provided by investing activities for the 2018 Period primarily reflects the maturities of investments of $4.5 million, partially offset by approximately $595,000 in net purchases of property and equipment. The cash provided in investing activities for the 2017 Period reflects the net maturities of investments of $18.1 million.
Financing activities. The cash provided by financing activities for the 2018 Period primarily represents $81.5 million in net proceeds from the sales of our common stock under the Underwriting Agreement and Purchase Agreement described below, $24.3 million in net proceeds received under our at-the-market equity offering program (ATM), $9.9 million in net proceeds received from our loan and security agreement executed with Hercules, and approximately $262,000 related to stock option exercises, offset by the payment of approximately $324,000 of issuance costs related to a sale of our common stock during December 2017. The cash provided by financing activities for the 2017 Period represents $2.4 million in net proceeds received from our loan and security agreement executed with Hercules, offset by approximately $138,000 of deferred financing costs.
In March 2017, we terminated the ATM established in December 2013 and established a new ATM pursuant to which we were able to offer and sell up to $35.0 million of our common stock at then current market prices from time to time through Cantor Fitzgerald & Co. (Cantor), as sales agent. In August 2017, we amended our sales agreement with Cantor to increase the maximum aggregate offering price of shares of common stock that can be sold under the ATM to $75.0 million.
During the three and six months ended June 30, 2018, we sold 6,314,410 and 6,481,475 shares under the ATM for net proceeds of $23.7 million and $24.3 million (after deducting commissions and other offering expenses), respectively. There were no sales under this program in the three and six months ended June 30, 2017. Through June 30, 2018, we sold a total of 11,518,354 shares under the ATM for net proceeds of $47.3 million (after deducting commissions and other offering expenses).
On May 16, 2018, we entered into an Underwriting Agreement with Cantor relating to the underwritten offering of 7,777,778 shares of our common stock. Cantor agreed to purchase the shares of our common stock pursuant to the Underwriting Agreement at a price of $4.31 per share. In addition, we granted Cantor an option to purchase, at the public offering price less any underwriting discounts and commissions, an additional 1,166,666 shares of our common stock, exercisable for 30 days from the date of the prospectus supplement. The option was exercised by Cantor on May 23, 2018. The aggregate proceeds from Cantor, net of underwriting discounts and offering costs, were approximately $38.3 million.
On June 14, 2018, we entered into a purchase agreement with Consonance Capital Master Account L.P. and P Consonance Opportunities Ltd. (collectively, Consonance) relating to the registered offering of 7,166,666 shares of our common stock at a price of $6.00 per share. The aggregate proceeds from Consonance, net of offering costs, were approximately $42.8 million.
24
License and collaboration agreement
On June 5, 2018, we entered into a license and collaboration agreement (the Agreement) with Yakult, under which we granted exclusive rights to Yakult to develop and commercialize products containing duvelisib in Japan for the treatment, prevention, palliation or diagnosis of all oncology indications in humans or animals.
Under the terms of the Agreement, Yakult received an exclusive right to develop and commercialize products containing duvelisib in Japan under mutually agreed development and commercialization plans at its own cost and expense. Yakult also received certain limited manufacturing rights in the event that we are unable to manufacture or supply sufficient quantities of duvelisib or products containing duvelisib to Yakult during the term of the Agreement. We retained all rights to duvelisib outside of Japan.
Yakult paid us an upfront, non-refundable payment of $10.0 million in June 2018. We are also entitled to receive aggregate payments of up to $90.0 million if certain development, regulatory and commercial milestones are successfully achieved. Yakult is obligated to pay us a double-digit royalty on net sales of products containing duvelisib in Japan, subject to reduction in certain circumstances, and to fund certain global development costs related to worldwide clinical trials conducted by us in which Yakult has opted to participate (Global Clinical Trials) on a pro-rata basis.
Unless earlier terminated by either party, the Agreement will expire upon the fulfillment of Yakult’s royalty obligations to us for the sale of any products containing duvelisib in Japan, which royalty obligations expire, on a product-by-product basis, upon the last to occur of (a) expiration of valid claims covering such product, (b) expiration of regulatory exclusivity for such product or (c) 10 years from first commercial sale of such product. Yakult may terminate the Agreement in its entirety at any time with 180 days’ written notice. Either party may terminate the Agreement in its entirety with 60 days’ written notice for the other party’s material breach if such party fails to cure the breach. We may terminate the Agreement if (i) Yakult fails to use commercially reasonable efforts to develop and commercialize products containing duvelisib in Japan or (ii) Yakult challenges any patent licensed by us to Yakult under the Agreement. Either party may terminate the Agreement in its entirety upon certain insolvency events involving the other party.
We recognized the upfront payment of $10.0 million as license revenue upon execution of the Agreement in June 2018.
Funding requirements
We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses and operating losses will increase substantially if and as we:
|
|
|
prepare for the anticipated commercialization of duvelisib; |
|
|
|
continue our ongoing clinical trials, including with our most advanced product candidates duvelisib and defactinib; |
|
|
|
add operational, financial and management information systems and personnel, including personnel to support our product development and planned commercialization efforts; and |
|
|
|
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval. |
We expect our existing cash and cash equivalents will be sufficient to fund our obligations for at least the next twelve months from the date of filing of this Quarterly Report on Form 10-Q. We have based this estimate on assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, and the extent to which we may enter into collaborations with third parties for development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and
25
operating expenses associated with completing the development of our current product candidates. Our future capital requirements will depend on many factors, including:
|
|
|
the scope, progress and results of our ongoing and potential future clinical trials; |
|
|
|
the extent to which we acquire or in-license other products and technologies; |
|
|
|
the costs, timing and outcome of regulatory review of our product candidates (including our efforts to seek approval and fund the preparation and filing of regulatory submissions); |
|
|
|
the costs and timing of commercialization activities for our product candidates, for which we receive marketing approval; |
|
|
|
revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; |
|
|
|
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and |
|
|
|
our ability to establish collaborations on favorable terms, if at all. |
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The disclosure of our contractual obligations and commitments was reported in our Annual Report on Form 10-K for the year ended December 31, 2017. There have not been any material changes from the contractual obligations and commitments previously disclosed in such report other than (i) a change in estimated obligations due to our landlord under the terms of our operating lease, entered into in April 2014, and amended effective February 2018, for our office space located in Needham, Massachusetts and (ii) our borrowing of an additional $10.0 million from Hercules Capital, Inc. in June 2018. These changes are more fully described in Note 12, Commitments and Contingencies and Note 7, Long-term Debt, respectively, to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk related to changes in interest rates. We had cash and cash equivalents of $168.7 million as of June 30, 2018, consisting of cash, U.S. Government money market funds, and corporate bonds and commercial paper of publicly traded companies. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because most of our investments are interest bearing. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates
26
increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.
We contract with CROs and contract manufacturers globally which may be denominated in foreign currencies. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of June 30, 2018, an immaterial amount of our total liabilities was denominated in currencies other than the functional currency.
As of June 30, 2018, we have borrowed $25.0 million under the Amended Loan Agreement. The Amended Loan Agreement bears interest per annum equal to the greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x) 10.5% plus (y) (A) the prime rate minus (B) 4.5%. Changes in interest rates can cause interest charges to fluctuate under the Amended Loan Agreement. A 10% increase in current interest rates would have resulted in an immaterial increase in the amount of cash interest expense for the three and six months ended June 30, 2018.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer and our Chief Operating Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2018, our Chief Executive Officer and our Chief Operating Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in internal control over financial reporting
During the quarter ended June 30, 2018, we implemented certain internal controls in connection with our adoption of ASC Topic 606, Revenue from Contracts with Customers. There have been no other changes in our internal control over financial reporting during the three and six months ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
27
None.
You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Item 1A. (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 as filed with the SEC on March 13, 2018. There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, except as noted below.
The success of our business may be dependent on the actions of our collaborative partners. If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.
An element of our business and funding strategy is to enter into collaborative arrangements with established pharmaceutical and biotechnology companies who will finance or otherwise assist in the development, manufacture and marketing of products incorporating our technology, and who also provide us with funding in the form of milestone payments for progress in clinical development or regulatory approval. For example, in June 2018, we entered into a license and collaboration agreement with Yakult Honsha Co., Ltd. (Yakult) under which we granted exclusive rights to Yakult to develop and commercialize products containing duvelisib in Japan for the treatment, prevention, palliation or diagnosis of all oncology indications in humans or animals under mutually agreed development and commercialization plans at Yakult’s own cost and expense.
We may seek additional third-party collaborators for the development and commercialization of our product candidates. We anticipate that we may seek to enter into additional collaborations for marketing and commercialization of our product candidates in certain territories worldwide at the appropriate time in the future. Our likely collaborators for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates would pose the following risks to us:
· |
collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; |
· |
collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities; |
· |
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; |
· |
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; |
· |
a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products; |
28
· |
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation; |
· |
disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources; |
· |
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and |
· |
if the rights to duvelisib in Japan are returned to us by Yakult, there is no assurance that we would be able to find another partner in Japan and we will need to establish a new development and commercialization strategy for duvelisib in Japan. |
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
RECENT SALES OF UNREGISTERED SECURITIES
None.
PURCHASE OF EQUITY SECURITIES
We did not purchase any of our equity securities during the period covered by this Quarterly Report on Form 10-Q.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
The following disclosure is provided in accordance with and in satisfaction of the requirements of Item 2.02 “Results of Operations and Financial Condition” of Form 8-K:
On August 8, 2018, Verastem, Inc. announced its financial results for the quarter ended June 30, 2018 and commented on certain corporate accomplishments and plans. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 hereto.
The information furnished in Item 5 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
29
The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated herein by reference.
30
10.1 |
*† |
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31.1 |
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31.2 | ||
32.1 |
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32.2 |
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99.1 |
* |
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101.INS |
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XBRL Instance Document |
101.SCH |
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XBRL Taxonomy Extension Schema Document |
101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
*Filed or furnished herewith.
†Confidential treatment requested under 17 C.F.R. §200.80(c) and Rule 24b‑2. The confidential portions of this exhibit have been omitted and are marked accordingly. The confidential portions have been provided separately to the SEC pursuant to the confidential treatment request.
31
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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VERASTEM, INC. |
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Date: August 8, 2018 |
By: |
/s/ ROBERT FORRESTER |
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Robert Forrester |
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President and Chief Executive Officer |
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(Principal executive officer) |
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Date: August 8, 2018 |
By: |
/s/ DANIEL PATERSON |
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Daniel Paterson |
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Chief Operating Officer |
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(Principal financial and accounting officer) |
32
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
LICENSE AND COLLABORATION AGREEMENT
between
VERASTEM, INC.
and
YAKULT HONSHA CO., LTD
DATED
June 5, 2018
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
TABLE OF CONTENTS
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Page |
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ARTICLE 1 DEFINITIONS |
1 | |
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ARTICLE 2 LICENSE |
13 | |
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2.1 |
Exclusive License Grant to Licensee |
13 |
2.2 |
Non-Exclusive License Grant to Licensee |
14 |
2.3 |
Right to Sublicense |
14 |
2.4 |
Right to Subcontract. |
15 |
2.5 |
Upstream Licenses |
16 |
2.6 |
Disclosure of the Verastem IP |
17 |
2.7 |
Verastem Retained Rights |
17 |
2.8 |
License Grant to Verastem |
17 |
2.9 |
No Implied Licenses; Negative Covenant |
17 |
2.10 |
Reimbursement for Third Party IP Sublicense |
17 |
2.11 |
Non-Compete |
18 |
2.12 |
[* * *] |
18 |
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ARTICLE 3 GOVERNANCE |
18 | |
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3.1 |
Alliance Managers |
18 |
3.2 |
Joint Steering Committee |
18 |
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ARTICLE 4 DEVELOPMENT |
21 | |
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4.1 |
Diligence and Responsibilities |
21 |
4.2 |
Development Plan |
21 |
4.3 |
Development Costs |
21 |
4.4 |
Development Records |
22 |
4.5 |
Clinical Trial Audit Rights |
22 |
4.6 |
Development Reports |
23 |
4.7 |
Data Exchange and Use |
23 |
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ARTICLE 5 REGULATORY |
24 | |
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5.1 |
Licensee’s Responsibilities |
24 |
5.2 |
Verastem’s Responsibilities |
25 |
5.3 |
Right of Reference and Use |
25 |
5.4 |
Adverse Events Reporting |
26 |
5.5 |
Safety and Regulatory Audits |
27 |
5.6 |
No Harmful Actions |
27 |
5.7 |
Notice of Regulatory Action |
28 |
i
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
ARTICLE 6 SUPPLY AND COMMERCIALIZATION |
28 | |
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6.1 |
Supply. |
28 |
6.2 |
Commercialization Diligence |
29 |
6.3 |
Commercialization Plan |
29 |
6.4 |
Commercialization Reports |
29 |
6.5 |
Commercial Forecast |
30 |
6.6 |
Coordination of Commercialization Activities |
30 |
6.7 |
Diversion |
30 |
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ARTICLE 7 PAYMENTS |
31 | |
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7.1 |
Upfront Payment |
31 |
7.2 |
Development Milestone Payments |
31 |
7.3 |
Sales Milestone Payments |
32 |
7.4 |
Royalty Payments to Verastem |
32 |
7.5 |
Late Payments |
34 |
7.6 |
Financial Records and Audits |
34 |
7.7 |
Taxes |
35 |
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ARTICLE 8 CONFIDENTIALITY; PUBLICATION |
36 | |
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8.1 |
Duty of Confidence |
36 |
8.2 |
Exemptions |
36 |
8.3 |
Authorized Disclosures |
37 |
8.4 |
Publications |
38 |
8.5 |
Publication and Listing of Clinical Trials |
39 |
8.6 |
Publicity; Use of Names |
39 |
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ARTICLE 9 REPRESENTATIONS, WARRANTIES, AND COVENANTS |
41 | |
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9.1 |
Representations, Warranties of Each Party |
41 |
9.2 |
Representations and Warranties of Verastem |
41 |
9.3 |
[* * *] |
42 |
9.4 |
Representations and Warranties of Licensee |
42 |
9.5 |
Covenant of Verastem |
42 |
9.6 |
Covenants of Licensee |
42 |
9.7 |
Compliance with Anti-Corruption Laws |
43 |
9.8 |
NO OTHER WARRANTIES |
44 |
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ARTICLE 10 INDEMNIFICATION |
44 | |
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10.1 |
By Licensee |
44 |
10.2 |
By Verastem |
45 |
10.3 |
Indemnification Procedure |
45 |
10.4 |
Mitigation of Loss |
46 |
10.5 |
Limitation of Liability |
46 |
ii
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
10.6 |
Insurance |
46 |
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ARTICLE 11 INTELLECTUAL PROPERTY |
46 | |
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11.1 |
Ownership |
46 |
11.2 |
Patent Prosecution |
47 |
11.3 |
Patent Enforcement |
47 |
11.4 |
Infringement of Third Party Rights |
48 |
11.5 |
Patents Licensed From Third Parties |
49 |
11.6 |
Product Trademarks |
49 |
11.7 |
Patent Marking |
50 |
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ARTICLE 12 TERMS AND TERMINATION |
51 | |
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12.1 |
Term |
51 |
12.2 |
Termination |
51 |
12.3 |
Effect of Termination. |
52 |
12.4 |
Bankruptcy Code §365(n) Election |
54 |
12.5 |
Accrued Rights |
54 |
12.6 |
Survival |
54 |
12.7 |
Termination Not Sole Remedy |
54 |
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ARTICLE 13 DISPUTE RESOLUTION |
55 | |
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13.1 |
General |
55 |
13.2 |
Negotiation; Escalation |
55 |
13.3 |
Arbitration |
55 |
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ARTICLE 14 MISCELLANEOUS |
57 | |
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14.1 |
Force Majeure |
57 |
14.2 |
Assignment |
57 |
14.3 |
Severability |
57 |
14.4 |
Notices |
58 |
14.5 |
Governing Law |
59 |
14.6 |
Entire Agreement; Amendments |
59 |
14.7 |
Headings |
59 |
14.8 |
Independent Contractors |
59 |
14.9 |
Waiver |
59 |
14.10 |
Waiver of Rule of Construction |
60 |
14.11 |
Cumulative Remedies |
60 |
14.12 |
Business Day Requirements |
60 |
14.13 |
Further Actions |
60 |
14.14 |
Construction |
60 |
14.15 |
Counterparts |
61 |
14.16 |
Language |
61 |
iii
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
LICENSE AND COLLABORATION AGREEMENT
This License and Collaboration Agreement (this “Agreement”) is made as of June 5, 2018 (the “Effective Date”), by and between Verastem, Inc., a Delaware corporation (“Verastem”), having a place of business at 117 Kendrick Street, #500, Needham, MA 02494, USA, and Yakult Honsha Co., Ltd., a Japanese corporation (“Licensee”), having a place of business at 1-19 Higashi Shimbashi 1-chome, Minato-ku, Tokyo, 105-8660, Japan. Verastem and Licensee are referred to in this Agreement individually as a “Party” and collectively as the “Parties.”
