Verastem Oncology shares rocket up further in pre-market trading after it signs new deal with leading Chinese pharmaceutical company

Shares of Verastem Inc (NASDAQ:VSTM) are still soaring in Wednesday’s pre-market session on the back of news that the cancer specialist had signed an exclusive license agreement with CSPC Pharmaceutical Group Limited (HKG:1093), a leading pharmaceutical company in China.

The companies announced their entry into an exclusive licensing agreement for CSPC to develop and commercialize Copiktra, which is also known as duvelisib, to fight chronic lymphocytic leukemia, follicular lymphoma as well small lymphocytic lymphoma, for the treatment of all oncology indications in China.

In the wake of the news, Oppenheimer analyst Leah Rush Cann, who has an Outperform rating and a $16 price target on the stock, made the case that the licensing deal could provide an upside to Verastem’s outlook, depending on the timing of a $15mln upfront payment from CSPC as well as additional milestones.   

“This agreement with Verastem Oncology brings to our pipeline an overseas approved innovative oncology drug with the potential to help Chinese patients battling cancer, including some high unmet need hematologic malignancies,” said Cai Dongchen, Chairman of CSPC.

“Our long-standing development and commercial experience in the Chinese pharmaceutical market, together with Verastem Oncology’s expertise with Copiktra, will ensure the timely and efficient development of this exciting therapy.”

Verastem Oncology crashed Tuesday, down as much as 21% on more than four times the stock’s normal trading volume today. But the stock has since rebounded, rising as much as 11% to $7.95 before Wednesday’s opening bell.

Earlier, the company announced it had won its first approval from US regulators for its drug to treat three forms of blood cancer. The US Food and Drug Administration has given the green light for the drug Copiktra to fight relapsed cases of chronic lymphocytic leukemia, follicular lymphoma as well as small lymphocytic lymphoma.

READ: Verastem Oncology shares jump after winning FDA approval for blood cancer drug

Under the terms of the agreement, Verastem Oncology shall receive an upfront payment of US$15 million. Verastem Oncology is also entitled to receive additional development milestone payments of US$30 million.

Oppenheimer’s Leah Rush Cann expects Verastem to commercialize Copiktra for chronic lymphocytic leukemia next year and estimates that the Needham, Massachusetts-based biotech’s product revenue will jump to $401.1 million in 2022.

“We expect Verastem will launch its first product, Copiktra (duvelisib) in the next two years and that operating losses will continue until a few years after duvelisib has launched,” Rush Cann wrote in a note to investors.

“We estimate Verastem is capitalized to fund its programs for the estimated launch of duvelisib in 2019,” she added.

CSPC will receive exclusive rights to develop and commercialize Copiktra and hold the marketing authorization and product license for Copiktra in China. CSPC will have the right to collaborate with Verastem Oncology on certain global development and clinical trial activities and will share pro-rata in the cost.

“We are delighted to be working with CSPC, a respected leader in developing, manufacturing and commercializing pharmaceuticals in China,” said Robert Forrester, president and chief executive officer of Verastem.

“CSPC is a constituent stock of the Hang Seng Index and is recognized as one of the most valuable brands in China. We believe this partnership underscores the global potential of Copiktra and complements the growing list of strategic partners focused on bringing Copiktra to patients worldwide. As we execute the launch of Copiktra in the US, we will work collaboratively in parallel with CSPC to rapidly advance Copiktra through the hospitals in China and ultimately to cancer patients in need.

– Updated with comments from Oppenheimer analyst –

Story by ProactiveInvestors