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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | ||
ý |
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 September 30, 2013 |
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OR |
||
o |
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 (State or other jurisdiction of incorporation or organization) |
27-3269467 (I.R.S. Employer Identification Number) |
|
215 First Street, Suite 440 Cambridge, MA (Address of principal executive offices) |
02142 (Zip Code) |
(617) 252-9300
(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 ý No o
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 ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
As of November 7, 2013 there were 25,647,732 shares of Common Stock, $0.0001 par value per share, outstanding.
i
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 of 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, including the development of our compounds and diagnostics programs, the timeline for clinical development and regulatory approval of our compounds, the expected timing for the reporting of data from ongoing trials, the structure of our planned or pending clinical trials and our ability to fund operations, are forward looking statements. 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. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, our ability to raise additional capital to support our clinical development programs and other operations, our ability to develop products of commercial value and to identify, discover and obtain rights to additional potential product candidates, our ability to protect and maintain our intellectual property and the ability of our licensors to obtain and maintain patent protection for the technology or products that we license from them, the outcome of research and development activities and the fact that the preclinical and clinical testing of our compounds and preliminary data from clinical trials may not be predictive of the success of ongoing or later clinical trials, that data may not be available when we expect it to be, our reliance on third-parties, competitive developments, the effect of current and future legislation and regulation and regulatory actions, as well as other risks described in our Annual Report on Form 10-K and other filings with the Securities and Exchange Commission, or SEC.
As a result of these and other factors, we may not actually 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. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Item 1. Condensed Consolidated Financial Statements (Unaudited).
Verastem, Inc.
(A development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands,
except per share amounts)
|
September 30, 2013 |
December 31, 2012 |
|||||
---|---|---|---|---|---|---|---|
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ | 22,640 | $ | 10,096 | |||
Short-term investments |
77,290 | 46,480 | |||||
Prepaid expenses and other current assets |
1,077 | 506 | |||||
Total current assets |
101,007 | 57,082 | |||||
Property and equipment, net |
674 | 811 | |||||
Long-term investments |
30,340 | 34,944 | |||||
Restricted cash |
86 | 86 | |||||
Other long-term assets |
322 | | |||||
Total assets |
$ | 132,429 | $ | 92,923 | |||
Liabilities and stockholders' equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ | 1,836 | $ | 1,848 | |||
Accrued expenses |
3,457 | 551 | |||||
Other current liabilities |
413 | | |||||
Total current liabilities |
5,706 | 2,399 | |||||
Other long-term liabilities |
18 | 58 | |||||
Stockholders' equity: |
|||||||
Preferred stock, $0.0001 par value; 5,000 shares authorized; none issued |
| | |||||
Common stock, $0.0001 par value; 100,000 shares authorized, 25,214 and 20,364 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively |
3 | 2 | |||||
Additional paid-in capital |
202,951 | 136,893 | |||||
Accumulated other comprehensive income |
80 | 22 | |||||
Deficit accumulated during the development stage |
(76,329 | ) | (46,451 | ) | |||
Total stockholders' equity |
126,705 | 90,466 | |||||
Total liabilities and stockholders' equity |
$ | 132,429 | $ | 92,923 | |||
See accompanying notes.
2
Verastem, Inc.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands, except per share amounts)
|
Three months ended September 30, |
Nine months ended September 30, |
Period from August 4, 2010 (inception) to September 30, 2013 |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2013 | 2012 | 2013 | 2012 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
$ | 6,789 | $ | 8,132 | $ | 18,130 | $ | 17,618 | $ | 50,125 | ||||||
General and administrative |
3,855 | 2,298 | 11,879 | 6,636 | 26,596 | |||||||||||
Total operating expenses |
10,644 | 10,430 | 30,009 | 24,254 | 76,721 | |||||||||||
Loss from operations |
(10,644 | ) | (10,430 | ) | (30,009 | ) | (24,254 | ) | (76,721 | ) | ||||||
Interest income |
53 | 63 | 131 | 191 | 392 | |||||||||||
Net loss |
(10,591 | ) | (10,367 | ) | (29,878 | ) | (24,063 | ) | (76,329 | ) | ||||||
Accretion of preferred stock |
| | | (6 | ) | (40 | ) | |||||||||
Net loss applicable to common stockholders |
$ | (10,591 | ) | $ | (10,367 | ) | $ | (29,878 | ) | $ | (24,069 | ) | $ | (76,369 | ) | |
Net loss per share applicable to common stockholdersbasic and diluted |
$ | (0.47 | ) | $ | (0.51 | ) | $ | (1.37 | ) | $ | (1.32 | ) | $ | (6.53 | ) | |
Weighted-average number of common shares used in net loss per share applicable to common stockholdersbasic and diluted |
22,437 | 20,160 | 21,797 | 18,246 | 11,694 | |||||||||||
Comprehensive loss |
$ | (10,508 | ) | $ | (10,335 | ) | $ | (29,820 | ) | $ | (24,039 | ) | $ | (76,249 | ) | |
See accompanying notes.
3
Verastem, Inc.
(A development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in
thousands)
|
Nine months ended September 30, |
Period from August 4, 2010 (inception) to September 30, 2013 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2013 | 2012 | ||||||||
Operating activities |
||||||||||
Net loss |
$ | (29,878 | ) | $ | (24,063 | ) | $ | (76,329 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||
Depreciation and amortization |
174 | 146 | 464 | |||||||
Stock-based compensation expense |
7,976 | 4,627 | 17,063 | |||||||
Common stock issued in exchange for license |
| 1,957 | 2,003 | |||||||
Obligation to issue a warrant in exchange for license |
| | 439 | |||||||
Change in fair value of obligation to issue warrant |
| 431 | 398 | |||||||
Changes in operating assets and liabilities: |
||||||||||
Prepaid expenses and other current assets |
(893 | ) | (298 | ) | (1,399 | ) | ||||
Accounts payable |
(12 | ) | (536 | ) | 1,836 | |||||
Accrued expenses and deferred rent |
2,873 | 1,059 | 3,462 | |||||||
Net cash used in operating activities |
(19,760 | ) | (16,677 | ) | (52,063 | ) | ||||
Investing activities |
||||||||||
Purchases of property and equipment |
(36 | ) | (321 | ) | (1,139 | ) | ||||
Purchases of investments |
(103,363 | ) | (145,910 | ) | (293,242 | ) | ||||
Maturities of investments |
77,214 | 95,479 | 185,693 | |||||||
Increase in restricted cash |
| | (86 | ) | ||||||
Net cash used in investing activities |
(26,185 | ) | (50,752 | ) | (108,774 | ) | ||||
Financing activities |
||||||||||
Proceeds from issuance of redeemable convertible preferred stock |
| | 68,107 | |||||||
Proceeds from the exercise of stock options |
30 | 2 | 33 | |||||||
Net proceeds from the issuance of common stock and restricted common stock |
59,761 | 57,599 | 116,639 | |||||||
Cash used to settle restricted stock liability awards |
(1,302 | ) | | (1,302 | ) | |||||
Net cash provided by financing activities |
58,489 | 57,601 | 183,477 | |||||||
Increase (decrease) in cash and cash equivalents |
12,544 | (9,828 | ) | 22,640 | ||||||
Cash and cash equivalents at beginning of period |
10,096 | 20,954 | | |||||||
Cash and cash equivalents at end of period |
$ | 22,640 | $ | 11,126 | $ | 22,640 | ||||
Supplemental disclosure of non-cash financing activity |
||||||||||
Accretion of redeemable convertible preferred stock to redemption value |
$ | | $ | 6 | $ | 40 | ||||
Conversion of redeemable convertible preferred stock upon initial public offering |
$ | | $ | 68,148 | $ | 68,148 | ||||
Reclassification of obligation to issue warrant from liabilities to equity |
$ | | $ | 837 | $ | 837 | ||||
See accompanying notes.
