Shares of Verastem (NASDAQ: VSTM), a biopharmaceutical company developing new cancer treatments, slid 34.1% in December, according to data from S&P Global Market Intelligence. The FDA approved the company's first drug in September, but nervous investors sold their shares anyway.
In December, the Nasdaq Biotechnology index fell 11.2%, and the industry's smallest members suffered the most. The index has since recovered, but Verastem shares are still 20% lower than they were at the beginning of December because investors are justifiably concerned about the company's first drug launch.
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In September, the FDA approved Verastem's Copiktra for the treatment of leukemia and lymphoma patients following two failed attempts with other options. The pivotal study that supported the approval enrolled patients who had received just one prior therapy, but the observed benefit-to-risk ratio will limit the drug's available patient population.
At recent prices, Verastem sports a tiny $127 million enterprise value that might tempt some bargain shoppers to take a chance. A look at the uphill battle ahead of Verastem, though, makes the odds of success look extremely slim.
Copkitra is one of several PI3K inhibitors, and the first has been a total flop. Gilead Sciences (NASDAQ: GILD) has plenty of resources to market a new cancer drug, but it still can't get Zydelig off the ground despite results that show adding it to Rituxan reduced the risk of disease progression by 82% compared to Rituxan alone. Despite launching in 2014, Zydelig sales fell during the first nine months of 2018 to just $92 million.
Verastem licensed Copkitra from a smaller company that remains entitled to around 10% of the drug's net sales. That means little Verastem needs its PI3K inhibitor to outperform Gilead's by a mile just to break even. That simply doesn't seem like a risk worth taking.
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