Verastem Sinks as Mesothelioma Study Halted For Futility

Xconomy Boston — 

When a clinical trial is stopped early, it can mean one of a few things—including that a drug seems clearly to be helping patients, or that it seems clearly to not be helping. Unfortunately for Verastem and its cancer stem cell drug VX-6063, today it’s the latter.

Boston-based Verastem (NASDAQ: VSTM) said today that it’s stopped enrolling patients in a Phase 2 study of VX-6063 in mesothelioma. The reason: A data safety monitoring board did an interim analysis, and found VX-6063, when given to mesothelioma patients as a maintenance treatment following chemotherapy, wasn’t producing “a sufficient level of efficacy” to justify continuing the trial.

CEO Robert Forrester said in a statement that the company will now “reevaluate its clinical priorities,” and use its cash—the company had about $132 million on hand at the end of the second quarter—for other purposes. It has two other drug candidates, VS-4718 and VS-5584, in early testing for solid tumors. It also has studies underway testing VS-6063 in lung and ovarian cancers.

Still, the study in mesothelioma—a rare form of lung cancer often found in people exposed to asbestos—was Verastem’s biggest test to date, and investors didn’t take the news well, sending shares down almost 50 percent in pre-market trading. At about $3 a share, Verastem’s stock is now worth less than a third of what it was when the company went public at $10 a share in January 2012.

That’s noteworthy: Verastem went public at a time when biotechs weren’t just parading down Wall Street with one IPO after another. The window had just begun to crack open for these offerings, and Verastem was one of the first to step through. It raised $55 million at $10 apiece, hitting its projected $9 to $11 per share range and selling a million more shares than it initially thought it would. Since then, biotech has been on its bull run and has produced some very lucrative IPOs.

Yet Verastem has never been able to break out from the pack of new public biotechs. Its best days came in July 2013 when shares were worth about $17 apiece, but since then, shares been on a slow descent downwards. Verastem’s biggest institutional shareholders as of an April 2015 proxy filing were CHP III LP (a fund managed by Cardinal Partners, 6.5 percent stake) FMR LLC (6.4 percent), Eastern Capital (5.5 percent), and Platinum Investment Management (5.2 percent). Co-founder Christoph Westphal held a 7.3 percent stake as of April.

A clinical trial failure like this wasn’t the type of news biotech needed after a week in which drug pricing became a hot button political issue, thanks in part to the Turing Pharmaceuticals fiasco, as Alex Lash wrote here. The Nasdaq Biotechnology Index (NASDAQ: IBB) is down about 13 percent since closing at about $356 on Sept. 18 as the pricing debate has taken center stage. Is sentiment changing against biotech? It’ll be worth watching as a few other prospects like Edge Therapeutics and Mirna Therapeutics prep to go public later this week.

Verastem was co-founded by Westphal in mid-2010. He ran the company as chairman and CEO, invested in it, and took it public a few years later. Westphal moved into the executive chairman role in 2013, handing the CEO post to Forrester, and has since founded another company, the muscle cramp treatment developer Flex Pharma (NASDAQ: FLKS), which went public earlier this year.

Westphal, best known as the CEO of the controversial anti-aging firm Sirtris Pharmaceuticals, has helped found a number of other local biotechs, among them Alnylam Pharmaceuticals (NASDAQ: ALNY), Momenta Pharmaceuticals (NASDAQ: MNTA), and Acceleron Pharma (NASDAQ: XLRN).