4
Verastem, Inc.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted 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 of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three months ended September 30, 2013 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2013. 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, 2012 as filed with the Securities and Exchange Commission ("SEC") on March 26, 2013.
Subsequent Events
In preparing the financial statements included in this Form 10-Q, the Company has evaluated all subsequent events that occurred after September 30, 2013 through the date of the filing of this Form 10-Q.
2. Fair value of financial instruments
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy is now established that 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 | |
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 |
5
Verastem, Inc.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Fair value of financial instruments (Continued)
The following table presents information about the Company's financial assets and liabilities that have been measured at fair value at September 30, 2013 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands).
Description
|
Total | Quoted prices in active markets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Financial assets |
|||||||||||||
Cash equivalents |
$ | 21,069 | $ | 16,069 | $ | 5,000 | $ | | |||||
Short-term investments |
77,290 | | 77,290 | | |||||||||
Long-term investments |
30,340 | | 30,340 | | |||||||||
Total financial assets |
$ | 128,699 | $ | 16,069 | $ | 112,630 | $ | | |||||
Financial liabilities |
|||||||||||||
Liability classified stock-based compensation awards |
$ | 413 | $ | 413 | $ | | $ | | |||||
Total financial liabilities |
$ | 413 | $ | 413 | $ | | $ | | |||||
The following table presents information about the Company's financial assets that have been measured at fair value at December 31, 2012 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands).
Description
|
Total | Quoted prices in active markets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Financial assets |
|||||||||||||
Cash equivalents |
$ | 8,171 | $ | 8,171 | $ | | $ | | |||||
Short-term investments |
46,480 | | 46,480 | | |||||||||
Long-term investments |
34,944 | | 34,944 | | |||||||||
Total financial assets |
$ | 89,595 | $ | 8,171 | $ | 81,424 | $ | | |||||
The Company's cash equivalents and investments are comprised of money market accounts, government-sponsored enterprise securities and commercial paper of publicly traded companies secured by the U.S. government. These investments 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, 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
6
Verastem, Inc.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Fair value of financial instruments (Continued)
Company did not adjust or override any fair value measurements provided by the pricing services as of September 30, 2013.
The Company's liability classified stock-based compensation awards are comprised of restricted stock units that allow for greater than minimum statutory tax withholdings. These awards are valued based on the fair value of the Company's common stock underlying the awards, which is traded on an active market.
3. Investments
The Company's investments are classified as available-for-sale pursuant to Accounting Standards Codification (ASC) 320, InvestmentsDebt and Equity Securities. The Company classifies investments available to fund current operations as current assets on its balance sheets. Investments are classified as long-term assets on the balance sheets if (i) the Company has the intent and ability to hold the investments for a period of at least one year and (ii) the contractual maturity date of the investments is greater than one year.
Investments are carried at fair value with unrealized gains and losses included as a component of accumulated other comprehensive income, until such gains and losses are realized. If a decline in the fair value is considered other-than-temporary, based on available evidence, the unrealized loss is transferred from other comprehensive income to the statement of operations. There were no charges taken for other-than-temporary declines in fair value of investments during the three and nine months ended September 30, 2013 and 2012 or for the period from August 4, 2010 (inception) to September 30, 2013. The Company recorded $58,000, $24,000, $83,000, $33,000 and $80,000 of unrealized gains during the nine months ended September 30, 2013 and 2012, three months ended September 30, 2013 and 2012, and the period from August 4, 2010 (inception) to September 30, 2013, respectively. Realized gains and losses are included in interest income in the statement of operations. There were no realized gains or losses recognized during the three and nine months ended September 30, 2013 or 2012 or for the period from August 4, 2010 (inception) to September 30, 2013. The Company utilizes the specific identification method as a basis to determine the cost of securities sold.
The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment's carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers the intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment's amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company's investment policy, the severity and the duration of the impairment and changes in value subsequent to year end. As of September 30, 2013, there were no investments with a fair value that was significantly lower than the amortized cost basis or any investments that had been in an unrealized loss position for a significant period.
7
Verastem, Inc.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Investments (Continued)
Cash, cash equivalents and investments at September 30, 2013 and December 31, 2012 consist of the following (in thousands):
|
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2013 |
|||||||||||||
Cash and cash equivalents: |
|||||||||||||
Cash and money market accounts |
$ | 17,640 | $ | | $ | | $ | 17,640 | |||||
Corporate bonds |
5,000 | | | 5,000 | |||||||||
Total cash and cash equivalents |
$ | 22,640 | $ | | $ | | $ | 22,640 | |||||
Investments: |
|||||||||||||
Government-sponsored enterprise securities (due within 1 year) |
$ | 39,295 | $ | 16 | $ | | $ | 39,311 | |||||
Government-sponsored enterprise securities (due within 1 - 2 years) |
13,049 | 4 | | 13,053 | |||||||||
Corporate bonds (due within 1 year) |
37,921 | 60 | (2 | ) | 37,979 | ||||||||
Corporate bonds (due within 1 - 2 years) |
17,285 | 5 | (3 | ) | 17,287 | ||||||||
Total investments |
$ | 107,550 | $ | 85 | $ | (5 | ) | $ | 107,630 | ||||
Total cash, cash equivalents, and investments |
$ | 130,190 | $ | 85 | $ | (5 | ) | $ | 130,270 | ||||
|
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, 2012 |
|||||||||||||
Cash and cash equivalents: |
|||||||||||||
Cash and money market accounts |
$ | 10,096 | $ | | $ | | $ | 10,096 | |||||
Total cash and cash equivalents |
$ | 10,096 | $ | | $ | | $ | 10,096 | |||||
Investments: |
|||||||||||||
Government-sponsored enterprise securities (due within 1 year) |
$ | 46,469 | $ | 14 | $ | (3 | ) | $ | 46,480 | ||||
Government-sponsored enterprise securities (due within 1 - 2 years) |
34,931 | 14 | (1 | ) | 34,944 | ||||||||
Total investments |
$ | 81,400 | $ | 28 | $ | (4 | ) | $ | 81,424 | ||||
Total cash, cash equivalents, and investments |
$ | 91,496 | $ | 28 | $ | (4 | ) | $ | 91,520 | ||||
8
Verastem, Inc.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Accrued expenses
Accrued expenses consist of the following (in thousands):
|
September 30, 2013 |
December 31, 2012 |
|||||
---|---|---|---|---|---|---|---|
Compensation and related benefits |
$ | 1,191 | $ | 173 | |||
Contract research organizations |
973 | 69 | |||||
License milestones |
765 | | |||||
Professional fees |
375 | 183 | |||||
Other |
110 | 54 | |||||
Deferred rent |
43 | 36 | |||||
Consulting |
| 36 | |||||
|
$ | 3,457 | $ | 551 | |||
5. 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, unvested restricted stock and unvested restricted stock units 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 due to their anti-dilutive effect:
|
Three Months ended | Nine Months ended | Period from August 4, 2010 (inception) to September 30, 2013 |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
September 30, 2013 |
September 30, 2012 |
September 30, 2013 |
September 30, 2012 |
||||||||||||
Outstanding stock options |
2,313 | 1,152 | 2,313 | 1,152 | 2,313 | |||||||||||
Unvested restricted stock |
434 | 1,018 | 434 | 1,018 | 434 | |||||||||||
Unvested restricted stock units |
543 | 899 | 543 | 899 | 543 |
6. Stock-based compensation
In December 2011, the Company adopted the 2012 Incentive Plan (the 2012 Plan). The 2012 Plan became effective upon the closing of the Company's IPO in February 2012. The 2012 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (RSUs) and other stock-based and cash awards. Upon effectiveness, the number of shares of common stock reserved under the 2012 Plan was the sum of 3,428,571 shares plus the number of shares available under the 2010 Equity Incentive Plan (the 2010 Plan). The number of shares reserved under the 2012 Plan is increased by the number of shares of common stock (up to a maximum of 571,242 shares) subject to outstanding awards under the 2010 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased. The 2012 Plan includes an "evergreen provision" that allows for an annual increase in the number of shares of common stock available for issuance under the 2012 Plan. The annual increase will be added on the first day of each
9
Verastem, Inc.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Stock-based compensation (Continued)
year beginning in 2013 and each subsequent anniversary until the expiration of the 2012 Plan and is equal to the lowest of 1,285,714 shares of common stock, 4.0% of the number of shares of common stock outstanding or an amount determined by the board of directors. On January 1, 2013, the shares available under the 2012 Plan increased by 844,448 shares of common stock.
