Verastem Oncology
Annual Report 2016

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K(Mark One) ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from to Commission file number 001-35403Verastem, Inc.(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction ofincorporation or organization)27-3269467(I.R.S. EmployerIdentification No.)117 Kendrick Street, Suite 500Needham, Massachusetts(Address of principal executive offices)02494(Zip Code)Registrant’s telephone number, including area code: (781) 292-4200Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon Stock, $0.0001 par valueNASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. ☒ Yes ☐ NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). ☒ Yes ☐ NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer ☐Accelerated filer ☐Non‑accelerated filer ☐(Do not check if asmaller reporting company)Smaller reporting company ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ NoAggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2016 was $47,609,884.The number of shares outstanding of the registrant’s common stock as of March 15, 2017 was 36,992,418. Table of ContentsTABLE OF CONTENTSPART IItem 1. Business 4Item 1A. Risk Factors 36Item 1B. Unresolved Staff Comments 63Item 2. Properties 63Item 3. Legal Proceedings 63Item 4. Mine Safety Disclosures 63PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of EquitySecurities 64Item 6. Selected Financial Data 66Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 67Item 7A. Quantitative and Qualitative Disclosures About Market Risk 79Item 8. Consolidated Financial Statements and Supplementary Data 80Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 80Item 9A. Controls and Procedures 80Item 9B. Other Information 81PART III Item 10. Directors, Executive Officers and Corporate Governance 82Item 11. Executive Compensation 85Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 92Item 13. Certain Relationships and Related Transactions, and Director Independence 94Item 14. Principal Accountant Fees and Services 96PART IV Item 15. Exhibits and Financial Statement Schedules 97Item 16. Form 10-K Summary 97SIGNATURES 98 2 Table of ContentsFORWARD‑LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements that involve substantial risks anduncertainties. All statements, other than statements related to present facts or current conditions or historical facts,contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, futurefinancial position, future revenues, projected costs, prospects, plans and objectives of management, are forward lookingstatements. Such statements relate to, among other things, the development of our product candidates, includingduvelisib, defactinib (VS-6063), VS-4718 and VS-5584, and our FAK, PI3K, and mTOR programs generally, the timelinefor clinical development and regulatory approval of our product candidates, the expected timing for the reporting ofdata from on-going trials, the structure of our planned or pending clinical trials, additional planned studies, our rights todevelop or commercialize our product candidates and our ability to finance contemplated development activities andfund operations for a specified period. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,”“predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions areintended to identify forward-looking statements, although not all forward-looking statements contain these identifyingwords. Forward-looking statements are not guarantees of future performance and our actual results could differmaterially from the results discussed in the forward-looking statements we make. Factors that could cause actual resultsto differ materially from those in the forward-looking statements include, but are not limited to, our ability to raiseadditional capital to support our clinical development program and other operations, our ability to develop products ofcommercial value and to identify, discover and obtain rights to additional product candidates, our ability to protect andmaintain our intellectual property and the ability of our licensors to obtain and maintain patent protection for thetechnology or products that we license from them, the fact that the preclinical and clinical testing of our productcandidates and preliminary data from clinical trials may not be predictive of the success of ongoing or later clinicaltrials, that data may not be available when we expect it to be, that enrollment of clinical trials may take longer thanexpected, that our product candidates may cause unexpected safety events, that we will be unable to successfullyinitiate or complete the clinical development of our product candidates, including duvelisib, defactinib, VS-4718 andVS-5584, that development of our product candidates will take longer or cost more than planned, that we or InfinityPharmaceuticals, Inc. (Infinity) will fail to fully perform under our license agreement for duvelisib, that the transition ofthe duvelisib program from Infinity will not be completed, our reliance on third-parties, competitive developments, theeffect of current and future legislation and regulation and regulatory actions, as well as other risks described in thisAnnual Report on Form 10-K and other filings with the Securities and Exchange Commission (SEC). As a result of these and other factors, we may not actually achieve the plans, intentions or expectationsdisclosed in our forward-looking statements, and you should not place undue reliance on our forward-lookingstatements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers,dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.3 Table of Contents PART I Item 1. BusinessOVERVIEWWe are a biopharmaceutical company focused on discovering and developing drugs to improve outcomes forpatients with cancer. Our most advanced product candidates, duvelisib and defactinib (VS-6063), utilize a multi-facetedapproach to treat cancers originating either in the blood or major organ systems. We are currently evaluating thesecompounds in both preclinical and clinical studies as potential therapies for certain cancers, including leukemia,lymphoma, lung cancer, ovarian cancer, mesothelioma, and pancreatic cancer. We believe that these compounds may bebeneficial as therapeutics either as single agents or when used in combination with immuno-oncology agents or othercurrent and emerging standard of care treatments in aggressive cancers that are poorly served by currently availabletherapies.Duvelisib targets the Phosphoinositide 3-kinase (PI3K) and defactinib targets the Focal Adhesion Kinase (FAK)signaling pathways. The PI3K signaling pathway plays a central role in cancer proliferation and survival. Duvelisib is aninvestigational oral therapy designed to attack both malignant B-cells and T-cells and disrupt the tumormicroenvironment to help thwart their growth and proliferation for patients with