Editor's Note: This article was updated to include more information about the clinical trial of VS-6766 and Defactinib.
Shares of Verastem (VSTM -1.97%) -- a small-cap oncology-focused biotech -- were up by 10.9% as of 2:12 p.m. EDT on Monday. The company has not reported any news, though, so the reason behind that stock market rise is a bit of a mystery. However, that gain essentially recouped the stock's Friday decline.
Verastem's stock has been highly volatile all year, and not just because of the coronavirus-fueled market crash. On April 27, its shares plunged by more than 40% after data from a study failed to impress investors. Specifically, in a clinical trial investigating the efficacy of Verastem's combination of VS-6766 and Defactinib as a treatment for aggressive tumors, only one of the 10 patients treated for KRAS mutant non-small cell lung cancer (NSCLC) experienced a tumor reduction.
This result was especially disappointing since investors have high hopes for Verastem's attempts to find a treatment for "KRAS mutant advanced solid tumors," which, according to the company, "are notoriously difficult to treat and quite common across solid tumors." In other words, this market presents an exciting opportunity for Verastem, and while last week's data temporarily took the wind out of the company's sails, investors may still be hopeful that Verastem's pipeline will eventually yield a successful treatment for KRAS-mutated tumors.
The same clinical trial also investigated the efficacy of the combination in six patients with KRAS mutant low-grade serous ovarian cancer (LGSOC), of which four experienced a tumor reduction.
Whether Verastem is worth buying right now depends on your risk tolerance. The company currently has just one approved product on the market: Copiktra, a treatment for leukemia. During the fourth quarter, Copiktra recorded a measly $3.6 million in revenue. Given that, Verastem's future largely hinges on its pipeline. A lot could go wrong for the company's investigational drugs, however, including regulatory roadblocks or more negative results from clinical trials. And, in the almost seven years since it peaked above $17 a share, the stock now down almost 90%. With that backdrop in mind, only investors willing to take on some risk should consider investing in this biotech stock.