Restricted stock
A summary of the Company's non-vested restricted stock as of September 30, 2013 and changes during the nine months ended September 30, 2013 is as follows:
|
Shares | Weighted- average purchase price per share |
|||||
---|---|---|---|---|---|---|---|
Non-vested at December 31, 2012 |
747,000 | $ | 0.027 | ||||
Vested |
(313,289 | ) | 0.022 | ||||
Non-vested at September 30, 2013 |
433,711 | $ | 0.029 | ||||
As of September 30, 2013, there was $3.1 million of total unrecognized stock-based compensation expense related to non-vested restricted stock. The expense is expected to be recognized over a weighted average period of 1.3 years.
A summary of the Company's non-vested RSUs as of September 30, 2013 and changes during the nine months ended September 30, 2013 is as follows:
|
Shares | Weighted- average grant date fair value |
|||||
---|---|---|---|---|---|---|---|
Outstanding at December 31, 2012 |
899,204 | $ | 10.70 | ||||
Settled |
(317,869 | ) | 10.57 | ||||
Canceled |
(38,571 | ) | 11.00 | ||||
Outstanding at September 30, 2013 |
542,764 | $ | 10.75 | ||||
As of September 30, 2013, there was $5.3 million of total unrecognized stock-based compensation expense related to non-vested RSUs granted under the 2012 Plan. The expense is expected to be recognized over a weighted-average period of 2.3 years.
During the first quarter of 2013, the Company amended the terms of certain RSUs related to a total of 657,058 shares of common stock to allow for tax withholdings greater than the minimum required statutory withholding amount. As a result of this change in the terms of the awards, the outstanding RSUs are considered to be liability instruments. As a result of this modification, the Company records a liability for the fair value of the awards as of each reporting date with the change in fair value recorded through the statement of operations. The Company will record stock-based compensation expense equal to the greater of the original grant date fair value of the awards or the settlement date fair value. During the three and nine months ended September 30, 2013, the Company
10
Verastem, Inc.
(A development stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Stock-based compensation (Continued)
deposited with tax authorities $395,000 and $1.2 million, respectively, to settle the tax liability for awards that settled during the respective periods. The liability related to these awards is recorded within other current liabilities on the consolidated balance sheet as of September 30, 2013.
Stock options
A summary of the Company's stock option activity and related information follows:
|
Shares | Weighted- average price per share |
Weighted- average remaining contractual term (years) |
Aggregate intrinsic value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding at December 31, 2012 |
1,424,241 | $ | 6.90 | ||||||||||
Granted |
1,035,500 | 9.92 | |||||||||||
Exercised |
(71,795 | ) | 0.42 | ||||||||||
Canceled |
(74,884 | ) | 5.88 | ||||||||||
Outstanding at September 30, 2013 |
2,313,062 | $ | 8.49 | 9.0 | $ | 9,246,235 | |||||||
Exercisable at September 30, 2013 |
618,567 | $ | 7.26 | 8.6 | $ | 3,210,462 | |||||||
Vested and expected to vest at September 30, 2013(1) |
2,024,731 | $ | 8.84 | 9.1 | $ | 7,391,462 | |||||||
The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model using the following assumptions:
|
Nine Months ended September 30, |
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2013 | 2012 | |||||
Risk-free interest rate |
1.1 | % | 0.9 | % | |||
Dividend yield |
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Volatility |
75 | % | 76 | % | |||
Expected term (years) |
6.0 | 5.9 |
7. Stockholders' Equity
In July 2013, the Company closed a public offering in which it sold 4,255,000 shares of its common stock to the public at a price of $15.00 per share, including 555,000 shares issued pursuant to the exercise of the underwriters' option to purchase additional shares. This offering was completed under the shelf registration statement that was filed on Form S-3 and declared effective by the Securities Exchange Commission on February 14, 2013. The net proceeds from this offering were approximately $59.8 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.
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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 financial statements and related notes appearing elsewhere in this quarterly report. 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 or in our annual report on Form 10-K.
OVERVIEW
We are a biopharmaceutical company focused on discovering and developing drugs to treat cancer by the targeted killing of cancer stem cells. A cancer stem cell is a particularly aggressive type of tumor cell, resistant to conventional cancer therapy, that we believe is an underlying cause of tumors, their recurrence and metastasis. We have proprietary technology to create a stable population of cancer stem cells that we use to screen for and identify small molecule compounds that target cancer stem cells. Our most advanced programs target the Focal Adhesion Kinase, or FAK, and the PI3K/mTOR signaling pathways. Our lead FAK inhibitor, VS-6063, has been assigned defactinib as the United States Adopted Name (USAN). We have received orphan drug designation for the use of VS-6063 in mesothelioma in the European Union and in the United States. VS-6063 is currently in a registration-directed trial (COMMAND) in patients with mesothelioma, a Phase 1b trial in combination with weekly paclitaxel for patients with ovarian cancer, a Phase 2 study in patients with non-small cell lung cancer and a Phase 1 trial in Japan. In addition to VS-6063, our FAK inhibitor VS-4718 is in a Phase 1 clinical trial in patients with advanced cancers and we expect our dual mTORC1/2 and PI3K inhibitor VS-5584 to enter a Phase 1 clinical trial in patients with advanced cancers by year end 2013.
We commenced active operations in the second half of 2010. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring and developing our technology, identifying potential product candidates, undertaking preclinical studies of our most advanced product candidates and conducting clinical trials for VS-6063 and VS-4718. As of September 30, 2013, we have not generated any revenues and have financed our operations with net proceeds from the private placement of our preferred stock and public offerings of our common stock.
As of September 30, 2013, we had a deficit accumulated during the development stage of $76.3 million. We had net losses of $29.9 million, $24.1 million and $76.3 million for the nine months ended September 30, 2013 and 2012 and for the period from August 4, 2010 (inception) to September 30, 2013. 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 continue the research and development and initiate and conduct additional clinical trials of, and seek marketing approval for, 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 will need to obtain substantial 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 future 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
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estimate, and different estimateswhich also would have been reasonablecould 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, 2012 related to accrued research and development expenses and stock-based compensation. There were no changes to these critical accounting policies in the three and nine months ended September 30, 2013. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the SEC on March 26, 2013.
The Company has elected to follow the extended transition period guidance provided for in Securities Act Section 7(a)(2)(B) for complying with new or revised accounting standards. The Company will disclose the date on which adoption of such standards is required for non-emerging growth companies and the date on which the Company will adopt the recently issued accounting standards.
