Financial Performance - The company has an accumulated deficit of $720.7 million as of September 30, 2022[124]. - The net loss for the three months ended September 30, 2022, was $18.1 million, compared to $57.0 million for the same period in 2021[124]. - Total revenue for the three months ended September 30, 2022, was $0.0 million, a decrease of 100% compared to $2.0 million in the same period of 2021[134]. - Net loss for the three months ended September 30, 2022, was $18.1 million, a decrease of 21% compared to a net loss of $22.8 million in the same period of 2021[134]. - Total revenue for the nine months ended September 30, 2022, was $2.6 million, an increase of 72% from $1.5 million in the same period of 2021[146]. - Transition services revenue for the nine months ended September 30, 2022, was $0.0 million, a decrease of 100% from $0.6 million in the same period of 2021[149]. Expenses - Research and development expenses for the three months ended September 30, 2022, were $11.3 million, an increase of 21% from $9.3 million in the same period of 2021[135]. - Selling, general and administrative expenses for the three months ended September 30, 2022, were $6.4 million, up 16% from $5.5 million in the same period of 2021[141]. - Research and development expenses for the nine months ended September 30, 2022, were $39.8 million, a 42% increase from $28.0 million in the same period of 2021[150]. - Selling, general and administrative expenses were $18.9 million in 2022, up from $18.5 million in 2021, a 2.2% increase[2]. Cash and Investments - The company had cash, cash equivalents, and investments totaling $104.0 million as of September 30, 2022, expected to fund operations for at least 12 months[124]. - As of September 30, 2022, the company had $104.0 million in cash, cash equivalents, and investments[5]. - Cash provided by investing activities was $53.2 million in 2022, primarily from net maturities of investments[7]. - The company raised approximately $27.4 million from the sale of 23,573,403 shares under its at-the-market equity offering program in 2022[8]. Debt and Financing - The company expects to finance future development costs through existing cash, milestone payments, and potential strategic financing opportunities[125]. - The company entered into a Loan Agreement with Oxford for up to $150.0 million, with an initial term loan of $25.0 million funded at closing[9]. - Interest income for the nine months ended September 30, 2022, increased to $0.4 million, a 216% increase from $0.1 million in the same period of 2021[146]. - Interest expense for the nine months ended September 30, 2022, was $1.4 million, an 86% decrease from $10.0 million in the same period of 2021[146]. - Interest income increased to $0.4 million in 2022 from $0.1 million in 2021, a 300% increase driven by higher interest rates[3]. - Interest expense decreased significantly to $1.4 million in 2022 from $10.0 million in 2021, a reduction of 86% due to the conversion of 2020 Notes[4]. Clinical Trials and Research - The combination of avutometinib (VS-6766) and defactinib has received breakthrough designation from the FDA for treating recurrent low-grade serous ovarian cancer (LGSOC)[109]. - The ongoing FRAME study is evaluating the combination of avutometinib (VS-6766) and defactinib in patients with various cancers, including KRAS mutant NSCLC and LGSOC[112]. - The RAMP 201 trial is assessing the efficacy and safety of avutometinib (VS-6766) alone and in combination with defactinib in patients with recurrent LGSOC[113]. - The company received a $3.8 million Therapeutic Accelerator Award from the Pancreatic Cancer Network to support a Phase 1b/2 clinical trial of avutometinib (VS-6766) in combination with defactinib[120]. - The RAMP 202 trial did not meet criteria for continuation in the trial expansion phase for KRAS G12V NSCLC patients[116]. - The company has entered into clinical collaboration agreements with Amgen and Mirati Therapeutics to evaluate combinations of avutometinib (VS-6766) with their respective KRAS inhibitors[117][119]. Future Outlook - The company expects to continue incurring significant expenses and operating losses while funding obligations for at least the next twelve months[191]. - The company may finance cash needs through equity offerings, debt financings, collaborations, and licensing arrangements, which may dilute existing stockholders' interests[196].

RASTEM® Corporate Presentation August 2022 Safe Harbor Statement This presentation includes forward-looking statements about, among other things, Verastem Oncology's programs and product candidates, including anticipated regulatory submissions, approvals, performance and potential benefits of Verastem Oncology's product candidates, that are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Applicable risks ...

Financial Performance - The company reported a net loss of $22.0 million for the three months ended June 30, 2022, compared to a net loss of $38.9 million for the same period in 2021[117]. - Net loss for the three months ended June 30, 2022, was $21.9 million, representing a 30% increase from a net loss of $16.9 million in the same period of 2021[126]. - Total revenue for the three months ended June 30, 2022, was $0.5 million, a decrease of 100% compared to $500,000 in the same period of 2021[126]. - Total revenue for the six months ended June 30, 2022, was $2.6 million, a 72% increase from $1.5 million in the same period of 2021[139]. - Transition services revenue was $0.0 million in the 2022 Quarter, a decrease of 100% from $0.4 million in the 2021 Quarter, as services were substantially completed in 2021[127]. - The company recorded other income of $34,000 in the 2022 Period, compared to no other income in the 2021 Period[146]. Cash and Investments - As of June 30, 2022, the company had an accumulated deficit of $702.6 million and cash, cash equivalents, and investments totaling $94.3 million[117]. - The company has cash, cash equivalents, and investments totaling $94.3 million as of June 30, 2022, with primary exposure to interest rate sensitivity due to the nature of its investment portfolio[191]. - For the six months ended June 30, 2022, the company reported a net cash used in operating activities of $31.975 million, compared to $32.742 million for the same period in 2021[153]. - Cash provided by investing activities for the 2022 Period was $48.5 million, primarily from net maturities of investments[154]. - The cash inflow from operating activities due to changes in operating assets and liabilities was $3.4 million for the 2022 Period[153]. Research and Development - The ongoing FRAME study is evaluating the combination of VS-6766 and defactinib in patients with recurrent low-grade serous ovarian cancer (LGSOC) and KRAS mutant tumors[108]. - The combination of VS-6766 and defactinib has received breakthrough designation from the FDA for the treatment of all patients with recurrent LGSOC[105]. - The company expects to report topline results from Part A of the RAMP 202 study in the second half of 2022[109]. - The company received a "Therapeutic Accelerator Award" of up to $3.8 million from the Pancreatic Cancer Network to support a Phase 1b/2 clinical trial of VS-6766 in combination with defactinib[113]. - The company has initiated registration-directed trials entitled RAMP 201 and RAMP 202 to evaluate the efficacy and safety of VS-6766 alone and in combination with defactinib[109]. - Approximately 80% of patients remained on study treatment with a median duration of follow-up of four months in the interim analysis of the RAMP 201 trial[110]. - The company anticipates incurring significant expenses and continuing operating losses due to ongoing research and development efforts for VS-6766 and defactinib[117]. - Research and development expenses increased by 53% to $14.9 million in the 2022 Quarter from $9.7 million in the 2021 Quarter, driven by higher contract research organization costs and drug substance costs[128]. - Research and development expenses for the six months ended June 30, 2022, were $28.5 million, up 53% from $18.6 million in the same period of 2021, mainly due to increased CRO and drug product costs[141]. Debt and Financing - The company raised $24.1 million in net proceeds from a loan and security agreement with Oxford during the 2022 Period[156]. - The company entered into a loan agreement allowing for up to $150 million in term loans, with an initial loan of $25 million funded at closing[157]. - Interest expense decreased by 65% to $0.7 million in the 2022 Period from $2.0 million in the 2021 Period, attributed to the conversion of $28.0 million principal of convertible senior notes[148]. - The company entered into a Loan Agreement on March 25, 2022, borrowing $25.0 million, with interest rates subject to fluctuations based on the one-month CME Secured Overnight Financing Rate plus a margin[193]. - The company may finance its cash needs through equity offerings, debt financings, collaborations, and licensing arrangements, which may dilute existing stockholders' interests[188]. Licensing and Agreements - The Secura APA resulted in an upfront payment of $70 million, with potential regulatory milestone payments up to $45 million and sales milestone payments up to $50 million[174]. - The company expects to receive low double-digit royalties on annual aggregate net sales above $100 million in the U.S., EU, and the UK from the Secura agreement[174]. - The company sold its COPIKTRA license and no longer sells COPIKTRA in the U.S., expecting to finance operations through future milestones and royalties[150]. - In the 2022 Period, the company recognized $2.6 million in revenue from the sale of the COPIKTRA license and related assets, primarily due to a regulatory milestone achieved by Secura's sublicensee, CSPC, amounting to $2.5 million[177]. - The company is obligated to pay Chugai a non-refundable payment of $3.0 million under the Chugai Agreement, along with double-digit royalties on net sales of products containing VS-6766[179]. - The Chugai Agreement allows Chugai to obtain opt-back rights for development and commercialization in the EU, Japan, and Taiwan, contingent upon certain conditions[180]. - The company may terminate the Chugai Agreement with 180 days' written notice, while Chugai may terminate under certain conditions related to patent challenges[182]. Operational Risks - The company expects to incur significant expenses and operating losses as it continues ongoing clinical trials for product candidates VS-6766 and defactinib, and anticipates that existing cash resources will be sufficient for at least the next twelve months[183]. - The company is subject to fluctuations in foreign currency rates due to contracts with CROs and contract manufacturers globally[192].

