Why Verastem Stock Broke Down Today

What happened

Shares of the small-cap oncology specialist Verastem (NASDAQ: VSTM) fell by as much as 19.1% on nearly double the average daily volume in early morning trading today. Verastem's shares have since recovered to some degree but remain down by 6.2% as of 1:08 p.m. EDT.

So what

The oncology company's shares are getting trounced today in response to its disappointing fourth-quarter earnings report released after the bell yesterday. Most critically, Verastem's newly approved leukemia and lymphoma drug Copiktra badly missed consensus revenue estimates for the three-month period.

Specifically, the company reported that Copiktra sales came in at $1.2 million for the fourth quarter. Wall Street, on the other hand, was expecting a much higher figure of around $2.9 million, according to Factset Consensus.

Now what

On the bright side, this latest drop might represent an attractive entry point for bargain hunters for two reasons. First off, Verstem's shares are now being valued at approximately $24 million less than the company's current cash position. That's unusual, even for a pre-revenue biotech, suggesting that Verastem's shares might be near a bottom. Secondly, Copiktra's sales are projected to pick up steam from here on out, perhaps making this beaten-down biotech stock a great pick at these levels.

The counterpoint to this argument is that Copiktra's commercial launch is already underwater from a momentum standpoint, and it belongs to a class of drugs that simply haven't performed well in the marketplace. As such, investors may want to strongly consider both sides of the argument before taking a flier on this early commercial-stage biotech.

10 stocks we like better than VerastemWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Verastem wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.