Verastem Stock: Looking Increasingly Attractive (NASDAQ:VSTM)

Verastem’s (NASDAQ:VSTM) strategy is to buy big pharma cast-offs on the cheap, and then run them through the clinical and regulatory process. This lets them skip the discovery process altogether, sometimes even the earlier stage trials. There’s no harm in the strategy, except that it hasn’t been so successful with duvelisib. That asset didn’t sell well, and was sold off for $70mn. With that fund, they purchased two more assets – RAF/MEK dual inhibitor VS-6766 from Chugai and Defactinib, an FAK inhibitor.

As I said before:

VS-6766 has unique properties. Not only does it block MEK activity, but it also stops RAF from phosphorylating MEK. Thus, VS-6766 is able to block MEK signaling while avoiding compensatory activation of MEK which limits the efficacy of just MEK inhibitors.

Last year, the company began two registration-directed phase 2 studies in LGSOC and NSCLC, respectively, where LGSOC is low-grade serous ovarian carcinoma and NSCLC is non-small cell lung cancer. These trials pit VS-6766 versus VS-6766 + Defactinib in these two cancers with or without KRAS mutation for the recurrent low grade LGSOC trial, and Recurrent G12V or Other KRAS-Mutant NSCLC, respectively. Both trials will topline in 2023.

One important point noted in earlier trials is that VS-6766 inhibits MEK phosphorylation, unlike other RAF/MEK inhibitors; this is good because MEK phosphorylation may cause unwanted cellular processes. For example, “Lee et al (91) showed that the rates of MEK phosphorylation in colon cancer, villous adenoma and tubular adenoma were 76, 40 and 30%, respectively, while the phosphorylation of MEK in normal colonic mucosal cells was barely detectable.” This tells us that MEK phosphorylation may be responsible for tumorigenesis, tumor cell survival and proliferation.

Another datapoint is interim data from the FRAME study published last year in patients with low-grade serous ovarian cancer (LGSOC). An ORR of 56% was observed in this analysis so far, in patients with KRAS-G12 mutant LGSOC, and a 41% ORR in the overall LGSOC population. Updated data presented at ESMO last year showed the following:

• Among the evaluable patients with LGSOC (n=24), the overall response rate (ORR) was 46% (11 of 24).

• Among the patients with KRAS mutant LGSOC (n=11) and KRAS wild type LGSOC (n=9), the ORR was 64% (7 of 11) and 44% (4 of 9), respectively.

• The median progression-free survival (mPFS) across all patients was 23.0 months (95% CI: 10.6- not reached).

This high ORR in KRAS-mutant cancer proves the clinical thesis behind the molecule to a large degree. They also beat historical ORR standards by a very large margin. Even with MEK inhibitors, data was poor:

The initial phase II trial examined selumetinib in recurrent LGSOC.19 The objective response rate (ORR) was 15%, with 65% of patients having stable disease, and median progression-free survival (PFS) was 11.0 months. DNA from 34 patients was analyzed for KRAS and BRAF mutations. There were two BRAF mutations (6%) and 14 KRAS mutations (41%); however, no correlation between response and mutational status was found.

Another dataset from the MILO trial comparing binimetinib with physician’s choice of chemotherapy (PCC):

In the MILO trial, the ORR by BICR was 16% for binimetinib and 13% for PCC; however, in the updated analysis, the ORR by local investigator assessment was 24% in both groups. In GOG 0281, the ORRs were 26% and 6.2% for trametinib and PCC, respectively.

Both selumetinib and binimetinib are MEK inhibitors, whereas VS-6766 is a dual MEK/RAF inhibitor.

In latest news, the company completed enrollment in Selection Phases (Part A) of RAMP 201 and RAMP 202, two trials evaluating VS-6766 +/- Defactinib for the treatment of low-grade serous ovarian cancer and KRAS G12V mutant non-small cell lung cancer. Topline results are planned for the second quarter and the second half of this year, respectively.

Interim data was just recently announced in June from the Phase 2 RAMP 201 trial evaluating VS-6766 ± defactinib in recurrent low-grade serous ovarian cancer (LGSOC), regardless of KRAS status:

The analysis indicated encouraging efficacy results with confirmed responses by independent review in patients treated with VS-6766 monotherapy and patients treated with VS-6766 in combination with defactinib. The findings also include confirmed responses by independent review in both KRAS mutant and KRAS wild-type LGSOC.

The company also inked two important deals, one with Amgen with LUMAKRAS and the other with Mirati with adagrasib. They just initiated enrollment in the Phase 1/2 trial with Amgen to evaluate VS-6766 in combination with LUMAKRASTM (sotorasib) in patients with KRAS G12C-mutant non-small lung cancer.

Financials

VSTM has a market cap of $234mn, and a cash balance of $106mn as of the last quarter. They secured a $150mn term loan facility from Oxford Finance. To these cash figures should be added a small $2.5mn milestone payment from Secura for the approval of duvelisib in a new indication in China. Also to be added, the first Therapeutic Accelerator Award of $3.8M from the Pancreatic Cancer Network (PanCAN) for Verastem’s work in pancreatic cancer.

Research & development expenses for the 2022 quarter were $13.6 million, and selling, general & administrative expenses $5.9 million. At that rate, and given their entire cash position, they do have cash, as the company guides, to 2025. However, a lot can change in 3 years, including their need for further cash due to some unforeseen circumstances, like regulatory delay.

In terms of market potential, 1,000 to 2,000 patients in the U.S. and 15,000 to 30,000 worldwide are diagnosed with LGSOC each year. This is a slow growing cancer with a 10-year survival rate, so patients remain under treatment for a long time. There are 80,000 patients worldwide and 6000 in the US with a 10-year prevalence. 70% of these patients have a RAS mutation and are targets for VS-6766 treatment. According to some analysts, this is a nearly half-a-billion dollar opportunity.

Bottomline

Verastem is in a very interesting position right now, with a low price, progressing trials and good data. A small pilot may be warranted.