Whereas, Licensee has extensive experience and expertise in, the research, development and commercialization of pharmaceutical products in Japan;
Whereas, Verastem is a biopharmaceutical company that Controls (as defined below) certain intellectual property rights related to the pharmaceutical compound known as Duvelisib; and
Whereas, Licensee is interested in obtaining a license under such intellectual property rights to Develop and Commercialize Licensed Product in the Field in the Territory (each capitalized term as defined below), and Verastem is willing to grant such a license to Licensee, all subject to the terms and conditions set forth herein.
Agreement
Now, Therefore, in consideration of the foregoing premises and the covenants contained herein, the receipt and sufficiency of which are acknowledged, the Parties hereby agree as follows:
Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:
1.2 “Alliance Manager” has the meaning set forth in Section 3.1. |
1
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
1.3 “Anti-Corruption Laws” has the meaning set forth in Section 9.7(a)(i). |
1.5 “Arbitration Notice” has the meaning set forth in Section13.3(a). |
1.6 “Arbitrators” has the meaning set forth in Section 13.3(b). |
1.8 “[* * *] Clinical Trial” means the Clinical Trial with Protocol No. [* * *]. |
1.9 “Business Day” means a day other than a Saturday, Sunday or a day on which banking institutions in New York, New York or Tokyo, Japan are required by Applicable Laws to remain closed. |
1.10 “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31. |
1.11 “Calendar Year” means each twelve (12) month period commencing on January 1. |
1.13 “Clinical Trial” means any human clinical trial of a Licensed Product. |
2
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
this clause (b), an acquisition or a merger or consolidation of such Party or its controlling Affiliate in which the holders of shares of voting capital stock of such Party or its controlling Affiliate, as the case may be, immediately prior to such acquisition, merger or consolidation will beneficially own, directly or indirectly, at least fifty percent (50%) of the shares of voting capital stock of the acquiring Third Party or the surviving corporation in such acquisition, merger or consolidation, as the case may be, immediately after such acquisition, merger or consolidation. |
1.16 “Combination Product” means any pharmaceutical product which contains two or more active pharmaceutical ingredients, at least one of which is the Licensed Compound. For the avoidance of doubt, a Licensed Product containing the Licensed Compound as its sole active pharmaceutical ingredient will not constitute a Combination Product, even if it is co-administered with a pharmaceutical product containing one or more active pharmaceutical ingredients that are not the Licensed Compound. |
1.17 “Commercialization” or “Commercialize” means all activities directed to marketing, promoting, advertising, exhibiting, distributing (including storage for distribution or inventory), detailing, selling (and offering for sale or contracting to sell) or otherwise commercially exploiting (including pricing and reimbursement activities) a Licensed Product in the Field (including importing and exporting activities in connection therewith). |
1.18 “Commercialization Plan” has the meaning set forth in Section 6.3. |
1.19 “Commercially Reasonable Efforts” means, with respect to a Party’s obligations or activities under this Agreement, [* * *]. Commercially Reasonable Efforts of a Party shall require that such Party (on its own or acting through its Affiliates, Sublicensees or, Subcontractors), at a minimum, and without in any way limiting the foregoing: [* * *]. |
3
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Regulatory Authorities). A synopsis of the [* * *] Study proposed as of the Effective Date is attached hereto as Exhibit G. |
1.22 “Control” or “Controlled” means the possession by a Party (whether by ownership, license or otherwise) of, (a) with respect to any tangible Know-How, the legal authority or right to physical possession of such tangible Know-How, with the right to provide such tangible Know-How to the other Party on the terms and conditions set forth herein, or (b) with respect to Patent Rights, intangible Know-How or other intellectual property rights, the legal authority or right to grant a license, sublicense, access or right to use (as applicable) under such Patent Rights, intangible Know-How or other intellectual property rights to the other Party on the terms and conditions set forth herein, in each case of (a) and (b), without breaching the terms of any agreement with a Third Party in existence as of the time such Party or its Affiliates would first be required hereunder to grant the other Party such access, right to use or (sub)license. |
1.23 “CRO” means a contract research organization. |
1.25 "Development Data" shall mean written reports of pre-clinical studies and Clinical Trials primarily containing non-clinical, clinical or CMC data relating to the Licensed Compound or the Licensed Products in the Field, and supporting documentation (e.g., protocols, format of case report forms, analysis plans) for such reports. Notwithstanding any provision of this Agreement to the contrary, Development Data that Verastem is required to deliver to Licensee under this Agreement shall be limited to Development Data that is Controlled by Verastem and is |
4
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
necessary or useful to support the Development, Regulatory Approval or Commercialization of a Licensed Product in the Territory. Licensee’s use of such Development Data in connection with applications for Regulatory Approval shall be subject to Licensee’s payment obligations under Section 5.3(b). |
1.26 “Development Plan” has the meaning set forth in Section 4.2. |
1.27 “Disclosing Party” has the meaning set forth in Section 8.1(a). |
1.28 “DLBCL” means diffuse large B-cell lymphoma. |
1.29 “Dollar” or “$” means the U.S. dollar, and “$” shall be interpreted accordingly. |
1.30 “Early Access Program” means any program that provides patients with a Licensed Product prior to Regulatory Approval in the Territory and in which the use of the Licensed Product is not primarily intended to obtain information about the safety or effectiveness of a drug. “Early Access Programs” shall include treatment INDs / protocols, named patient programs and compassionate use programs. |
1.31 “Entity” means a partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, incorporated association, joint venture or similar entity or organization. |
1.32 “Executive Officers” has the meaning set forth in Section 3.2(e). |
1.33 “Existing Confidentiality Agreement” has the meaning set forth in Section 1.20. |
1.34 “Exploit” or “Exploiting” means to (a) Develop, (b) obtain, hold and maintain Regulatory Approvals, and any pricing or reimbursement approvals, as applicable, (c) Manufacture, or (d) Commercialize Licensed Products. |
1.35 “Field” means the treatment, prevention, palliation or diagnosis of any oncology Indication in humans or animals. |
1.37 “FL” means follicular lymphoma. |
1.38 “[* * *] Study” means the Registrational Trial planned by Verastem for the Licensed Product in FL to [* * *]. |
5
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
1.39 “FTE” means the equivalent of the work of a full-time individual for a twelve (12) month period. |
1.41 “Fully Burdened Manufacturing Cost” means, with respect to any Licensed Product supplied by or on behalf of Verastem to Licensee hereunder: |
(a) to the extent that such Licensed Product (or any precursor or intermediate thereof) is Manufactured by a Third Party manufacturer, [* * *]; plus |
(b) to the extent that such Licensed Product (or any precursor or intermediate thereof) is Manufactured by Verastem or its Affiliates, [* * *]. Such fully burdened costs shall be calculated in accordance with United States GAAP. |
1.44 “Generic Product” means, with respect to a Licensed Product in the Territory, a pharmaceutical product that (a) contains the same active pharmaceutical ingredients (and no other active pharmaceutical ingredients) as such Licensed Product, (b) is approved by the PMDA based on reference to data contained in an earlier Regulatory Approval for such Licensed Product, and (c) is sold by a Third Party that is not a Sublicensee and did not purchase such product or its active pharmaceutical ingredients from Licensee or its Affiliates or Sublicensees. |
6
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
1.45 “Global Clinical Trial” means a Clinical Trial conducted by Verastem (or any of its Affiliates, Third Party Licensees or Subcontractors) in cooperation with Licensee both inside and outside the Territory under the Global Strategy, which Global Clinical Trial shall be governed by the following: |
(a) if Verastem plans to conduct a multi-national Clinical Trial, the JSC shall discuss and agree upon whether such multi-national Clinical Trial should include the Territory, [* * *]; and |
(b) in the event that the JSC agrees to include the Territory in such multi-national Clinical Trial, such Clinical Trial shall be regarded as a Global Clinical Trial (and if the JSC determines that such multi-national Clinical Trial will not include the Territory, such multi-national Clinical Trial shall be regarded as a Verastem New Clinical Trial). |
1.46 “Global Strategy” means Verastem’s worldwide Development, regulatory and Commercialization strategy with respect to the Licensed Compound and Licensed Products, including the designation of Indications for which to seek Regulatory Approval and Verastem’s global publication strategy. |
1.47 “GLP” means all applicable Good Laboratory Practice standards, including, as applicable, as set forth in the then-current good laboratory practice standards promulgated or endorsed by the U.S. Food and Drug Administration, as defined in 21 C.F.R. Part 58, and the equivalent Applicable Laws in the Territory, each as may be amended and applicable from time to time. |
1.48 “Governmental Authority” means any federal, state, national, state, provincial or local government, or political subdivision thereof, or any multinational organization or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, or any court or tribunal (or any department, bureau or division thereof, or any governmental arbitrator or arbitral body). |
1.49 “ICH Guidelines” mean the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use Harmonized Tripartite Guideline. |
1.50 “Indemnified Party” has the meaning set forth in Section 10.3. |
1.51 “Indemnifying Party” has the meaning set forth in Section 10.3. |
1.52 “Indication” means a disease, condition, disorder or syndrome. |
1.53 “Infinity” has the meaning set forth in Section 2.5(a)(i). |
1.54 “Infinity Agreement” has the meaning set forth in Section 2.5(a)(i). |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
1.55 “Infringed Patent Right” has the meaning set forth in Section 7.4(c). |
1.56 “Initial Tech Transfer” has the meaning set forth in Section 2.6. |
1.57 “INK” has the meaning set forth in Section 2.5(a)(i). |
1.58 “INK Agreement” has the meaning set forth in Section 2.5(a)(i). |
1.59 “Invention” means any information, discovery, improvement, modification, process, method, assay, design, protocol (including any Clinical Trial protocol), formula, data, invention, algorithm, forecast, profile, strategy, plan, result, know-how or trade secret (in each case, whether or not patentable), that is discovered, generated, conceived or reduced to practice by or on behalf a Party (including by its Affiliates, licensees, Sublicensees, Subcontractors or their respective employees, agents), in the course of the performance of this Agreement, including all rights, title and interest in and to the intellectual property rights therein and thereto. |
1.60 “JPT” has the meaning set forth in Section 3.2(f). |
1.61 “JSC” has the meaning set forth in Section 3.2(a). |
1.63 “License” means the licenses granted by Verastem to Licensee pursuant to Section 2.1 and Section 2.2. |
1.64 “Licensed Compound” means the compound known by the names INK1197, IPI-145 or duvelisib (INN; International Nonproprietary Names), as described on Exhibit B, or any of its various chemical forms, including acids, bases, salts, metabolites, esters, isomers, enantiomers, pro-drug forms, hydrates, solvates, polymorphs and degradants thereof, in each case that has substantially the same pharmacological effect, in crystal, powder or other form. |
1.65 “Licensed Product” means any pharmaceutical product that contains or comprises the Licensed Compound. [* * *]. Each Licensed Product shall be distinguished by dosage form, and for the avoidance of doubt, Licensed Product containing the Licensed Compound as its sole active pharmaceutical ingredient and each Combination Product shall constitute separate and distinct Licensed Products under this Agreement. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
1.66 “Licensed Trademarks” means the trademarks set forth on Exhibit F, to the extent Controlled by Verastem in the Territory. |
1.67 “Licensee Indemnitees” has the meaning set forth in Section 10.2. |
1.68 “Licensee IP” means Licensee Know-How and Licensee Patents. For clarity, Inventions owned by Licensee pursuant to Section 11.1(b) shall be included within the Licensee IP. |
1.69 “Licensee Know-How” means all Know-How Controlled by Licensee or its Affiliates as of the Effective Date or at any time during the Term (including any and all data, Clinical Trial data, results, Development Data and Regulatory Documents generated by or on behalf of Licensee, its Affiliates, Sublicensees or Subcontractors) relating to the Licensed Compound or Licensed Product that is necessary or reasonably useful for Exploiting the Licensed Products in the Field. |
1.70 “Licensee Patents” means all Patent Rights Controlled by Licensee or its Affiliates as of the Effective Date or at any time during the Term that cover the Licensed Compound or Licensed Product (including composition of matter and methods of using, making or detecting the Licensed Compound or the Licensed Products). |
[* * *]
Such amounts shall be determined from the books and records of Licensee, its Affiliates and its Sublicensees, in each case maintained in accordance with Japanese GAAP or International Financial Reporting Standards, consistently applied.