Financial Performance - The company reported a net loss of $17.0 million for the three months ended March 31, 2022, compared to a net loss of $15.0 million for the same period in 2021, indicating a year-over-year increase in losses of approximately 13.3%[108] - Total revenue for the three months ended March 31, 2022, was $2.6 million, a 158% increase from $1.0 million in the same period of 2021[116] - Revenue from the sale of COPIKTRA license and related assets was $2.6 million in the 2022 Period, compared to $0.9 million in the 2021 Period, representing a 205% increase[116] - Net loss for the three months ended March 31, 2022, was $16.96 million, a 13% increase from a net loss of $15.03 million in the same period of 2021[116] - Total operating expenses rose by 30% to $19.6 million in the 2022 Period from $15.1 million in the 2021 Period[116] - Research and development expenses increased by 53% to $13.6 million in the 2022 Period from $8.9 million in the 2021 Period, driven by costs associated with clinical trials[118] Cash and Financing - As of March 31, 2022, the company had an accumulated deficit of $680.7 million and cash, cash equivalents, and investments totaling $106.3 million, which are expected to fund operations for at least the next 12 months[108] - Cash, cash equivalents, and investments as of March 31, 2022, totaled $106.3 million[125] - Cash used in operating activities for the 2022 Period was $19.3 million, similar to $19.3 million in the 2021 Period[127] - Cash provided by financing activities for the 2022 Period was $25.5 million, compared to cash used of $0.6 million in the 2021 Period[127] - The company entered into a loan agreement with Oxford for up to $150 million, with an initial term loan of $25 million funded at closing[131] - The company borrowed $25.0 million under a Loan Agreement, with interest rates subject to fluctuations based on the one-month CME Secured Overnight Financing Rate plus 7.37%[168] - The company expects to continue incurring significant expenses and operating losses while funding its obligations for at least the next twelve months[158] - The company anticipates financing its cash needs through equity offerings, debt financings, collaborations, and milestone payments[163] Product Development - The company is focused on advancing its lead product candidates, VS-6766 and defactinib, which are being investigated for various solid tumors, including low-grade serous ovarian cancer and KRAS mutant non-small cell lung cancer[92][93] - VS-6766 has received breakthrough designation from the FDA for the treatment of all patients with recurrent low-grade serous ovarian cancer, regardless of KRAS status, after one or more prior lines of therapy[97] - The combination of VS-6766 and defactinib is being evaluated in the FRAME study for patients with recurrent low-grade serous ovarian cancer and KRAS mutant tumors, with registration-directed trials RAMP 201 and 202 initiated based on preliminary results[99][100] - The company entered into a clinical collaboration agreement with Amgen to evaluate the combination of VS-6766 with Amgen's KRAS-G12C inhibitor LUMAKRAS in a Phase 1/2 trial[101] - Defactinib has received orphan drug designation in ovarian cancer in the U.S., EU, and Australia, highlighting its potential in treating this indication[96] Operational Challenges - The ongoing COVID-19 pandemic has impacted clinical trial operations, with delays in startup activities and limits on new trials at some sites, which may affect the company's timelines[110] - The company has financed its operations primarily through public offerings, collaborations, and loans, indicating a reliance on external funding sources for ongoing development[105][109] Licensing and Agreements - The company entered into a license agreement with Secura, receiving an upfront payment of $70.0 million and potential regulatory milestone payments up to $45.0 million[149] - Secura is obligated to pay sales milestone payments of up to $50.0 million based on COPIKTRA's worldwide net sales exceeding $100.0 million, $200.0 million, and $300.0 million[149] - The company recognized $2.6 million in revenue from the sale of COPIKTRA license and related assets during the 2022 Period, primarily from a regulatory milestone[152] - The company has entered into a license agreement with Chugai for the development and commercialization of products containing VS-6766, with an upfront payment of $3.0 million[153]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35403 Verastem, Inc. (Exact name of registrant as specified in its charter) | Delaware | | --- | | (State or other ...

Financial Performance - The company reported an accumulated deficit of $647.2 million as of September 30, 2021[145]. - The net loss for the three months ended September 30, 2021, was $22.8 million, compared to a net loss of $54.7 million for the same period in 2020[145]. - Total revenue for the three months ended September 30, 2021, was $2,000, a decrease of $78,645, or 100%, compared to $78,647 for the same period in 2020[1]. - Product revenue, net for the three months ended September 30, 2021, was $0.0 million, a decrease of $5,829, or 100%, compared to $5.8 million for the same period in 2020[1]. - Total revenue for the nine months ended September 30, 2021, was $1.5 million, a decrease of $86.5 million, or 98%, compared to $88.0 million for the same period in 2020[1]. - Sale of COPIKTRA license and related assets revenue for the nine months ended September 30, 2021, was $0.9 million, a decrease of $69.1 million, or 99%, compared to $70.0 million for the same period in 2020[1]. - Net loss for the nine months ended September 30, 2021, was $(54.7) million, compared to a net loss of $(47.9) million for the same period in 2020, representing an increase in loss of $6.9 million, or 14%[1]. Research and Development - The overall response rate (ORR) in the FRAME study for KRAS-G12 mutant low-grade serous ovarian cancer (LGSOC) was 52% among evaluable patients[136]. - The median progression-free survival across all patients in the FRAME study was 23.0 months[137]. - The combination of VS-6766 and defactinib received breakthrough designation from the FDA for recurrent LGSOC treatment[134]. - The FRAME study was expanded to include new cohorts in pancreatic cancer and KRAS-G12V mutant NSCLC[136]. - The company has commenced registration-directed trials for VS-6766 as a monotherapy and in combination with defactinib[138]. - The company expects to incur significant expenses and operating losses due to ongoing research and development of VS-6766 and defactinib[145]. Expenses - Research and development expenses for the three months ended September 30, 2021, were $9.3 million, a decrease of $1.6 million, or 15%, compared to $10.9 million for the same period in 2020[1]. - Selling, general and administrative expenses for the three months ended September 30, 2021, were $5.5 million, a decrease of $15.1 million, or 73%, compared to $20.6 million for the same period in 2020[1]. - Research and development expenses for the nine months ended September 30, 2021, were $28.0 million, a decrease of $3.2 million, or 10%, compared to $31.2 million for the same period in 2020[1]. - Selling, general and administrative expenses for the nine months ended September 30, 2021, were $18.5 million, a decrease of $37.2 million, or 67%, compared to $55.7 million for the same period in 2020[1]. Cash and Financing - The company had cash, cash equivalents, and investments totaling $103.4 million as of September 30, 2021[145]. - Net cash used in operating activities for the 2021 Period was $(43,569) thousand, compared to $(11,803) thousand in the 2020 Period, reflecting increased net losses[187]. - Cash provided by financing activities in the 2021 Period was $80 thousand, significantly lower than $106,236 thousand in the 2020 Period[187]. - The company sold 0 shares under the 2017 ATM in the 2021 Period, while it sold 6,769,559 shares for net proceeds of approximately $12.2 million in the 2020 Period[193]. - The company expects to finance a portion of its business through future milestones and royalties received pursuant to the Secura APA[184]. - The company anticipates financing its cash needs through equity offerings, debt financings, and collaborations[225]. Agreements and Obligations - A clinical collaboration agreement was signed with Amgen to evaluate the combination of VS-6766 with Amgen's KRAS G12C inhibitor LUMAKRAS in a Phase 1/2 trial[139]. - Secura made an upfront payment of $70.0 million and agreed to regulatory milestone payments up to $45.0 million related to COPIKTRA[210]. - Sales milestone payments of up to $50.0 million are contingent on total worldwide net sales of COPIKTRA exceeding $100.0 million, $200.0 million, and $300.0 million[210]. - The company recognized $0.9 million in revenue from the sale of COPIKTRA license and related assets for the nine months ended September 30, 2021, primarily from a regulatory milestone[213]. - The Chugai Agreement includes a non-refundable payment of $3.0 million and double-digit royalties on net sales of products containing VS-6766[217]. - The company may terminate the Chugai Agreement with 180 days' written notice under certain conditions[219].

