VSTM Overaction to Black Box Label Creates Buying Opportunity

Last Updated on January 15, 2019 by Sultan Beardsley

For months Verastem Oncology (VSTM) investors have been eagerly awaiting the FDA’s decision on it’s lead product Duvelisib; a PI3K-δ (delta) and PI3K-γ (gamma) inhibitor that was granted Orphan Drug Designation. In the phase 3 clinical trial (DUO) the drug performed impressively by significantly improving the clinical outcome for patients with Relapsed or Refractory Chronic Lymphocytic Leukemia and Small Lymphocytic Lymphoma. Patients in this class were at the end-of-the line. None of their prior treatments worked and, frankly speaking, they were facing imminent death.

In DUO Duvelisib was compared to ofatumumab, a product of Novartis Pharmaceuticals prescribed for the same indication. In the trial Duvelisib decreased the risk of patient fatality by a whopping 48%, regardless of the patient’s genomic profile.  The objective response rate (ORR) and reduction of lymph node burden derived from treatment with Duvelisib was significantly superior to ofatumumab (73.8% vs. 45.3%  and 85% vs. 16% respectively). That’s incredible. Anytime a therapy can offer increased responses rate and  bio marker reductions at those magnitudes is an applaudable medical achievement. Lastly, the two drugs had comparable safety profiles . So why the sudden drop in share price?

The Black Box Label

Serious adverse events observed in 33% of patients and the risk of sudden death prompted assignment by the FDA of a Black Box label for Duvelisib. It’s basically a warning that if you take the medication you can experience serious health reactions including death. Who on earth would take this? I’ll tell you who. Patients with Relapsed or Refractory Chronic Lymphocytic Leukemia and Small Lymphocytic Lymphoma . If they don’t, then they’re all but guaranteed to die. So the argument that medical practitioners would be hesitant to prescribe Duvelisib is preposterous. As noted in the companies press release yesterday, Duvelisib will immediately ready for sale. That means revenue should start rolling in soon. After all, the reason that Duvelisib was granted Orphan Drug Designation and Fast Track Designation was because it fulfills an unmet medical need patients are literally dying for.

More Targeted Therapies For NHL Underway

Defactinib is next up in VSTM’s pipeline. It inhibits the focal adhesion kinase protein (FAK) involved in cellular adhesion (stickiness). Whereas, Duvelisib is a first-in-class drug with the dual function of inhibiting both delta and gamma forms of the PI3 Kinase protein; a key regulator of cell growth in T-cell and B-cell cancers. Both processes, cellular adhesion (i.e. to other cells or the environment) and cell growth are essential for cancer proliferation and movement. The result: Patient fatality. Defactib is currently in phase 2b testing and has so far demonstrated promising results.

Lastly I want to highlight the extensive partnerships VSTM has with big pharma, and prestigious medical and academic institutions. These should not be overlooked. Relationships with companies like Merck (MRK) and Pfizer (PFE), and institutions Dana-Farber Cancer Institute, Washington University in St. Louis, and Cancer Research UK bolster VSTM’s capacity to conduct studies and leverage the acumen of world class medical investigators to develop elite targeted NHL therapies.  Additionally,  it speaks to the potential of VSTM as an oncology company and their products to be competitive alternatives to existing NHL treatments. Consequently, this raises the likelihood of a potential buyout down the road once the Duvelisib and Defactinib prove themselves clinically and fiscally.