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
confirmation patent or registration patent or patent of addition based on any such patent, patent term extensions, and supplemental protection certificates or requests for continued examinations, foreign counterparts, and the like of any of the foregoing. |
1.74 “Patent Prosecution” means activities directed to (a) preparing, filing and prosecuting applications (of all types) for any Patent Right, (b) managing any interference, opposition, re-issue, reexamination, supplemental examination, invalidation proceedings (including inter partes or post-grant review proceedings), revocation, nullification, or cancellation proceeding relating to the foregoing Patent Rights, (c) maintaining issued Patent Right(s), (d) listing in regulatory publications (as applicable), (e) patent term extension for issued Patent Right(s) and maintenance thereof, and (f) managing, including settling, any interference, opposition, reexamination, invalidation, revocation, nullification or cancellation proceeding relating to issued Patent Right(s). |
1.75 “Person” means any individual, unincorporated organization or association, Entity, Governmental Authority or governmental agency. |
1.77 “PMDA” means the Japanese Pharmaceuticals and Medical Devices Agency, and local counterparts thereto, and any successor agency(ies) or authority thereto having substantially the same function. |
1.79 “[* * *] Clinical Trial” means the Clinical Trial with Protocol No. [* * *]. |
1.80 “Product Infringement” has the meaning set forth in Section 11.3(a). |
1.81 “Product Marks” has the meaning set forth in Section 11.6(b). |
1.82 “Product Recall” means any recall or market withdrawal of a Licensed Product in the Territory. |
1.83 “PTCL” means peripheral T-cell lymphoma. |
1.84 “Public Official” has the meaning set forth in Section 9.7(d). |
1.85 “Publication” has the meaning set forth in Section 8.4. |
1.86 “Quality Agreement” has the meaning set forth in Section 6.1(b). |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
1.87 “Receiving Party” has the meaning set forth in Section 8.1(a). |
1.88 “Registrational Trial” means a controlled or uncontrolled human Clinical Trial of a Licensed Product that is intended (as of the time the first patient is enrolled in the Clinical Trial) to obtain sufficient data and results to support the filing of an application for Regulatory Approval without the requirement for any further Clinical Trial prior to submission of such application to the applicable Regulatory Authority. |
1.89 “Regulatory Approval” means, with respect to a Licensed Product in a country, all regulatory approvals granted by the applicable Regulatory Authority that are necessary for the Commercialization of such Licensed Product in such country, excluding any pricing and reimbursement approvals in connection therewith. |
1.92 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any Regulatory Authority with respect to a pharmaceutical product, including any such right that may become available following the Effective Date, including orphan drug exclusivity, new chemical entity exclusivity, data exclusivity, pediatric exclusivity, rights conferred in the United States under the Hatch-Waxman Act or the USFDA Modernization Act of 1997 (but excluding any patent term extension mechanism), or rights similar thereto outside the United States, but in all cases excluding Patent Rights and patent term extensions based on such rights. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
1.94 “Rules” has the meaning set forth in Section13.3(a). |
1.95 “Sales Milestone Event” has the meaning set forth in Section 7.3. |
1.96 “Sales Milestone Payment” has the meaning set forth in Section 7.3. |
1.97 “SEC” has the meaning set forth in Section 8.6(c). |
1.98 “Subcontractor” has the meaning set forth in Section 2.4(a). |
1.99 “Sublicensee” has the meaning set forth in Section 2.3(b). |
1.100 “Supply Agreement” has the meaning set forth in Section 6.1(a). |
1.103 “Territory” means Japan. |
1.105 "Third Party Licensee" means any Third Party holding a license (whether exclusive or non-exclusive) under the Verastem IP in the Field outside of the Territory. |
1.106 “TP-IP Sublicense Payments” has the meaning set forth in Section 2.10. |
1.107 “United States” means the United States of America. |
1.108 “Upstream License Agreement” has the meaning set forth in Section 2.5(a)(i). |
1.109 “Upstream Licensors” has the meaning set forth in Section 2.5(a)(i). |
1.111 “USFDA” means the United States Food and Drug Administration or any successor Entity thereto. |
1.112 “Valid Claim” means a claim of any (a) issued, unexpired patent that has not been revoked or held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction from which no appeal can be taken, or with respect to which an appeal is not taken within the time allowed for appeal, and that has not been disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise or (b) a pending patent |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
application that has not been finally abandoned, finally rejected or expired (after exhaustion of all appeals); provided, however, that if a claim of a pending patent application shall not have issued within [* * *] years after the earliest filing date from which such claim takes priority, such claim shall not constitute a Valid Claim for the purposes of this Agreement unless and until a patent issues with such claim. |
1.113 “VAT” means the value added taxes. |
1.114 “Verastem New Clinical Trial” means any Clinical Trial in which the first patient is enrolled after the Effective Date and that is conducted by Verastem or any of its Affiliates, Third Party Licensees or Subcontractors solely outside the Territory. Notwithstanding the foregoing, and for the avoidance of doubt, the [* * *] Clinical Trial and the [* * *] Clinical Trial shall be deemed Verastem New Clinical Trials. |
1.115 “Verastem Indemnitees” has the meaning set forth in Section 10.1. |
1.116 “Verastem IP” means Verastem Know-How, Verastem Patents, and the Licensed Trademarks. For clarity, Inventions owned by Verastem in accordance with Section 11.1(a) shall be included in the Verastem IP. |
1.117 “Verastem Know-How” means all Know-How Controlled by Verastem as of the Effective Date or at any time during the Term (subject to the provisions of Section 2.11 that is necessary or reasonably useful for the Development, Manufacture or Commercialization of Licensed Products in the Field in the Territory; provided, however, that Verastem Know-How shall exclude all Know-How that comes into Verastem’s Control as a result of a Change of Control of Verastem. |
1.119 “Working Group” has the meaning set forth in Section 3.2(g). |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(i) Licensee shall have the right to grant sublicenses of the License to Third Parties to fulfill any of its obligations under this Agreement (any such Third Party, a “Sublicensee”), and Licensee shall notify Verastem in writing of such sublicense. Notwithstanding the foregoing, Licensee shall obtain Verastem’s prior written consent if Licensee wishes to sublicense all or substantially all of Licensee’s rights or obligations to a Third Party under this Agreement in the Territory. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
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(iii) Licensee shall Control, or shall cause Sublicensees to assign to Licensee, all intellectual property rights with respect to the Licensed Compound or Licensed Products that are made, discovered, developed or otherwise created by such Sublicensees in the course of performing such sublicense agreement. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(b) Verastem shall have the right to engage its Subcontractors to perform its activities for which Verastem is assuming obligations under this Agreement, provided, that (i) Verastem shall remain directly responsible for any activities that have been subcontracted to its Subcontractor and shall be responsible for the performance of its Subcontractors, and (ii) any breach by a Subcontractor of the terms and conditions of this Agreement shall be deemed a breach by Verastem of such terms and conditions. Verastem shall Control, or shall cause its Subcontractors to assign to Verastem, all intellectual property rights solely relating to the Licensed Compound or Licensed Product (including, for the avoidance of doubt, Development Data resulting from such subcontracted activities) that are made, discovered, developed or otherwise created by such Subcontractors in the course of performing such subcontracted activities. |
(a) Licensee acknowledges and agrees that: |
(ii) Licensee shall, and shall cause its Affiliates and Sublicensees to, comply in all material respects with the Upstream License Agreements and take any action reasonably requested by Verastem to prevent any potential material breach by Licensee, its Affiliates or Sublicensees of any applicable term of any Upstream License Agreements; |
(iii) it has received a redacted copy of the INK Agreement and a copy of the Infinity Agreement existing as of the Effective Date; and |
(iv) notwithstanding any provision of this Agreement to the contrary, (A) Verastem may provide a copy of this Agreement, and any amendment to this Agreement, to any Upstream Licensor, and (B) Verastem may provide to any Upstream Licensor any information required to be provided to such Upstream Licensor in accordance with the applicable Upstream License Agreement. Verastem acknowledges and agrees that Licensee may provide to any Affiliate or Sublicensee a copy of the Upstream License Agreement and this Agreement; provided that such Affiliate or Sublicensee is subject to confidentiality and non-use obligations no less stringent than those set forth in Article 8. |
(b) [* * *] |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
2.11 Non-Compete. During the Term, Licensee shall not, and shall ensure that its Affiliates and Sublicensees do not, [* * *], without the prior written consent of Verastem. |
2.12 [* * *]. |
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Territory; and (vii) perform such other functions as expressly set forth in this Agreement or allocated to the JSC by the Parties’ written agreement. |
(c) Limitation of Authority. The JSC shall only have the powers expressly assigned to it in this Article 3 and elsewhere in this Agreement and shall not have the authority to: (i) modify or amend the terms and conditions of this Agreement (except for amendments to the Development Plan pursuant to Section 4.2); (ii) waive either Party’s compliance with the terms and conditions of this Agreement; or (iii) determine any issue in a manner that would conflict with the express terms and conditions of this Agreement. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(i) Non-Member Attendance. Each Party may from time to time invite a reasonable number of participants, in addition to its representatives, to attend a meeting of the JSC (in a non-voting capacity), JPT or any Working Group in the event that the planned agenda for such JSC, JPT or Working Group meeting would require such participants’ expertise; provided that if either Party intends to have any Third Party (including any consultant) attend such a meeting, such Party shall provide [* * *] days prior written notice to the other Party and shall ensure that such Third Party is bound by a written confidentiality and non-use agreement consistent with the terms of this Agreement. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(b) Without limiting the foregoing, with respect to the Global Clinical Trials, Licensee shall have a right to elect, at its sole discretion, to perform certain Development activities such as monitoring and site management in the Territory by using its internal clinical research associates. If Licensee elects (i) to perform such Development activities of a Global Clinical Trial in the Territory, Licensee shall, in collaboration with any global CRO engaged by Verastem to conduct such Global Clinical Trial (including any local Affiliate of a global CRO or global service provider), use Commercially Reasonable Efforts to perform the Development activities in the Territory that are assigned to Licensee for purposes of contributing to such Global Clinical Trial, or (ii) not to perform such Development activities of a Global Clinical Trial in the Territory by using its internal clinical research associates, such Development activities shall be performed by a global CRO engaged by Verastem instead. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(b) Notwithstanding Section 4.3(a) above, with respect to a Global Clinical Trial, Licensee shall bear (i) all costs incurred by Licensee, its Affiliates, its Sublicensees or its Subcontractors to the extent Licensee, its Affiliates, its Sublicensees, or its Subcontractors perform Development activities in connection with such Global Clinical Trial in the Territory, (ii) all costs incurred by Verastem, its Affiliates, its Third Party Licensees or its Subcontractors to the extent Verastem, its Affiliates, its Third Party Licensees or its Subcontractors perform Development activities in connection with such Global Clinical Trial in the Territory, to the extent Licensee does not perform Development activities of such Global Clinical Trial in the Territory; and (iii) a pro rata portion of the common expenses (e.g., study management cost and data management cost) [* * *]. Verastem may invoice Licensee on a [* * *] basis for the foregoing costs incurred by Verastem with respect to the Global Clinical Trial, and Licensee shall pay the amount invoiced within [* * *] Business Days after the receipt of any such invoice. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
or other areas of remediation are not, by their nature, reasonably capable of remediation within such [* * *] day period (e.g., due to delays of the Clinical Trial site), then such period shall be reasonably extended. |
(b) Licensee will provide Verastem with copies of all quality oversight or audit reports prepared in connection with any audit that Licensee, its Affiliates or Sublicensees conduct of any Clinical Trial site that Licensee, its Affiliates or Sublicensees have engaged, or are evaluating to potentially engage, to fulfill Licensee’s Development obligations under the Development Plan no later than [* * *] days after receiving or finalizing, as applicable, any such report. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
are Controlled by Verastem, provided that Licensee’s right to access, review and copy such records shall be limited to such records that are necessary or useful for the Development, Regulatory Approval or Commercialization of Licensed Products in the Territory, and Licensee’s use of such records in connection with applications for Regulatory Approval shall be subject to Licensee’s payment obligations under Section 5.3(b). |
(c) Notwithstanding anything herein to the contrary, Licensee’s use of the Development Data from any Verastem New Clinical Trial shall be subject to Section 5.3(b). |
(b) Licensee shall provide to Verastem for review and comment drafts of all material Regulatory Documents which Licensee plans to submit to a Regulatory Authority, or any Regulatory Documents that could reasonably be expected to have a material impact on the further Development or Regulatory Approval in the Field in the Territory, together with a written English summary thereof, reasonably (but in no event later than [* * *] Business Days or, if Licensee has fewer than [* * *] Business Days to prepare a submission, as soon as reasonably practicable) prior to submission, and shall incorporate any reasonable comments from Verastem that are provided to Licensee before the date of such submission. In addition, Licensee shall notify Verastem of any Regulatory Documents submitted to or received from any Regulatory Authority in the Territory and shall provide Verastem with copies thereof within [* * *] Business Days after submission or receipt of such Regulatory Documents. |
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such meeting or discussion, Licensee shall provide Verastem with a written summary thereof in English promptly, but in no event later than [* * *] days, following such meeting or discussion. |
(i) In the event that Licensee notifies Verastem in writing before enrollment of the first patient in such Verastem New Clinical Trial, Licensee shall be responsible for [* * *] of the costs incurred by Verastem in the conduct of such Verastem New Clinical Trial. Verastem shall invoice Licensee on a [* * *] basis for the amount of foregoing Licensee’s cost burden, and Licensee shall pay the amount invoiced within [* * *] Business Days after the receipt of such invoice. |
(ii) In the event that Licensee notifies Verastem in writing after the enrollment of the first patient in such Verastem New Clinical Trial, but before Verastem’s final data becomes available, Licensee shall be responsible for [* * *] of the costs incurred by Verastem in the conduct of such Verastem New Clinical Trial. Verastem shall invoice Licensee [* * *] of the costs actually incurred by Verastem up to that point and Licensee shall pay the amount invoiced within [* * *] Business Days after the receipt of any such invoice. Thereafter, Verastem shall invoice Licensee on a [* * *] basis for the amount of foregoing Licensee’s cost burden, and |
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Licensee shall pay the amount invoiced within [* * *] Business Days after the receipt of such invoice. |
