Shares of Verastem Inc. plummeted 67.4 percent Monday after the Cambridge biotech reported that its lead drug candidate failed to help patients suffering from a rare form of lung cancer.
Verastem, which helped propel the long-running boom in initial public offerings of biotech companies when it went public in early 2012, said it had stopped enrolling patients with malignant pleural mesothelioma — a type of cancer caused by exposure to asbestos — in its most advanced clinical study. That study, if successful, was widely expected to lead to a new-drug application.
The company said results from the trial so far revealed that its experimental compound, VS-6063, did not show “a sufficient level of efficacy” to continue the study.
Its stock tumbled $3.82 a share to $1.85 on the Nasdaq stock exchange, well off the 52-week high of $12.35 it set in March.
“It’s unfortunately a major setback to the company,” said Verastem’s chief executive, Robert Forrester. “But we remain committed to therapies for cancer stem cells. While this is disappointing, we still remain passionate about our mission to change the way cancer is treated.”
Verastem was founded in 2010 by entrepreneur and investor Christoph Westphal, a partner at the Boston venture capital firm Longwood Founders Fund, and Robert Weinberg, a biology professor at the Massachusetts Institute of Technology and founding member of the Whitehead Institute for Biomedical Research. Its goal was to develop combination therapies to kill tumor-regenerating stem cells that survive after cancer cells are shrunk by conventional therapies.
When it raised $55 million in a high-profile initial public offering in January 2012, Verastem became one of the first biotechs since the late 1990s to take its shares public before any of its drugs had entered clinical trials. That helped usher in an era in which more than 100 biopharma start-ups around the country became public companies over the past three years.
Verastem’s reversal was the second this month for a Boston-area biotech, underscoring the difficulty of bringing breakthrough treatments to market. In mid-September, Forum Pharmaceuticals Inc., of Waltham, said it had ended late-stage trials of a potential drug to treat Alzheimer’s disease due to gastrointestinal side effects.
Forrester said Verastem is moving forward with earlier-stage clinical studies of VS-6063 for other types of cancers and with other cancer drug candidates.
But investors reacted quickly and negatively to the news that the Cambridge company had abandoned its most advanced trial.
“The trial’s failure is a severe blow to Verastem,” Eric Criscuolo, a life sciences research analyst for the investment firm Mizuho Securities USA Inc., wrote in a note to investors after downgrading his recommendation on Verastem’s shares from “buy” to “neutral.” “Focus must now shift to two early stage pipeline compounds, but confidence is severely wounded.”
Verastem has more than 40 employees at its headquarters outside of Kendall Square. Forrester said the company has “no current plans” to reduce its staff in response to the failed trial. He said Verastem outsources much of its clinical development, making it easier to adjust in the face of setbacks.
“We recognize that biotech drug development is tough,” he said.