Analyst Conference Summary

Verastem Oncology

conference date: March 12, 2019 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2019 (Q4, fourth quarter 2019)

Forward-looking statements

Overview: First quarter of commercial revenue from Copiktra of $1.2 million.

Basic data (GAAP):

Revenue was $1.2, down sequentially from $15.5 million, and up from $0.0 year-earlier. Revenue in the quarter was from Copitra sales.

Net income was negative $11.3 million, up sequentially from negative $21.7 million and up from negative $18.2 million year-earlier.

EPS, diluted, was negative $0.37, down sequentially from negative $0.29, and up from negative $0.43 year-earlier.



Conference Highlights:

Robert Forrester, CEO of Verastem, said "Upon the early FDA approval we received, our commercial team was mobilized the same day and began educating physicians, patients and payors on the clinical benefits and appropriate use of Copiktra and to secure access to therapy. This year is poised to be an exciting one as we continue to drive awareness of Copiktra and work to expand upon the potential of PI3K inhibition through the investigation of duvelisib, initially as a monotherapy, and through novel combinations, in additional hematologic malignancies like peripheral T-cell lymphoma (PTCL)."

In September the FDA approved Copikta (duvelisib), a P13K inhibitor, for treatment of relapsed or refractory CLL/SLL and FL, and for accelerated approval for relapsed or refractory FL. A confirmatory Phase 3 study will be started in 2019.

Product revenue from Copiktra/duvelisib was $1.2 million, up sequentially from $0.5 million.

The launch is on track and Copiktra was available for distribution on the day it was approved. Already included in NCCN guidelines, and reimbursement coverage has been secured.

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

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

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

Verastem Oncology entered into exclusive license agreements with CSPC Pharmaceutical Group Limited (CSPC) to develop and commercialize COPIKTRA in China, Hong Kong, Macau and Taiwan. Verastem Oncology received an upfront payment of $15.0 million and is entitled to receive aggregate payments of up to $160.0 million if certain development, regulatory and commercial milestones are successfully achieved, plus double-digit royalties on net sales of products containing duvelisib in the CSPC Territory.

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

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

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

Cash and equivalents ended at $249.7 million, up sequentially from $145.6 million. $150 million in 5% convertible senior notes were issued. Verastem has a $50.0 million line of credit available. Long term debt including convertible notes was $114.7 million.

Cost of good sold was $116 thousand. R&D expense was $8.8 million. G&A was $26.2 million. Amortization $392 thousand. Total operating expense was $35.5 million. Loss from operations was $34.3 million. Other income $25.6 million. Interest net expense $2.6 million.

The G&A increase of $19.4 million, or 285%, from Q4 2017 to Q4 2018 was due to higher personnel and related costs, as well as promotional and consulting costs in support of the commercial launch of Copiktra.


Copiktra PI3K reception headwinds? We are refining our message. Moving from dual inhibition to the CLL safety and efficacy, then FL.

2019 expense run rate? It is early in the launch, so we are not giving guidance. But $35 million operating expense in Q4 might be informative.

National sales meeting last week discussed identifying types of patient for treatment. These are post two therapies, where there is an open space.

Most of our clinical trial experience was in Europe, meaning we had to introduce ourselves and the drug in the U.S.

Label expansion strategy? We want to own our current indication. That is data-driven. Expanding CLL, SLL and FL based on trials underway now. PCTL trial accrued quickly. Then more aggressive types of NHL with combination studies. Eventually combine with IO to attack solid tumors.

Has been working on reimbursement, at perhaps 90%, getting to 99%.

Pace of sales, inventory? Certainly year will be weighted to back end. Will be a slow build as doctors dose first patient. Then with good results should see more new patients and continued dosing. Revenue is recognized when the drug is received by the specialty pharmacy.

PTCL is likely to be the next label expansion. We are getting Extraordinary interest to try Copiktra in new indications around the world.

EMA approval timeline? Will likely have another collaboration outside Europe later this year. We are actively working on strengthening our KOL network in the EU and finalizing a regulatory strategy. Will have more on the EU in the second half of the year.

We are not looking to find a collaborator for sales in the U.S.

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Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. These are my personal notes which I share with other investors and which I use as the basis of my Seeking Alpha articles.

Copyright 2019 William P. Meyers