Verastem, Inc. (VSTM) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining the H.C. Wainwright 2021 BioConnect Conference. My name is Sean Lee, and I'm an equity research analyst at the firm. While we are virtual this year, we are confident we are going to be able to provide value to you with over 375 companies presenting at this conference. Today, I am hosting a fireside chat with the CEO of Verastem Oncology, Mr. Brian Stuglik. Brian, to start with off and for the benefit of the investors who aren't -- may not be familiar with Verastem, could you give us some background on the company and its product pipeline?

Sure. Thank you, Sean, and thank you to H.C. Wainwright for hosting the virtual conference. So Verastem is a Boston-based company. We were founded in 2010, and we're as a research-based organization. In 2020, we went through a pretty significant transformation of the company. Beginning in January of 2020, we in-licensed what we now call VS-6766, which is a dual RAF/MEK inhibitor, and we're combining that with our FAK inhibitor program. So that was the first transformational event. The second transformational event was that, in September of 2020, we announced the asset purchase agreement with Secura Bio for COPIKTRA. That was a very lucrative transaction for Verastem. It allowed us to focus on accelerating our best-in-class RAF/MEK program along with our FAK program. So we're excited to have then progress that program pretty rapidly in 2020 with concluding the year on opening up 2 registration-directed trials that we hope will bring benefit for patients out there.

Great. As you've mentioned, the company's lead product, VS-6766 is a RAF/MEK inhibitor. Well, the first generation of RAF inhibitors, such as Zelboraf and Tafinlar have achieved some notable results, especially against the BRAF-mutant cancers. Their overall impact has been limited due to their acquired drugging resistance. Now how does 6766 work to address this shortcoming of the class?

Yes. Very good question. What I'd like to do is maybe share a slide or 2 that will take us through 2 concepts, the concepts of vertical blockade and the concept of parallel blockade. So first talking about vertical blockade. RAS is a smart pathway. And if you block any one node in this pathway, what happens is signaling reoccurs. And as a result, what happens is it's probably insufficient to just block one of these nodes to get the depth and duration needed for the full antitumor effect. As you can see here on the left, VS-6766 simultaneously blocks both RAF and MEK resulting in a more complete shutdown of the pathway. This mechanism also gives us a lot of optionality because, as you can see, there's a number of upstream and downstream targets here on the left that we can combine with VS-6766, and we recently completed some preclinical data that's very compelling with the G12C inhibitors that we hope to be moving into the clinic soon. So that's the concept of vertical blockade. The second concept connected with our FRAME program is this concept of parallel path blocking. So what happens when you block the RAS pathway, there's parallel signaling that occurs to -- resulting in tumor growth. And what we know is that when you block RAF, FAK is upregulated and our product defactinib actually blocks signaling within FAK, which in turn shuts down one of these parallel pathways for driving tumor growth. And again, as part of our research program, we're also investigating combinations of VS-6766 and our FAK inhibitor with other targets in these parallel pathways, like PI3K inhibitors and AKT inhibitors, and we've actually now generated data with an mTOR inhibitor, everolimus. So we're excited about the optionality that VS-6766 provides for us.

That certainly sounds very interesting. But at the same time, I know that several approved MEK inhibitors are on the market, and some have even been specifically approved to be used in combination with RAF inhibitors. So in what way is using 6766 superior to these already commercially available combinations?

Yes. I think there are several differences. Here's what we know so far. First, VS-6766, in one product simultaneously is inhibiting MEK, BRAF and CRAF, all in one molecule. The second difference that we're seeing is one of the outcomes of the program that we've had to date is we've been able to develop an intermittent schedule for VS-6766, where it's given on a twice-weekly basis. And when you look at the safety associated with that twice-weekly program, we've been able to eliminate many of the toxic effects that the other MEK inhibitors and BRAF inhibitors have -- it's really limited, their ability to be used in combination for long periods of time in patients. Most importantly, though, when we went to that intermittent schedule, the question is whether or not we retain activity. And again, compared to historic response rates in low-grade serous ovarian cancer, we're showing very high results, very high partial responses with VS-6766 plus defactinib, and we're also seeing responses in patients previously treated with MEK inhibitors. So again, we think there's something different with VS-6766. And when we partner it with our FAK inhibitor, we think that's even adding even more to the positive outcomes here.

That certainly sounds very promising. Maybe we can dive a little deeper into the company's clinical programs. The Phase I/II FRAME study is where most of the -- most encouraging data you have so far comes from. And it has -- we've seen good results in both low-grade serous ovarian cancer and non-small cell lung cancer with KRAS-G12V mutations. So could you remind us a little bit on what are the most important results so far? And what can we expect -- when do we expect the next update from the frame study? And what will be included in this update?