Financial Performance - The company reported a net loss of $16.9 million for the three months ended June 30, 2021, compared to a net loss of $23.0 million for the same period in 2020, representing a 27% improvement [148]. - Total revenue for the 2021 Quarter was $500,000, a decrease of 88% from $4.3 million in the 2020 Quarter [148]. - Product revenue, net was $0.0 million for the 2021 Quarter, down from $4.2 million in the 2020 Quarter, due to the sale of the COPIKTRA license [148]. - The net loss for the six months ended June 30, 2021, was $31.9 million, a reduction of 48% from a net loss of $61.0 million in the same period of 2020 [157]. - Total revenue for the six months ended June 30, 2021, was $1.5 million, a decline of 90% compared to $9.4 million in the same period of 2020 [157]. - Interest expense for the six months ended June 30, 2021, was $2.0 million, a significant decrease of 84% from $12.5 million in the same period of 2020 [170]. Research and Development - Research and development expenses increased by 4% to $9.7 million in the 2021 Quarter from $9.3 million in the 2020 Quarter [148]. - Research and development expense for the six months ended June 30, 2021, was $18.6 million, a decrease of 8% from $20.3 million in the same period of 2020 [166]. - The combination of VS-6766 and defactinib received breakthrough designation from the FDA for treating recurrent low-grade serous ovarian cancer (LGSOC) [131]. - The FRAME study demonstrated a 52% overall response rate (ORR) in patients with recurrent LGSOC, with a 70% ORR in KRAS mutant LGSOC patients [133]. - The company anticipates an increase in expenses for VS-6766 and defactinib as registration directed trials have commenced [166]. Cash and Investments - As of June 30, 2021, the company had cash, cash equivalents, and investments totaling $114.1 million [175]. - The company had cash, cash equivalents, and investments totaling $114.1 million as of June 30, 2021, expected to fund operations for at least 12 months [138]. - Cash, cash equivalents, and investments as of June 30, 2021, totaled $114.1 million [218]. - The company expects to finance future operations through milestones and royalties from the Secura APA following the sale of the COPIKTRA license [174]. - The company expects to incur significant expenses and operating losses, with existing cash resources sufficient to fund obligations for at least the next twelve months [211]. Operational Highlights - The ongoing COVID-19 pandemic has impacted clinical trial operations, but patient accruals have increased as restrictions ease [142]. - The company is focusing on its lead product candidates, VS-6766 and defactinib, following the sale of its COPIKTRA license [136]. - The company plans to continue ongoing clinical trials, initiate additional trials, and expand its intellectual property portfolio, which will impact future capital requirements [212]. Debt and Financing - The company closed a registered direct public offering of $150.0 million aggregate principal amount of 5.00% Convertible Senior Notes due 2048, with net proceeds of approximately $145.3 million [183]. - The initial conversion rate for the 2018 Notes is 139.5771 shares per $1,000 principal amount, corresponding to an initial conversion price of approximately $7.16 per share, representing a 15.0% premium over the last reported sale price of $6.23 per share [184]. - The company exchanged approximately $28.0 million aggregate principal amount of 2018 Notes for newly issued 5.00% Convertible Senior Notes due 2048, which closed on November 13, 2020 [186]. - On July 1, 2021, the company exercised its 2020 Notes Mandatory Conversion Option for $28.0 million of the 2020 Notes, converting them into 8,615,384 shares of common stock [196]. Revenue Recognition - The company received an up-front payment of $70.0 million from Secura for the exclusive worldwide license of duvelisib, with additional regulatory milestone payments up to $45.0 million and sales milestone payments up to $50.0 million [200]. - The company recognized $0.9 million in revenue from the sale of COPIKTRA license and related assets during the six months ended June 30, 2021, primarily from a regulatory milestone achieved by Secura's sublicensee [203]. - The company recorded no transition services revenue in the 2020 Period, with $0.6 million recognized in the 2021 Period [163]. Financial Structure and Risk - The company has no off-balance sheet arrangements as defined under SEC rules, indicating a straightforward financial structure [217]. - There have been no material changes in the company's contractual obligations and commitments since the last annual report [216]. - The company contracts with CROs and contract manufacturers globally, which may expose it to fluctuations in foreign currency rates, although an immaterial amount of total liabilities were denominated in foreign currencies as of June 30, 2021 [219]. - The company is exposed to interest rate risk, with an immediate 100 basis point change in interest rates expected to have no material effect on the fair market value of its investment portfolio due to its short-term duration and low risk profile [218]. - The company’s 2018 Notes bear interest at a fixed rate, minimizing exposure to interest rate changes, but may result in higher future interest payments if credit ratings improve [220]. Internal Controls - Management evaluated the effectiveness of disclosure controls and procedures as of June 30, 2021, concluding they were effective at the reasonable assurance level [221]. - There have been no changes in internal control over financial reporting that materially affected the company during the three months ended June 30, 2021 [222].

[General Information](index=1&type=section&id=General%20Information) This section provides the company's filing status, shares outstanding, and a disclaimer regarding forward-looking statements [Filing Information](index=1&type=section&id=Filing%20Information) This section details the company's filing status, identification, and securities information for the quarterly period ended March 31, 2021 - Verastem, Inc. filed its Quarterly Report on Form 10-Q for the period ended March 31, 2021[2](index=2&type=chunk) Company Identification and Filing Status | Detail | Value | | :--- | :--- | | Registrant Name | Verastem, Inc. | | State of Incorporation | Delaware | | Commission File Number | 001-35403 | | Trading Symbol | VSTM | | Exchange | The Nasdaq Global Market | | Filer Status | Non-accelerated filer, Smaller reporting company | - The registrant has filed all required reports under the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. All Interactive Data Files required by Rule 405 of Regulation S-T have been submitted electronically[3](index=3&type=chunk) [Shares Outstanding](index=2&type=section&id=Shares%20Outstanding) As of May 10, 2021, Verastem, Inc. reported 171,919,345 shares of Common Stock outstanding Common Stock Outstanding | Date | Shares Outstanding | | :--- | :--- | | May 10, 2021 | 171,919,345 | [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the forward-looking nature of statements within the report, emphasizing substantial risks and uncertainties related to product candidates VS-6766 and defactinib - The report contains forward-looking statements regarding strategy, future operations, financial position, revenues, costs, prospects, plans, and management objectives[11](index=11&type=chunk) - Key product candidates mentioned in forward-looking statements are VS-6766 (RAF/MEK program) and defactinib (FAK program), with focus on clinical development, regulatory submissions, and commercialization[11](index=11&type=chunk) - Significant risks and uncertainties include negative clinical trial results, delays in regulatory approvals, challenges in obtaining and enforcing intellectual property, competitive developments, and the ability to secure adequate future financing[12](index=12&type=chunk) - The duration and impact of the COVID-19 pandemic are also identified as factors that may affect or exacerbate these risks and uncertainties[12](index=12&type=chunk) [PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents Verastem, Inc.'s unaudited condensed consolidated financial statements for the three months ended March 31, 2021, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a summary of the company's financial position as of March 31, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets (in thousands) | Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $35,514 | $67,782 | | Short-term investments | $85,583 | $73,444 | | Total current assets | $127,678 | $144,938 | | Total assets | $136,901 | $154,349 | | **Liabilities** | | | | Total current liabilities | $11,844 | $17,093 | | Convertible senior notes | $19,672 | $19,051 | | Total liabilities | $34,292 | $39,075 | | **Stockholders' Equity** | | | | Total stockholders' equity | $102,609 | $115,274 | | Accumulated deficit | $(607,542) | $(592,511) | - Total assets decreased from **$154.3 million** at December 31, 2020, to **$136.9 million** at March 31, 2021, primarily due to a decrease in cash and cash equivalents[15](index=15&type=chunk) - Total liabilities