Verastem(VSTM) - 2019 Q4 - Annual Report

Financial Performance - Total revenue for the year ended December 31, 2019, was $17.5 million, a decrease of 34.5% from $26.7 million in 2018[424]. - The net loss for 2019 was $149.2 million, compared to a net loss of $72.4 million in 2018, indicating a significant increase in operational losses[424]. - Total operating expenses increased to $149.797 million in 2019, up from $121.501 million in 2018, representing a rise of 23.2%[492]. - The net loss for 2019 was $149.209 million, compared to a net loss of $72.434 million in 2018, indicating a worsening financial position[492]. - The company reported a net cash used in operating activities of $138.5 million in 2019, an increase from $74.5 million in 2018, largely due to higher selling and administrative expenses[517]. Revenue Breakdown - Product revenue, net for COPIKTRA was $12.3 million in 2019, compared to $1.7 million in 2018[424]. - License and collaboration revenue dropped to $5.117 million in 2019 from $25 million in 2018, reflecting a decline of 79.6%[492]. - Product revenue for the year ended December 31, 2019, was $12.3 million, a significant increase from $1.7 million in 2018, driven by greater market penetration of COPIKTRA[494]. - License and collaboration revenue decreased to $5.1 million in 2019 from $25.0 million in 2018, primarily due to the absence of large upfront payments received in the previous year[495]. Expenses - Research and development expenses increased to $45.8 million in 2019, up from $43.6 million in 2018, reflecting ongoing clinical trials and product development[424]. - Selling, general and administrative expenses rose significantly to $101.212 million in 2019 from $77.265 million in 2018, an increase of 31%[492]. - Costs of sales for products rose to $1.2 million in 2019 from $0.2 million in 2018, reflecting increased volume and associated costs for COPIKTRA[496]. - Research and development expenses were $45.778 million in 2019, slightly up from $43.648 million in 2018[492]. - Selling, general and administrative expenses rose to $101.2 million in 2019 from $77.3 million in 2018, driven by increased personnel costs and consulting fees related to commercial launch activities[498]. Cash and Investments - Cash, cash equivalents, and short-term investments totaled $111.3 million as of December 31, 2019, including $35.7 million of restricted cash[428]. - As of December 31, 2019, the company had $111.3 million in cash and short-term investments, including $35.7 million in restricted cash[515]. - Cash provided by investing activities in 2019 was $89.6 million, contrasting with cash used of $138.4 million in 2018, reflecting net maturities of investments[518]. Debt and Financing - Future financing may include collaboration agreements, equity offerings, or debt, but there is no guarantee of favorable terms[429]. - The company has borrowed a total of $35.0 million in term loans under the 2019 Term Loan Agreement, with a remaining borrowing capacity of $40.0 million[523]. - The 2019 Term Loan accrues interest at a floating rate, with a minimum of 9.75% and a maximum of 12.00%, and allows for interest-only payments until April 1, 2021[524]. - The company closed a registered direct public offering of $150.0 million aggregate principal amount of 5.00% Convertible Senior Notes due 2048, resulting in net proceeds of approximately $145.3 million[533]. - The company expects existing cash resources and revenue from COPIKTRA to be sufficient to fund obligations for at least the next twelve months[547]. Regulatory and Product Development - COPIKTRA was approved by the FDA on September 24, 2018, for the treatment of adult patients with relapsed or refractory CLL/SLL and FL[437]. - The company anticipates that research and development expenses may increase significantly as it undertakes larger clinical trials for existing and future product candidates[440]. - The company anticipates significant changes in costs and timelines for product candidates if regulatory authorities require additional clinical trials[442]. - The company plans to commercialize COPIKTRA and continue ongoing clinical trials for multiple product candidates[549]. Accounting Practices - Revenue is recognized when customers obtain control of products, with specific accounting practices outlined under ASC 606[450]. - Product revenue from COPIKTRA is recorded at wholesale acquisition costs, net of reserves for variable considerations such as discounts and rebates[452]. - The company provides invoice discounts and compensates distributors for services, which are recorded as reductions in revenue[454]. - Reserves for chargebacks and government rebates are established in the same period as revenue recognition, affecting product revenue and liabilities[456]. - The company evaluates milestone payments in collaboration agreements to determine their probability and impact on revenue recognition[466]. Tax and Operating Losses - As of December 31, 2019, the accumulated deficit reached $524.8 million, up from $375.6 million in 2018[428]. - The company has federal and state net operating loss carryforwards of $371.7 million and $392.3 million, respectively, available to reduce future taxable income[555]. - The company recorded a 100% valuation allowance against its net operating loss and tax credit carryforwards of $128.4 million, indicating uncertainty in realizing these tax benefits[555]. Interest Income and Expense - Interest income reflects earnings from cash and securities, while interest expense includes costs from term loans and notes[446]. - Interest income increased to $4.381 million in 2019 from $2.603 million in 2018, showing a growth of 68.3%[492]. - Interest expense rose sharply to $20.608 million in 2019 from $5.810 million in 2018, reflecting a significant increase in borrowing costs[492]. - Interest income increased to $4.4 million in 2019 from $2.6 million in 2018, attributed to higher investment cost basis and interest rates[502]. - Interest expense surged to $20.6 million in 2019 from $5.8 million in 2018, primarily due to the issuance of 2018 Notes and higher interest rates[503]. Other Considerations - The company has not recognized any royalty revenue from its licensing arrangements to date, indicating potential future revenue opportunities[468]. - The company has not recorded any off-balance sheet arrangements during the periods presented[552]. - The company is focused on expanding its intellectual property portfolio and may acquire or in-license additional products and technologies[549]. - The company may need to finance future capital requirements through equity offerings, debt financings, or collaborations, which could dilute existing stockholders' interests[550]. - The company is exposed to interest rate risk, with a potential 100 basis point increase in rates having an immaterial effect on the fair market value of its investment portfolio[560]. - The company has contractual obligations totaling $5.7 million in operating lease obligations as of December 31, 2019[551].