May 23, 2012
The Boston Globe
After coup, Verastem navigates choppy waters
CAMBRIDGE — Two-year-old Verastem Inc., which raised $55 million in an initial public offering in late January, was one of the first biotechnology start-ups in years to take its shares public before its drugs had entered clinical trials, a coup in an era of skeptical investors.
Four months later, as executives on Tuesday remotely rang the opening bell on the Nasdaq exchange from their research lab in Cambridge, the company’s shares were buffeted by the volatile stock market as Verastem adjusted to life as a newly public company.
They closed the day at $9.58, down 4.2 percent from Monday’s close and 21.7 percent from their peak in March.
But company officials prefer to focus on the benefits of their IPO, which has given them access to the capital that can bankroll their novel approach to fighting cancer.
Verastem will initially target breast cancer as it develops drugs. It’s facing turbulent markets but believes its initial public offering will give it better access to capital.
“Most of the biotech companies don’t have that luxury,” said chief operating officer Robert Forrester. “We think we can be fleet of foot.”
Unlike conventional cancer therapies that attack solid tumors, the drugs Verastem is working to develop would destroy the cancer stem cells that survive and regenerate tumors after cancer nonstem cells are shrunk.
The company will initially target breast cancer, but scientists think their approach can be applied to lung, colon, prostate, and other cancers.
Verastem plans to start clinical trials on its first two drug candidates in the next 12 months, though it will be four years before they would be available under a best-case scenario.
“In a sense, we’re just getting started,” Verastem cofounder Robert Weinberg, who chairs the company’s scientific advisory board, said Tuesday. “We have a way of generating large pure populations of cancer stem cells [for research]. And we have a game plan that will let us identify anticancer stem cell agents.”
The ultimate goal is to provide patients with a cocktail containing two drugs: one attacking cancer nonstem cells and the other targeting the stem cells.
A number of other companies, ranging from start-ups like OncoMed Pharmaceuticals Inc. in Redwood City, Calif., to drug giants such as GlaxoSmithKline in Britain, are also targeting tumor-initiating cells. But big-block institutions, including the Boston-based mutual fund companies Fidelity Investments and Putnam Investments, have put money into Verastem at a relatively early stage, partly because of its star roster of scientists and entrepreneurs.
In addition to Weinberg, a biology professor at the Massachusetts Institute of Technology and founding member of the Whitehead Institute for Biomedical Research, the company’s scientific board includes Eric Lander, founding director of the Broad Institute.
Verastem’s chairman and chief executive is serial biotechnology entrepreneur Christoph Westphal, a partner at the venture capital firm Longwood Founders Fund.
“The people involved in Verastem have really been on the leading edge of understanding cancer biology for a long time,” said consultant Jonathan Gertler, senior partner at Back Bay Life Science Advisors in Boston. “This company has a unique profile in terms of the scientific legacy of the people involved.”
But like other companies that have gone public in the recent turbulent stock market environment, notably Facebook Inc., whose executives rang the Nasdaq bell last Friday on their first day of trading, Verastem will have to navigate choppy waters.
The company’s shares were priced at $10 in January, started trading slightly higher, peaked at $12.24 in March, and fell back to $10 before Tuesday’s trading session.
Just keeping its shares relatively steady in this market environment amounts to a vote of confidence from investors, chief operating officer Forrester suggested.
Still, the company is keeping its payroll small until its drug candidates get closer to market. It currently has 21 employees at its headquarters and research lab outside Kendall Square and works with several dozen contractors, consultants, and informal collaborators globally.
Even with its novel approach and its ability to raise money from the public markets, Verastem, like all other companies developing cancer treatments, faces formidable scientific hurdles, its leaders acknowledged.
“This is a business where the probability of success is not high,” Forrester said. “We’re going to try to change that by being smart about the drug-development process.”