(iii) In the event that Licensee notifies Verastem in writing after the final data of such Verastem New Clinical Trial is available, Licensee shall be responsible for [* * *] of the costs incurred by Verastem in the conduct of such Verastem New Clinical Trial. Verastem shall invoice Licensee for the amount of foregoing Licensee’s cost burden, and Licensee shall pay the amount invoiced within [* * *] Days after the receipt of such invoice. |
(c) Notwithstanding the foregoing Section 5.3(b), with respect to the [* * *] Clinical Trial, the [* * *] Clinical Trial and the [* * *], Licensee shall be required to notify Verastem in writing by the later of (i) [* * *] days following the Effective Date or (ii) [* * *] days after [* * *] the [* * *] Clinical Trial, the [* * *] Clinical Trial, or the [* * *], as applicable, if Licensee desires to include any Development Data from any such Clinical Trial in any application for Regulatory Approval in the Territory for the purpose of supporting efficacy of any Licensed Product (excluding, for the avoidance of doubt, inclusion of Development Data in supplemental documents for purposes that are unrelated to efficacy, such as mandatory inclusion in the Licensed Product’s safety database). If Licensee so notifies Verastem, then Licensee shall be responsible for [* * *] of the costs incurred by Verastem in the conduct of the [* * *]. Verastem shall invoice Licensee [* * *] of the costs actually incurred by Verastem up to that point and Licensee shall pay the amount invoiced within [* * *] Business Days after the receipt of any such invoice. Thereafter, Verastem shall invoice Licensee on a [* * *] basis for the amount of Licensee’s cost burden, and Licensee shall pay the amount invoiced within [* * *] Business Days after the receipt of such invoice. If Licensee elects to use the Development Data from the [* * *] Clinical Trial, the [* * *] Clinical Trial or the [* * *] after such period, then Sections 5.3(b)(ii) and 5.3(b)(iii) shall apply accordingly. |
(a) Promptly following the Effective Date, but in no event later than [* * *] days thereafter, Licensee and Verastem shall develop and agree in a written agreement to worldwide safety and pharmacovigilance procedures for the Parties with respect to Licensed Products, such as safety data sharing and exchange, adverse events reporting and prescription events monitoring (the “Pharmacovigilance Agreement”). Such Pharmacovigilance Agreement shall describe the obligations of both Parties with respect to the coordination of collection, investigation, reporting and exchange of information between the Parties concerning adverse events or any other safety issue of any significance and product quality and product complaints involving adverse events, in each case with respect to Licensed Products and sufficient to permit each Party and its Affiliates, Third Party Licensees and Sublicensees to comply with its legal obligations with respect thereto. The Pharmacovigilance Agreement shall be promptly updated if required by changes in Applicable Law. Each Party hereby agrees to comply with its respective obligations under the Pharmacovigilance Agreement and to cause its Affiliates, Third Party Licensees and Sublicensees to comply with such obligations. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(a) If a Regulatory Authority desires to conduct an inspection or audit of Licensee, its Affiliates, Sublicensees or Subcontractors (including Clinical Trial sites) relating to the Licensed Compound or the Licensed Products, Licensee shall promptly notify Verastem thereof. Verastem shall have the right, but not the obligation, to be present at any such inspection. Licensee shall permit Regulatory Authorities to conduct inspections or audit of Licensee, its Affiliates, Sublicenses or Subcontractors (including Clinical Trial sites) relating to the Licensed Compound or the Licensed Products, and shall ensure that such Affiliates, Sublicensees and Subcontractors permit such inspections or audit. Licensee will provide Verastem with a written summary in English of any findings of a Regulatory Authority following a regulatory audit within [* * *] days following any such inspection or audit, and will provide Verastem with an unredacted copy of any report issued by such Regulatory Authority following such audit. |
(b) If a Regulatory Authority desires to conduct an inspection or audit of Verastem, its Affiliates, Third Party Licensees or Subcontractors (including Clinical Trial sites) relating to the Licensed Compound or the Licensed Products for the Territory, Verastem shall promptly notify Licensee thereof. Licensee shall have the right to request to be present at any such inspection, and Verastem shall consider Licensee’s request in good faith. Verastem shall permit Regulatory Authorities to conduct inspections or audit of Verastem, its Affiliates, Third Party Licensees or Subcontractors (including Clinical Trial sites) relating to the Licensed Compound and/or the Licensed Products, and shall ensure that such Affiliates, Third Party Licensees and Subcontractors permit such inspections or audit. Verastem will provide Licensee with a written summary in English of any findings of a Regulatory Authority following a regulatory audit within [* * *] days following any such inspection or audit, and will provide Licensee with an unredacted copy of any report issued by such Regulatory Authority following such audit. |
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Licensed Product that could have an adverse impact upon other Party’s regulatory status of any Licensed Product, then such Party shall have the right to bring the matter to the attention of the JSC and the Parties shall discuss in good faith a resolution of such concern. Without limiting the foregoing, unless the Parties otherwise agree: (a) Licensee shall not, and shall not permit its Affiliates, Sublicensees or Subcontractors to, communicate with any Regulatory Authority having jurisdiction outside the Territory with respect to any Licensed Product, unless so ordered by such Regulatory Authority, in which case Licensee shall immediately, but in any event within [* * *], notify Verastem of such order; and (b) Licensee shall not, and shall not permit its Affiliates, Sublicensees or Subcontractors to, submit any Regulatory Documents or seek Regulatory Approvals outside the Territory. |
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conditions consistent with the principles set forth on Exhibit H hereto (Supply Agreement Key Terms) and typical for such agreements (the “Supply Agreement”). Verastem shall invoice Licensee for the Licensed Compound and Licensed Product upon delivery and Licensee shall pay the amount invoiced within [* * *] Business Days after its receipt of the invoice. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
annually within [* * *] days after the end of such Calendar Year a written report that summarizes the Commercialization activities on a Licensed Product-by-Licensed Product basis performed by or on behalf of Licensee, its Affiliates and Sublicensees in the Territory during such Calendar Year. Such report shall contain sufficient detail to enable Verastem to assess Licensee’s compliance with its Commercialization obligations in Section 6.2. [* * *]. Licensee shall provide updates to any such report at each meeting of the JSC, JPT and any Working Group established by the JSC to oversee Commercialization-related activities under this Agreement. |
(a) The Parties recognize that they may benefit from the coordination of certain activities in support of the Commercialization of Licensed Products in and outside the Territory in furtherance of the Global Strategy. As such, the Parties shall coordinate such activities where appropriate, which may include scientific and medical communication and Licensed Product positioning. |
(b) Licensee shall keep Verastem informed on the status of any application for pricing or reimbursement approval for Licensed Products in the Territory, including any discussion with Regulatory Authorities with respect thereto, and shall notify Verastem within [* * *] Business Days of any such status update or discussion. Each Party shall have the right to determine the price of Licensed Products sold in its territory and neither Party shall have the right to direct, control or approve the pricing of Licensed Products in the other Party’s territory. |
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
located in any country, jurisdiction or region in the other Party’s territory, or solicit orders from any prospective purchaser located in any country, jurisdiction or region in the other Party’s territory. If a Party, its Affiliates, Third Party Licensees (with respect to Verastem) or Sublicensees (with respect to Licensee) receive any order for Licensed Products for use from a prospective purchaser located in a country, jurisdiction or region in the other Party’s territory, then such Party shall immediately, but in any event within [* * *] hours, refer that order to such other Party and shall not accept any such orders. Neither Party shall, nor permit its Affiliates, Third Party Licensees (with respect to Verastem) or Sublicensees (with respect to Licensee) to, deliver or tender (or cause to be delivered or tendered) any Licensed Products for use in the other Party’s territory. |
Development Milestone Event |
Milestone Payment |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *]
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Each milestone payment set forth above shall be payable only once for the Licensed Products. If any milestone event occurs for the Licensed Products for the [* * *] without one or more of the prior milestone events for the [* * *] occurring for Licensed Products, then Licensee shall make the milestone payment(s) for all such prior, unpaid milestone events for the [* * *] at the same time it is required to pay Verastem for the milestone event that has occurred.
Sales Milestone Threshold |
Milestone Payment |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
Each Sales Milestone Payment will be payable only one-time and only upon the first achievement of the applicable Sales Milestone Event in the Territory, and no amounts would be due for subsequent or repeated achievements. If a Sales Milestone Event is achieved prior to the achievement of the preceding Sales Milestone Event set forth in the relevant chart (i.e., if a lower-listed Sales Milestone Event is achieved before a Sales Milestone Event that is listed higher up in the relevant chart), then upon achievement of the relevant Sales Milestone Event, payments for all preceding Sales Milestone Events set forth in the relevant chart shall become due and payable.
32
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
perpetual, irrevocable and royalty-free, in each case only to the extent that (A) the License with respect to such Licensed Product in the Territory has not been terminated prior to expiration of the applicable Royalty Term and (B) Licensee has paid Verastem all royalties payable with respect to such Licensed Product in the Territory throughout the applicable Royalty Term. |
(d) Payments to Third Parties. Each Party shall be solely responsible for making all payments owed by it to Third Parties, including, with respect to Verastem, the Upstream Licensors (in accordance with the terms of the Upstream License Agreements), and neither Party shall have any obligation to make any such payments on behalf of the other Party. |
33
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(a) Licensee shall maintain, and shall cause its Affiliates and Sublicensees to maintain, complete and accurate records in sufficient detail to permit Verastem to confirm the accuracy of the amount of royalty payments and other amounts payable under this Agreement, in accordance with Japanese GAAP or International Financial Reporting Standards, consistently applied. Upon reasonable prior notice, such records shall be open during regular business hours for a period of [* * *] years from the creation of individual records for examination by an independent certified public accountant selected by Verastem and reasonably acceptable to Licensee for the purpose of verifying for Verastem the accuracy of the financial reports furnished by Licensee pursuant to this Agreement or of any payments made, or required to be made by Licensee, pursuant to this Agreement. Such audits shall not occur more often than [* * *]. Such accountant shall execute a suitable confidentiality agreement reasonably acceptable to Licensee prior to conducting such audit, and shall not disclose Licensee’s Confidential Information to Verastem, except to the extent such disclosure is necessary to verify the accuracy of the financial reports furnished by Licensee or the amount of payments by Licensee under this Agreement. |
34
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Licensee will pay any amounts shown to be owed to Verastem but unpaid within [* * *] days after the accountant’s report, plus interest (as set forth in Section 7.5) from the original due date. Verastem shall bear the full cost of such audit unless such audit reveals an underpayment by Licensee of more than [* * *] of the amount actually due for the time period being audited, in which case Licensee shall [* * *]. |
(b) Withholding Tax. The Parties hereby acknowledge and agree that (i) under the Applicable Laws as of the Effective Date no withholding or similar Taxes will be imposed or levied on account of any payment made under this Agreement, and (ii) to the extent that there is a change in Applicable Law at any time during the Term such that withholding or other additional potential Taxes may be imposed or levied on account of the payment of any amounts owed under this Agreement, then the Parties shall use Commercially Reasonable Efforts to mitigate the amount of such Taxes that would be required to be withheld or paid, or to mitigate the effect of such change in Applicable Law. Notwithstanding the foregoing, if Licensee is so required by Applicable Law to deduct and withhold Taxes from a payment due and payable to Verastem hereunder, Licensee shall: (a) promptly notify Verastem of such requirement; (b) make such required deduction and withholding from the corresponding payment; (c) pay to the relevant Governmental Authority (e.g., the applicable taxing authority) the full amount required to be so deducted and withheld; and (d) promptly forward to Verastem an official receipt (or certified copy) or other documentation reasonably acceptable to Verastem evidencing such payment to such Governmental Authority(ies). [* * *]. |
35
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(c) Cooperation. The Parties acknowledge and agree that it is mutual objective and intent to minimize, to the extent feasible under the Applicable Laws, any Taxes payable in connection with this Agreement, and shall reasonably cooperate each other in good faith in accordance with Applicable Laws to minimize any Taxes in connection with this Agreement. |
(b) the Receiving Party may only use any Confidential Information of the Disclosing Party for the purposes of performing its obligations or exercising its rights under this Agreement; and |
(c) a Receiving Party may disclose Confidential Information of the Disclosing Party to: (i) such Receiving Party’s Affiliates, Third Party Licensees (with respect to Verastem) or Sublicensees (with respect to Licensee); and (ii) employees, directors, agents, contractors, consultants and advisors of the Receiving Party and its Affiliates, Third Party Licensees (with respect to Verastem) or Sublicensees (with respect to Licensee), in each case to the extent reasonably necessary for the purposes of, and for those matters undertaken pursuant to, this Agreement; provided that such Persons are bound by legally enforceable obligations to maintain the confidentiality of the Disclosing Party’s Confidential Information in a manner consistent with the confidentiality provisions of this Agreement; and provided further that each Party shall remain responsible for any failure by its Affiliates, Third Party Licensees (with respect to Verastem) or Sublicensees (with respect to Licensee), and its and its Affiliates’, Third Party Licensees’ (with respect to Verastem) or Sublicensees’ (with respect to Licensee) respective employees, directors, agents, consultants, advisors, and contractors, to treat such Confidential Information as required under this Section 8.1 as if such Affiliates, Third Party Licensees (with respect to Verastem) or Sublicensees (with respect to Licensee) employees, directors, agents, consultants, advisors and contractors were Parties directly bound to the requirements of this Section 8.1. |
36
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(b) is generally available to the public before its receipt from the Disclosing Party; |
(c) became generally available to the public or otherwise part of the public domain after its disclosure by the Disclosing Party and other than through any act or omission of the Receiving Party (or any Person to whom the Receiving Party disclosed such Confidential Information) in breach of this Agreement; |
(d) is subsequently disclosed to the Receiving Party or any of its Affiliates without obligation of confidentiality by a Third Party who may rightfully do so and is not under a conflicting obligation of confidentiality to the Disclosing Party; or |
(e) is developed by the Receiving Party or any of its Affiliates independently and without use of or reference to any Confidential Information received from the Disclosing Party, as documented by the Receiving Party’s business records. |
No combination of features or disclosures shall be deemed to fall within the foregoing exclusions merely because individual features are published or available to the general public or in the rightful possession of the Receiving Party, unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the Receiving Party.