Yes. So if we look at the most recent data, this was our updated data from August of 2020, and this is that in nearly 17 patients. So we almost doubled what we reported at AACR. And what's impressive about the data is what's on the left-hand side here, where almost all patients had benefit. We continue to maintain a very high overall response rate in patients with KRAS mutations, well over 56%. You can see that, on the right-hand side, we're seeing responses in patients, as I mentioned, previously treated with MEK inhibitors nearly in that 50% range, and we're seeing this very good duration of therapy in patients. What's important about this study, too, is it's still ongoing. So since this August update, Dr. Banerji has mentioned in scientific forums that there's been 2 additional patients respond, one with a KRAS mutation and the other non-KRAS mutation. So if confirmed, these numbers would now be 6 out of 9 and 9 out of 17. So we're very pleased that as we've doubled the number of patients here, we've seen the data hold up. The other important thing is in the complete trial, we've seen -- had about 60 patients enrolled. And to date, nobody has come off for adverse events. So again, a very, very tolerable regimen. We plan on, I think, updating this data in mid-2021. We'll have to see how the data matures over that time frame, but it will be at least an update for the duration of therapy, Dr. Banerji has enrolled several more patients into the trial. So we'll see how far he gets with data collection and reporting. In lung cancer, if we turn to lung cancer, again, what we were excited to see from both a single-agent trial and the combination trial is the strong signal in KRAS-G12V non-small cell lung cancer. So this is data from a combined analysis where, from a single-agent perspective, those are noted as mono here. There were 5 patients treated with G12V, 2 of them responded. In the combination with defactinib, we've had 2 G12V patients treated, 2 of them have responded. So in total, we're looking at 7 patients with G12V, we've seen 4 out of those 7 patients have a response. And it's small numbers, but we're excited because this is underpinned in 2 separate trials, a monotherapy trial, a combo trial. And there's a biologic rationale behind why this is happening because G12C -- I'm sorry, G12V signals more through the CRAF pathway. And we know we have some strong inhibition there. So we're very pleased with both low-grade serous ovarian cancer and non-small cell lung cancer, and that led to the activation of our registration trials late in 2020.

Certainly looking forward to the updates. Now as you mentioned, the company just started the registration-directed trials in these 2 indications. Now could you maybe highlight for us the current [treatment landscapes] for low-grade serous ovarian cancer and K12V non-small cell lung cancer? And what are the potential market opportunities?

Sure. So let's start with low-grade serous ovarian cancer. This is important to note it's a subset of ovarian cancer, and it's different from high-grade in that this is more heavily driven by mutations in the RAS pathway. So you'll see the current treatment algorithm here is essentially chemotherapy, hormonal therapy and MEK inhibitors. There's no agent approved here. And the PARP inhibitors aren't used in low grades. They're more used in high grade. And then looking at the current results in these patients, you can see it ranges from 10% to 25%. When you reach those 25% responses, though, they're kind of inhibited a bit by the toxicity associated with MEK inhibitors. So in trials that have been recently reported, about 1/3 of patients have discontinued because of that. So you can see compared to the standard of care we're about doubling what's been shown with those other agents, and we're doing it with what seemingly is a more tolerable regimen. So in total, the way to think about this disease is we estimate there's about 6,000 patients in the U.S., 80,000 patients worldwide. These patients live a long time. And again, they need effective treatment options. And so combining the market size with the long duration of therapy, we think this is a potential meaningful opportunity for Verastem. And then changing to lung cancer. Again, once -- on the right here, once patients get by their checkpoint inhibitor, the standard of care is chemotherapy. And that's a response rate in the range of about 10%. What we're targeting with our initial approach in our RAMP 202 study is this G12V market. So you can see KRAS represents about 25% of all lung cancer, KRAS-G12V is about the same size as the ERK market. Importantly, we're in the lead here. There's no other agent that's in late-stage development for G12V. And then for G12C, as I mentioned, we produced some very compelling preclinical data, and our plans are to look at doing combinations with G12C inhibitors because, again, we think there's still room for improvement across the board with all these KRAS mutations. So again, as we've talked about under this concept of vertical blockade, we think 6766 can be a backbone across many of these different KRAS subtypes.

Looks like there's plenty of opportunity for Verastem in both of these indications. My understanding of the pivotal studies that were just started is that these 2 are both fairly small underpacing studies. Now could you walk us through the design of these studies? And also, what gives you confidence that these smaller studies may be sufficient to support regulatory approval?

