Friday, June 07, 2013

Verastem (VSTM) and Anti-Cancer Drugs

Verastem (VSTM) believes its drugs can destroy cancer stem cells that are notoriously resistant to chemotherapy.  Scientists have been on a quest for years to find drugs that are effective on cancer stem cells.      Anti-psychotic drugs recently showed promise in fighting stem cells.  Nanomed treatments may be the next big thing.  This is clearly a hot area for research, so Verastem needs to stand out from the crowd.

I am extremely impressed with the management team's qualifications.  They probably have the best bench strength of any small pharma company I've seen in recent years simply because their key people have led life science companies that were acquired.  This means they clearly know how to deliver products that Big Pharma finds valuable.  The single best risk-management technique for any young company is the presence of serial entrepreneurs in the executive team.

Their main drugs are in Phase 1 studies.  I'm not scientifically qualified to evaluate their characteristics, so I can only comment on their market potential for treating ailments like mesothelioma.  Eli Lilly's Premextred (brand name Alimta) treats mesothelioma and had over US$1B in sales in 2012.  Verastem's drugs need to be more effective than Alimta to dent those sales, so we'll have to wait for the trial data.  Any Big Pharma company that wants to take some market share way from Eli Lilly should take a serious look at Verastem.

Verastem's 10-Q for May 9, 2013 said they have over $28M in cash on March 31.  Their quarterly loss was -US$9M, so they can expect to raise more capital by the end of the year (unless they start tapping into their US$38M in short-term investments).  Verastem is too risky for my portfolio at his time but I am optimistic that their talented management can deliver meaningful results.

Full disclosure:  No position in VSTM or other companies mentioned at this time.