decreased from **$39.1 million** to **$34.3 million**, mainly driven by a reduction in accrued expenses[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section presents the company's financial performance for the three months ended March 31, 2021, and 2020 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Item | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Total revenue | $1,006 | $5,056 | | Total operating expenses | $15,114 | $31,415 | | Loss from operations | $(14,108) | $(26,359) | | Net loss | $(15,031) | $(37,990) | | Net loss per share—basic and diluted | $(0.09) | $(0.35) | | Comprehensive loss | $(15,050) | $(37,995) | - Total revenue decreased by **80%** from **$5.1 million** in Q1 2020 to **$1.0 million** in Q1 2021, primarily due to the sale of the COPIKTRA license[17](index=17&type=chunk) - Net loss significantly improved by **60%** from **$(38.0) million** in Q1 2020 to **$(15.0) million** in Q1 2021, driven by reduced operating expenses[17](index=17&type=chunk) - Net loss per share decreased from **$(0.35)** in Q1 2020 to **$(0.09)** in Q1 2021[17](index=17&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's stockholders' equity for the three months ended March 31, 2021 Changes in Stockholders' Equity (in thousands, except share data) | Item | Balance at Dec 31, 2020 | Net Loss | Unrealized Loss on Securities | Stock Options Exercise | RSU Vesting | Stock-based Comp. | ESPP Issuance | Balance at Mar 31, 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock (Shares) | 170,456,179 | — | — | 173,890 | 1,047,271 | — | 53,372 | 171,730,712 | | Common Stock (Amount) | $17 | — | — | — | — | — | — | $17 | | Additional Paid-in Capital | $707,715 | — | — | $381 | $(52) | $1,980 | $76 | $710,100 | | Accumulated Other Comprehensive Income | $53 | — | $(19) | — | — | — | — | $34 | | Accumulated Deficit | $(592,511) | $(15,031) | — | — | — | — | — | $(607,542) | | Total Stockholders' Equity | $115,274 | $(15,031) | $(19) | $381 | $(52) | $1,980 | $76 | $102,609 | - Total stockholders' equity decreased from **$115.3 million** at December 31, 2020, to **$102.6 million** at March 31, 2021, primarily due to the net loss incurred during the period[19](index=19&type=chunk) - Common stock shares outstanding increased due to exercises of stock options, vesting of restricted stock units, and issuances under the Employee Stock Purchase Plan[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the company's cash inflows and outflows for the three months ended March 31, 2021, and 2020 Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(19,318) | $(34,003) | | Net cash (used in) provided by investing activities | $(12,372) | $32,050 | | Net cash (used in) provided by financing activities | $(578) | $93,421 | | (Decrease) increase in cash, cash equivalents and restricted cash | $(32,268) | $91,468 | | Cash, cash equivalents and restricted cash at end of period | $35,755 | $170,730 | - Net cash used in operating activities decreased by **$14.7 million**, from **$(34.0) million** in Q1 2020 to **$(19.3) million** in Q1 2021, primarily due to a decreased net loss[21](index=21&type=chunk) - Investing activities shifted from providing **$32.1 million** in Q1 2020 to using **$(12.4) million** in Q1 2021, mainly due to net purchases of investments[21](index=21&type=chunk) - Financing activities used **$(0.6) million** in Q1 2021, a significant decrease from providing **$93.4 million** in Q1 2020, which included proceeds from a common stock issuance[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies and financial statement items [1. Nature of business](index=10&type=section&id=1.%20Nature%20of%20business) Verastem, Inc. is a development-stage biopharmaceutical company focused on novel anticancer agents, specifically RAF/MEK inhibition (VS-6766) and FAK inhibition (defactinib) for various solid tumors - Verastem, Inc. is a development-stage biopharmaceutical company focused on novel anticancer agents, particularly VS-6766 (RAF/MEK program) and defactinib (FAK program), for various solid tumors[22](index=22&type=chunk)[23](index=23&type=chunk) - The company sold its exclusive worldwide license for COPIKTRA (duvelisib) to Secura Bio, Inc. on September 30, 2020[24](index=24&type=chunk) Key Financial Position (in millions) | Item | March 31, 2021 | | :--- | :--- | | Cash, cash equivalents, and investments | $127.1 | | Accumulated deficit | $607.5 | - The company expects existing cash resources to fund planned operations for at least **12 months** from the issuance date of the financial statements[27](index=27&type=chunk) - Future development costs are expected to be financed through existing cash, future milestones/royalties from the Secura APA, or strategic financing opportunities (collaboration agreements, equity offerings, debt)[28](index=28&type=chunk) [2. Summary of significant accounting policies](index=12&type=section&id=2.%20Summary%20of%20significant%20accounting%20policies) The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim reporting, assuming the company continues as a going concern - Financial statements are prepared under GAAP for interim reporting, assuming a going concern for the next twelve months[31](index=31&type=chunk) - The company adopted ASU 2019-12 (Simplifying Accounting for Income Taxes) in Q1 2021, which had no effect on its financial statements or disclosures[33](index=33&type=chunk) - The company is evaluating the impact of ASU 2016-13 (Measurement of Credit Losses on Financial Instruments), effective after December 15, 2022, and ASU 2020-06 (Debt with Conversion and Other Options), effective after December 15, 2023, for smaller reporting companies[34](index=34&type=chunk)[37](index=37&type=chunk) - Credit risk is mitigated by maintaining cash, cash equivalents, and investments with high-quality financial institutions. As of March 31, 2021, Secura accounted for over **60%** of accounts receivable and all revenue for the three months ended March 31, 2021[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [3. Cash, cash equivalents and restricted cash](index=14&type=section&id=3.%20Cash,%20cash%20equivalents%20and%20restricted%20cash) The company's total cash, cash equivalents, and restricted cash decreased from $68.0 million at December 31, 2020, to $35.8 million at March 31, 2021 Cash, Cash Equivalents and Restricted Cash (in thousands) | Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $35,514 | $67,782 | | Restricted cash | $241 | $241 | | Total cash, cash equivalents and restricted cash | $35,755 | $68,023 | - Restricted cash of approximately **$0.2 million** is held to collateralize outstanding letters of credit for the company's office space in Needham, Massachusetts[41](index=41&type=chunk) [4. Fair value of financial instruments](index=14&type=section&id=4.%20Fair%20value%20of%20financial%20instruments) The company categorizes its financial instruments into a three-level fair value hierarchy, with total financial assets measured at fair value of $125.4 million as of March 31, 2021 - The fair value hierarchy prioritizes valuation inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[42](index=42&type=chunk)[44](index=44&type=chunk) Financial Assets Measured at Fair Value (in thousands) | Description | March 31, 2021 Total | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Cash equivalents | $33,820 | $33,820 | $— | $— | | Short-term investments | $85,583 | $— | $85,583 | $— | | Long-term investments | $5,998 | $— | $5,998 | $— | | **Total financial assets** | **$125,401** | **$33,820** | **$91,581** | **$—** | Convertible Senior Notes Fair Value vs. Carrying Value (in thousands) | Item | March 31, 2021 Fair Value | March 31, 2021 Carrying Value | | :--- | :--- | :--- | | 2018 Notes | $0.3 | Included in $19.7 | | 2020 Notes | $31.4 | Included in $19.7 | | **Aggregate Notes** | **$31.7** | **$19.7** | - The fair value of the 2018 and 2020 Convertible Senior Notes was determined using Level 3 inputs, influenced by the company's stock price, volatility, and market yields[45](index=45&type=chunk) [5. Investments](index=17&type=section&id=5.%20Investments) As of March 31, 2021, total cash, cash equivalents, restricted cash, and investments amounted to $127.3 million (fair value), with an aggregate unrealized loss of $17 thousand Cash, Cash Equivalents, Restricted Cash and Investments (in thousands) | Item | Amortized Cost (Mar 31, 2021) | Gross Unrealized Gains (Mar 31, 2021) | Gross Unrealized Losses (Mar 31, 2021) | Fair Value (Mar 31, 2021) | | :--- | :--- | :--- | :--- | :--- | | Cash, cash equivalents & restricted cash | $35,755 | $— | $— | $35,755 | | Investments (due within 1 year) | $85,550 | $50 | $(17) | $85,583 | | Investments (due between 1 and 5 years) | $5,998 | $— | $— | $5,998 | | **Total** | **$127,303** | **$50** | **$(17)** | **$127,336** | - The company had three investments in an unrealized loss position as of March 31, 2021, with an immaterial aggregate unrealized loss, and none were considered other-than-temporarily impaired[46](index=46&type=chunk) [6. Accrued expenses](index=18&type=section&id=6.