Defactinib (VS-6063) - Verastem

The biotech that helped start the IPO craze has been among the first to feel the savage response of the market when a lead drug stumbles and falls.

The storm clouds began to build around Verastem's ($VSTM) cancer drug defactinib when Twitter got hold of some ugly safety and efficacy data related to non-small cell lung cancer. But when the biotech acknowledged a month later that the drug had failed a study for mesothelioma, the rout that followed triggered a meltdown in the company's share price.

The disaster forced Verastem, which was founded by Christoph Westphal, to lay off half its staff. But the loss of credibility has been much more damaging than any single miss in a clinical study.

It was Verastem's IPO back in 2012 that signaled the return of public offerings after a long and painful drought following the 2008 financial crisis. Over the next three years a tsunami of biotech IPOs would follow.

Verastem's painful reorganization, though, helps underscore that there are no sure bets in biotech. So perhaps it's fitting that the company that helped get the gold rush started was also among the first to feel the downturn as doubts about biopharma have crept back into the minds of generalist investors. For Westphal, who also set up Sirtris and sold it to GlaxoSmithKline ($GSK) for $720 million, regaining investors' trust will not be easy.

For more:
Westphal's Verastem concedes lead drug flopped in PhII mesothelioma study
Verastem shares crater on Twitter chatter around cancer data
Biotech vet Westphal to exit CEO post of cancer drug developer Verastem

Defactinib (VS-6063) - Verastem

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