(b) disclosure of this Agreement, its terms and the status and results of Development or Commercialization activities to actual or bona fide potential investors, acquirors, (sub)licensees, lenders and other financial or commercial partners solely for the purpose of evaluating or carrying out an actual or potential investment, acquisition, (sub)license, debt transaction or collaboration; provided that in each such case on the condition that such Persons are bound by written, binding obligations of confidentiality and non-use consistent with this Agreement; |
(c) such disclosure is required by judicial or administrative process, provided that in such event such Party shall promptly notify the other Party in writing of such required disclosure and provide the other Party an opportunity to challenge or limit the disclosure obligations. Confidential Information that is disclosed by judicial or administrative process shall |
37
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
remain otherwise subject to the confidentiality and non-use provisions of this Article 8, and the Party disclosing Confidential Information pursuant to Applicable Laws or court order shall (i) take all steps reasonably necessary, including seeking of confidential treatment or a protective order, to ensure the continued confidential treatment of such Confidential Information (ii) limit disclosure of such Confidential Information only to that which is required to be disclosed by the applicable Governmental Authority; |
(d) such disclosure is by Verastem and is required to comply with its obligations to one or more Upstream Licensors; or |
(e) disclosure pursuant to Sections 8.4 and 8.6. |
Notwithstanding the foregoing, in the event a Party is required or permitted to make a disclosure of the other Party’s Confidential Information pursuant to Section 8.3(a), it will, except where impracticable, give reasonable advance notice to the other Party of such disclosure and use Commercially Reasonable Efforts to secure confidential treatment of such information. In any event, each Party agrees to take all reasonable action to avoid disclosure of Confidential Information of the other Party hereunder.
Nothing in Sections 8.1 or 8.3 shall limit either Party in any way from disclosing to any Third Party such Party’s U.S. or foreign income tax treatment and the U.S. or foreign income tax structure of the transactions relating to such Party that are based on or derived from this Agreement, as well as all materials of any kind (including opinions or other tax analyses) relating to such tax treatment or tax structure, except to the extent that nondisclosure of such matters is reasonably necessary in order to comply with applicable securities laws.
38
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
any trademarks and corporate or trade names of Licensee shall not be impaired, in a manner consistent with best practices used by Verastem with respect to its other collaborators, and in a manner consistent with Licensee’s brand usage policies. |
(e) Other than the press release set forth in Exhibit C and the public disclosures permitted by Section 8.6(b), the Parties agree that the portions of any other news release or other public announcement relating to this Agreement or the performance hereunder that would disclose information other than that already in the public domain, shall first be reviewed and approved by both Parties (with such approval not to be unreasonably withheld or delayed), except as required by Applicable Laws. |
(f) The Parties agree that after a disclosure pursuant to Section 8.6(d) or issuance of a press release (including the initial press release) or other public announcement pursuant to Section 8.6(a) or Section 8.6(b) that has been reviewed and approved by the other |
40
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Party, the disclosing Party may make subsequent public disclosures reiterating such information without having to obtain the other Party’s prior consent and approval. |
(g) Each Party shall have the right to use the other Party’s name and logo in presentations, its website, collateral materials and corporate overviews to describe the collaboration relationship, as well as in taglines of press releases issued pursuant to this Section 8.6; provided that each Party will use the other Party’s corporate name only in such manner that the distinctiveness, reputation, and validity of any trademarks and corporate or trade names of the other Party shall not be impaired, in a manner consistent with best practices used by the Party for its other collaborators, and in a manner consistent with the other Party’s brand usage policies. |
9.1 Representations, Warranties of Each Party. Each Party represents and warrants to the other Party as of the Effective Date that: |
(a) it has the full right, power and authority to enter into this Agreement and to perform its obligations hereunder; |
(b) this Agreement has been duly executed by it and is legally binding upon it, enforceable in accordance with its terms, and does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material Applicable Laws or regulation of any court, governmental body or administrative or other agency having jurisdiction over it; and |
(c) there are no legal claims, judgments or settlements against or owed by it or any of its Affiliates, or pending or, to its present knowledge, threatened, legal claims or litigation, in each case, relating to antitrust, anti-competition, anti-bribery or corruption violations. |
9.2 Representations and Warranties of Verastem. Verastem represents and warrants to Licensee that as of the Effective Date: |
(a) subject to Section 2.5, it has the right under the Verastem IP to grant the License to Licensee, and it has not granted any license or other right under the Verastem IP that is inconsistent with the License; |
(b) it has not received any written notice from any Third Party asserting or alleging that the Development of the Licensed Compound or Licensed Product prior to the Effective Date infringed or misappropriated the intellectual property rights of such Third Party; |
41
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(d) to Verastem’s knowledge, there are no material safety issues with respect to the Licensed Compound or Licensed Product in the Field. |
9.4 Representations and Warranties of Licensee. Licensee represents and warrants to Verastem that as of the Effective Date: |
(a) Licensee and its Affiliates are not, and has not been, debarred or disqualified by any Regulatory Authority; |
(b) Verastem will conduct the Global Clinical Trial in the Territory in strict adherence with the study design set forth in the protocol for such Global Clinical Trial; and |
42
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
debarred by any Regulatory Authority, or, to Licensee’s knowledge, is the subject of debarment proceedings by a Regulatory Authority; |
(b) Licensee will conduct its Clinical Trials under the Development Plan in strict adherence with the study design set forth in the protocol for such Clinical Trial, as may be amended from time to time, and will comply with the statistical analysis plan implemented in connection therewith; and |
(c) Licensee will only engage Clinical Trial sites that conduct all Clinical Trials in compliance with Applicable Laws in the relevant jurisdiction, including GCP and the ICH Guidelines as applicable. |
(a) Notwithstanding anything to the contrary in this Agreement, Licensee agrees that: |
(ii) it shall not, in the performance of this Agreement, directly or indirectly, make any payment, or offer or transfer anything of value, or agree or promise to make any payment or offer or transfer anything of value, to a government official or government employee, to any political party or any candidate for political office or to any other Third Party with the purpose of influencing decisions related to either Party or its business in a manner that would violate Anti-Corruption Laws; |
(i) has taken any action in violation of any applicable Anti-Corruption Laws; or |
(ii) has corruptly offered, paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or indirectly, to any Public Official (as defined in Section 9.7(d)), for the purposes of: |
(1) influencing any act or decision of any Public Official in his or her official capacity; |
43
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
(2) inducing such Public Official to do or omit to do any act in violation of his or her lawful duty; |
(3) securing any improper advantage; or |
(4) inducing such Public Official to use his or her influence with a government, Governmental Authority, or commercial enterprise owned or controlled by any government (including state-owned or controlled veterinary, laboratory or medical facilities) in obtaining or retaining any business whatsoever. |
(c) Licensee further represents and warrants that, as of the Effective Date, none of the officers, directors or employees of Licensee or of any of its Affiliates or agents acting on behalf of Licensee or any of its Affiliates, in each case that are employed or reside outside the United States, is a Public Official. |
44
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
reasonable attorneys’ fees and costs) incurred in connection with any claims, demands, actions or other proceedings by any Third Party (individually and collectively, “Losses”) to the extent arising from (a) the Exploitation of the Licensed Compound or Licensed Products by or on behalf of Licensee or any of its Affiliates, Sublicensees or Subcontractors, including product liability claims (other than product liability claims resulting from Verastem’s breach of its obligations under the Supply Agreement), (b) the gross negligence or willful misconduct of Licensee or its Affiliates, Sublicensees or Subcontractors, (c) Licensee’s breach of any of its representations or warranties made in or pursuant to this Agreement or any Licensee covenants or obligations set forth in or entered into pursuant to this Agreement, or (d) failure of Licensee or its Affiliates, Sublicensees or Subcontractors to abide by any Applicable Laws, in each case of clauses (a) through (d) above, except to the extent such Losses arise out of a Verastem Indemnitee’s gross negligence or willful misconduct or material failure to abide by any Applicable Laws. |
45
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
resolution of the dispute pursuant to Article 13, the Parties may conduct separate defenses of such claims, with each Party retaining the right to claim indemnification from the other Party in accordance with Sections 10.1 or 10.2 upon resolution of the underlying claim. |
46
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
11.1(a)(iii) above. Licensee shall take (and cause its Affiliates, Sublicensees, and Subcontractors, including their respective employees, agents, and contractors to take) such further actions reasonably requested by Verastem to evidence such assignment and to assist Verastem in obtaining patent and other intellectual property rights protection for such Inventions. Licensee shall obligate its Affiliates, Sublicensees and Subcontractors to assign all such jointly-invented Inventions to Licensee (or directly to Verastem) so that Licensee can comply with its obligations under this Section 11.1(c), and Licensee shall promptly obtain such assignment. |
(iii) [* * *]. |
(b) Licensee Patents. As between the Parties, Licensee shall have the sole right to control the Patent Prosecution of all Licensee Patents throughout the world, at Licensee’s own cost and expense. |
(c) Cooperation. Each Party shall provide the other Party all reasonable assistance and cooperation in the Patent Prosecution efforts under this Section 11.2, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution. |
47
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
action alleging the invalidity, unenforceability or non-infringement of any Verastem Patents and Licensee Patents (collectively “Product Infringement”). For clarity, Product Infringement excludes any adversarial Patent Prosecution proceedings. |
(i) Verastem shall have the first right, in its sole discretion, to bring and control any legal action to enforce Verastem Patents against any Product Infringement in the Territory at its own expense as it determines appropriate, provided that Verastem notifies Licensee of any such legal action reasonably in advance, and reasonably considers Licensee’s comments with respect thereto. In the event Verastem is unable or unwilling to bring or control such legal action against such Product Infringement in the Territory within [* * *] after the date of notice of such Patent Infringement, Licensee, subject to any applicable restrictions under the Upstream License Agreements, shall have the right, but not the obligation to, take any legal action, at Licensee’s own cost and expense, as Licensee deems appropriate to prevent or enjoin such Product Infringement in the Territory. |
(ii) Licensee shall have the first right to bring and control any legal action to enforce Licensee Patents against any Product Infringement in the Territory at its own expense as it reasonably determines appropriate, and in the event Licensee is unable or unwilling to bring or control the legal action against such Product Infringement in the Territory within [* * *] after the date of notice of such Patent Infringement, Verastem may, but not be obligated to, take any legal action, at Verastem’s own expense, as Verastem deems appropriate to prevent or enjoin such Product Infringement in the Territory. |
(c) Cooperation. At the request of the Party bringing an action related to Product Infringement, the other Party shall provide reasonable assistance in connection therewith, including by executing reasonably appropriate documents, cooperating in discovery and joining as a party to the action if required by Applicable Law to pursue such action, at each such Party’s sole cost and expense. |
(d) Recoveries. Any recoveries resulting from enforcement action relating to a claim of Product Infringement in the Territory shall be first applied against payment of each Party’s costs and expenses in connection therewith. [* * *]. |
(a) Notice. If any Licensed Compound or Licensed Product used or sold by Licensee, its Affiliates or Sublicensees in the Territory becomes the subject of a Third Party’s claim or assertion of infringement of a Patent Right or other rights in the Territory that are owned or controlled by such Third Party, then the Party becoming aware of such claim or assertion shall promptly notify the other Party within [* * *] days after receipt of such claim or assertion and such notice shall include a copy of any summons or complaint (or the equivalent thereof) received regarding the foregoing. Thereafter, the Parties shall promptly meet to consider the claim or |
48
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
assertion and the appropriate course of action and may, if appropriate, agree on and enter into a “common interest agreement” wherein the Parties agree to their shared, mutual interest in the outcome of such potential dispute. The Parties shall assert and not waive the joint defense privilege with respect to any communications between the Parties in connection with the defense of such claim or assertion. |
(b) Defense. Licensee shall be solely responsible for the defense of any such infringement claims brought against Licensee, at Licensee’s cost and expense and Verastem shall provide reasonable assistance to Licensee at Verastem’s cost and expense; provided that Licensee shall not agree to any settlement, consent to judgment or other voluntary final disposition in connection with such defense action without Verastem’s consent (such consent not to be unreasonably withheld, conditioned or delayed) if such settlement, consent to judgment or other voluntary final disposition would (1) result in the admission of any liability or fault on behalf of Verastem, (2) result in or impose any payment obligations upon Verastem, or (3) subject Verastem to an injunction or otherwise limit Verastem’s ability to take any actions or refrain from taking any actions under this Agreement or with respect to any Licensed Compound or Licensed Product. Licensee shall keep Verastem informed on the status of such defense action, and Verastem shall, at its own expense, (i) provide reasonable support to Licensee upon Licensee’s reasonable request; and (ii) have the right, but not the obligation, to participate or be separately represented in such defense action at its sole option. |
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(ii) Licensee shall execute any documents required in the reasonable opinion of Verastem to be entered as a “registered user” or recorded licensee of Verastem’s Licensed Trademarks or to be removed as registered user or licensee thereof. |
50
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”). REDACTED MATERIAL IS MARKED
WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
51
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
or in association with any other Person, commences a legal action challenging the validity, enforceability or scope of any Verastem Patent that is or was included in the License at any time during the Term anywhere in the world. |
(e) Full Force and Effect During Notice Period. This Agreement shall remain in full force and effect until the expiration of the applicable termination notice period. For clarity, if any milestone event is achieved during the termination notice period, then the corresponding milestone payment is accrued and Licensee shall remain responsible for the payment of such milestone payment even if the due date of such milestone payment may come after the effective date of the termination. |
(b) Regulatory Approval. Licensee shall assign to Verastem or a Third Party designated by Verastem all Regulatory Approvals for the Licensed Products in the Territory, at Licensee’s cost and expense. In addition, upon Verastem’s written request, Licensee shall, at its cost and expense, provide to Verastem copies of all tangible Development Data and Regulatory Documents Controlled by Licensee. The Parties shall discuss and establish appropriate arrangements with respect to safety data exchange, provided that Verastem will assume all safety and safety database activities no later than [* * *] after the termination hereof. |
