Earnings Beat Pushes VSTM into Major Breakout Territory

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Due Diligence Report: Earnings Beat Pushes VSTM into Major Breakout Territory

 

Summary:

 

Verastem, Inc., incorporated on August 4, 2010, is a biopharmaceutical company. The Company is focused on discovering and developing drugs to treat cancer by the targeted killing of cancer stem cells. The Company’s programs target the Focal Adhesion Kinase (FAK) and the PI3K/mTOR signaling pathways. As of December 31, 2014, the Company had received orphan drug designation for the use of VS-6063 and VS-5584 in mesothelioma in the European Union and in the United States. The Company’s FAK inhibitor VS-4718 and its dual mTORC1/2 and PI3K inhibitor VS-5584 are in Phase I clinical trials in patients with cancers. The Company has technology to create a stable population of cancer stem cells that it uses to screen for and identify small molecule compounds that target cancer stem cells. The Company’s solution includes the discovery and development of oncology therapeutics targeting cancer stem cells (CSCs). The Company is engaged in running clinical trials in cancers where CSCs were implicated in disease progression, including mesothelioma, ovarian, non-small cell lung and other cancers, such as breast cancer.

The Company’s VS-6063 (defactinib) is an orally available small molecule compound designed to target CSCs through the inhibition of FAK signaling. The Company is engaged in conducting clinical trials of VS-6063 in patients with cancer, including the registration-directed COMMAND study in patients with mesothelioma, a Phase I/Ib clinical trial of VS-6063 in combination with paclitaxel for patients with ovarian cancer, a Phase II study of VS-6063 in patients with non-small cell lung cancer (NSCLC), a Phase II trial preceding surgery in mesothelioma and a Phase I combination study of VS-6063 and VS-5584 in patients with relapsed mesothelioma. The Company’s VS-4718 is an orally available small molecule compound designed to target CSCs through the inhibition of FAK signaling. The Company is engaged in conducting a Phase I, dose escalation clinical trial of its FAK inhibitor, VS-4718, in patients with cancers. As of January 8, 2015, the Maximum Tolerated Dose (MTD) had not been reached. The Company’s VS-5584 is an orally available small molecule that inhibits both mTORC1/2 and PI3K signaling. The Company is engaged in conducting a Phase I, dose escalation clinical trial of its dual mTORC1/2 and PI3K inhibitor, VS-5584, in patients with cancers. As of January 8, 2015, the MTD had not been reached.

Verastem, Inc. has a current market capitalization of $59.64 M with 36.93 M outstanding shares. Its daily average volume traded is 0.41M shares.

Financial Highlights (FYE 2015):

Revenue: Nil

Gross Profit: Nil

Net Income: -57.9 M

Cash and Cash Equivalents: 110.3 M

Total Debt: Nil

Recent News and Analysis:

The company recently reported financial results for the year ended December 31, 2015, and also provided an overview of certain corporate developments. As of December 31, 2015, Verastem had cash, cash equivalents and investments of $110.3 million compared to $92.7 million as of December 31, 2014. Verastem used $45.6 million for operating activities during the year ended December 31, 2015 (“2015 Period”). Net loss for the 2015 Period was $57.9 million, or $1.61 per share, as compared to a net loss of $53.4 million, or $2.07 per share, for the year ended December 31, 2014 (“2014 Period”). Net loss for the 2015 Period and 2014 Period includes non-cash stock-based compensation expense of $9.7 million and $12.1 million, respectively. Research and development expense for the 2015 Period was $40.6 million compared to $35.4 million for the 2014 Period. The $5.2 million increase from the 2014 Period to the 2015 Period was primarily related to an increase of $5.8 million in contract research organization expense for outsourced biology, chemistry, development and clinical services, which includes our clinical trial costs, an increase in personnel related costs of $1.4 million, and an increase of approximately $558,000 in consulting expense. These increases were partially offset by decreases of $1.3 million in stock-based compensation expense and $1.2 million in license fees.

The Needham, Massachusetts-based company said it had a loss of 32 cents per share. The results topped Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for a loss of 37 cents per share. This resulted in a surge in the stock price over the last two days, from $1.14 close on March 1 to a mid-day high of $1.70 on Thursday.

 

Conclusions:

From a technical perspective, Verastem spiked modestly higher off its new 52-week low on Tuesday of $1.05 a share with above-average volume. This high-volume spike to the upside has quickly pushed this stock into a big breakout trade above some key near-term overhead resistance levels. The breakout flew past the resistance levels at 1.21 and even challenged the resistance at $1.44. Should the stock close above the $1.44 resistance on Thursday, the next resistance is around the $2.15 level. Watch this one closely as the earnings beat pushes the stock upwards.

Sources:

1. http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=VSTM.O
2. https://www.google.ca/finance?q=NASDAQ%3AVSTM&hl=en&gl=ca&ei=bVzYVpnaCcSr2AbX5JvoDQ
3. http://finance.yahoo.com/q?s=vstm&ql=1
4. http://finance.yahoo.com/news/verastem-reports-end-2015-financial-120500998.html
5. http://finance.yahoo.com/echarts?s=VSTM+Interactive#{“showEma”:true,”emaColors”:”#cc0000,#009999,#ff00ff”,”emaPeriods”:”50,20,100″,”emaWidths”:”1,1,1″,”emaGhosting”:”0,0,0″,”allowChartStacking”:true}

 

 

 

 

 

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