%20Accrued%20expenses) Total accrued expenses decreased from $14.7 million at December 31, 2020, to $8.8 million at March 31, 2021, primarily due to reductions in compensation and consulting fees Accrued Expenses (in thousands) | Item | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Research and development expenses | $4,554 | $5,176 | | Compensation and related benefits | $1,310 | $5,930 | | Interest | $589 | $236 | | Consulting fees | $543 | $1,091 | | Professional fees | $503 | $615 | | Commercialization costs | $87 | $330 | | Other | $1,222 | $1,282 | | **Total accrued expenses** | **$8,808** | **$14,660** | - The decrease in accrued expenses was primarily driven by a reduction in compensation and related benefits, and consulting fees[47](index=47&type=chunk) [7. Product revenue reserves and allowances](index=18&type=section&id=7.%20Product%20revenue%20reserves%20and%20allowances) Following the sale of COPIKTRA in September 2020, product revenue reserves and allowances significantly decreased to $32 thousand at March 31, 2021 - The company's sole source of product revenue from COPIKTRA ended on September 30, 2020, after its sale to Secura[48](index=48&type=chunk) Product Revenue Allowance and Reserve Categories (in thousands) | Category | Balance at Dec 31, 2020 | Credits and Payments Made | Ending Balance at Mar 31, 2021 | | :--- | :--- | :--- | :--- | | Trade discounts and allowances | $23 | $(19) | $4 | | Government rebates and other incentives | $67 | $(67) | $— | | Returns | $31 | $(3) | $28 | | **Total** | **$121** | **$(89)** | **$32** | [8. Leases](index=18&type=section&id=8.%20Leases) The company has an operating lease for its Needham, Massachusetts office space, extending through June 2025, with consistent operating lease expense - The company's operating lease for office space in Needham, Massachusetts, extends through June 2025[49](index=49&type=chunk) Lease Information (in thousands, except years and rate) | Item | March 31, 2021 | | :--- | :--- | | Right-of-use asset, net | $2,628 | | Lease liability | $3,359 | | Operating lease expense (Q1 2021) | $221 | | Operating lease expense (Q1 2020) | $221 | | Weighted average remaining lease term | 4.3 years | | Weighted average discount rate | 14.6% | | Total Lease Maturity Analysis | $4,493 | | Less: Present value discount | $(1,134) | | Lease Liability | $3,359 | [9. Convertible Senior Notes](index=19&type=section&id=9.%20Convertible%20Senior%20Notes) The company has 2018 and 2020 Convertible Senior Notes outstanding, bearing 5.00% interest and maturing in 2048, with the 2019 Notes fully converted by March 31, 2020 [2018 Notes](index=19&type=section&id=2018%20Notes) The 2018 Notes, with an aggregate principal amount of $150.0 million, bear 5.00% interest and mature on November 1, 2048, convertible at an initial price of $7.16 per share - The 2018 Notes have an aggregate principal amount of **$150.0 million**, bear **5.00%** interest, and mature on November 1, 2048[52](index=52&type=chunk) - Initial conversion rate is **139.5771 shares** of common stock per **$1,000** principal amount, equivalent to an initial conversion price of approximately **$7.16 per share**[53](index=53&type=chunk) - The company can automatically convert outstanding 2018 Notes if the Daily VWAP of its common stock equals or exceeds **130%** of the conversion price for at least **20 trading days** within a **30-day period**[54](index=54&type=chunk)[56](index=56&type=chunk) [2019 Notes](index=21&type=section&id=2019%20Notes) The 2019 Notes, issued in exchange for 2018 Notes, were fully converted into common stock by March 31, 2020, including a cash make-whole provision - The 2019 Notes were issued in exchange for 2018 Notes, bearing **5.00%** interest and maturing on November 1, 2048[59](index=59&type=chunk) - By March 31, 2020, all 2019 Notes were converted into **34,796,350 shares** of common stock and **$1.8 million** in cash for the interest make-whole provision[59](index=59&type=chunk) - The 2019 Notes Interest Make-Whole Provision was bifurcated as a derivative liability, with a fair value of **$0.2 million** at issuance[65](index=65&type=chunk) [2020 Notes](index=23&type=section&id=2020%20Notes) The 2020 Notes, issued in exchange for $28.0 million of 2018 Notes, are senior unsecured obligations with a 5.00% interest rate and a November 1, 2048 maturity - The 2020 Notes were issued in exchange for **$28.0 million** of 2018 Notes, are senior unsecured, bear **5.00%** interest, and mature on November 1, 2048[66](index=66&type=chunk)[74](index=74&type=chunk) - Initial conversion rate is **307.6923 shares** of common stock per **$1,000** principal amount, corresponding to an initial conversion price of approximately **$3.25 per share**[68](index=68&type=chunk) - The company has the right to redeem the 2020 Notes on or after November 1, 2023, and holders have repurchase options on November 1, 2023, and subsequent dates[69](index=69&type=chunk)[70](index=70&type=chunk) - The 2020 Notes exchange was treated as a debt modification, reducing the carrying value by **$2.3 million** due to the change in the fair value of the conversion option[75](index=75&type=chunk) [10. Common stock](index=25&type=section&id=10.%20Common%20stock) On March 3, 2020, the company completed a PIPE offering, selling 46,511,628 shares of common stock at $2.15 per share, generating approximately $93.8 million in net proceeds - On March 3, 2020, the company completed a PIPE offering, selling **46,511,628 shares** of common stock at **$2.15 per share**[77](index=77&type=chunk) PIPE Offering Details (March 2020) | Item | Value | | :--- | :--- | | Shares Sold | 46,511,628 | | Purchase Price per Share | $2.15 | | Net Proceeds | ~$93.8 million | [11. Stock-based compensation](index=25&type=section&id=11.%20Stock-based%20compensation) The company grants stock options, restricted stock units (RSUs), and offers an Employee Stock Purchase Plan (ESPP) as forms of stock-based compensation [Stock options](index=25&type=section&id=Stock%20options) As of March 31, 2021, 12.5 million stock options were outstanding with a weighted-average exercise price of $3.85 and an aggregate intrinsic value of $5.7 million Stock Option Activity (Three months ended March 31, 2021) | Item | Shares | Weighted-average exercise price per share | | :--- | :--- | :--- | | Outstanding at December 31, 2020 | 12,690,745 | $3.90 | | Granted | 801,659 | $2.21 | | Exercised | (246,758) | $1.54 | | Forfeited/cancelled | (725,888) | $3.76 | | Outstanding at March 31, 2021 | 12,519,758 | $3.85 | | Vested at March 31, 2021 | 8,007,568 | $4.61 | Black-Scholes Assumptions for Stock Options | Assumption | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Risk-free interest rate | 0.55 % | 1.58 % | | Volatility | 97 % | 88 % | | Dividend yield | — | — | | Expected term (years) | 6.1 | 6.1 | [Restricted stock units (RSUs)](index=26&type=section&id=Restricted%20stock%20units%20(RSUs)) As of March 31, 2021, 2,850,955 RSUs were outstanding, with a weighted average grant date fair value of $1.78 per share, generally vesting over four years RSU Activity (Three months ended March 31, 2021) | Item | Shares | Weighted average grant date fair value per share | | :--- | :--- | :--- | | Outstanding at December 31, 2020 | 2,649,317 | $1.73 | | Granted | 497,590 | $2.26 | | Vested | (72,390) | $2.45 | | Forfeited/cancelled | (223,562) | $2.01 | | Outstanding at March 31, 2021 | 2,850,955 | $1.78 | - RSUs generally vest in four substantially equal installments over **four years**, or other specified periods, contingent on continued employment[80](index=80&type=chunk) [Employee stock purchase plan](index=26&type=section&id=Employee%20stock%20purchase%20plan) The Amended and Restated 2018 ESPP allows eligible employees to purchase common stock at 85% of the lesser of the fair market value at the beginning or end of the purchase period - The ESPP allows eligible employees to purchase common stock at **85%** of the lesser of the fair market value on the grant date or exercise date[82](index=82&type=chunk) ESPP Shares Issued and Compensation Expense (Q1 2021) | Item | Value | | :--- | :--- | | Shares Issued | 53,372 | | Proceeds | $0.1 million | | Stock-based Compensation Expense | < $0.1 million | ESPP Weighted-Average Assumptions | Assumption | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Risk-free interest rate | 0.09 % | 1.57 % | | Volatility | 65 % | 78 % | | Dividend yield | — | — | | Expected term (years) | 0.5 | 0.5 | [12. Net loss per share](index=28&type=section&id=12.%20Net%20loss%20per%20share) Basic and diluted net loss per common share are calculated based on net loss and weighted-average common shares outstanding, with potentially dilutive securities excluded due to their anti-dilutive effect - Basic and diluted net loss per common share are calculated by dividing net loss by the weighted-average number of common shares outstanding[84](index=84&type=chunk) Potentially Dilutive Securities Excluded from Diluted EPS | Security Type | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--- | :--- | :--- | | Outstanding stock options | 12,519,758 | 14,202,430 | | Outstanding restricted stock units | 2,850,955 | 1,614,784 | | 2018 Notes | 41,873 | 3,950,032 | | 2020 Notes | 8,615,384 | — | | Employee stock purchase plan | 33,034 | 128,545 | | **Total potentially dilutive securities** | **24,061,004** | **19,895,791** | - All potentially dilutive securities were excluded from the diluted net loss per share calculation because their inclusion would have had an anti-dilutive effect[85](index=85&type=chunk) [13. License, collaboration and commercial agreements](index=28&type=section&id=13.