(c) Product Marks. Except with respect to the Licensed Trademarks, which, for the avoidance of doubt, shall remain solely owned by Verastem during and following the Term, Licensee shall transfer and assign, and shall ensure that its Affiliates and Sublicensees transfer and assign, to Verastem, at no cost to Verastem, all Product Marks relating to any Licensed Product and any applications therefor (excluding any such marks that include, in whole or part, any corporate name or logos of Licensee or its Affiliates or Sublicensees). Verastem and its Affiliates |
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
and licensees shall have the right to use other identifiers specific to any Licensed Product (e.g., Licensee compound identifiers). Licensee shall also transfer to Verastem any in-process applications for trademarks for any Licensed Product. |
(e) Wind Down and Transition. Licensee shall be responsible, at its own cost and expense, for the wind-down of Licensee’s, its Affiliates’ and its Sublicensees’ Development and Commercialization activities for the Licensed Compound and Licensed Products. Licensee shall, and shall cause its Affiliates and Sublicensees to, reasonably cooperate with Verastem to facilitate orderly transition of the Development and Commercialization of the Licensed Compound and Licensed Products to Verastem or its designee, including (i) assigning or amending as appropriate, upon request of Verastem, any agreements or arrangements with Third Party vendors (including distributors) to Develop, promote, distribute, sell or otherwise Commercialize the Licensed Compound or Licensed Products or, to the extent any such Third Party agreement or arrangement is not assignable to Verastem, reasonably cooperating with Verastem to arrange to continue to provide such services for a reasonable time after termination; and (ii) to the extent that Licensee or its Affiliate is performing any activities described above in (i), reasonably cooperating with Verastem to transfer such activities to Verastem or its designee and continuing to perform such activities on Verastem’s behalf for a reasonable time after termination until such transfer is completed. |
(f) Ongoing Clinical Trial. If, at the time of such termination, Licensee or its Affiliates are conducting any Clinical Trials, then, on a Clinical Trial-by-Clinical Trial basis, and in Verastem’s sole discretion: |
(i) If Verastem elects to have such Clinical Trial transferred to Verastem, then Licensee shall fully cooperate, and shall ensure that its Affiliates fully cooperate, with Verastem to transfer the conduct of such Clinical Trial to Verastem or its designees effective as of [* * *] after the termination effective date, and Verastem shall assume responsibility for the conduct of such transferred Clinical Trial after the effective date of such transfer, provided that Licensee shall bear the cost and expense of such Clinical Trial until the effective date of such transfer; or |
(ii) If Verastem elects not to have such Clinical Trial transferred to Verastem, then Licensee shall, at its sole cost and expense, orderly wind-down the conduct of any such Clinical Trial that is not assumed by Verastem under clause (i) above. |
(g) Return of Confidential Information. At Verastem’s election, Licensee shall return (at Verastem’s expense) or destroy all tangible materials comprising, bearing or containing any Confidential Information of Verastem that are in Licensee’s or its Affiliates’ or |
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Sublicensees’ possession or control and provide written certification of such destruction except to the extent that Licensee is required to retain such materials by Applicable Laws; provided that Licensee may retain one (1) copy of such Confidential Information for its legal archives, and provided further, that Licensee shall not be required to destroy electronic files containing such Confidential Information that are made in the ordinary course of its business information back-up procedures pursuant to its electronic record retention and destruction practices that apply to its own general electronic files and information. Any Confidential Information retained by Licensee pursuant to this Section 12.3(g) shall remain subject to Licensee’s confidentiality obligations in accordance with Article 8. |
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12.8 Termination of Upstream License Agreements. Upon any termination of a given Upstream License Agreement, whether with respect to the Territory or in its entirety (except as caused by Licensee’s, its Affiliates’, or its Sublicensees’ breach of this Agreement or the applicable Upstream License Agreement), Verastem shall use Commercially Reasonable Efforts to put Licensee in contact with the Upstream Licensor for purposes of Licensee negotiating a direct license with such Upstream Licensor in the Territory, provided that Verastem shall not be required to incur any costs or pay any amounts in connection therewith. |
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
industry knowledge relevant to the particular dispute. Each Party shall promptly select one (1) Arbitrator each, which selections shall in no event be made later than [* * *] days after receipt of the Arbitration Notice. The third Arbitrator shall be chosen promptly by mutual agreement of the Arbitrators chosen by the Parties, but in no event later than [* * *] days after the date that the last of such Arbitrators was appointed. |
(c) The Arbitrators’ decision and award shall be made within [* * *] days of the filing of the arbitration demand, and the Arbitrators shall agree to comply with this schedule before accepting appointment. However, this time limit may be extended by agreement of the Parties or by the Arbitrators. The Arbitrators shall be authorized to award compensatory damages, but shall not be authorized to reform, modify or materially change this Agreement. The Arbitrators shall, within [* * *] days after the conclusion of the hearing, issue a written award and statement of decision describing the material facts and the grounds for the conclusions on which the award is based, including the calculation of any damages awarded. The decision of the Arbitrators shall be final, conclusive and binding on the Parties and enforceable by any court of competent jurisdiction. |
(d) Each Party shall bear its own costs and expenses (including legal fees and expenses) relating to the arbitration proceeding, except that the fees of the Arbitrators and other related costs of the arbitration shall be shared equally by the Parties, unless the Arbitrators determine that a Party has incurred unreasonable expenses due to vexatious or bad faith positions taken by the other Party, in which event the Arbitrators may make an award of all or any portion of such expenses (including legal fees and expenses) so incurred. |
(e) The Arbitrators shall be required to render the decision in writing and to comply with, and the award shall be limited by, any express provisions of this Agreement relating to damages or the limitation thereof. No Arbitrator shall have the power to award punitive damages under this Agreement regardless of whether any such damages are contained in a proposal, and such award is expressly prohibited. |
(f) Unless the Parties otherwise agree in writing, during the period of time that any arbitration proceeding is pending under this Agreement, the Parties shall continue to comply with all those terms and provisions of this Agreement that are not the subject of the pending arbitration proceeding. |
(g) All arbitration proceedings and decisions of the Arbitrators under this Section 13.3 shall be deemed Confidential Information of both Parties under Article 8. The arbitration proceedings shall take place in [* * *]. The language of the arbitration proceeding shall be in English. |
(h) Notwithstanding the foregoing, any dispute, controversy or claim relating to the scope, validity, enforceability or infringement of any Patent Rights or trademark rights shall be submitted to a court of competent jurisdiction in the country in which such Patent Rights or trademark rights were granted or arose. Nothing in this Section 13.3 will preclude either Party |
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from seeking equitable relief or interim or provisional relief from a court of competent jurisdiction, including a temporary restraining order, preliminary injunction or other interim equitable relief, concerning a dispute either prior to or during any arbitration if necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding. |
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unenforceable provision(s) with valid, legal and enforceable provision(s) that, insofar as practical, implement the purposes of this Agreement. |
If to Verastem:
Verastem, Inc.
117 Kendrick Street, #500,
Needham, MA 02494
USA
Attn: President and CEO
with a copy to:
Verastem, Inc.
117 Kendrick Street, #500,
Needham, MA 02494
USA
Attn: COO
If to Licensee:
Yakult Honsha Co., Ltd.
6F Ginza-Kobiki Bldg.
16-21, Ginza 7-Chome
Chuo-Ku, Tokyo, 104-0061
Japan
Attn: Head of Pharmaceutical Division
with a copy to:
Yakult Honsha Co., Ltd.
3F Ginza-Kobiki Bldg.
16-21, Ginza 7-Chome
Chuo-Ku, Tokyo, 104-0061
Japan
Attn: Head of Pharmaceutical Business Management & Licensing Department
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by electronic mail or facsimile on a Business Day (or if delivered or sent on a non-Business Day, then on the next Business Day); (b) on the Business Day after dispatch if sent by nationally-recognized overnight courier; or (c) on the fifth Business Day following the date of mailing if sent by mail.
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any such right, and any single or partial exercise of any particular right by any Party will not exhaust the same or constitute a waiver of any other right provided in this Agreement. |
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
{Signature Page Follows}
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In Witness Whereof, the Parties intending to be bound have caused this License and Collaboration Agreement to be executed by their duly authorized representatives as of the Effective Date.
Verastem, Inc.Yakult Honsha Co., Ltd.
By: /s/ Robert ForresterBy:/s/ Takashige Negishi
Name: Robert ForresterName: Takashige Negishi
Title: President & CEOTitle: President and Representative Director
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Exhibit A:Verastem Patents
Exhibit B:Structure of Licensed Compound
Exhibit C:Joint Press Release
Exhibit D: Diligence Obligations
Exhibit E:Development Plan
Exhibit F:Licensed Trademarks
Exhibit G:Synopsis of the [* * *]
Exhibit HSupply Agreement Key Terms
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Exhibit A
Verastem Patents
Attorney Docket |
Application # |
Filing Date |
Patent # |
Issue Date |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
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[* * *] |
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Exhibit B
Structure of Licensed Compound
[* * *]
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Exhibit C
Joint Press Release
Verastem Oncology and Yakult Honsha Co., Ltd. Sign Exclusive License Agreement for the Development and Commercialization of Duvelisib in Japan
̶ Verastem to Receive Upfront Payment of $10 Million USD,Then Eligible to Receive Up To $90 Million USD in Future Milestones, Plus Royalties ̶
̶ Yakult Obtains Rights to First-in-class Oral Dual Inhibitor of Phosphoinositide-3-kinase (PI3K)-delta and PI3K-gamma (PI3K-δ,γ), Duvelisib for Oncology Indications in Japan ̶
BOSTON, MA, USA and TOKYO, JAPAN – May [XX], 2018 – Verastem, Inc. (President and CEO: Robert Forrester, NASDAQ: VSTM) and Yakult Honsha Co., Ltd. (President: Takashige Negishi, Tokyo: 2267), today announced their entry into an exclusive licensing agreement for Yakult to develop and commercialize Verastem’s duvelisib, a first-in-class oral dual inhibitor of phosphoinositide 3-kinase (PI3K)-delta and PI3K-gamma, for the treatment, prevention or diagnosis of all oncology indications in Japan. Verastem’s New Drug Application (NDA) for duvelisib is currently under review with the U.S. Food and Drug Administration (FDA) and is seeking full approval for the treatment of relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) and accelerated approval for the treatment of relapsed or refractory follicular lymphoma (FL). On April 9, 2018, Verastem announced that the FDA had accepted the NDA for filing with Priority Review.
Under the terms of the agreement, Verastem will receive a one-time upfront payment of $10 million from Yakult. Verastem is eligible to receive up to an additional $90 million if certain future pre-specified development and commercialization milestones are successfully achieved by Yakult, plus double-digit royalties based on future net sales of duvelisib in Japan. In exchange, Yakult will receive exclusive rights to develop and commercialize duvelisib in Japan, at its own cost and expense. Yakult will also fund certain global development costs on a pro-rata basis. Verastem will retain all rights to duvelisib outside of Japan.
“In Japan, current therapies to treat CLL/SLL and FL are extremely limited and duvelisib has robust clinical data supporting its efficacy and safety in both indications, which we can build upon,” said Masanori Ito, Head of Pharmaceutical Business Division/Managing Executive Officer, Member of the Board of Yakult. “We are eager to collaborate with Verastem to develop duvelisib in these initial hematologic malignancies, and then plan to later expand development to include the additional indications of PTCL and DLBCL. We believe this collaboration underscores our commitment to innovation, growing our oncology franchise, and commercializing medicines that positively impact the lives of patients in Japan.”
“Following extensive due diligence, we have chosen Yakult as our duvelisib development and commercialization partner in Japan,” said Robert Forrester, President and Chief Executive Officer of Verastem. “Yakult is an established oncology leader in Japan that successfully markets several branded anti-cancer therapies, including Elplat® and Campto®. This agreement is an important, validating
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achievement for both duvelisib and Verastem Oncology and speaks to the significant global potential of this novel therapeutic for a broad range of hematologic malignancies. We look forward to working with the world-class development, regulatory and commercial teams at Yakult as they advance oral duvelisib toward commercialization in Japan.”
Duvelisib is a first-in-class investigational oral, dual inhibitor of phosphoinositide 3-kinase (PI3K)-delta and PI3K-gamma, two enzymes known to help support the growth and survival of malignant B-cells and T-cells. PI3K signaling may lead to the proliferation of malignant B- and T-cells and is thought to play a role in the formation and maintenance of the supportive tumor microenvironment.1,2,3 Duvelisib was evaluated in late- and mid-stage extension trials, including DUO™, a randomized, Phase 3 monotherapy study in patients with relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL),4 and DYNAMO™, a single-arm, Phase 2 monotherapy study in patients with refractory indolent non-Hodgkin lymphoma (iNHL).5 Both DUO and DYNAMO achieved their primary endpoints. Verastem Oncology’s New Drug Application (NDA) requesting the full approval of duvelisib for the treatment of patients with relapsed or refractory CLL/SLL, and accelerated approval for the treatment of patients with relapsed or refractory follicular lymphoma (FL) was accepted for filing by the U.S. Food and Drug Administration (FDA), granted Priority Review and assigned a target action date of October 5, 2018. Duvelisib is also being developed by Verastem Oncology for the treatment of peripheral T-cell lymphoma (PTCL), and is being investigated in combination with other agents through investigator-sponsored studies.6 Information about duvelisib clinical trials can be found on www.clinicaltrials.gov.
About Verastem Oncology
Verastem, Inc. (Nasdaq:VSTM), operating as Verastem Oncology, is a biopharmaceutical company focused on developing and commercializing medicines to improve the survival and quality of life of cancer patients. Verastem Oncology is currently developing duvelisib, a dual inhibitor of PI3K-delta and PI3K-gamma, which has successfully met its primary endpoint in a Phase 2 study in indolent Non-Hodgkin Lymphoma (iNHL) and a Phase 3 clinical trial in patients with chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL). Verastem Oncology’s New Drug Application (NDA) requesting the full approval of duvelisib for the treatment of patients with relapsed or refractory CLL/SLL, and accelerated approval for the treatment of patients with relapsed or refractory follicular lymphoma (FL) was accepted for filing by the U.S. Food and Drug Administration (FDA), granted Priority Review and assigned a target action date of October 5, 2018. In addition, Verastem Oncology is developing the FAK inhibitor defactinib, which is currently being evaluated in three separate clinical collaborations in combination with immunotherapeutic agents for the treatment of several different cancer types, including pancreatic cancer, ovarian cancer, non-small-cell lung cancer (NSCLC), and mesothelioma. Verastem Oncology’s product candidates seek to treat cancer by modulating the local tumor microenvironment and enhancing anti-tumor immunity. For more information, please visit www.verastem.com.
About Yakult Honsha Co., Ltd.
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Yakult is a leading Japanese company focused on the development and marketing of pharmaceuticals, foods, beverages, and cosmetics. With respect to its pharmaceutical business, Yakult has a strong presence in development and commercialization of the therapeutic products in the field of oncology. The company, led by Takashige Negishi, in 2017 recorded ¥378.3 Billion Revenues.