RESULTS OF OPERATIONS
Comparison of the Three Months ended September 30, 2013 and September 30, 2012
Research and development expense. Research and development expense for the three months ended September 30, 2013 (2013 Quarter) was $6.8 million compared to $8.1 million for the three months ended September 30, 2012 (2012 Quarter). The $1.3 million decrease from the 2012 Quarter to the 2013 Quarter was primarily related to a decrease of $2.7 million in license fee expense related to our agreement with Pfizer, Inc., including the issuance of 192,012 shares of common stock in the 2012 Quarter. This was partially offset by an increase of approximately $534,000 in contract research organization expense for outsourced biology, chemistry and development services, an approximately $426,000 increase in personnel costs primarily due to increased headcount and an approximately $158,000 increase in stock-based compensation expense.
General and administrative expense. General and administrative expense for the 2013 Quarter was $3.9 million compared to $2.3 million for the 2012 Quarter. The $1.6 million increase from the 2012 Quarter to the 2013 Quarter primarily resulted from an increase of $1.0 million in stock-based compensation expense associated with restricted stock units and restricted stock units with performance-based vesting provisions, an increase in consulting costs of approximately $183,000 and an approximately $137,000 increase in personnel costs primarily due to increase in salaries and headcount.
Interest income. Interest income decreased to approximately $53,000 for the 2013 Quarter from approximately $63,000 for the 2012 Quarter. This decrease was due to lower coupon rates on investments for the 2013 Quarter compared to the 2012 Quarter.
Comparison of the Nine Months ended September 30, 2013 and September 30, 2012
Research and development expense. Research and development expense for the nine months ended September 30, 2013 (2013 Period) was $18.1 million compared to $17.6 million for the nine months ended September 30, 2012 (2012 Period). The approximately $513,000 increase from the 2012 Period to the 2013 Period was primarily related to an increase of $2.3 million in contract research organization expense for outsourced biology, chemistry and development services, a $1.2 million increase in personnel costs primarily due to increased headcount and an approximately $317,000 increase in stock-based compensation expense. These increases were partially offset by a decrease of $3.4 million in license fee expense related to our agreement with Pfizer, Inc., including the issuance of 192,012 shares of common stock.
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General and administrative expense. General and administrative expense for the 2013 Period was $11.9 million compared to $6.6 million for the 2012 Period. The $5.3 million increase from the 2012 Period to the 2013 Period primarily resulted from an increase of $3.0 million in stock-based compensation expense associated with restricted stock units, an increase in professional fees and other costs of $1.1 million, an increase in consulting fees of approximately $460,000, an approximately $244,000 increase in corporate franchise taxes and an approximately $137,000 increase in personnel costs primarily due to increase in salaries and headcount.
Interest income. Interest income decreased to approximately $131,000 for the 2013 Period from approximately $191,000 for the 2012 Period. This decrease was due to lower coupon rates on investments for the 2013 Period compared to the 2012 Period.
LIQUIDITY AND CAPITAL RESOURCES
Sources of liquidity
As of September 30, 2013, we have not generated any revenues. Since our inception in August 2010, we have financed our operations principally through private placements and public offerings of our common stock. As of September 30, 2013, we had $130.3 million in cash, cash equivalents, and investments. We primarily invest our cash, cash equivalents and investments in a U.S. Treasury money market fund, government-sponsored enterprise securities, corporate bonds and commercial paper.
In July 2013, we closed a public offering in which we sold 4,255,000 shares of common stock at a price of $15.00 per share, including 555,000 shares issued pursuant to the exercise of the underwriters' option to purchase additional shares. This offering was completed under the shelf registration statement that was filed on Form S-3 and declared effective by the Securities Exchange Commission on February 14, 2013. The net proceeds to the Company from this offering were approximately $59.8 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.
Cash flows
Operating activities. The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in the components of working capital. The significant increase in cash used in operating activities for the 2013 Period compared to the 2012 Period is due to an increase in research and development expenses as we increased our research and development headcount and increased spending on external research and development costs.
Investing activities. The cash used in investing activities for the 2013 Period reflects the net purchases of investments of $26.2 million and the purchase of property and equipment totaling $36,000. The cash used in investing activities for the 2012 Period reflects the net purchases of investments of $50.4 million and the purchase of $321,000 of property and equipment.
Financing activities. The cash provided by financing activities in the 2013 Period reflects the net proceeds from the public offering of our common stock and cash paid to settle restricted stock awards. The cash provided by financing activities in the 2012 Period reflects the net proceeds from our initial public offering less issuance costs paid in prior periods.
Funding requirements
We expect our existing cash, cash equivalents and investments, will enable us to fund our current operating plan and capital expenditure requirements into the first half of 2016. 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
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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 operating expenses associated with completing the development of our current product candidates. Our future capital requirements will depend on many factors, including:
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. We do not have any committed external source of funds. 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 future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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 Securities and Exchange Commission 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, cash equivalents and investments of $130.3 million as of September 30, 2013, consisting of cash, U.S. Treasury money market fund, government-sponsored enterprise securities, corporate bonds and commercial paper. 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 in short-term securities. Our available-for-sale securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration most of our investment portfolio and the low risk profile
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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. 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 September 30, 2013, approximately $209,000 of our total liabilities were denominated in currencies other than the functional currency.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2013. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the 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. Disclosure controls and procedures include, without limitation, controls and procedures 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 accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. 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 September 30, 2013, our Chief Executive Officer and Chief Financial 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
No change in our internal control over financial reporting occurred during the fiscal quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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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, 2012. There have been no material changes from the factors disclosed in our 2012 Annual Report on Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission.
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 registered equity securities during the period covered by this Quarterly Report on Form 10-Q.
USE OF PROCEEDS FROM REGISTERED SECURITIES
In February 2012, we completed an initial public offering of 6,325,000 shares of our common stock at a price of $10.00 per share for an aggregate offering price of $63.3 million. The offer and sale of all of the shares in the offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-177677), which was declared effective by the SEC on January 26, 2012, and a registration statement on Form S-1 (File No. 333-179910) filed pursuant to Rule 462(b) of the Securities Act.
As of September 30, 2013, we have used approximately $43.5 million of the net proceeds mentioned above primarily to fund the preclinical and clinical development of our lead product candidates, to advance and expand the research, preclinical and clinical development of additional product candidates and companion diagnostics and for working capital, capital expenditures and other general corporate purposes. We have invested the balance of the net proceeds from the offerings in a variety of capital preservation investments, including investment grade, interest bearing instruments, U.S. government securities and corporate bonds. There has been no material change in our planned use of the balance of the net proceeds from the offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
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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 November 12, 2013, Verastem, Inc. announced its financial results for the quarter ended September 30, 2013 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 (the "Exchange Act"), 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, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
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.
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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.
VERASTEM, INC. | ||||
Date: November 12, 2013 |
By: |
/s/ ROBERT FORRESTER Robert Forrester President and Chief Executive Officer (Principal executive officer) |
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Date: November 12, 2013 |
By: |
/s/ JOHN B. GREEN John B. Green Chief Financial Officer (Principal financial and accounting officer) |
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10.1 | Letter Agreement, dated December 1, 2011, by and between Verastem, Inc. and Poniard Pharmaceuticals, Inc. | ||
10.2 |
Letter Agreement, dated March 6, 2013, by and among Verastem, Inc., The Scripps Research Institute and Poniard Pharmaceuticals, Inc. (filed herewith). |
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10.3 |
Consent and Assumption Agreement, dated September 4, 2013, by and between Verastem, Inc. and Encarta, Inc. and joined in by Poniard, LLC (filed herewith).* |
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31.1 |
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
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31.2 |
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
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32.1 |
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). |
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32.2 |
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). |
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99.1 |
Press Release issued by Verastem, Inc. on November 12, 2013 (furnished herewith). |
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101.INS |
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XBRL Instance Document |
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101.SCH |
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XBRL Taxonomy Extension Schema Document |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.