%20License,%20collaboration%20and%20commercial%20agreements) This section details the company's key license and collaboration agreements, including the sale of the COPIKTRA license to Secura Bio, Inc., and agreements with Chugai, Sanofi, Yakult, and CSPC [Secura Bio, Inc. (Secura)](index=28&type=section&id=Secura%20Bio,%20Inc.%20(Secura)) On September 30, 2020, Verastem sold its exclusive worldwide license for COPIKTRA (duvelisib) to Secura Bio, Inc. for an upfront payment of $70.0 million, with potential for future milestones and royalties - Verastem sold its exclusive worldwide license for COPIKTRA (duvelisib) to Secura Bio, Inc. on September 30, 2020, for an upfront payment of **$70.0 million**[87](index=87&type=chunk)[88](index=88&type=chunk) - The Secura APA includes potential regulatory milestone payments up to **$45.0 million** and sales milestone payments up to **$50.0 million**[88](index=88&type=chunk)[89](index=89&type=chunk) - Verastem is entitled to low double-digit royalties on annual aggregate net sales above **$100.0 million** and **50%** of all royalty, milestone, and sublicense revenue from Secura's sublicensees (Sanofi, Yakult, CSPC)[89](index=89&type=chunk) Revenue from Secura APA (Q1 2021, in millions) | Revenue Type | Amount | | :--- | :--- | | Regulatory milestone (Sanofi sublicensee) | $0.8 | | Expected future royalties | $0.1 | | Transition services revenue | $0.2 | | **Total recognized revenue** | **$1.1** | [Chugai Pharmaceutical Co., Ltd (Chugai)](index=32&type=section&id=Chugai%20Pharmaceutical%20Co.,%20Ltd%20(Chugai)) On January 7, 2020, Verastem entered into an exclusive worldwide license agreement with Chugai for the development and commercialization of VS-6766, with Chugai retaining opt-back rights - Verastem obtained an exclusive worldwide license from Chugai for the development, commercialization, and manufacture of VS-6766[99](index=99&type=chunk)[100](index=100&type=chunk) - A non-refundable upfront payment of **$3.0 million** was made to Chugai in February 2020 and recorded as research and development expense[100](index=100&type=chunk)[104](index=104&type=chunk) - Chugai has opt-back rights for VS-6766 in the European Union, Japan, and Taiwan, with consideration based on Verastem's development costs[100](index=100&type=chunk) [Sanofi](index=34&type=section&id=Sanofi) In July 2019, Verastem granted Sanofi exclusive rights for duvelisib in certain territories, with Secura assuming obligations post-APA, entitling Verastem to 50% of future milestone and royalty payments - Verastem granted Sanofi exclusive rights for duvelisib in Russia, CIS, Turkey, the Middle East, and Africa, receiving a **$5.0 million** upfront payment and potential milestones up to **$42.0 million**[105](index=105&type=chunk)[106](index=106&type=chunk) - After the Secura APA (September 30, 2020), Secura assumed all responsibilities under the Sanofi Agreement, and Verastem is entitled to **50%** of future milestone and royalty payments from Sanofi, remitted by Secura[107](index=107&type=chunk) [Yakult Honsha Co., Ltd. (Yakult)](index=34&type=section&id=Yakult%20Honsha%20Co.,%20Ltd.%20(Yakult)) In June 2018, Verastem granted Yakult exclusive rights for duvelisib in Japan, with Secura assuming obligations post-APA, entitling Verastem to 50% of future milestone and royalty payments - Verastem granted Yakult exclusive rights for duvelisib in Japan, receiving a **$10.0 million** upfront payment and potential milestones up to **$90.0 million**[108](index=108&type=chunk)[109](index=109&type=chunk) - After the Secura APA (September 30, 2020), Secura assumed all responsibilities under the Yakult Agreement, and Verastem is entitled to **50%** of future milestone and royalty payments from Yakult, remitted by Secura[110](index=110&type=chunk) [CSPC Pharmaceutical Group Limited (CSPC)](index=34&type=section&id=CSPC%20Pharmaceutical%20Group%20Limited%20(CSPC)) In September 2018, Verastem granted CSPC exclusive rights for duvelisib in China, Hong Kong, Macau, and Taiwan, with Secura assuming obligations post-APA, entitling Verastem to 50% of future milestone and royalty payments - Verastem granted CSPC exclusive rights for duvelisib in China, Hong Kong, Macau, and Taiwan, receiving a **$15.0 million** upfront payment and potential milestones up to **$160.0 million**[113](index=113&type=chunk)[114](index=114&type=chunk) - After the Secura APA (September 30, 2020), Secura assumed all responsibilities under the CSPC Agreement, and Verastem is entitled to **50%** of future milestone and royalty payments from CSPC, remitted by Secura[115](index=115&type=chunk) [14. Income taxes](index=36&type=section&id=14.%20Income%20taxes) The company did not record a federal or state income tax provision or benefit for the three months ended March 31, 2021, or 2020, due to expected losses and a full valuation allowance - No income tax provision or benefit was recorded for Q1 2021 or Q1 2020 due to expected losses and a full valuation allowance against net deferred tax assets[116](index=116&type=chunk) [15. Commitments and contingencies](index=36&type=section&id=15.%20Commitments%20and%20contingencies) The company has no other material commitments or contingencies beyond the minimum lease payments disclosed in Note 8 - The company has no other commitments or contingencies beyond minimum lease payments[117](index=117&type=chunk) [16. Restructurings](index=36&type=section&id=16.%20Restructurings) The company undertook two restructurings in 2020, eliminating 31 positions in February and 41 positions in August, with $0.1 million remaining accrued for the August 2020 Restructuring as of March 31, 2021 - The February 2020 Restructuring eliminated approximately **31 positions**, incurring **$1.8 million** in one-time termination benefits[118](index=118&type=chunk) - The August 2020 Restructuring, in connection with the duvelisib sale, involved a workforce reduction of approximately **41 positions**, mainly in commercial operations[119](index=119&type=chunk) Accrued Liabilities Activity for Restructurings (in thousands) | Item | Accrued at Dec 31, 2020 | Paid | Accrued at Mar 31, 2021 | | :--- | :--- | :--- | :--- | | August 2020 Restructuring | $1,027 | $(907) | $120 | [17. Subsequent events](index=37&type=section&id=17.%20Subsequent%20events) The company is not aware of any material subsequent events that would require disclosure or impact the carrying value of assets or liabilities as of the balance sheet date - No material subsequent events were identified between the quarter-end and the issuance date of the financial statements[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, compared to the same period in 2020 [Overview](index=38&type=section&id=OVERVIEW) Verastem is a development-stage biopharmaceutical company focused on novel anticancer agents VS-6766 and defactinib, with registration-directed trials underway and sufficient cash resources for at least 12 months - Verastem is a development-stage biopharmaceutical company focused on novel anticancer agents VS-6766 (dual RAF/MEK inhibitor) and defactinib (FAK inhibitor) for solid tumors[124](index=124&type=chunk)[126](index=126&type=chunk)[128](index=128&type=chunk) - VS-6766 and defactinib are being investigated in preclinical and clinical studies for low-grade serous ovarian cancer (LGSOC), non-small cell lung cancer (NSCLC), colorectal cancer (CRC), pancreatic cancer, uveal melanoma, and endometrial cancer[125](index=125&type=chunk) - Updated data from The FRAME study showed a **52%** overall response rate (ORR) in LGSOC, with **70%** ORR in KRAS mutant LGSOC[129](index=129&type=chunk)[131](index=131&type=chunk) - Registration-directed trials, RAMP 201 (LGSOC) and RAMP 202 (KRAS mutant NSCLC), commenced in Q4 2020[132](index=132&type=chunk) - The company sold its duvelisib program (COPIKTRA) to Secura Bio, Inc. on September 30, 2020, to focus on VS-6766 and defactinib[133](index=133&type=chunk) Key Financials (in millions) | Item | March 31, 2021 | | :--- | :--- | | Accumulated deficit | $607.5 | | Net loss (Q1 2021) | $15.0 | | Cash, cash equivalents, and investments | $127.1 | - Existing cash resources are expected to fund planned operations for at least **12 months**[135](index=135&type=chunk) [COVID-19 pandemic](index=41&type=section&id=COVID-19%20pandemic) The COVID-19 pandemic has impacted the company's operations, with employees working remotely and clinical trial startup activities experiencing delays in European countries - The COVID-19 pandemic has affected employees, patients, communities, and business operations, with most employees working from home since mid-March 2020[138](index=138&type=chunk) - Patient accruals in clinical trials have increased as restrictions eased, but European restrictions still cause delays in clinical trial startup