Verastem: Stem cell cancer speculation

Stem cells are the fundamental building blocks of humans. As undifferentiated cells, they have the ability to become part of a calf muscle, a neuron, cornea or anything else in the body.

Scientists have long believed that the flexibility of stem cells can be harnessed to cure intractable human diseases, such as Alzheimer's, Parkinson's or diabetes.

Unfortunately, stem cells are manifest in cancerous tumors as well. Cancer stem cells (CSC) play a role in metastasis, the spread of cancer from the original tumor site to other areas of the body, by breaking away and implanting themselves in other organs.

A small biotech company with a market cap just shy of $200 million, Verastem (VSTM) is working to develop drugs that target CSCs and can be administered in conjunction with a patient's chemotherapy regimen.

Verastem went public just over a year ago and currently has five compounds in various stages of development, three of which are extremely promising product candidates.

Two compounds focus on disrupting CSCs' production of focal adhesion kinase (FAK), a protein that regulates how cells stick to one another as well as how they spread.

CSCs, particularly those of highly malignant cancers, produce FAK at much higher rates and via different pathways than other cells, allowing the development of small molecule drugs that specifically target those cells.

Verastem's VS-6063 is on track to begin trials in treating mesothelioma; in a limited-scope, small-scale trial, VS-6030 showed signs of activity and a pivotal trial is expected to begin around midyear.

The compound also showed promise in treating ovarian cancer and recruitment is underway for a phase 1/2 trial. The company's VS-4718, which also focuses on FAK disruption, is slated to begin trials later this year.

VS-5584 is slated to begin phase 1 trials in the back half of the year, as a PI3K/mTor pathway inhibitor. In many cancers, that pathway is overactive, which allows cancer cells to proliferate unchecked.

None of these product candidates are cancer treatments in themselves; each is designed for administration in conjunction with other chemotherapies.

Significant testing remains before any of Verastem's products actually come to market, but they enjoy an advantage because they're focused on cancers that have shown stubborn resistance to conventional treatments.

With about $90 million in cash or easily convertible assets, Verastem is well positioned to fund itself through the clinical trials now on its docket.

However, if the company runs into trouble, Verastem has several licensing agreements in place with pharmaceutical companies such as Pfizer, as well as academic institutions such as Harvard University and the Massachusetts Institute of Technology.

All of these deep-pocketed institutions have financial incentive to ensure Verastem's clinical trials are brought to fruition.

While only appropriate for aggressive investors, Verastem's progress in cutting-edge cancer treatment rates it a buy under $13.