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Exhibit 10.1
December 1, 2011
Poniard Pharmaceuticals, Inc.
300 Elliott Avenue West, Suite 500
Seattle, WA 98119
Attn: Anna Wight, Vice President Legal
Poniard Pharmaceuticals, Inc.
7000 Shoreline Court, Suite 270
South San Francisco, CA 94080
Attn: Cheni Kwok, Senior Vice President, Corporate Development
Dear Cheni and Anna:
This letter relates to the License Agreement, dated as of November 17, 2011 (the License Agreement), between Verastem, Inc. (Verastem) and Poniard Pharmaceuticals, Inc.
For purposes of the License Agreement (including the Common Stock Warrant Agreement described therein), we wish to clarify that the number of shares of Verastems common stock as to which the warrant referenced in Section 4.3 of the License Agreement (the Warrant) is exercisable (currently 500,000 shares) shall be appropriately adjusted to reflect any stock dividend, stock split, combination or other similar recapitalization with respect to Verastems common stock occurring at any time after the date of the License Agreement and prior to the issuance of the Common Stock Warrant Agreement pursuant to the License Agreement.
In addition, we wish to clarify that the provisions of Section 2(e) of the Common Stock Warrant Agreement apply to, and shall adjust the securities, cash or other property deliverable upon exercise of the Warrant as a result of, any Reorganization whether occurring before or after issuance of the Warrant.
Please sign below to acknowledge your agreement herewith.
Very truly yours,
VERASTEM, INC.
By: |
/s/ Robert Forrester |
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Name: Robert Forrester |
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Title: COO |
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ACKNOWLEDGED AND AGREED:
PONIARD PHARMACEUTICALS, INC.
By: |
/s/ Ronald Martell |
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Name: Ronald Martell |
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Title: CEO |
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215 First St. Suite 440 Cambridge, MA 02142 P: (617) 252-9325 F: (617) 812-0059 www.verastem.com
Exhibit 10.2
Verastem, Inc.
215 First Street, Suite 440
Cambridge, MA 02142
March 6, 2013
BY E-MAIL
Roberta Hunt
The Scripps Research Institute
10550 North Torrey Pines Road
La Jolla, CA 92037
Fred Craves
Poniard Pharmaceuticals, Inc.
300 Elliott Avenue West, Suite 500
Seattle, WA 98119
Re: Modifying Patent Prosecution Rights and Obligations under the TSRI Agreement and Verastem Agreement
Dear Sirs or Madams:
This letter agreement (the Letter Agreement) is entered into by and among Verastem, Inc. (Verastem), The Scripps Research Institute (TSRI), and Poniard Pharmaceuticals, Inc. (Poniard). Reference is hereby made to the License Agreement by and among TSRI and Poniard, dated as of May 5, 2008 (the TSRI Agreement), and the License Agreement by and among Verastem and Poniard, dated as of November 17, 2011 (the Verastem Agreement). Capitalized terms used herein but not defined have the meaning set forth in the TSRI Agreement or the Verastem Agreement, as applicable.
This Letter Agreement is intended to modify the rights and obligations of Verastem, TSRI and Poniard under the TSRI Agreement and the Verastem Agreement with respect to the Licensed Patent Rights (as defined in the TSRI Agreement) that have been sublicensed by Poniard to Verastem under the Verastem Agreement (the TSRI Patent Rights). For the sake of clarity, the TSRI Patent Rights include the Licensed Patent Rights (as defined in the Verastem Agreement) that are Controlled (as defined in the Verastem Agreement) by Poniard pursuant to the TSRI Agreement. Exhibit A attached hereto sets forth the TSRI Patent Rights as of the date of this Letter Agreement (the Effective Date). Annually, or earlier upon request by Verastem, TSRI shall update Exhibit A to reflect the current patent applications and patents included in the TSRI Patent Rights.
Pursuant to Sections 8.1, 8.2 and 8.3 of the TSRI Agreement, TSRI is responsible for the preparation, filing and prosecution of the patent applications within the TSRI Patent Rights and for the maintenance of the patents issuing therefrom, and Poniard is required to pay or reimburse all costs and expenses paid or incurred by TSRI with respect to such patent prosecution and maintenance activities (the TSRI Patent Rights Costs) within thirty (30) days after receipt of an itemized invoice therefor. TSRI must keep Poniard timely informed with regard to such patent prosecution and maintenance activities, and provide Poniard, and Poniards counsel, with reasonable opportunity to review and comment on the text of each patent application within the TSRI Patent Rights before filing. TSRI is also required to provide Poniard with copies of all relevant patent applications, amendments, related correspondence and other related matters.
Pursuant to Section 5.1.1 of the Verastem Agreement, Verastem has agreed to reimburse Poniard for the TSRI Patent Rights Costs and Poniard has agreed to (a) keep Verastem timely informed with regard to the patent application and maintenance processes and other submissions for the TSRI Patent Rights; (b) give Verastem, and Verastems counsel, reasonable opportunity to review and comment on the text of each patent application within the TSRI Patent Rights before filing; and (c) include Verastems comments in any comments provided to TSRI, in each case to the extent that TSRI has granted such rights to Poniard.
Notwithstanding Sections 8.1, 8.2 and 8.3 of the TSRI Agreement or Section 5.1.1 of the Verastem Agreement, each of Verastem, Poniard and TSRI agree that, effective upon the Effective Date, Verastem shall directly reimburse TSRI for the TSRI Patent Costs incurred on or after the Effective Date in accordance with the terms of Section 8.3 of the TSRI Agreement, and that all of Poniards rights and obligations under Sections 8.1 and 8.2 of the TSRI Agreement with respect to the TSRI Patent Rights shall be transferred to Verastem. Accordingly, Poniard hereby assigns to Verastem and Verastem hereby assumes, all of Poniards rights and obligations under Sections 8.1, 8.2 and 8.3 of the TSRI Agreement solely with respect to the TSRI Patent Rights, and TSRI hereby acknowledges and consents to the assignment and assumption of such rights and obligations. Verastem and Poniard agree that, as of the Effective Date, Section 5.1.1 of the Verastem Agreement shall no longer apply to the TSRI Patent Rights.
Except as expressly set forth in this Letter Agreement, all of the terms and conditions of the TSRI Agreement and Verastem Agreement shall remain unchanged and in full force and effect, and are hereby ratified and confirmed in all respects.
Please indicate your acceptance of the terms and conditions set forth in this Letter Agreement by executing a copy of this letter and returning it to Verastem. Upon your execution of this Letter Agreement, it will be a binding contract among Verastem, TSRI and Poniard, and will be binding on the successors and assigns thereof.
This Letter Agreement may be executed in counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one and the same agreement. This Letter Agreement, following its execution, may be delivered via facsimile or other form of electronic delivery, which shall constitute delivery of an execution original for all purposes.
[Signature pages follow.]
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Sincerely, | |
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VERASTEM, INC. | |
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By: |
/s/ Daniel Paterson |
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Name: |
Daniel Paterson |
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(Printed) |
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Title: |
V.P., Head of Corporate Dev, |
ACCEPTED AND AGREED BY:
THE SCRIPPS RESEARCH INSTITUTE
By: |
/s/ Thomas E. Northrup |
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Thomas E. Northrup, Ph.D., J.D. |
Name: |
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General Counsel |
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(Printed) |
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The Scripps Research Institute |
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Title: |
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ACCEPTED AND AGREED BY:
PONIARD PHARMACEUTICALS, INC.