For more information on Yakult, visit: http://www.yakult.co.jp/english/index.html or view the
following company profile:
http://www.yakult.co.jp/english/pdf/profile2017-2018_en.pdf
Verastem, Inc. forward-looking statements notice:
This press release includes forward-looking statements about Verastem Oncology’s strategy, future plans and prospects, including statements regarding the development and activity of Verastem Oncology’s investigational product candidates, including duvelisib and defactinib, and Verastem Oncology’s PI3K and FAK programs generally, the potential to receive milestone and royalty payments under the agreement with Yakult, the structure of our planned and pending clinical trials, Verastem Oncology’s financial guidance and the timeline and indications for clinical development and regulatory submissions. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statement. Applicable risks and uncertainties include the risks that approval of Verastem Oncology’s New Drug Application for duvelisib in any jurisdiction will not occur on the expected timeframe or at all, including by the U.S. Food and Drug Administration’s target action date; that a filing of a European Marketing Application may not be achieved in fiscal year 2019 or at all; that partnerships or collaborations for the development of duvelisib outside of the United States may not be successful; that even if data from clinical trials is positive, regulatory authorities may require additional studies for approval or may approve for indications or patient populations that are not as broad as intended and the product may not prove to be safe and effective or may require labeling with use or distribution restrictions; that the preclinical testing of Verastem Oncology’s product candidates and preliminary or interim data from clinical trials may not be predictive of the results or success of ongoing or later clinical trials; that the full data from the DUO study will not be consistent with the previously presented results of the study; that data may not be available when expected, including for the Phase 3 DUO study; that the degree of market acceptance of product candidates, if approved, may be lower than expected; that the timing, scope and rate of reimbursement for our product candidates is uncertain; that there may be competitive developments affecting our product candidates; that data may not be available when expected; that enrollment of clinical trials may take longer than expected; that our product candidates will cause unexpected safety events or result in an unmanageable safety profile as compared to their level of efficacy; that duvelisib will be ineffective at treating patients with lymphoid malignancies; that Verastem Oncology will be unable to successfully initiate or complete the clinical development and eventual commercialization of its product candidates; that the development and commercialization of Verastem Oncology’s product candidates will take longer or cost more than planned; that Verastem Oncology may not have sufficient cash to fund its contemplated operations; that Verastem Oncology or Infinity
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Pharmaceuticals, Inc. will fail to fully perform under the duvelisib license agreement; that Verastem Oncology may be unable to make additional draws under its debt facility or obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity, debt financing or otherwise; that Verastem Oncology will not pursue or submit regulatory filings for its product candidates, including for duvelisib in patients with CLL/SLL or iNHL; and that Verastem Oncology’s product candidates will not receive regulatory approval, become commercially successful products, or result in new treatment options being offered to patients. Other risks and uncertainties include those identified under the heading "Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (SEC) on March 13, 2018 and in any subsequent filings with the SEC. The forward-looking statements contained in this press release reflect Verastem Oncology’s views as of the date hereof, and the Company does not assume and specifically disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.
Contact:
Verastem Oncology, Inc.
Marianne M. Lambertson
Vice President, Corporate Communications
Investor Relations/Public Relations
+1 781-292-4273
mlambertson@verastem.com
References
1 Winkler D.G., Faia K.L., DiNitto J.P. et al. PI3K-delta and PI3K-gamma inhibition by IPI-145 abrogates immune responses and suppresses activity in autoimmune and inflammatory disease models. Chem Biol 2013; 20:1-11.
2 Reif K et al. Cutting Edge: Differential Roles for Phosphoinositide 3 kinases, p110-gamma and p110-delta, in lymphocyte chemotaxis and homing. J Immunol 2004:173:2236-2240.
3 Schmid M et al. Receptor Tyrosine Kinases and TLR/IL1Rs Unexpectedly activate myeloid cell PI3K, a single convergent point promoting tumor inflammation and progression. Cancer Cell 2011;19:715-727.
4 www.clinicaltrials.gov, NCT02004522
5 www.clinicaltrials.gov, NCT01882803
6 www.clinicaltrials.gov, NCT02783625, NCT02158091
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Exhibit D
Diligence Obligations
Type |
Description of obligation |
Date required by Licensee to meet obligation |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
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Exhibit E
Development Plan
[* * *]
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WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SEC.
Exhibit F
Licensed Trademarks
Mark |
Country |
App. No. |
App. Date |
Reg. No. |
Reg. Date |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
[* * *] |
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Exhibit G
Synopsis of the [* * *] Study
[* * *]
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Exhibit H
Supply Agreement Key Terms
[* * *]
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Exhibit 31.1
CERTIFICATIONS
I, Robert Forrester, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Verastem, Inc.; |
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
/s/ ROBERT FORRESTER |
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|
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Robert Forrester |
|
President and Chief Executive Officer |
Date: August 8, 2018
1
Exhibit 31.2
CERTIFICATIONS
I, Daniel Paterson, certify that:
1. |
I have reviewed this Quarterly Report on Form 10-Q of Verastem, Inc.; |
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 8, 2018
1
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Verastem, Inc. (the “Company”) for the period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Robert Forrester, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
/s/ ROBERT FORRESTER |
|
|
|
Robert Forrester |
|
President and Chief Executive Officer |
Date: August 8, 2018
1
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Verastem, Inc. (the “Company”) for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Daniel Paterson, Chief Operating Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
/s/ DANIEL PATERSON |
|
|
|
Daniel Paterson |
|
Chief Operating Officer |
Date: August 8, 2018
1
Exhibit 99.1
|
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Verastem Oncology Reports Second Quarter 2018 Financial Results
BOSTON, MA – August 8, 2018 - Verastem, Inc. (Nasdaq: VSTM) (Verastem Oncology or the Company), focused on developing and commercializing medicines to improve the survival and quality of life of cancer patients, today reported financial results for the quarter ended June 30, 2018 and provided an overview of certain corporate developments.
“During the second quarter of 2018, we’ve been actively preparing for the commercialization of duvelisib, our first-in-class, oral dual inhibitor of phosphoinositide 3-kinase (PI3K)-delta and PI3K-gamma for the treatment of patients with relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) or follicular lymphoma (FL),” said Robert Forrester, President and Chief Executive Officer of Verastem Oncology. “In advance of our target action date of October 5, 2018, we have been building our U.S. sales force and commercial capabilities in preparation for a potential product launch of duvelisib in the U.S. in 2018. On the financial front, we have significantly strengthened our balance sheet, ending June 30, 2018 with $168.7 million in cash and cash equivalents.”
Second Quarter 2018 and Recent Highlights:
Corporate and Financial
· |
Duvelisib NDA accepted by FDA with priority review – In April 2018, Verastem Oncology announced that the U.S. Food and Drug Administration (FDA) accepted the duvelisib New Drug Application (NDA) for filing with Priority Review, with a target action date of October 5, 2018. In the accepted NDA, the Company is seeking full approval for duvelisib, its first-in-class investigational oral dual inhibitor of PI3K-delta and PI3K-gamma, for the treatment of relapsed or refractory CLL/SLL and accelerated approval for the treatment of relapsed or refractory FL. The duvelisib NDA is supported by clinical data from the randomized Phase 3 DUO™ study evaluating duvelisib as a monotherapy in patients with relapsed or refractory CLL/SLL, as well as the Phase 2 DYNAMO™ study evaluating patients with iNHL that are double-refractory to both rituximab and chemotherapy or radioimmunotherapy. Both DUO and DYNAMO achieved their primary endpoints. |
· |
Hosted Analyst and Investor Day highlighting commercial potential of duvelisib – In early May 2018, Verastem Oncology hosted an Analyst and Investor Day in New York City titled, “Duvelisib: Harnessing the Power of Dual PI3K Inhibition.” Key opinion leaders in the hematologic oncology field including Dr. Lori Kunkel, Former Chief Medical Officer, Pharmacyclics, Dr. Jennifer Brown, Dana-Farber Cancer Institute, Dr. Ian Flinn, Sarah Cannon Research Institute, Dr. Steven Horwitz, Memorial Sloan Kettering Cancer Center as well as Dr. Brian Koffman, Founder & Medical Director of the Chronic Lymphocytic Leukemia (CLL) Society, and a CLL patient, joined the Verastem Oncology executive leadership team for an in-depth discussion regarding the unmet need among CLL/SLL and FL patients, where PI3K-delta and PI3K-gamma inhibitors fit into the treatment paradigm, and the growing opportunity for duvelisib in CLL/SLL and FL, and beyond. The Company also provided an overview of its duvelisib commercial strategy and initiatives. The webcast is available within the “Media” section of the Company’s website at www.verastem.com. |
1
· |
Signed exclusive license agreement with Yakult Honsha Co., Ltd. (Yakult) to develop and commercialize duvelisib in Japan – In June 2018, Verastem Oncology announced its entry into an exclusive license and collaboration agreement with Yakult to develop and commercialize duvelisib for the treatment, prevention or diagnosis of all oncology indications in Japan. The transaction, which carries a total deal value of up to $100.0 million, includes a one-time upfront payment of $10.0 million and up to an additional $90.0 million if certain future pre-specified development, regulatory and commercial milestones are successfully achieved by Yakult. In addition, Verastem Oncology is also eligible to receive double-digit royalties based on future net sales of duvelisib in Japan. Pursuant to the agreement, Yakult has the right to develop and commercialize duvelisib in Japan at its own cost and expense. In addition, Yakult may fund certain global development costs on a pro-rata basis. Verastem Oncology retains all rights to duvelisib outside of Japan. |
· |
Strengthened the balance sheet through the sale of equity for net proceeds of approximately $105 Million – In May 2018, Verastem Oncology completed an underwritten registered offering of 8,944,444 shares of its common stock at a price to the public of $4.50 per share. The net proceeds to Verastem from the offering were approximately $38.3 million. In June 2018, Verastem Oncology completed a registered offering of 7,166,666 shares of its common stock at a price of $6.00 per share to funds managed by Consonance Capital. The net proceeds to Verastem Oncology from this offering were approximately $42.8 million. The Company also sold 6,314,410 shares of common stock under its at-the-market equity offering program for net proceeds of approximately $23.7 million |
· |
Joined the Russell 3000® Index – In June 2018, the Company joined the broad-market Russell 3000® Index as part of the Russell US Indexes annual reconstitution. |
Scientific Presentations at Major Medical Meetings
Duvelisib
· |
The efficacy of duvelisib monotherapy following disease progression on ofatumumab monotherapy in patients with relapsed/refractory CLL or SLL in the DUO™ crossover extension study – In June 2018, at both the American Society of Clinical Oncology 2018 Annual Meeting (ASCO 2018) and the European Hematology Association 2018 Annual Meeting (EHA 2018), Dr. Byrone Kuss, Flinders Medical Centre, and Dr. Peter Hillman, St. James Universiity Hospital, respectively, presented additional data from the open-label, DUO crossover extension study where patients with radiologically confirmed progressive disease (PD) following treatment with ofatumumab in DUO were given the option to receive treatment with duvelisib. Among the 89 evaluable patients (median 3 prior therapies; range 2-8), duvelisib as a monotherapy achieved a 73% overall response rate (ORR) per investigators assessment in the extension study (95% confidence interval CI: 64,82); 5% complete response with incomplete marrow recovery (CRi), and 68% partial response (PR). The median progression-free survival (mPFS) for duvelisib in the DUO crossover extension study was 15 months (95% CI: 10,17). Notably, 83% of patients in the duvelisib arm post-crossover had >50% reductions in the size of their target nodal lesions. The safety profile of duvelisib as a monotherapy was manageable and consistent with what was observed in the Phase 3 DUO™ study. These data build upon the previously reported positive DUO results and further support duvelisib as an effective oral monotherapy treatment option for patients with relapsed or refractory CLL/SLL. |
· |
A Phase IB/II study of duvelisib in combination with Fludarabine (F), Cyclophosphamide (C), and Rituximab (R) (dFCR) for frontline therapy of younger CLL patients - At EHA 2018, Dr. Matthew Davids, Dana-Farber Cancer Institute, presented data on the 31 patients evaluable for post-dFCR response. The ORR was 94%, with 26% (n=8) of patients achieving a complete response (CR) or CRi, and 68% achieving a PR. The best |
2
rate of minimum residual disease (MRD) negativity in the bone marrow (BM) in patients with at least one evaluation was 76% (22 of 29 patients). All patients who achieved CR/CRi at the primary endpoint also had BM-MRD negativity (26%). Among survivors, the median follow-up is 24.5 months (range 6.9-46 months). The two-year progression-free survival and overall survival rates for patients in the study were both 97%. Eight patients have now completed two years of duvelisib maintenance therapy. Based on these results the recommended Phase 2 dose of duvelisib in combination with FCR was 25mg twice daily. The most common all grade non-hematologic adverse events (AEs) were nausea (72%, all Grade 1/2), fatigue (69%, 3% Grade 3), fever (53%, all Grade 1/2), diarrhea (47%, 3% Grade 3), transaminitis (34%, 28% Grade 3/4), anorexia (34%, all Grade 1/2), vomiting (28%, all Grade 1/2), pruritus (16%, 3% Grade 3), arthritis (9%, all Grade 2) and Cytomegalovirus (CMV) reactivation (6%, both Grade 2). The most common all grade hematologic adverse events were thrombocytopenia (65%; 34% Grade 3-4), neutropenia (59%; 50% Grade 3-4), and anemia (38%, 16% Grade 3). Serious AEs included transaminitis (Grade ≥3), febrile neutropenia (n=6, all Grade 3), pneumonia (n=6, including 3 cases of PJP despite planned prophylaxis), and colitis (n=1 Grade 2, n=1 Grade 3). These results suggest that duvelisib in combination with FCR is an effective regimen for the initial therapy of younger, fit CLL patients and results in a high rate of BM-MRD negativity (76%), significantly higher than historical data with FCR. |
· |
The effect of duvelisib, a dual inhibitor of PI3K-δ,γ, on components of the tumor microenvironment in previously untreated follicular lymphoma patients – At both ASCO 2018 and EHA 2018, Dr. Carla Casulo, University of Rochester, Wilmot Cancer Center, presented data from blood samples from healthy volunteers and FL patients treated in the CONTEMPO study. Samples collected both pre- and post-duvelisib treatment were analyzed. Ex vivo and in vitro PI3K-delta assays and PI3K-gamma assays, with PI3K-gamma-selective (idelalisib, TGR-1202, IPI-3063) and PI3K-delta-selective (IPI-549) inhibitors were compared. Collectively, the results of this analysis support the thesis that duvelisib disrupts PI3K-delta and PI3K-gamma function in FL patients, inhibiting the tumor microenvironment (TME) cancer-supportive macrophages and T-cells. |
· |
Duvelisib inhibition of chemokines in patients with CLL (DUO™) and iNHL (DYNAMO™) – At both ASCO 2018 and EHA 2018, Dr. David Weaver, Verastem Oncology’s Vice President, Translational Medicine, presented data showing that PI3K-delta inhibition directly targets proliferation and survival of malignant leukemia and lymphoma cells, while PI3K-gamma inhibition modulates the TME through key support cells, including tumor-associated macrophages, nurse-like stroma and T-cells, and via soluble factors stimulating tumor growth, survival and migration. Serum samples from patients in the Phase 3 DUO study in relapsed/refractory CLL/SLL and the Phase 2 DYNAMO study in relapsed/refractory indolent non-Hodgkin lymphoma (iNHL) were collected at baseline and at infusuion cycle date C2D1 and used for correlative studies of 24 chemokines, cytokines and serum factors. These data support the hypothesis that treatment with duvelisib results in significant reduction of chemokines potentially derived from the tumor cells and TME and that further investigation of the effects of duvelisib on TME pharmacodynamic markers is warranted. |
· |
Presented scientific data supporting immuno-oncology applications of duvelisib at the 3rd annual Advances in Immuno-Oncology Congress – In May 2018, Jonathan Pachter, Ph.D., Verastem Oncology’s Chief Scientific Officer, gave an oral presentation highlighting the unique potential of duvelisib, as a dual inhibitor of PI3K-delta and PI3K-gamma, to enhance the efficacy of immune checkpoint and co-stimulatory antibodies in preclinical models of both hematological malignancies and solid tumors. Dr. Pachter also moderated a round table discussion regarding novel checkpoint pathways and emerging strategies for combined modality treatment. |
3
Defactinib
· |
Presented preliminary Phase 1 results from combination trial with defactinib, pembrolizumab and gemcitabine in advanced cancer – At ASCO 2018, Dr. Andrea Wang-Gillam presented a poster describing results from the ongoing Phase 1 study evaluating defactinib in combination with pembrolizumab and gemcitabine in patients with advanced cancer, including pancreatic cancer. The combination treatment appears to be well tolerated, the recommended Phase 2 dose was established, and the expansion phase of the study is now ongoing. Encouraging signs of clinical activity were observed in three pancreatic ductal adenocarcinoma (PDAC) patients treated beyond 250 days, including one patient with confirmed PR and two patients with stable disease. Meaningful reductions (57-96%) in the pancreatic cancer marker CA19-9 were also observed in all three patients. In addition, analysis of paired biopsies showed that the combination treatment induced desirable biomarker changes including increased proliferating CD8+ T-cells and reduced immunosuppressive Tregs and macrophages. |
· |
Presented scientific data supporting immuno-oncology applications of defactinib at the 3rd Annual Advances in Immuno-Oncology Congress – During Dr. Pachter’s oral presentation, he also provided an update on the scientific rationale and clinical progress of Verastem Oncology’s lead focal adhesion kinase (FAK) inhibitor, defactinib, in combination with PD-1 and PD-L1 inhibitors in solid tumors. |
All posters and presentations are available within the “Media” section of the Company’s website at www.verastem.com.