activities[138](index=138&type=chunk) - The full extent of the pandemic's direct or indirect impact on the business, results of operations, and financial condition is highly uncertain[138](index=138&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) The company's financial statements require estimates and judgments, with critical accounting policies remaining materially unchanged from the prior annual report - The preparation of financial statements requires management to make estimates and judgments affecting reported amounts[140](index=140&type=chunk) - Critical accounting policies include revenue recognition (product revenue, licenses, and intellectual property sales), accrued research and development expenses, stock-based compensation, intangible assets, and leases[142](index=142&type=chunk) - There were no material changes to critical accounting policies during the three months ended March 31, 2021[142](index=142&type=chunk) [RESULTS OF OPERATIONS](index=42&type=section&id=RESULTS%20OF%20OPERATIONS) The company's Q1 2021 results showed a significant reduction in net loss and operating expenses compared to Q1 2020, primarily due to the divestment of the COPIKTRA license [Revenue](index=42&type=section&id=Revenue) Total revenue for Q1 2021 was $1.0 million, an 80% decrease from $5.1 million in Q1 2020, primarily due to the cessation of COPIKTRA product sales Revenue Comparison (in thousands) | Revenue Type | Q1 2021 | Q1 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $— | $5,034 | $(5,034) | (100)% | | License and collaboration revenue | $— | $22 | $(22) | (100)% | | Sale of COPIKTRA license and related assets | $850 | $— | $850 | 100% | | Transition services revenue | $156 | $— | $156 | 100% | | **Total revenue** | **$1,006** | **$5,056** | **$(4,050)** | **(80)%** | - Product revenue ceased in Q1 2021 due to the sale of the COPIKTRA license as of September 30, 2020[144](index=144&type=chunk) - New revenue in Q1 2021 included **$0.8 million** from a regulatory milestone achieved by Sanofi (Secura's sublicensee) and **$0.1 million** from expected royalties under the Secura APA[146](index=146&type=chunk) - Transition services revenue of **$0.2 million** was recognized in Q1 2021 for support functions provided to Secura[147](index=147&type=chunk) [Operating Expenses](index=42&type=section&id=Operating%20Expenses) Total operating expenses decreased by 52% from $31.4 million in Q1 2020 to $15.1 million in Q1 2021, driven by the elimination of COPIKTRA-related costs and reduced SG&A expenses Operating Expenses Comparison (in thousands) | Expense Type | Q1 2021 | Q1 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of sales - product | $— | $495 | $(495) | (100)% | | Cost of sales - intangible amortization | $— | $392 | $(392) | (100)% | | Research and development | $8,896 | $10,924 | $(2,028) | (19)% | | Selling, general and administrative | $6,218 | $19,604 | $(13,386) | (68)% | | **Total operating expenses** | **$15,114** | **$31,415** | **$(16,301)** | **(52)%** | - Cost of sales for product and intangible amortization were **$0** in Q1 2021 due to the COPIKTRA license sale[148](index=148&type=chunk)[150](index=150&type=chunk) - R&D expense decreased by **$2.0 million**, primarily due to a **$3.0 million** license fee paid to Chugai in Q1 2020, partially offset by increased costs for VS-6766 and defactinib drug substance and IST expenses[151](index=151&type=chunk) - SG&A expense decreased by **$13.4 million**, mainly from reduced personnel-related costs (**$7.4 million**), consulting and professional fees (**$5.0 million**), and commercial activities costs (**$0.5 million**) following the COPIKTRA divestment[152](index=152&type=chunk) [Other Income (Expense)](index=44&type=section&id=Other%20Income%20(Expense)) Other expense of $1.3 million in Q1 2020 related to the 2019 Notes' make-whole interest provision ceased in Q1 2021, while interest income and expense both decreased Other Income (Expense) Comparison (in thousands) | Item | Q1 2021 | Q1 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Other expense | $— | $(1,313) | $1,313 | (100)% | | Interest income | $52 | $356 | $(304) | (85)% | | Interest expense | $(975) | $(10,674) | $9,699 | (91)% | - Other expense in Q1 2020 was due to the mark-to-market adjustment of the 2019 Notes' make-whole interest provision; this expense was **$0** in Q1 2021 as all 2019 Notes converted[153](index=153&type=chunk) - Interest income decreased by **$0.3 million** due to lower interest rates on investments[154](index=154&type=chunk) - Interest expense decreased by **$9.7 million** due to the conversion of 2019 Notes and repayment of the term loan facility[155](index=155&type=chunk) [Restructuring](index=44&type=section&id=Restructuring) In Q1 2020, the company recorded $1.8 million in restructuring expenses related to the February 2020 Restructuring, which involved eliminating 31 positions, with no charges incurred in Q1 2021 - In Q1 2020, **$1.8 million** was recorded for the February 2020 Restructuring, which included one-time termination benefits for **31 employee positions**[156](index=156&type=chunk) - No restructuring charges were incurred in Q1 2021[156](index=156&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=44&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity is primarily supported by equity offerings, debt financings, and upfront payments from license agreements, with $127.1 million in cash, cash equivalents, and investments as of March 31, 2021 [Sources of liquidity](index=44&type=section&id=Sources%20of%20liquidity) The company's operations are financed through equity offerings, debt, and upfront payments from license agreements, with future milestones and royalties from the Secura APA expected - Operations are financed primarily through public/private equity offerings, debt, and upfront payments from license/collaboration agreements[157](index=157&type=chunk) - Product revenue from COPIKTRA ceased after its license sale in September 2020; future funding will include milestones and royalties from the Secura APA[157](index=157&type=chunk) Liquidity Position (March 31, 2021) | Item | Amount | | :--- | :--- | | Cash, cash equivalents, and investments | $127.1 million | - Investments are primarily in U.S. Government money market funds, agency bonds, corporate bonds, and commercial paper[158](index=158&type=chunk) [Cash flows](index=46&type=section&id=Cash%20flows) Net cash used in operating activities decreased by $14.7 million in Q1 2021, while investing activities shifted to a net use of cash, and financing activities significantly decreased Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Operating activities | $(19,318) | $(34,003) | | Investing activities | $(12,372) | $32,050 | | Financing activities | $(578) | $93,421 | | **(Decrease) increase in cash, cash equivalents and restricted cash** | **$(32,268)** | **$91,468** | - The decrease in cash used in operating activities was primarily due to a decreased net loss and a net decrease in working capital components[161](index=161&type=chunk) - Investing activities in Q1 2021 primarily involved net purchases of investments (**$12.2 million**) and fixed assets (**$0.2 million**)[162](index=162&type=chunk) - Financing activities in Q1 2020 included **$93.9 million** in net proceeds from a common stock offering[163](index=163&type=chunk)[164](index=164&type=chunk) [License and collaboration agreements](index=50&type=section&id=License%20and%20collaboration%20agreements) The company's primary license agreement is the Secura APA, under which it sold the COPIKTRA license for an upfront payment and potential milestones/royalties, retaining 50% of future payments from sublicensees - The Secura APA involved the sale of the COPIKTRA license for an upfront payment of **$70.0 million**, regulatory milestones up to **$45.0 million**, sales milestones up to **$50.0 million**, and low double-digit royalties[181](index=181&type=chunk)[182](index=182&type=chunk) - Verastem is entitled to **50%** of all royalty, milestone, and sublicense revenue payments payable to Secura under existing license agreements with Sanofi, Yakult, and CSPC[182](index=182&type=chunk) - In Q1 2021, **$0.9 million** was recognized from the Secura APA, including a regulatory milestone from Sanofi and expected royalties[186](index=186&type=chunk) - The Chugai Agreement grants Verastem exclusive worldwide rights for VS-6766, with a **$3.0 million** non-refundable payment made in February 2020[187](index=187&type=chunk)[188](index=188&type=chunk)[191](index=191&type=chunk) [Funding requirements](index=52&type=section&id=Funding%20requirements) The company expects to incur significant expenses and operating losses for ongoing clinical trials and commercialization efforts, with existing cash projected to fund operations for at least the next twelve months - The company expects to incur significant expenses and operating losses due to ongoing and new clinical trials for VS-6766 and defactinib, intellectual property expansion, and commercialization efforts[192](index=192&type=chunk) - Existing cash resources are expected to fund obligations for at least the next twelve