By: |
/s/ Fred Craves |
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Name: |
Fred Craves |
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(Printed) |
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Title: |
Director |
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Exhibit 10.3
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONSENT AND ASSUMPTION AGREEMENT
This CONSENT AND ASSUMPTION AGREEMENT (the Agreement) is made as of the 4th day of September, 2013, by and between and Verastem, Inc., a Delaware corporation (Verastem) and Encarta, Inc., a Delaware corporation (Encarta) and is joined in by Poniard (assignment for the benefit of creditors), LLC, a California limited liability company, in its sole and limited capacity as Assignee for the Benefit of Creditors of Poniard Pharmaceuticals, Inc. (Poniard ABC) for the limited purposes set forth herein.
RECITALS
WHEREAS, by resolution of the board of directors of Poniard Pharmaceuticals, Inc., a Washington corporation (Poniard), Poniard transferred ownership of all of its right, title and interest in and to all of its assets, properties and rights, tangible and intangible, wherever located (the Assets), to Poniard ABC, and in so doing, designated Poniard ABC to act, pursuant to Washington state law, as the Assignee for the Benefit of Creditors of Poniard;
WHEREAS, on or about March 11, 2013, Poniard filed with the Superior Court of the State of Washington King County (the Court) a Petition for Appointment of General Receiver over the Assets. By order dated March 12, 2013, the Court appointed Poniard ABC as a general receiver in connection with Poniards receivership in the Court;
WHEREAS, on June 24, 2013, Poniard ABC filed with the Court a motion seeking (i) a hearing with the Court and (ii) authorization of the sale of the Assets (the Sale Motion). Pursuant to the Sale Motion, Poniard requested entry of an order (the Approval Order) that, among other things, authorized Poniard ABC to enter into such documents and agreements as may be necessary to implement the sale transaction;
WHEREAS, on August 2, 2013, the Court entered the Approval Order approving the Sale Motion, and approving and authorizing Poniard ABC to enter into and implement that certain Asset Purchase Agreement by and between Poniard ABC and Encarta, dated as of June 20, 2013, and all associated agreements and transactions (the Purchase Agreement);
WHEREAS, upon the Closing of the transactions contemplated by the Purchase Agreement, that certain License Agreement dated November 17, 2011 between Verastem and Poniard, as such agreement may have been amended from time to time, and any ancillary agreements related or necessary thereto, including that certain Letter Agreement dated as of December 1, 2011 by and between Verastem and Poniard and that certain Letter Agreement dated as of March 6, 2013 by and among Verastem, Poniard and The Scripps Research Institute (collectively, the Verastem License Agreement), and any and all of Poniard ABCs right, title, benefit, privileges and interest which it has in, to and under the Verastem License Agreement, shall be assigned, transferred, conveyed and delivered by Poniard ABC to Encarta; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
WHEREAS, Encarta wishes to accept, assume, comply with, perform and discharge all of Poniard ABCs rights and obligations under the Verastem License Agreement, and Verastem wishes to consent to the assignment of the Verastem License Agreement to Encarta and to accept the exercise and performance of all of Poniard ABCs rights and obligations under the Verastem License Agreement from Encarta, in each case, upon and subject to the terms and conditions set forth in this Agreement and the applicable terms and conditions set forth in the Verastem License Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Verastem, Encarta and Poniard ABC intending to be legally bound hereby agree as follows:
1. Definitions. Capitalized terms used herein but not defined herein have the respective meanings ascribed to them in the Verastem License Agreement and the rules of usage set forth therein shall apply hereto.
2. Effectiveness. This Agreement shall become effective as of the date first written above (such date, the Effective Date).
3. Acknowledgment and Consent. Verastem hereby acknowledges that (i) the Verastem License Agreement is in full force and effect, and (ii) to Verastems knowledge, there are no defaults under the Verastem License Agreement and no events which with the giving of notice or the passage of time would constitute a default under the Verastem License Agreement. Verastem hereby consents to the assignment of the Verastem License Agreement by Poniard ABC to Encarta pursuant to the Purchase Agreement. Verastem hereby agrees to accept Encartas exercise and performance of all of the rights and obligations of Poniard ABC under the Verastem License Agreement (including those rights and obligations that existed prior to the Effective Date), in each case, upon and subject to the terms and conditions set forth in this Agreement and all applicable terms and conditions set forth in the Verastem License Agreement.
4. Assumption. Encarta hereby accepts, assumes and agrees to comply with, perform and discharge, all of the rights and obligations of Poniard ABC under the Verastem License Agreement (including those rights and obligations that existed prior to the Effective Date), in each case, upon and subject to the terms and conditions set forth in this Agreement and all applicable terms and conditions set forth in the Verastem License Agreement. On and after the Effective Date, the term Poniard as used in the Verastem License Agreement shall be deemed to be replaced by and refer to Encarta.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5. Poniard ABC Acknowledgement. Poniard ABC hereby acknowledges Verastems consent to the assignment of the Verastem License Agreement by Poniard ABC to Encarta and Encartas acceptance, assumption and agreement to comply with, perform and discharge of all of the rights and obligations of Poniard ABC under the Verastem License Agreement (including those rights and obligations that existed prior to the Effective Date), in each case, upon and subject to the terms and conditions set forth in this Agreement and all applicable terms and conditions set forth in the Verastem License Agreement.
6. Representations and Warranties. Encarta hereby represents and warrants to Verastem that, as of the Effective Date:
a. Encarta has provided Verastem with true, correct and complete copies of the Purchase Agreement and all ancillary documentation related to the Verastem License Agreement executed in connection with the Closing of the transactions contemplated by the Purchase Agreement;
b. Encarta owns or otherwise Controls (or will own or otherwise Control upon the Closing of the transactions contemplated by the Purchase Agreement) all of the Licensed Patent Rights and documented Licensed Know-How;
c. the License Agreement dated as of May 5, 2008 by and between The Scripps Research Institute (Scripps) and Poniard, as such agreement may have been amended from time to time, and any ancillary agreements related or necessary thereto (the Scripps License Agreement) has been assigned (or will be assigned upon the Closing of the transactions contemplated by the Purchase Agreement) to Encarta in accordance with the applicable terms and conditions set forth in the Scripps License Agreement;
d. Scripps has consented in writing to the assignment of the Scripps License Agreement by Poniard ABC to a third party provided that, as a condition to such consent, Scripps shall have received any unpaid amounts due under the Scripps License Agreement;
e. Encarta has accepted, assumed and agreed (or will accept, assume and agree upon the Closing of the transactions contemplated by the Purchase Agreement) to comply with, perform and discharge, all of the rights and obligations of Poniard ABC under the Scripps License Agreement (including those rights and obligations that existed prior to the Effective Date), in each case, subject to all applicable terms and conditions set forth in the Scripps License Agreement;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
f. To Encartas knowledge, Encarta has cured, to the satisfaction of Scripps, any and all breaches under the Scripps License Agreement that existed prior to the Effective Date; and
g. To Encartas knowledge, Encarta is not currently in material breach (or will not be in material breach upon the Closing of the transactions contemplated by the Purchase Agreement) of any of its obligations under the Scripps License Agreement.
