aibioVerastem sells $75.0 million of notes to Oberland Capital and repays Oxford loan
Tickers VSTM
The note purchase agreement allows up to $150.0 million of notes with interest capped at 9.75%. Verastem also sold 1,416,939 shares to Oberland funds at $5.2931 per share and received about $32.3 million in net proceeds from the notes after the Oxford payoff. Its year-end cash figure is unaudited and preliminary.
Key facts
- Company
- Verastem, Inc. (NASDAQ: VSTM)
- News type
- Debt Financing
- Primary source
- Verastem, Inc. Form 8-K filed January 13, 2025 (SEC EDGAR)
Verastem, Inc. (Nasdaq: VSTM) said on January 13, 2025 that it signed a Note Purchase Agreement with Oberland Capital Management LLC and funds it manages, and sold $75.0 million of notes at closing. It used the proceeds to repay its Oxford loan. The agreement lets the company sell up to $150.0 million of notes in total. The terms are in a Form 8-K filed the same day.
The notes
Verastem signed the agreement with RGCM SA LLC as purchaser agent, and with Oberland Capital Management LLC and certain funds it manages as purchasers. The company received net proceeds of approximately $32.3 million after repaying the balance of its Oxford obligations.
Two later sales are at the company's option. A second sale of $25.0 million principal may happen before December 31, 2025, upon FDA approval sufficient for the promotion and sale of avutometinib and defactinib for low-grade serous ovarian cancer. A third sale of up to $50.0 million may happen before December 31, 2026, if trailing six-month worldwide net sales of the two drugs reach at least $55.0 million. Both later sales depend on events the 8-K does not report as having happened. On December 30, 2024 the FDA accepted for review the company's New Drug Application under the accelerated approval pathway, for avutometinib with defactinib in recurrent low-grade serous ovarian cancer with a KRAS mutation. The application has Priority Review and a Prescription Drug User Fee Act action date of June 30, 2025; the FDA is not currently planning an advisory committee.
The terms
The notes bear interest at the greater of Term SOFR and 4.29%, plus 3.71%, with an overall cap of 9.75%. Interest is payable quarterly until the seventh anniversary of the closing date. Principal comes due in two equal instalments, on the sixth anniversary and at maturity. For the first eight quarters, the company may pay up to 50% of the interest in kind, which adds it to principal. After an Event of Default, the rate may rise by an additional 5.00%.
The purchasers also receive a revenue participation of 1.00% of the first $100.0 million of net sales of each included product in each calendar year, payable quarterly, from January 13, 2025 until the maturity date. The percentage rises pro rata with the second and third sales, to a maximum of 2.00% once $150 million of notes has been bought.
Verastem may redeem the notes early at its option. The repayment amount is 135% of principal for a redemption before the second anniversary on a change of control, otherwise 175% before the third anniversary and 195% after it, less certain cash payments already made. The purchasers may demand redemption after a change of control or an Event of Default.
The agreement contains no financial covenants. It does contain customary limits on asset sales, mergers, new debt, liens, dividends and stock repurchases. The notes are secured by a security interest in substantially all of the company's and its subsidiaries' assets, including intellectual property for avutometinib and defactinib.
The stock purchase and the Oxford payoff
On the same day, Verastem signed a Stock Purchase Agreement with the Oberland funds and their affiliates. The investors bought 1,416,939 shares at $5.2931 per share, a price based on the trailing 30-trading-day volume-weighted average price. They may take part in equity offerings of up to $2.5 million for three years. Verastem must file a resale registration statement and have it effective no later than May 15, 2025.
The company will terminate its loan and security agreement dated March 25, 2022 with Oxford Capital, LLC and Oxford Finance Credit Fund III LP, and repay about $42.7 million. That payoff includes a fee of 5.0% of the original principal, due at prepayment or maturity, plus certain prepayment fees.
Cash and what the notes cost
The 8-K gives preliminary, unaudited cash, cash equivalents and short-term investments of about $88.8 million as of December 31, 2024. The filing says the figure is an unaudited, preliminary estimate and that undue reliance should not be placed on it.
The revenue participation runs until the maturity date, so the company pays a share of product sales on top of interest. The 8-K names no banks, placement agent or law firms.