Verastem Oncology and Yakult Sign Exclusive Licensing Agreement

Verastem Oncology (NASDAQ:VSTM) is set to receive an upfront payment of US$10 million–and may be eligible to receive up to $90 million in future milestone payments plus royalties for the development and commercialization of its Duvelisib in Japan.

The payments will be from Verastem and Yakult Honsha (TYO:2267) as stated in an announcement on  Tuesday (June 5). According to the press release, the companies signed an exclusive license agreement for the development and commercialization of Verastem’s Duvelisib for all oncology indications in Japan.

The drug is a first-in-class oral dual inhibitor of PI3K-delta and PI3k-gamma.

“In Japan, current therapies to treat CLL/SLL and FL are extremely limited and duvelisib has robust clinical data supporting its efficacy and safety in both indications, which we can build upon,” Masanori Ito, head of pharmaceutical business division/managing executive officer at Yakult said in the press release.

Verastem’s CEO Robert Forrester shared similar sentiments in the announcement which will validate “achievement for both duvelisib and Verastem Oncology.”

The new drug application for Verastem’s Duvelisib is currently under review by the US Food and Drug Administration (FDA) which is applying for full approval to treat relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) and accelerated approval to treat relapsed or refractory follicular lymphoma (FL). The FDA granted the application priority review in April 2018.

In addition to what Yakult payed Verastem for the exclusive agreement, Yakult will fund certain global development costs on a pro-rata basis. The exclusive agreement means Verastem will still own all rights to develop the drug outside of Japan but won’t be able make more licensing agreements there—creating an equally beneficial agreement for both companies involved.

Duvelisib inhibitor agents PI3K-delta and PI3k-gamma are two enzymes known to help support the growth and survival of malignant B-cells and T-cells thought to play a role in the formation and maintenance of the supportive tumor microenvironment.

The drug has been in the clinic for late and mid-stage extension trials, including DUO a Phase 3 and Phase 2 monotherapy studies for patients with with relapsed or refractory chronic lymphocytic leukemia/small lymphocytic lymphoma, and refractory indolent non-Hodgkin lymphoma.

Verastem is a biopharmaceutical company developing and commercializing medicine for cancer patients, as the name suggests. While Duvelisib is the most developed drug candidate in the company’s pipeline, it is working on a variety of other indications for the drug as well as indications for defactinib.

The Japanese-based Yakult has a broader focus on developing and marketing pharmaceuticals, food, cosmetics and beverages, including fermented milk. On the pharmaceutical side of its business, Yakult has a large focus in the field of oncology with some of its anti-cancer therapies including Elplat and Campto.

Investor Takeaway

Since the announcement released Tuesday morning, Verastem’s share price increased 7.39 percent to $5.52 as of market close. Yakult’s share price increase 1.12 percent to ¥7,210 as of 3 p.m. GMT.

TipRanks showed one analyst issued a note to investors for Verastem Tuesday based off the announcement. Oppenheimer analyst Leah Cann assigned the company a “Buy” position with a $15.00 price target.

“The Defactinib data in pancreatic cancer presented at ASCO are early, but encouraging in this difficult to treat setting,” Cann said in the note. “In addition, the licensing deal for Duvelisib in Japan could provide upside to our outlook.”

As Cann mentioned, this licensing deal may provide an upside for the company. With the recent revenue boost, the company may funnel the money into different R&D channels of its pipeline. Investors can also look forward to hearing about Duvelisib’s new drug application come October.

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Securities Disclosure: I, Gabrielle Lakusta, hold no direct investment interest in any company mentioned in this article.