Yes. Thanks for the question, Sean. For both of these opportunities, we're approaching these as adaptive design and they're designed for potential accelerated approval. With the low-grade serous ovarian cancer study, we have met with the FDA, and they were supportive of this development strategy and the adaptive design. And you can see there's 2 phases to the study. The first is a selection phase where we will compare VS-6766 monotherapy to the combination with defactinib. That's required because this is a novel-novel registration. So once we pick that winner, we'll expand it to include KRAS-mutant patients as well as KRAS wild-type patients in the neighborhood of 100 to 120 patients with the primary endpoint being overall response rate. What gives us confidence in this trial is that as we continue to expand our experience in low-grade serous ovarian cancer, we're seeing the response rates hold up at 50%. And again, given that kind of response rate, you can obviously do a smaller trial. We have the opportunity to resize the trial here in the expansion phase, if we need to, as the study continues. Then for lung cancer, slightly different approach, where, again, this has the potential to do 2 things for us: first, confirm the signal that we're seeing, which is what we'll do in the selection phase; and then if we confirm that signal, we'll be able to carry these patients forward, expanding them into a full cohort of patients for accelerated approval. So the design here is we'll take standard chemotherapy plus checkpoint patients, we'll select them for G12V, we'll pick the winner based on what we see in the selection phase, we'll decide on the overall size that we'll need for registration. And again, I think based on the precedent with the G12C inhibitors, we're probably looking at similar-sized trials, similar end points for approval is chemotherapy is the standard of care there. So both these trials, we opened at the end of 2020. We're really focused on getting the sites open worldwide. And again, we plan on providing guidance later this year in terms of when we'll be reaching the selection phase of the trial for both the low-grade serous program and the G12V non-small cell lung cancer program.

Brian, that was very helpful. In both the FRAME study and in these 2 pivotal studies, 6766 is used in combination with Verastem's defactinib, so -- and you mentioned parts about how they work together in parallel blockade. So would you consider running the studies using just 6766? Or do you think the 2 drugs will always be used in a combination?

Yes. We're going to let -- Sean, we're going to let the science drive us here as you can see in both the lung cancer study and in the low-grade serous ovarian cancer study. We're going to actually compare in the selection phase monotherapy 6766 versus the combination, and we'll look at the totality of the data here. What is the response rate? What's the duration of response? What's the safety profile? And based on that, we'll follow the science. What's important is we have worldwide rights to both defactinib and VS-6766. So we're really agnostic in terms of which one goes forward for patients.

Sounds good. And maybe to close out, could you highlight for investors what are the key milestones we should expect over the next 12 months? And also, in terms of finances, do you have sufficient resources to run the FRAME and the RAMP studies? And what's your expected cash runway?

Yes. Thanks. Yes, to close out, at Verastem, we're very proud that to have opened up these 2 registration trials so quickly. We're aggressively focused on reaching the expansion phase for both of these trials, as mentioned, given they're early in their start-up phase, and we still face a little bit challenging health care environment. We'll plan on providing firm guidance on when we anticipate reaching that selection phase of the trial later in 2021. For the FRAME study, we plan on providing an update to the non-small cell lung cancer cohort in the second quarter of 2021. For low-grade serous ovarian cancer, that update is planned for mid-2021. And then there's an additional study we'll be reported in 2021, which is the Phase I combination of 6766 plus everolimus As I mentioned, we're looking at a couple of opportunities here for parallel blockade. The additional information we'll be sharing with investors over the year is that we're looking at a variety of preclinical combinations and, again, based on what we see activity-wise in those combinations, where appropriate, we'll be pursuing clinical combinations, and we'll have to see how that evolves in 2021, but we're anticipating announcing some clinical collaborations. And then last question around cash, cash runway. At the end of the third quarter, we had reported cash of about $206 million. We have a pro forma cash of $168 million after we've repaid our Hercules debt, which we announced in the fourth quarter of the year. So given that position and given our estimates of having about $50 million in operating expenses, coupled with the expected milestones and royalty payments from the Secura Bio transaction, we're currently guiding to having cash runway until at least 2024. And again, that gives us good funding to complete both of these initial registration programs we started.

Sounds very good and definitely looking forward to another exciting year with Verastem.

Yes, us as well. And again, I wanted to, again, thank you for the opportunity to update the investor community.

Thank you very much, Brian, for joining me for this fireside chat. Hopefully, our next conference will be one where we can hold in-person rather than virtually. But in the meantime, we're very grateful for your flexibility and your presence online this year. Thank you again from the H.C. Wainwright team.

Yes, and thank you very much, Sean.