months[194](index=194&type=chunk) - Future capital requirements are dependent on factors such as clinical trial scope and results, regulatory review, commercialization costs, intellectual property maintenance, and the ability to secure collaborations[199](index=199&type=chunk) - Future funding is anticipated through equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements, which may involve dilution or restrictive covenants[195](index=195&type=chunk) [CONTRACTUAL OBLIGATIONS AND COMMITMENTS](index=54&type=section&id=CONTRACTUAL%20OBLIGATIONS%20AND%20COMMITMENTS) There have been no material changes to the company's contractual obligations and commitments from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to contractual obligations and commitments since the Annual Report on Form 10-K for the year ended December 31, 2020[196](index=196&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=54&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) The company did not have any off-balance sheet arrangements during the periods presented, nor does it currently have any, as defined under SEC rules - The company has no off-balance sheet arrangements[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risk primarily from changes in interest rates, affecting its $127.1 million in cash, cash equivalents, and investments, though the impact is not material due to the short-term, low-risk nature of investments - The company's primary market risk exposure is interest rate sensitivity, affecting its **$127.1 million** in cash, cash equivalents, and investments[198](index=198&type=chunk) - Due to the short-term duration and low-risk profile of investments, a **100 basis point** change in interest rates would not materially affect the fair market value of the portfolio[201](index=201&type=chunk) - The fixed-rate 2018 and 2020 Convertible Senior Notes have minimal exposure to changes in interest rates[203](index=203&type=chunk) - Foreign currency fluctuations from global CRO and contract manufacturer agreements are currently immaterial[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2021[204](index=204&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2021[205](index=205&type=chunk) [PART II—OTHER INFORMATION](index=57&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This part contains other information not included in the financial statements, such as legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - There are no legal proceedings to report[208](index=208&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - No material changes to risk factors from the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[209](index=209&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no recent unregistered sales of equity securities and no purchases of its own equity securities during the period - No recent unregistered sales of equity securities[210](index=210&type=chunk) - No purchases of equity securities were made by the company during the reporting period[211](index=211&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There are no defaults upon senior securities to report[212](index=212&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - There are no mine safety disclosures to report[213](index=213&type=chunk) [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) The company reported no other information - There is no other information to report[214](index=214&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of this Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Chief Financial Officer, a press release, and Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2)[218](index=218&type=chunk) - A press release issued by Verastem, Inc. on May 11, 2021, is filed as Exhibit 99.1[218](index=218&type=chunk) - Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE) and the cover page in Inline XBRL (104) are included[218](index=218&type=chunk) [SIGNATURES](index=59&type=section&id=SIGNATURES) The report is duly signed on behalf of Verastem, Inc. by its Chief Executive Officer, Brian M. Stuglik, and Chief Business and Financial Officer, Robert Gagnon, on May 11, 2021 - The report is signed by Brian M. Stuglik, Chief Executive Officer, and Robert Gagnon, Chief Business and Financial Officer, on May 11, 2021[223](index=223&type=chunk)

Financial Performance - Total revenue for 2020 was $88.5 million, a significant increase from $17.5 million in 2019, primarily driven by the sale of the COPIKTRA license and related assets[358]. - Product revenue, net for 2020 was $15.2 million, compared to $12.3 million in 2019, reflecting growth in sales[358]. - The company reported a net loss of $67.7 million for 2020, an improvement from a net loss of $149.2 million in 2019[365]. - Total operating expenses decreased to $137.9 million in 2020 from $149.8 million in 2019, reflecting cost-saving measures and reduced headcount[430]. - Selling, general and administrative expenses decreased significantly to $62.8 million in 2020 from $101.2 million in 2019, driven by reduced personnel costs and consulting fees[440]. - Cash used in operating activities decreased to $33.5 million in 2020 from $138.5 million in 2019, primarily due to a decrease in net loss and improved working capital[454]. Research and Development - Research and development expenses for 2020 were $41.4 million, slightly decreased from $45.8 million in 2019, indicating a focus on cost management[358]. - Total research and development expenses for 2020 were $41.376 million, a decrease of 9.8% from $45.778 million in 2019[379]. - COPIKTRA expenses were $13.454 million in 2020, down 47.4% from $25.518 million in 2019[379]. - Defactinib/VS-6766 expenses increased significantly to $12.073 million in 2020 from $1.823 million in 2019[379]. - The company anticipates that research and development expenses may increase significantly in future periods due to costlier development activities[379]. - The company expects to incur significant expenses and operating losses in the foreseeable future due to continued research and development efforts[366]. Cash and Investments - As of December 31, 2020, the company had cash, cash equivalents, and investments totaling $147.2 million, sufficient to fund operations for the next 12 months[365]. - As of December 31, 2020, the company had $147.5 million in cash, cash equivalents, restricted cash, and investments[452]. - The company anticipates that its existing cash resources will be sufficient to fund its obligations for at least the next twelve months[475]. - As of December 31, 2020, the company had cash, cash equivalents, restricted cash, and investments totaling $147.5 million, up from $111.3 million as of December 31, 2019[487]. Licensing and Revenue Recognition - The company recognizes revenue when control of the product is obtained, with COPIKTRA sales recorded at wholesale acquisition costs[392][393]. - Variable consideration for COPIKTRA sales includes trade discounts, chargebacks, and government rebates, impacting net revenue[394][398]. - The company engages in collaboration and licensing arrangements for research and development, which include upfront payments and milestone payments[404]. - The company recognizes revenue from non-refundable upfront fees for licenses when the license is transferred to the customer and they can benefit from it[406]. - Milestone payments are included in the transaction price only if it is probable that significant revenue reversal will not occur, with adjustments made at each reporting period[409]. - The company has not yet recognized any royalty revenue from licensing arrangements, which include sales-based royalties[410]. Debt and Obligations - The company has a total of $28.3 million in aggregate principal amount outstanding for the 2018 and 2020 Notes as of December 31, 2020[474]. - The company has contractual obligations totaling $4.7 million, including operating lease obligations and the 2020 Notes[478]. - The company issued $150.0 million in 5.00% Convertible Senior Notes due 2048, with net proceeds of approximately $145.3 million[463]. - The initial conversion price for the 2020 Notes is approximately $3.25 per share, representing a 153.9% premium to the stock price of $1.28 on November 5, 2020[469]. Market Risk and Exposure - The company’s primary exposure to market risk is interest rate sensitivity, with an immediate 100 basis point change in interest rates expected to have no material effect on the fair market value of its investment portfolio due to its short-term duration and low risk profile[487]. - The company contracts with CROs and contract manufacturers globally, which may expose it to fluctuations in foreign currency rates; however, as of December 31, 2020, an immaterial amount of total liabilities was denominated in currencies other than the functional currency[488]. - The 2018 Notes and 2020 Notes bear interest at a fixed rate, resulting in minimal exposure to changes in interest rates, although future credit rating improvements could lead to higher relative interest rates[489].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-35403 Verastem, Inc. (Exact name of registrant as specified in its charter) Delaware (State or other juri ...