Analyst Conference Summary

Verastem Oncology

conference date: August 1, 2019 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2019 (Q2, second quarter 2019)

Forward-looking statements

Overview: Better than expected Copiktra product revenue; raised 2019 guidance.

Basic data (GAAP):

Revenue was $3.1, up 82% sequentially from $1.7 million, and but down 69% from $10.0 million year-earlier, when Verastem received a $10 million milestone payment.

Net income was negative $42.2 million, down sequentially from negative $38.1 million and down from negative $18.4 million year-earlier.

EPS, diluted, was negative $0.57, down sequentially from negative $0.52, and down from negative $0.53 year-earlier.


Product revenue for full year 2019 expected at $12 to $14 million, above prior guidance of $10 to $12 million.

Conference Highlights:

Dan Paterson, President of Verastem, said "With the third full quarter of the Copiktra launch now complete, including the first full quarter of the follicular lymphoma (FL) marketing campaign, net sales are up 81% quarter-over-quarter. We have begun to see early signs that our physician education efforts are having an impact and overcoming the historical misperceptions that surround PI3K inhibitors, namely through strong key opinion leader engagement, increased podium presentations and numerous new requests for investigator-sponsored research. Overall, we are encouraged by the breadth of reach the commercial team is achieving with hematologic oncologists and we look forward to building on this strong momentum for the remainder of 2019."

Announced plan: cash flow break even in 2 years. Broaden indications for Copiktra and have one additional commercial product approved in 5 years.

Brian Stuglik has been appointed as the new CEO. He said virtually all of the targetted insurance plans now reimburse for Copiktra. There has been a great deal of interest in starting more physician-initiated trials. Also plans a company study in NHL to start in Q4 2019.

Product revenue from Copiktra/duvelisib was $3.0 million, up 76% sequentially from $1.7 million. Increased guidance for 2019 Copiktra revenue to $14 to $16 million.

Non-GAAP net income negative $35.7 million, EPS negative $0.48.

In July 2019, the Company announced its entry into an exclusive license agreement granting Sanofi development and commercialization rights to products containing Copiktra in Russia and CIS (states allied to Russia), Turkey, the Middle East and Africa. Under the terms of the agreement, Verastem Oncology will receive an upfront payment of $5 million and is eligible to receive aggregate payments of up to $42 million if certain development and sales milestones are successfully achieved, plus double-digit percentage royalties based on future net sales of Copiktra in the licensed territories.

In September 2018 the FDA approved Copiktra (duvelisib), a P13K inhibitor, for treatment of relapsed or refractory CLL/SLL. In mid-March 2019, upon completion of the required 120-day waiting period following receipt of accelerated approval from the FDA, the Company launched its physician education and marketing campaign for Copiktra for the treatment of patients with Folicular Lymphoma after at least two prior systemic therapies. Accelerated approval in FL was based on overall response rate and continued approval may be contingent upon confirmatory trials, the first of which is expected to start in 2019.

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

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

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

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

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

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

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

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

Updated Phase 1 data was presented for duvelisib for PTCL in June 2019, showing compelling clinical activity.

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

Cash and equivalents ended at $187 million, down sequentially from $212 million. Verastem has a $50.0 million line of credit available. Long term debt $35 million plus convertible notes for $99 million.

Cost of good sold was $1 million. R&D expense was $11 million. G&A was $29 million. Amortization $ thousand. Total operating expense was $41 million. Loss from operations was $38 million. Other expense $4 million. Interest net expense $ million.

Q&A summary:

Alternative dosing? Based on data on interuptions based on side effects, we think we can interupt dosing but then resume and keep the efficacy.

Colitis management? We have not seen much colitis reported to us, about the same as clinical trials.

Follicular? We can now talk about it, so we are seeing some uptick, but cannot break it out.

R&D spend trend? We are investing $40 to $45 million per year in R&D, and expect that trend to continue. In Q2 $2.7 million was for severance. Our spend is about $35 million per quarter. Our goal is to get Copiktra revenue on an upward trend, and is so we have enough cash to execute on the plan.

Bloomberg only 34% increase in prescriptions? Retail market data by Bloomberg tends to be accurate. But we are in a specialty market that is mainly institutional. It is an immature market. We look at quarterly results internally, you should be cautious with outside data sources.

Combination with checkpoint inhibitors? The supporting data was presented in 2018 and is pretty impressive. For the IST we supply our drug but not the inhibitor. Longer term we may go down the partnering path. For checkpoint drugs the efficacy and side effects are a result of the same mechanism.

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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