Overview

We recently took a look at VSTM and their positioning for upside in the near and short term. The discussion took a look at whether the company was reduced risk at current levels or not. It was concluded that with analyst price targets, insider buys, positioning of “COPIKTRA,” and market cap based on the stock price at the time was indicative of future upside.

VSTM Recent Activity

Source: Volumebot.com

Since our piece, the share value has jumped from $3.35 to the $4 range but was soon pushed down and currently resides at $3.46 (as of January 21st). Frustrated investors have cited money managers “MMs” and others in collusion as being the source of this continued downside with screen shots of level two revealing the same average trade size creating the perfect environment for those looking to play swings. How far can shorts continue to push this and is there more downside? Are shorts banking on a similar performance to GILD and their drug Zydelig? This is a firm with extensive resources, yet it has been unable to produce the financial results one may expect. This is with the broad knowledge of its coupling with Rituxan reduced risk of disease by a staggering 82% when compared to Rituxan alone. In addition to this, bears seem to remain skeptical on VSTM’s need to outperform Zydelig by an extensive margin due to licensing obligations.

Source: Yahoo

With this in mind, VSTM was able to book in excess of $500k in sales within the remaining days of Q3.  Q4 will ultimately provide investors with a better view as to COPIKTRA’s performance and will undoubtedly determine direction of share price. A miss of estimates will likely allow bears to maintain control. Conversely a surprise should send the price towards the vesting level the board seems to foresee. Current estimates put Q4 expectation at a loss of -$.46.We hope to get a clear view on the following in the Q4 report.

• EPS beat
• Continuation of proving sales/ sales guidance
• Cost of revenue
• Update on deal with

2019 Guidance

Recently VSTM has provided some insight to investors with the announcement of an options vesting plan in which they are exercisable at prices in excess of $10. Many argue this is indicative of future share price, but is countered with many of the above points. VSTM additionally provided insights as to their forward looking statements in their Strategic Priorities For 2019. This press release touted the companies intent to pursue opportunities Duvelisib and was additionally supported by a concern for financials and a focus on entering 2019 with a strong balance sheet. The report details a focus centered on adding value by increasing revenue. This will be done through potential partnerships for Duvelisib, providing more Duvelisib data and exploring other opportunities for the platform. Additionally VSTM will be focused on increasing the revenue and opportunity of COPIKTRA.

VSTM In The Future

VSTM isn’t only looking forward to upcoming quarterly results for their approved product. The company is looking to the future with new trials. “Window of Opportunity Study of VS-6063 (Defactinib) in Participants With Surgical Resectable Malignant Pleural Mesothelioma,” is currently in the recruitment stage and is phase 2. 

The study will include an open label neoadjuvant with Defactinib ( VS-6063) prior to mesothelioma surgery and will be in individuals with malignant pleural mesothelioma who are eligible for surgery. The study hopes to collect data on; safety, biomarker responses from tumor tissue, pharmacokinetics, and tumor response rate. The study will include roughly 38 participants and is tentatively scheduled to be completed in September of 2019. Further details on the study, including the data that VSTM is pursing can be found here.

Pleural Mesothelioma is caused by inhaling asbestos and leaves patients with a one year life expectancy. Currently patients go through a combination of; surgery, chemotherapy, and radiation. Although there is only about 3000 cases of mesothelioma reported a year, nearly 90% are pleural.

Source: maacenter.org

Even although pleural is among the most common of mesothelioma and is the most studied, only 40% of patients are expected to live beyond a year after diagnosis. The current combination of treatments approach that is utilized is often credited with being “aggressive” and “invasive.” Additionally, these procedures have been found to at best to extend survival 19 months. Radiation has shown improvements, but no current treatment has properly solutions the ailment, leaving clinical stage treatments to hopefully provide an answer for those diagnosed.

Pleural Mesothelioma Market Size & Competition

Although Pleural Mesothelioma (PM) is the most common of mesothelioma, it remains to be rare. PM being the most common of Mesothelioma has attracted a wide array of research and clinical studies to find a solution. The current treatments are abysmal, leaving a massive opportunity for Verastem and others looking to properly scale the opportunity. A brief overview of candidates targeting PM reveals a lead for Verastem with many active trials being in Phase one such as Study of the Anti-PD-1 Antibody Pembrolizumab in Patients With Resectable Malignant Pleural Mesothelioma with Merck (NYSE: MRK). This study provides insight as to the opportunity for biotechs capable of a solution as the gap in treatment sparks interest. A closer parallel to Verastems progress in the field would be Tumor-Infiltrating Lymphocytes and Low-Dose Interleukin-2 Therapy study which is in the recruitment stage for both a phase 1 and 2. Although this study appears to have a wide reach, the completion is far past Verastems with an intended date in 2025. There are a handful of other studies taking a look at PM, but none are at the phase 2 stage with a completion date as close as Verastem. Additionally, many of the studies are targeting improvements on the previously established methods of radiation etc. As previously discussed, patients desire a treatment that is less invasive and increases life expectancy. Although these studies will inevitably contribute to an increase of the desired measures, they lack innovation and truly disruptive solutions to the scale a drug is capable of offering with proper response rates. Innovation and disruptive solutions (in our opinion) will be what changes the field of PM as it does every other field in eliminating many of the adverse measures witnessed with more traditional approaches. An orally administered treatment such as Defactinib and other compounds being tested for PM will disrupt the PM market and hopefully add unfathomable value to patients lives. For a look at previous data on Verastem’s study for Defactinib in this indication click here. Other pharmaceutical companies with clinical trials in this indication include; Novartis (NYSE: NVS), Bristol-Myers Squibb (NYSE: BMY), Janssen Pharmaceutica (subsidiary of Johnson and Johnson NYSE: JNJ), and Roche (OTCMKTS: RHHBY).

Conclusion

With the recent bashing of the market as a whole and slaughter of small caps, VSTM continues to touch what some claim to be unfathomable levels. Up coming Q4 results will provide investors and watchers of Verastem the opportunity to truly view the traction COPIKTRA has gained and further diminish speculation on many of the questions they are currently faced with. Q4 will inevitably determine where the share price is headed in a short term lens, but a look to the future reveals a pipeline with additional assets which may come to fruition.

Source: simplywallst.com

Investors seem to neglect such opportunity as they focus on whats at stake in a shorter view with Q4. Many of the upcoming studies Verastem is engaged in, provide insight as to their true potential value. As article such as the image left begin to surface in regards to Verastem’s current share price and future value, it is paramount for investors to look to the future beyond COPIKTRA and pay close attention to the additional assets they plan to develop as outlined in their 2019 guidance. This guidance focused on shareholder value and development of products which carry out Verastem’s  mission reaffirms a bullish thesis. This is further supported by the institutional support which appears to remain unfazed by short term movement and remains focused on long term future value. Q4 will provide us fascinating insight as to where we are headed in the short term. Good luck to all!