Second Quarter 2018 Financial Results
Net loss for the three months ended June 30, 2018 (2018 Quarter) was $18.4 million, or $0.30 per share, as compared to a net loss of $13.4 million, or $0.36 per share, for the three months ended June 30, 2017 (2017 Quarter). Net loss for the 2018 Quarter includes license revenue of $10.0 million, related to the upfront payment received in connection with the license and collaboration agreement with Yakult in June 2018. Cash used in operating activities, excluding the upfront payment from Yakult, was $20.3 million for the 2018 Quarter.
Research and development expense for the 2018 Quarter was $12.4 million compared to $9.0 million for the 2017 Quarter. The $3.4 million increase from the 2017 Quarter to the 2018 Quarter was primarily related to an increase of $1.6 million in contract research organization expense for outsourced biology, development and clinical services, which includes the Company’s clinical trial costs, an increase of $1.0 million in personnel related costs, and an increase of $0.4 million in stock-based compensation expense.
General and administrative expense for the 2018 Quarter was $15.8 million compared to $4.4 million for the 2017 Quarter. The increase of $11.4 million from the 2017 Quarter to the 2018 Quarter primarily resulted from increases in consulting and professional fees of $5.2 million, including $3.6 million related to commercial launch preparation activities, and an increase in personnel related costs of $4.4 million.
4
As of June 30, 2018, Verastem Oncology had cash and cash equivalents of $168.7 million compared to $86.7 million of cash, cash equivalents and investments as of December 31, 2017.
The number of outstanding common shares as of June 30, 2018 was 73,579,699.
Financial Guidance
Based on the Company’s current operating plans, assuming a favorable regulatory decision and estimated revenue, it expects to have sufficient cash and cash equivalents to fund operations into 2020.
Duvelisib is a first-in-class investigational oral, dual inhibitor of phosphoinositide 3-kinase (PI3K)-delta and PI3K-gamma, two enzymes known to help support the growth and survival of malignant B-cells and T-cells. PI3K signaling may lead to the proliferation of malignant B- and T-cells and is thought to play a role in the formation and maintenance of the supportive tumor microenvironment.1,2,3 Duvelisib was evaluated in late- and mid-stage extension trials, including DUO™, a randomized, Phase 3 monotherapy study in patients with relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL),4 and DYNAMO™, a single-arm, Phase 2 monotherapy study in patients with refractory indolent non-Hodgkin lymphoma (iNHL).5 Both DUO and DYNAMO achieved their primary endpoints. Verastem Oncology’s New Drug Application (NDA) requesting the full approval of duvelisib for the treatment of patients with relapsed or refractory CLL/SLL, and accelerated approval for the treatment of patients with relapsed or refractory follicular lymphoma (FL) was accepted for filing by the U.S. Food and Drug Administration (FDA), granted Priority Review and assigned a target action date of October 5, 2018. Duvelisib is also being developed by Verastem Oncology for the treatment of peripheral T-cell lymphoma (PTCL), and is being investigated in combination with other agents through investigator-sponsored studies.6 Information about duvelisib clinical trials can be found on www.clinicaltrials.gov.
About Defactinib
Defactinib is an investigational inhibitor of focal adhesion kinase (FAK), a non-receptor tyrosine kinase that mediates oncogenic signaling in response to cellular adhesion and growth factors.7 Based on the multi-faceted roles of FAK, defactinib is used to treat cancer through modulation of the tumor microenvironment and enhancement of anti-tumor immunity.8,9 Defactinib is currently being evaluated in three separate clinical collaborations in combination with immunotherapeutic agents for the treatment of several different cancer types including pancreatic cancer, ovarian cancer, non-small cell lung cancer (NSCLC), and mesothelioma. These studies are combination clinical trials with pembrolizumab and avelumab from Merck & Co. and Pfizer/Merck KGaA, respectively.10,11,12 Information about these and additional clinical trials evaluating the safety and efficacy of defactinib can be found on www.clinicaltrials.gov.
About Verastem Oncology
Verastem, Inc. (Nasdaq:VSTM), operating as Verastem Oncology, is a biopharmaceutical company focused on developing and commercializing medicines to improve the survival and quality of life of cancer patients. Verastem Oncology is currently developing duvelisib, a dual inhibitor of PI3K-delta and PI3K-gamma, which has successfully met its primary endpoint in a Phase 2 study in indolent non-Hodgkin lymphoma and a Phase 3 clinical trial in patients with chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL). Verastem
5
Oncology’s New Drug Application (NDA) requesting the full approval of duvelisib for the treatment of patients with relapsed or refractory CLL/SLL, and accelerated approval for the treatment of patients with relapsed or refractory follicular lymphoma (FL) was accepted for filing by the U.S. Food and Drug Administration, granted Priority Review and assigned a target action date of October 5, 2018. In addition, Verastem Oncology is developing the focal adhesion kinase (FAK) inhibitor defactinib, which is currently being evaluated in three separate clinical collaborations in combination with immunotherapeutic agents for the treatment of several different cancer types, including pancreatic cancer, ovarian cancer, non-small cell lung cancer (NSCLC), and mesothelioma. Verastem Oncology’s product candidates seek to treat cancer by modulating the local tumor microenvironment and enhancing anti-tumor immunity. For more information, please visit www.verastem.com.
Forward-looking statements notice:
This press release includes forward-looking statements about Verastem Oncology’s strategy, future plans and prospects, including statements regarding Verastem Oncology’s future financial position, objectives of management, the development and activity of Verastem Oncology’s investigational product candidates, including duvelisib and defactinib, and Verastem Oncology’s PI3K and FAK programs generally, the structure of its planned and pending clinical trials, Verastem Oncology’s financial guidance and the timeline and indications for clinical development, regulatory submissions and commercialization activities. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statement. Applicable risks and uncertainties include the risks that approval of Verastem Oncology’s New Drug Application for duvelisib will not occur on the expected timeframe or at all, including by the U.S. Food and Drug Administration’s target action date; that even if data from clinical trials is positive, regulatory authorities may require additional studies for approval and the product may not prove to be safe and effective; that the preclinical testing of Verastem Oncology’s product candidates and preliminary or interim data from clinical trials may not be predictive of the results or success of ongoing or later clinical trials; that a filing of a European Marketing Authorization Application may not be achieved; that the full data from the DUO™ study will not be consistent with the previously presented results of the study; that data may not be available when expected, including for the Phase 3 DUO study; that the degree of market acceptance of product candidates, if approved, may be lower than expected; that the timing, scope and rate of reimbursement for Verastem Oncology’s product candidates is uncertain; that there may be competitive developments affecting its product candidates; that data may not be available when expected; that enrollment of clinical trials may take longer than expected; that Verastem Oncology’s product candidates will cause unexpected safety events or result in an unmanageable safety profile as compared to their level of efficacy; that duvelisib will be ineffective at treating patients with lymphoid malignancies; that Verastem Oncology will be unable to successfully initiate or complete the clinical development and eventual commercialization of its product candidates; that the development and commercialization of Verastem Oncology’s product candidates will take longer or cost more than planned; that Verastem Oncology may not have sufficient cash to fund its contemplated operations; that Verastem Oncology or Infinity Pharmaceuticals, Inc. will fail to fully perform under the duvelisib license agreement; that Verastem Oncology may be unable to make additional draws under its debt facility or obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity, debt financing or otherwise; that Verastem Oncology will not pursue or submit regulatory filings for its product candidates, including for duvelisib in patients with CLL/SLL or iNHL; and that Verastem Oncology’s product candidates will not receive regulatory approval, become commercially
6
successful products, or result in new treatment options being offered to patients. Other risks and uncertainties include those identified under the heading "Risk Factors" in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, its Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (SEC) on March 13, 2018 and in any subsequent filings with the SEC. The forward-looking statements contained in this press release reflect Verastem Oncology’s views as of the date hereof, and the Company does not assume and specifically disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.
Verastem Oncology
Marianne M. Lambertson
Vice President, Corporate Communications
Investor Relations/Public Relations
+1 781-292-4273
mlambertson@verastem.com
References
1 Winkler D.G., Faia K.L., DiNitto J.P. et al. PI3K-delta and PI3K-gamma inhibition by IPI-145 abrogates immune responses and suppresses activity in autoimmune and inflammatory disease models. Chem Biol 2013; 20:1-11.
2 Reif K et al. Cutting Edge: Differential Roles for Phosphoinositide 3 kinases, p110-gamma and p110-delta, in lymphocyte chemotaxis and homing. J Immunol 2004:173:2236-2240.
3 Schmid M et al. Receptor Tyrosine Kinases and TLR/IL1Rs Unexpectedly activate myeloid cell PI3K, a single convergent point promoting tumor inflammation and progression. Cancer Cell 2011;19:715-727.
4 www.clinicaltrials.gov, NCT02004522
5 www.clinicaltrials.gov, NCT01882803
6 www.clinicaltrials.gov, NCT02783625, NCT02158091
7 Schaller M.D. and Parsons J.T. Focal adhesion kinase: an integrin-linked protein tyrosine kinase. Trends Cell Biol. 1993 3: 258-62.
8 Jiang H et al. Targeting focal adhesion kinase renders pancreatic cancers responsive to checkpoint immunotherapy. Nat Med 2016: Aug 22(8) 851-60.
9 Sulzmaier F.J. et al. FAK in cancer: mechanistic findings and clinical applications. Nature Rev Cancer. 2014 14: 598-610.
10 www.clinicaltrials.gov, NCT02546531
11 www.clinicaltrials.gov, NCT02943317
12 www.clinicaltrials.gov, NCT02758587
7
Verastem, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
|
|
June 30, |
|
December 31, |
|
||
|
|
2018 |
|
2017 |
|
||
|
|
(unaudited) |
|
|
|
|
|
Cash, cash equivalents and investments |
|
$ |
168,692 |
|
$ |
86,672 |
|
Prepaid expenses and other current assets |
|
|
1,745 |
|
|
1,115 |
|
Property and equipment, net |
|
|
1,270 |
|
|
861 |
|
Other assets |
|
|
1,211 |
|
|
1,143 |
|
Total assets |
|
$ |
172,918 |
|
$ |
89,791 |
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other current liabilities |
|
$ |
22,132 |
|
$ |
17,128 |
|
Long-term debt |
|
|
23,520 |
|
|
14,828 |
|
Other liabilities |
|
|
399 |
|
|
151 |
|
Stockholders’ equity |
|
|
126,867 |
|
|
57,684 |
|
Total liabilities and stockholders’ equity |
|
$ |
172,918 |
|
$ |
89,791 |
|
8
Verastem, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
License revenue |
|
$ |
10,000 |
|
$ |
— |
|
$ |
10,000 |
|
$ |
— |
|
Total revenue |
|
|
10,000 |
|
|
— |
|
|
10,000 |
|
|
— |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
12,381 |
|
|
9,042 |
|
|
23,315 |
|
|
17,427 |
|
General and administrative |
|
|
15,813 |
|
|
4,425 |
|
|
25,640 |
|
|
9,188 |
|
Total operating expenses |
|
|
28,194 |
|
|
13,467 |
|
|
48,955 |
|
|
26,615 |
|
Loss from operations |
|
|
(18,194) |
|
|
(13,467) |
|
|
(38,955) |
|
|
(26,615) |
|
Interest income |
|
|
343 |
|
|
140 |
|
|
534 |
|
|
295 |
|
Interest expense |
|
|
(516) |
|
|
(109) |
|
|
(996) |
|
|
(121) |
|
Net loss |
|
$ |
(18,367) |
|
$ |
(13,436) |
|
$ |
(39,417) |
|
$ |
(26,441) |
|
Net loss per share—basic and diluted |
|
$ |
(0.30) |
|
$ |
(0.36) |
|
$ |
(0.70) |
|
$ |
(0.71) |
|
Weighted-average number of common shares used in net loss per share-basic and diluted |
|
|
61,256 |
|
|
36,992 |
|
|
56,074 |
|
|
36,992 |
|
9