Verastem(VSTM) - 2021 Q2 - Quarterly Report

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].