7. Payments under Verastem License Agreement. Verastem hereby acknowledges and agrees that the first dosing of the first patient in a Phase I Clinical Trial for a Licensed Product (the First Milestone Event) occurred on July 16, 2013. On or before [* * *], Verastem shall pay to Encarta, and Poniard ABC hereby directs Verastem to pay to Encarta, the First Milestone Event payment of [* * *] as set forth in Section 4.2 of the Verastem License Agreement (the First Milestone Payment), and, on or before [* * *], Verastem and Encarta shall enter into the Common Stock Warrant Agreement (which shall be in the form attached as Exhibit D to the Verastem License Agreement) in accordance with Section 4.3 of the Verastem License Agreement and that certain Letter Agreement dated as of December 1, 2011 by and between Verastem and Poniard, in each case, in accordance with this Section 7 and all applicable terms and conditions set forth in the Verastem License Agreement. Encarta hereby acknowledges and agrees that the payment of the First Milestone Payment and execution and delivery of the Common Stock Warrant Agreement in accordance with this Section 7 shall be timely and in full satisfaction of Verastems obligations under Sections 4.2 and 4.3 of the Verastem License Agreement solely with respect to the First Milestone Event.
8. Miscellaneous.
a. Any notices to be delivered to Encarta under the Verastem License Agreement shall be delivered in accordance with Section 11.14 of the Verastem License Agreement to the following address(es):
Encarta, Inc.
750 Battery Street, Ste. 400
San Francisco, California 94111
Facsimile: (415) 837-0503
Email: fred@baycitycapital.com
Attention: Fred Craves
With a copy to:
Stradling Yocca Carlson & Rauth, P.C.
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Facsimile: (949) 823-5132
Email: lcohn@sycr.com
Attention: Lawrence B. Cohn, Esq.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
b. This Agreement shall be deemed to be part of and incorporated into the Verastem License Agreement. Except as expressly set forth herein, all of the terms and conditions of the Verastem License Agreement shall remain unchanged and are ratified, confirmed in all respects, and remain in full force and effect.
c. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
d. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the conflict of laws principles thereof.
e. This Assignment may be executed and delivered by facsimile or portable document format in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.
[SIGNATURES ON THE FOLLOWING PAGE]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
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VERASTEM, INC. | |
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By: |
/s/ Daniel Paterson |
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Name: Daniel Paterson |
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Title: Chief Business Officer |
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ENCARTA, INC. | |
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By: |
/s/ Fred Craves |
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Name: Fred Craves |
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Title: Chief Executive Officer |
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
The undersigned hereby joins this Agreement for purposes of evidencing its agreement to be bound by and to comply with the terms of Sections 5 and 7 of this Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be executed as of the Effective Date.
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PONIARD (ASSIGNMENT FOR THE BENEFIT OF CREDITORS), LLC, SOLELY AS ASSIGNEE FOR THE BENEFIT OF CREDITORS OF PONIARD PHARMACEUTICALS, INC. | |
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By: |
/s/ Michael A. Maidy |
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Name: Michael A. Maidy |
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Title:Manager |
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 Robert Forrester President and Chief Executive Officer |
Date: November 12, 2013
I, John B. Green, 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/ JOHN B. GREEN John B. Green Chief Financial Officer |
Date: November 12, 2013
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 September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, 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:
/s/ ROBERT FORRESTER Robert Forrester President and Chief Executive Officer |
Date: November 12, 2013
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 September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, John B. Green, Chief Financial 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:
/s/ JOHN B. GREEN John B. Green Chief Financial Officer |
Date: November 12, 2013
Exhibit 99.1
Verastem Reports Third Quarter 2013 Financial and Corporate Results
CAMBRIDGE, MA November 12, 2013 Verastem, Inc. (NASDAQ: VSTM), focused on discovering and developing drugs to treat cancer by the targeted killing of cancer stem cells, today reported financial results for the third quarter ended September 30, 2013, and also provided an overview of certain corporate accomplishments and plans.
We continue to execute on our development plans and have made significant and rapid progress in the third quarter, said Robert Forrester, President and Chief Executive Officer of Verastem. We have initiated five of our six planned clinical trials in 2013. We recently received IND allowance for the dual mTORC1/2 and PI3K inhibitor, VS-5584, and are on track to start the Phase 1 trial by year end.
We recently initiated three additional clinical trials of lead candidate VS-6063, said Dr. Joanna Horobin, Verastem Chief Medical Officer. The multi-national COMMAND study in mesothelioma is now open and accruing patients. We are actively enrolling patients to the Phase 2 trial of VS-6063 in patients with KRas-mutated non-small cell lung cancer and the Phase 1 dose escalation trial of VS-6063 in Japan. In addition, we continue to enroll the expansion phase of the combination trial of VS-6063 and weekly paclitaxel in patients with ovarian cancer. These efforts are part of the ongoing expansion for VS-6063s development program by both geography and therapeutic indication.
It is our mission to develop novel therapies targeting cancer stem cells to provide more durable responses for patients battling many types of cancer, said Christoph Westphal, M.D., Ph.D., Verastem Executive Chairman.
Q3 2013 and Recent Accomplishments
Our significant accomplishments include the following:
Advanced the FAK inhibition program
· Initiated COMMAND: A randomized, placebo controlled study of VS-6063 as maintenance following frontline therapy in patients with mesothelioma being conducted at approximately 35 sites in 11 countries
· Reported on the dose escalation portion of the Phase 1/1b study of VS-6063 in combination with weekly paclitaxel in patients with ovarian cancer
· The combination was well tolerated at all dose levels with weekly no worsening of the well-known side effects of paclitaxel
· Initial activity observed including a Complete Response in one of the three patients in the first cohort
· Opened the expansion portion of the Phase 1/1b study of VS-6063 and weekly paclitaxel in ovarian cancer
· Initiated a Phase 2 study of VS-6063 in KRas-mutated non-small cell lung cancer
· Initiated a Phase 1 study of VS-6063 in Japan to evaluate the safety profile and pharmacokinetics of VS-6063 in Japanese patients
· Opened all sites for the Phase 1 dose escalation trial of VS-4718 in patients with advanced
cancers
· Presented 11 posters on the clinical and preclinical development of VS-6063 and the role of FAK in cancer stem cell-driven disease progression at the annual AACR-EORTC-NCI Molecular Targets, AACR Ovarian Cancer, Cancer Advance and World Lung conferences
Progressed the dual PI3K/mTOR inhibition program
· Received IND allowance to initiate a Phase 1 study of VS-5584. The study is anticipated to start by year end 2013 in patients with advanced solid tumors and lymphomas
· Presented data at the 2013 AACR-EORTC-NCI Molecular Targets and the American Chemical Society meetings demonstrating the ability of VS-5584 to reduce cancer stem cells across multiple preclinical tumor models
Strengthened balance sheet and clinical advisory team
· Closed on a $63.8 million public offering with net proceeds to Verastem totaling approximately $59.8 million in July 2013
· Named Jose Baselga, M.D., Ph.D., Physician in Chief at Memorial Sloan-Kettering Cancer Center, as Senior Medical Advisor
2013/14 Milestones
Our planned upcoming clinical milestones include the following:
· Initiate Phase 1 dose escalation study of VS-5584 in patients with advanced solid tumors and lymphomas by year end 2013
· Complete enrollment in the Phase 1b portion of the VS-6063 trial in combination with weekly paclitaxel in patients with ovarian cancer in H1 2014
· Complete the Phase 1 dose escalation study of VS-6063 in patients with advanced solid tumors in Japan in H1 2014, with a goal of facilitating inclusion of Japanese sites into COMMAND in H2 2014
· Complete enrollment in the stage 1 portion of the VS-6063 Phase 2 trial in patients with non-small cell lung cancer midyear 2014
· Complete enrollment for the Phase 1 trial of VS-4718 in H2 2014
Upcoming Events
· NY CEO Conference on November 12th and 13th at Apella in New York City, NY
· Target TME Conference on November 18th-20th at the Royal Sonesta Hotel in Boston, MA
· Jefferies 2013 Global Healthcare Conference on November 20th and 21st at The Waldorf Hilton in London, UK
Third Quarter 2013 Financial Results
As of September 30, 2013, Verastem had cash, cash equivalents and investments of $130.3 million compared to $78.0 million on June 30, 2013 and $91.5 million on December 31, 2012. Verastem used $7.1 million for operating activities in the third quarter ended September 30, 2013.
