Verastem: Killing Cancer At The Root

| About: Verastem (VSTM)


Verastem (NASDAQ:VSTM) priced at $10, the mid-point of the $9 to $11 filing range. Demand was solid though as the deal size was increased from 4.5 to 5.5 million shares. The company has a promising but deeply scientific and complicated story that includes improved treatments for cancer and personalized diagnostics. VSTM is a bet on some good science and IP targeting cancer stem cells and the management team and advisory board that will play out over a decade. Another name investors might wish to look into is Viral Genetics which is another early stage company with science and technology that disrupts cellular metabolism.


As far as management goes it's an impressive team. The co-founder/CEO Christoph Westphal has chalked up several major successes including Alnylam (NASDAQ:ALNY) $461M market cap), Momenta (NASDAQ:MNTA) $775M market cap) and two others that were acquired by large drug companies [Glaxo (NYSE:GSK) and Lilly (NYSE:LLY)].

The scientific advisory board is outstanding. The mix of talent, expertise and accomplishment suggests that Verastem has a scientific network that will give them best possible access to developing science and potential partners in the ecosystem. Some biotechnology types talk about Verastem as a possible "next Vertex" which is another very successful small-molecule biotechnology company based in Cambridge, MA.

Vertex (NASDAQ:VRTX) is a $1B+ revenue company that has reached profitability and has pipeline of additional drugs that will fuel further growth. Investors should note that Vertex has been a very long term and extremely volatile stock. Just over the last decade the shares declined for nearly a few years (2002-2005) before quadrupling in 2006. Since then the stock has been "basically flat" but with gyrations from $15 to $55 during that time period!

Although it's a complex story the "money shot" for Verastem illustrates the potential the company has to have a major impact on treating cancer. Verastem basically targets the "root" of tumor to accomplish total removal rather than just a reduction. 1

In order to accomplish this Verastem has developed technology to find the specific cancer stem cells and create molecules that inhibit their formation and growth.

Along with clinical drug development Verastem is developing companion diagnostics tools to provide more individualized treatments known to be more effective.

1 Scientific illustrations are sourced from the Verastem IPO roadshow presentation.

In terms of meaningful developments the two lead clinical candidates are scheduled for IND in 2012, Phase I trials in 2013 and potential Phase II trials in 2014 and into 2015. This isn't a short-term story by any measure.

Verastem has some "special sauce" in addition to their management team and advisory board. The company has expertise and patents around the identification and targeting of cancer stem cells, inhibitors to cancer stem cell growth and some high-throughput screening tools.

There are myriad approaches to getting the jobs done at the cellular level these days and many are promising. Investors intrigued by this area should also look at Viral Genetics (OTC:VRAL), which has developed impressive science and IP around technology that can selectively disrupt cellular metabolic process to accomplish a broad range of end-points.

Verastem is definitely one of the development stage companies in this space to keep an eye on. The fact that there is solid investor demand for Verastem is encouraging in the fight against cancer.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.