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All Eyes on Verastem

Last Updated on April 26, 2020 by Chris Stang


Year to date, Verastem (VSTM) is up 208%, largely driven by the excitement around licensing the drug candidate CH5126766 from Chugai Pharmaceutical. The reason? An investigator sponsored trial evaluating CH5126766 in combination with Verastem’s focal adhesion kinase (FAK) inhibitor defactinib has been reported to show anticancer activity of the combination, which aligns with many preclinical studies. This is particularly notable as the combination is reported to have activity in KRAS mutated cancer. KRAS is a signaling enzyme in cancer cells that “drive” the continued uncontrolled growth. Some have touted this target (KRAS) as the holy-grail of anticancer therapy.

At the time of the licensing announcement, no clinical details were shared, but were forecast to be released at an upcoming scientific presentation. Well, now investors have patiently waited and the venue to reveal the results have arrived, American Association for Cancer Research (AACR) annual meeting. Now given the changes enacted due to SARS-CoV2, the presentation will take the form of a virtual poster presentation. This presentation will occur on Monday April 27th. Of note, the abstract will be available online starting at 12:01 AM on Monday April 27th. Additionally, Verastem has announced an investor conference call at 8:00 AM the morning of the 27th to discuss the results. So, what should we expect? Let’s take a look.

Competition: Verastem is not the only company seeking to develop candidates for KRAS mutated cancers. The two most notable companies developing drugs in the space are Amgen (AMGN) and Mirati (MTRX). Amgen is a large company, so their KRAS candidate (AMG510) is not the only factor that goes into their valuation, and is in fact, not a large factor in their stock price. Conversely, Mirati is a much smaller company and their candidate MRTX849 largely contributes to the stock price and valuation. Even more so, many would argue that the valuation is a touch over zealous and optimistic. Since these two companies are further ahead in development for KRAS mutated cancers, we will utilize their results as our measuring stick for Verastem.

The Measuring Stick: The results presented will be from the investigator sponsored phase I trial with follow-on expansion cohorts. While it is unclear what exact KRAS mutated cancers we will see data from, I do expect to see data in patients with low grade serous ovarian cancer (LGSOC), non-small cell lung cancer (NSCLC), and colorectal cancer (CRC). These are the KRAS mutated tumor types that Verastem has revealed will be moving onto expansion cohorts. I fully expect us to see response data (ability of the drug cocktail to shrink tumors) in the presentation and not durability data, as this is a rather young development. Based on the data available from Mirati and Amgen, these are the bars that I have set in order to constitute the Verastem cocktail as a viable competitor:

  • NSCLC: At least a 50% partial response rate and >90% disease control rate
  • CRC: At least a 10% partial response rate and >90% disease control rate
  • LGSOC: At least a 15% partial response rate and >80% disease control rate

Now the partial responses are defined as the reduction in a target tumor size, typically a reduction of at least 30%. A complete response is defined as absence of target tumor detection after therapy. This does not mean the patient is cured, as we know that when patients with metastatic cancer who have a complete response, the cancer is still there, we just cannot see it. Disease control rate is the combination of patients who have complete responses, partial responses, and stable disease. Essentially, this means the tumor has shrunk or has stopped progression.

While safety will also be important, it is hard to have any expectations at this until we see the first clinical data of the combination. But there is one final catch. When we target KRAS mutated cancer, the current approach is to target the KRAS enzyme with specific mutations (like the G12C mutation). This is the mutation that both Amgen and Mirati are targeting. Conversely, the approach that Verastem is taking with its drug cocktail is believed to be effective of regardless of the specific KRAS mutation. As such, this could greatly expand the market opportunity for Verastem if this approach comes to fruition.

The Financials: Assuming results are positive, it is important to evaluate how much of the potential future revenue Verastem would be entitled to. Verastem acquired rights to defactinib from Pfizer (PFE) in 2012. Of a present time, Verastem may owe Pfizer up to $2 million in developmental milestone and up to an additional $125 million in regulatory and commercial sales milestones. The other agent in the proposed KRAS cocktail is CH5126766, which was licensed from Chugai Pharmaceutical. As part of this agreement, Verastem is required to pay Chugai double-digit royalties on sales of CH5126766 if approved. Interestingly, Chugai still has the rights to opt-back development and commercialization rights for CH5126766 in the European Union and in Japan and Taiwan. If exercised, with would leave Verastem with the rights to half the KRAS cocktail in the US, but limited rights in other major markets. That being said, the Unites States is touted to be the most lucrative market for bio-pharmaceutical drugs, but would not be without royalties.

Final Thoughts: The KRAS market presents a lucrative opportunity for Verastem. This could be the inflection point investors need after the company has floundered with its rather disappointing launch of duvelisib. The major question becomes, has Verastem run too much going into the data? Time will tell, but that will largely be dependent upon the efficacy and safety of the data. Furthermore, I believe that many will be interested in seeing the cocktail showing activity in non-G12C KRAS mutated cancers, as that is where Verastem could jump ahead of the competition. Conversely, the competitors (Amgen and Mirati) are larger and arguably better run companies, which could prove tough competition down the road. I eagerly look forward to reviewing the data and wish those stock holders the best of luck.

I have no position in any of the stocks mentioned in this article.

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