Cambridge, MA-based Verastem has big names and big science on its side, which a lot of startups have, but now it’s doing something quite unconventional for a company that’s just 15 months old—it’s trying to go public.
Verastem, the company led by former Sirtris Pharmaceuticals CEO Christoph Westphal and founded on science from MIT luminaries Bob Weinberg and Eric Lander, most recently made news in July when it raised $32 million in venture capital. But today it looked to raise even more more, filing a prospectus for an initial public offering to raise as much as $50 million. The proposed deal is being underwritten by UBS, Leerink Swann, Lazard Capital Markets, Oppenheimer & Co., and Rodman & Renshaw.
Unlike most biotech companies seeking to go public, Verastem doesn’t have any drugs yet in clinical trials, which are easier for public investors to evaluate. Instead, the company’s IPO prospectus says it has drug discovery technology that seeks “to create a stable population of cancer stem cells to screen for and identify small molecule compounds that target cancer stem cells.” These cancer stem cells, sometimes called tumor-initiating cells, are thought to be one of the reasons why cancers often develop resistance to existing therapies and enable cancer cells to spread.
Scientists have long struggled to isolate enough of these elusive cells in the lab, and have found it difficult to keep them stable for experiments, and there has been great debate in academia about their ultimate value to cancer treatment. Verastem says it will seek to prove its concept with a lead drug known as VS-507, which targets breast cancer stem cells. The drug is still in preclinical studies, Verastem says.
What Verastem lacks in clinical proof, it makes up for with scientific and drug development experience. The company’s scientific advisory board includes George Daley of Children’s Hospital Boston; Nobel laureate Phil Sharp of MIT; Jose Baselga of Massachusetts General Hospital; Roger Tung, the CEO of Concert Pharmaceuticals; and Julian Adams, the president of Infinity Pharmaceuticals. Former Genzyme CEO Henri Termeer is on the board of directors.
Verastem has raised about $48 million in a pair of venture financings since it was founded in August 2010, and had burned through about $8.5 million of its cash through the end of September, according to the prospectus.
Several venture investors stand to quickly get some liquidity in their ownership stakes if Verastem can entice public investors to bite on an IPO. The biggest holders in Verastem, according to the filing, are Longwood Founders Fund, with a 15.5 percent stake; CHP of Princeton, NJ with 13.5 percent; MPM Bioventures with 13.2 percent; Bessemer Venture Partners with 12.9 percent; Eastern Capital Limited with 7.8 percent; and Advanced Technology Ventures with 5.1 percent. Westphal, 43, personally has 1.76 million shares of common stock in his name, or about a 3.4 percent ownership stake, according to the filing.
Verastem isn’t the only company going after cancer stem cells. Redwood City, CA-based OncoMed Pharmaceuticals has partnerships to develop drugs that go after cancer stem cells with Bayer and GlaxoSmithKline. The Verastem IPO filing also lists divisions of Astellas Pharma, Sanofi, and Glaxo as competitors.
