Verastem, De Risked?


Investors and watchers of VSTM were elated to receive positive news from the FDA in late September confirming approval of their drug “COPIKTRA.” Since this positive news the stock price has plummeted in excess of 65% from near $10 pre approval to its close on Christmas Eve of $3.35.

vstm 1-year chart from

Bears and others skeptical of VSTM’s future argued the price had been propped up on speculation, pushing the price near $10. This may explain the bulk of the drop from highs, but as it continues to plummet many question if it’s warranted. The stock currently trades around 58 cents above it’s 52 week low adding to the skepticism of this monstrous drop. The question continues to grow; is VSTM due for upside after this major hit?


VSTM is a biotech company based out of Boston. They have set out to provide the market with solutions geared towards improving the survival of cancer patients. As discussed above, their drug COPITKRA has been approved by the FDA.

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Source cancer

This grants sales intended for use in Chronic Lymphocytic Leukemia and Follicular Lymphoma. The bearish markets in culmination with other factors have pushed VSTM down in the $3 range leaving it currently sitting at $3.35. This places market cap at just over $247million. Outstanding shares source can be found by clicking here.

Reduced Risk?

COPIKTRA is set aside from competition as it is the “the first FDA approved dual inhibitor of PI3K-delta and PI3K-gamma drug.” Countless articles surfaced in favor of VSTM and their ability to navigate hurdles inherent with sales upon approval, many claiming VSTM had since seen a reduction in risk due to the immediate drop from approval. Third quarter results provided investors with a peak into potential lucrative opportunities for VSTM as well as potential hurdles. The quarter was well underway leading to a negligible number from sales of COPTIKRA, yet highlighted hope for many investors as $508,000 was booked in sales within the first several days that remained after approval.

The company beat estimates, but raised skepticism amongst many as this was largely credited to a $15 million upfront payment. This payment was realized after signing a distribution agreement with CPSC Pharmaceutical Group. Optimism was restored for many as it was communicated that up to $160 million could be earned for meeting criteria such as; sales milestones etc. Although the logistics of these various criteria were not fully disclosed, bulls are excited by the China opportunity for COPTIKRA that CPSC may be capable of scaling.


VSTM has attracted the attention of numerous hedge funds and had significant ownership from hedge funds. The largest owner of VSTM totaling at roughly $37.4 worth of stock in culmination with the 11 other funds invested in VSTM paint an interesting picture. A recent article on the topic dives into the details regarding this, with encouraging statistics such as 8 hedge funds being invested in VSTM in the previous quarter and 12 being invested at the end of September. It is recognized that historically following top hedge fund mangers will beat the S&P, so why has the market overlooked the numbers in regards to ownership?


As seen in the image left, VSTM has attracted sizable attention from hedge funds and has shown a growth in interest when compared with previous quarters. The question on everyones mind is; how has the recent market affected these numbers? Investors of both sides, Bull/Bearish seem to be relying on their version of the next quarterly readout leaning in favor of their positions. Historical Quarterly release data can be found here.

Financials Overview

The recent quarterly report highlighting sales of COPTIKRA, provided investors with further useful insights as to their financial standing. Currently VSTM sits at $146 million cash on hand as of Q3 2018 as seen here. The company saw a further decrease in the value of net income cash flows, coming in at -$61.08 million vs -$39.41 in Q2. A closer look at historical data on quarters reveals a trend fitting this variation. VSTM was able to beat expectations on a multitude of measures due to the upfront payment coming in at $15 million. This payment sparked further excitement as it was communicated that there is potential for upwards of $160 million if various criteria is met. The company saw a net loss coming in at ($21.7m) for Q3 2018 and quick assets totaling $145.6m at quarter end. This news was well received by investors, boosting VSTM 6% premarket. Although the bulls had their fun for the day, the bears have since taken control back.

Analysts Take

Despite mixed headwinds and opportunities when it comes to financials, VSTM has found itself with a buy rating from a multitude of analysts. This remains true when looking back and continues to be true today.


In addition, many analysts have set price targets for the company in excess of a 300% gain from its current price of $3.35. This places their forecast in the $12 to $18 range. These ratings and forecasts of share price are exciting when looking at such things as RSI which seem to indicate a potential reversal in store.


Although VSTM is often perceived as a sure candidate for upside due to many of the above discussed topics, it is important to review potential threats to such a these. It seems unlikely that dilution is on the horizon with the above financials taken into account, but the company may stand to suffer financially with a miss on earnings. This may damage share price and be impactful to a position if the company falls short of speculation on sales of COPTIKRA. VSTM may face a challenging quarter as the previous one was beat largely due to the upfront payment totaling $15 million. Although investors have received news pointing towards potential, there is little guidance on what the continuation of payouts from the $160 million total may look like. In essence bulls seem to be banking on healthy sales after the exciting report from the incredibly brief sales in Q3. If this excitement is not met and sales fail to impress, the share price will likely decline due to this being a crucial element of the bulls position.


VSTM has been pushed down for several reasons and was further damaged with the recent unfortunate bearish markets. The price declined from a potentially overhyped high in anticipation of FDA approval, but has since declined to questionable levels and is increasingly encroaching on 52 week lows. The share price continues to approach these seemingly astonishingly lows after FDA approval of COPTIKRA and exciting sales observed shortly after approval. Many claimed the company was de-risked upon a rapid decline from approval news sending the share price in the $5 range, but it has since taken a turn further down, placing it in the $3 range.

This has all taken place with few observable changes in the fundamentals and original reasons for the bulls excitement, leading to the question of whether the company deserves such a hit in share price or not. Both bulls and bears seem to be placing a lot of focus on the Q4 results, as both sides leverage arguments in the outcome of sales. Bulls foresee a continuation of the impressive brief Q3 sales and Bears argue they may fall short. Bulls have also become increasingly excited the potential payouts VSTM may receive based on the criteria with CPSC discussed above. Q4 will show us who is right, good luck to all!

Disclosure: I am/we are long VSTM.

Disclaimer: MS Money Move and it’s Chief Operating Officer who is a scientist and individual investor, as well as its affiliates are not registered ...

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