Net loss for the third quarter ended September 30, 2013 (the 2013 Quarter) was $10.6 million, or $0.47 per share applicable to common stockholders, as compared to net loss of $10.4 million, or $0.51 per share applicable to common stockholders, for the same period in 2012 (the 2012 Quarter). Net
loss includes stock-based compensation expense of $2.8 million and $1.6 million for the 2013 Quarter and 2012 Quarter, respectively.
Research and development expense for the 2013 Quarter was $6.8 million compared to $8.1 million for the 2012 Quarter. The $1.3 million decrease from the 2012 Quarter to the 2013 Quarter was primarily related to a decrease of $2.7 million in license fee expense related to our agreement with Pfizer, Inc., including the issuance of 192,013 shares of common stock in the 2012 Quarter. This was partially offset by an increase of approximately $534,000 in contract research organization expense for outsourced biology, chemistry and development services, an approximately $426,000 increase in personnel costs primarily due to increased headcount and an approximately $158,000 increase in stock based compensation expense.
General and administrative expense for the 2013 Quarter was $3.9 million compared to $2.3 million for the 2012 Quarter. The $1.6 million increase from the 2012 Quarter to the 2013 Quarter primarily resulted from an increase of $1.0 million in stock based compensation expense associated with restricted stock units and restricted stock units with performance based vesting provisions, an increase in consulting costs of approximately $183,000 and an approximately $137,000 increase in personnel costs primarily due to increase in salaries and headcount.
The number of outstanding common shares as of November 7, 2013 was 25,647,732.
About VS-6063
VS-6063 (defactinib) is an oral compound designed to target cancer stem cells through the potent inhibition of focal adhesion kinase (FAK). Cancer stem cells are an underlying cause of tumor resistance to chemotherapy, recurrence and ultimate disease progression. Research by Robert Weinberg, Ph.D., scientific cofounder and chair of Verastems Scientific Advisory Board, and Verastem has demonstrated that the FAK pathway is critical for the growth and survival of cancer stem cells. VS-6063 is currently being studied in the registration-directed COMMAND trial in mesothelioma, a Phase 1b study in ovarian cancer, a Phase 1 study in Japan and a Phase 2 trial in KRAS-mutated non-small cell lung cancer. VS-6063 has been granted orphan drug designation in the U.S. and E.U. for use in mesothelioma.
About VS-4718
VS-4718 is an oral compound designed to target cancer stem cells through the potent inhibition of focal adhesion kinase (FAK). Research by Robert Weinberg, Ph.D., scientific cofounder and chair of Verastems Scientific Advisory Board, and Verastem has demonstrated that the FAK pathway is critical for the growth and survival of cancer stem cells. VS-4718 is currently being studied in a Phase 1 dose escalation study in patients with advanced cancers.
About VS-5584
VS-5584 is an oral compound that potently and selectively inhibits the class 1 PI3K isoforms, mTORC1 and mTORC2. In preclinical studies, VS-5584 has been shown to reduce the percentage of cancer stem cells and induce tumor regression in taxane-resistant models. Verastem expects to initiate a Phase 1 dose escalation trial in patients with advanced solid tumors and lymphomas around year end 2013.
About Verastem, Inc.
Verastem, Inc. (NASDAQ: VSTM) is discovering and developing drugs to treat cancer by the targeted killing of cancer stem cells. Cancer stem cells are an underlying cause of tumor recurrence and
metastasis. Verastem is developing small molecule inhibitors of signaling pathways that are critical to cancer stem cell survival and proliferation: FAK, PI3K/mTOR and Wnt. For more information, please visit www.verastem.com.
Forward-looking statements:
This press release includes forward-looking statements about the Companys strategy, future plans and prospects, including statements regarding the development of the Companys compounds, including VS-6063, or defactinib, VS-4718 and VS-5584 and the Companys FAK, mTOR/PI3K and diagnostic programs generally, the timeline for clinical development including projected enrollment of trials, regulatory approval of the Companys compounds, the expected timing for the reporting of data from ongoing trials, the structure of the Companys planned or pending clinical trials and the Companys ability to fund operations. The words anticipate, appear, 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 the preclinical testing of the Companys compounds and preliminary data from clinical trials may not be predictive of the results or success of pending or later clinical trials, that data may not be available when we expect it to be, that the Company will not be able to enroll a sufficient number of patients in the expected timeframe, that the Company will be unable to successfully complete the clinical development of its compounds, including VS-6063, VS-4718 and VS-5584, that the development of the Companys compounds will take longer or cost more than planned, and that the Companys compounds will not receive regulatory approval or become commercially successful products. Other risks and uncertainties include those identified under the heading Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2012 and in any subsequent SEC filings. The forward-looking statements contained in this presentation reflect the Companys current views with respect to future events, and the Company does not undertake and specifically disclaims any obligation to update any forward-looking statements.
Contact Verastem, Inc.
Brian Sullivan, 617-252-9314
bsullivan@verastem.com
(A development-stage company)
Unaudited Selected Consolidated Balance Sheet Information
(in thousands)
|
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September 30, |
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December 31, |
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|
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2013 |
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2012 |
| ||
Cash, cash equivalents and investments |
|
$ |
130,270 |
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$ |
91,520 |
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Prepaid expenses and other current assets |
|
1,077 |
|
506 |
| ||
Property and equipment, net |
|
674 |
|
811 |
| ||
Other assets |
|
408 |
|
86 |
| ||
Total assets |
|
$ |
132,429 |
|
$ |
92,923 |
|
|
|
|
|
|
| ||
Accounts payable and accrued expenses |
|
5,293 |
|
2,399 |
| ||
Other liabilities |
|
431 |
|
58 |
| ||
Stockholders equity |
|
126,705 |
|
90,466 |
| ||
Total liabilities and stockholders equity |
|
$ |
132,429 |
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$ |
92,923 |
|
Verastem, Inc.
(A development-stage company)
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|
Three months ended, September 30, |
|
Nine months ended, September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Research and development |
|
$ |
6,789 |
|
$ |
8,132 |
|
$ |
18,130 |
|
$ |
17,618 |
|
General and administrative |
|
3,855 |
|
2,298 |
|
11,879 |
|
6,636 |
| ||||
Total operating expenses |
|
10,644 |
|
10,430 |
|
30,009 |
|
24,254 |
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|
|
|
|
|
|
|
|
|
| ||||
Loss from operations |
|
(10,644 |
) |
(10,430 |
) |
(30,009 |
) |
(24,254 |
) | ||||
Interest income |
|
53 |
|
63 |
|
131 |
|
191 |
| ||||
Net loss |
|
$ |
(10,591 |
) |
$ |
(10,367 |
) |
$ |
(29,878 |
) |
$ |
(24,063 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Accretion of preferred stock |
|
|
|
|
|
|
|
(6 |
) | ||||
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|
|
|
|
|
|
|
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Net loss applicable to common stockholders |
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$ |
(10,591 |
) |
$ |
(10,367 |
) |
$ |
(29,878 |
) |
$ |
(24,069 |
) |
|
|
|
|
|
|
|
|
|
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Net loss per share applicable to common stockholdersbasic and diluted |
|
$ |
(0.47 |
) |
$ |
(0.51 |
) |
$ |
(1.37 |
) |
$ |
(1.32 |
) |
Weighted-average number of common shares used in net loss per share applicable to common stockholders-basic and diluted |
|
22,437 |
|
20,160 |
|
21,797 |
|
18,246 |
|