Verastem, Inc. (NASDAQ:VSTM)

CAPS Rating: 5 out of 5

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Member Avatar acekeldog (99.84) Submitted: 2/3/2016 12:54:45 PM : Outperform Start Price: $1.09 VSTM Score: +4.41

This stock has a terrible chart, but has probably hit rock bottom. Cheers to everyone that bought at bottom and good luck.

VSTM Pumper

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Member Avatar zzlangerhans (99.78) Submitted: 1/15/2016 10:32:00 AM : Outperform Start Price: $1.29 VSTM Score: -11.17

I closed my prior futile green thumb on Verastem and immediately opened a new one, since in CAPS it pays to have a lower starting price if one is right long-term about a stock. If the stock doubles from here, I get an accuracy and 100 points, whereas if I just left the old green thumb open I'd still be hopelessly underwater on the pick and only reduce my deficit by 20 points. Of course, if I'm wrong and Verastem continues to drop, I'm just doubling down on my misery the way I did repeatedly with KaloBios.

That brings us to the question, how long can Verastem really go? The market cap today is 48M, and cash at the end of September was 120M. They burn about 12M per quarter, so figure actual cash is closer to 105M. There's no debt, and to the best of my knowledge the capital structure is clean without preferred stock or warrants. Therefore, the market cap is somewhat less than half the cash on hand.

The ridiculous imbalance here is somewhat ironic since one of the primary reasons I played with Verastem around 8 and got burned was that the enterprise value seemed so low at 200M, when it seemed like other bios were being spotted 500M+ just for answering the phone. Of course, the enterprise value is now -60M which shows how dangerous it can be to make arbitrary comparisons between biotech companies. The cheap ones are often cheap for a reason - no one with any real buying power wants to own them. Even when the stock is valued at cash or below, the argument is that the cash will only be there until it is wasted. If the company isn't willing to return the cash to shareholders, which they rarely do, it's worthless.

Of course, at a certain point the difference between market cap and cash will become ridiculous. At what point does that occur? Would it make sense for Verastem to be valued at 30M with 105M in cash? 20M? 5M? At what point does someone start accumulating the stock just to buy out the company and shut it down for the cash? Shkreli did it with KaloBios and only failed because his past misdeeds caught up with him. Even if no one buys a controlling interest in the company, Verastem still has an active pipeline. Even if defactinib is branded an albatross, can VS-4718 and VS-5584 be judged worthless despite the fact that they are only in phase I development? How much would it cost Verastem to inlicense another candidate to get their investor base excited again? Probably a relatively small chunk of their cash reserves.

I think Verastem still has a lot of options thanks to their cash, which also ensures that the company won't simply go bankrupt amid the current pessimistic mood in biotech. I added another 4000 shares at 1.33 today for a total of 10000 shares cost basis 2.01. My response to this crash is to average down on stocks trading far under cash with low burn rates and no debt. Besides Verastem, the group includes Biodel, Threshold, and OncoGenex. If the sector remains depressed for so long that cash erodes down to the market caps, then I'm probably done with my multiyear biotech experiment. Of course, I'd prefer to be on the leading edge of the rebound if and when it comes.

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Member Avatar PrototypeZ (21.41) Submitted: 1/6/2016 11:34:59 AM : Outperform Start Price: $10.22 VSTM Score: -79.35

Bio lemming pick zz

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Member Avatar oscillation (30.73) Submitted: 12/20/2015 2:48:48 AM : Outperform Start Price: $1.75 VSTM Score: -28.75

nev

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Member Avatar Haugurafpeningum (25.55) Submitted: 5/4/2015 7:07:17 AM : Outperform Start Price: $8.58 VSTM Score: -75.81

Insider Monkey. Improving OBV

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Member Avatar akamaidude (< 20) Submitted: 1/10/2014 10:09:15 PM : Outperform Start Price: $13.57 VSTM Score: -93.98

Promising technology and approach for cancer treatment and cure.

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Member Avatar rknapton (26.12) Submitted: 8/22/2013 5:22:16 PM : Underperform Start Price: $14.67 VSTM Score: +105.15

Short. No revenues… if gets some might change to neutral.

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Member Avatar cowman1 (< 20) Submitted: 1/24/2013 4:26:15 PM : Outperform Start Price: $10.21 VSTM Score: -114.33

USB analyst Matthew Roden thinks the company has a formular likely to prove crucial in the fight against many types of cancer.

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