Verastem Inc (NASDAQ: VSTM) Is Today's Biotech Focus

Verastem Inc (NASDAQ: VSTM), the biopharmaceutical company developing drugs to treat cancer, was recently initiated with outperform rating and a target price of $6 by Oppenheimer. If Oppenheimer is correct, then the new price represents an upside of more than 260%. The market celebrated the new rating and shares rose by 13.51%. We took a closer look and found out that it is heavily undervalued, holds tons of cash in the balance sheet and is currently delivering very good news. In this article, we will tell you more. Have a look at the recent volatility in the share price:SourceBusinessVerastem, Inc. has two drug candidates: duvelisib and defactinib (VS-6063). These products use a multi-faceted approach to treat the illness when it appears in blood or in organ systems. More specifically, the company focuses its research on the treatment of leukemia, lymphoma, lung cancer, ovarian cancer, mesothelioma, and pancreatic cancer.Duvelisib is in Phase 3 after it completed the trial of Phase 2 with 129 patients. Additionally, Defactinib is in Phase 1b and is being evaluated in combination with Merck & Co.’s PD-1 inhibitor pembrolizumab and gemcitabine in patients with advanced pancreatic cancer. There is also a Phase 1/2 trial of this drug, in which the company is working with Pfizer Inc. (Pfizer) and Merck KGaA. In addition to these two products, the company has other more earlier-stage programs that have passed preliminary clinical testing.The defactinib candidate (VS-6063) is still a candidate, but it seems that the company has the product on hold and prefers to focus on the other one. We could not agree more with this decision, since the trial of defactinib was responsible for the collapse of the stock in September 2015 after the company decided to stop trying the product with patients. The other product seems much more promising. This is the main reason that traders and investment managers, such as Oppenheimer, are raising their target prices for the company's shares.DuvelisibVerastem, Inc. acquired the rights to commercialize duvelisib on November 2, 2016 for a total amount of $28 million in milestones. Robert Forrester, President and Chief Executive Officer of Verastem, said the following regarding the acquisition:

"Duvelisib is a clinically validated, late-stage product candidate with a proven mechanism of action. This transaction has an attractive risk/reward profile given the modest financial investment prior to obtaining topline data from the DUO study, currently anticipated in the first half of 2017, as well as the potential applications for a variety of other lymphoid malignancies" Source

We believe that the release of the data in the first half of 2017 will create a large amount of volatility in the share price. Investing in this company is what savvy traders would call an event driven investment: If the study works well, the share return massive returns to investors. But, if it does not, the shareholders may lose some money.The symmetry of the investment is very interesting here, since at the moment the company holds tons of cash in the balance sheet, and the shares are trading close to its net asset value per share. Thus, we do not expect that the share price could decrease a lot after the Phase 3 study. We will tell you more about the company's financial figures now.Balance SheetLet us note the following figures so that we can discuss them later:

• Market Cap: $77.68 million
• Enterprise Value: -$14.68 million
• Long term debt: Nothing
• Total cash on the balance sheet: $80.90 million

What did you notice? Yes, the company is so cash rich that the enterprise value is negative. Even if the duvelisib Phase 3 does not work, the company will be able to try other products. The total outstanding shares is close to 37 million, which means that the total cash per share is $2.19.The share price is $2.10 as of April 17 ,2017. What does it mean? It means that the company can be liquidated right now and shareholders will obtain some return getting all the cash inside the company. So, to sum up, buying shares of this company means buying cash and the possibility of a bump in the share price since in the middle of 2017, duvelisib could pass the Phase 3.ConclusionVerastem has been identified by many investors as a company with outstanding potential. We assessed the company's catalysts as well as its balance sheet and we believe so as well. The Phase 3 of Duvelisib in the middle of 2017 may make the share price increase dramatically. Conversely, if this trial is not positive, the company holds tons of cash in the balance sheet and shareholders are protected on the downside. This is a situation that savvy traders call "heads, I win! Tails, I don't lose that much", since the symmetry of the investment is not perfect. To sum up, make your own research as always to check whether you arrive to our conclusions, but this seems like a buy.We will be updating our subscribers as soon as we know more. For the latest updates on VSTM, sign up below!Disclosure: We have no position in VSTM and have not been compensated for this article.