lymphatic cancers through the dualinhibition of PI3K delta and gamma. FAK is a non-receptor tyrosine kinase encoded by the PTK-2 gene that is involvedin cellular adhesion and, in cancer, metastatic capability. Defactinib is a targeted inhibitor of the FAK signalingpathway. Similar to duvelisib, defactinib is also orally available and designed to be a potential therapy for patients totake at home under the advice of their physician. Duvelisib is currently being studied in the DUO™ study, which is a Phase 3, randomized, open-label, two-armtrial of duvelisib versus treatment with ofatumumab. This study will evaluate the safety and efficacy of duvelisib ascompared to ofatumumab in approximately 300 patients with relapsed or refractory chronic lymphocytic leukemia(CLL) or small lymphocytic lymphoma (SLL).Duvelisib has successfully completed the Phase 2 DYNAMO™ study which is an open-label, single-arm trial ofduvelisib that evaluated the safety and efficacy of duvelisib in 129 patients with refractory indolent non-Hodgkinlymphoma (iNHL). This study met its primary endpoint of overall response rate (ORR) and the majority of reported sideeffects were expected, reversible and clinically manageable.Defactinib is currently being evaluated in a Phase 1b study in combination with Merck & Co.’s PD-1 inhibitorpembrolizumab and gemcitabine in patients with advanced pancreatic cancer, a Phase 1/2 clinical collaboration withPfizer Inc. (Pfizer) and Merck KGaA to evaluate defactinib in combination with avelumab, an anti-PD-L1 antibody, inpatients with ovarian cancer, and a Phase 1/2 study in collaboration with Cancer Research UK and Merck & Co. for thecombination of defactinib and pembrolizumab in patients with non-small cell lung cancer (NSCLC), mesothelioma orpancreatic cancer. In addition to duvelisib and defactinib, we have additional earlier-stage programs that have undergonepreliminary clinical testing, including clinical trials of the FAK inhibitor VS-4718 and the PI3K/mTOR inhibitor VS-5584. Though both of these programs are slated to complete their Phase 1 testing, we have no plans for furtherdevelopment at this time as we focus most of our resources on duvelisib and defactinib.4 Table of ContentsTHE PROBLEMCancer is a group of diseases characterized by uncontrolled growth and spread of abnormal cells. The AmericanCancer Society estimated that in the United States in 2017, approximately 1.7 million new cases of cancer would bediagnosed and approximately 600,000 people would die from the disease. Current treatments for cancer include surgery,radiation therapy, chemotherapy, hormonal therapy, immunotherapy, and targeted therapy. The cancer death rate in theUnited States has only decreased modestly since the early 1990s. Despite years of intensive research and clinical use,current treatments often fail to cure cancer. Cancer remains one of the world’s most serious health problems and is thesecond most common cause of death in the United States after heart disease. The following table sets forth the U.S.annual incidence of certain cancers, based on 2016 estimates from the National Cancer Institute’s Surveillance,Epidemiology, and End Results Program (NCI; SEER).Cancer type U.S. annual incidence Lymphoma Non-Hodgkin lymphoma 72,580 Chronic lymphocytic leukemia 18,960 Solid tumor Lung and bronchus cancer 224,390 Pancreatic cancer 53,070 Ovarian cancer 22,280 With the application of new technologies and key discoveries, we believe that we are now entering an era ofcancer research characterized by a more sophisticated understanding of the biology of cancer. We believe that thepotential of oral, targeted therapies, along with the rapidly advancing field of immunotherapy, or using the body’simmune system to fight cancer, are important new insights that present the opportunity to develop more effective cancertreatments.OUR STRATEGYOur product candidates seek to utilize a multi-faceted approach to treat cancer by directly targeting the cancercells, enhancing anti-tumor immunity, and modulating the local tumor microenvironment. Our goal is to build a leadingbiopharmaceutical company focused on the discovery, development and, ultimately, commercialization of novel drugsthat use a multi-faceted approach to improving outcomes for patients with cancer.Key elements of our strategy to achieve this goal are:·Advance our product candidates through clinical development. We have ongoing clinical trials ofduvelisib and defactinib both as single agents and in combination with other agents in severalhematologic and solid tumor indications.·Expand the indications in which our product candidates may be used. In parallel to CLL, SLL, iNHL,NSCLC, ovarian cancer, pancreatic cancer and mesothelioma trials that we are currently conducting,we plan to pursue additional disease indications to expand the potential of our product candidates.·Collaborate selectively to augment and accelerate translational research, development andcommercialization. We may seek third‑party collaborators for the development and eventualcommercialization of our product candidates. In particular, we may enter into third‑party arrangementsfor target oncology indications in which our potential collaborator has particular expertise or forwhich we need access to additional research, development, or commercialization resources.5 Table of Contents·Consider acquiring or in‑licensing rights to additional agents. We may pursue the acquisition orin‑license of rights to additional agents from third parties that may supplement our internal programsand allow us to initiate clinical development of a diverse pipeline of agents more quickly.·Build and maintain scientific leadership in the areas of lymphoid malignancies, immuno-oncologyand cancer stem cells (CSCs). We plan to continue to conduct research in the hematological, immuno-oncology and CSC fields to further our understanding of the underlying biology of enhancing thebody’s immune response to tumors as well as cancer progression and metastasis. We also plan tocontinue fostering relationships with top scientific advisors, researchers and physicians. We believethat exceptional advisors, employees and management are critical to leadership in the development ofnew therapies for the treatment of cancer.·Selectively build a commercial infrastructure in the U.S. for the potential launch of duvelisib inhematologic malignancies as an oral monotherapy for patients needing additional lines of therapyfollowing previous treatment.OUR PRODUCT CANDIDATESWe are focused on the discovery and development of small molecules for optimized efficacy and safetyprimarily as orally available drug candidates. We have several product candidates currently in clinical trials, includingduvelisib and defactinib. We are running clinical trials in cancers where there are limited treatment options, includingCLL, iNHL, T-cell lymphoma, lung cancer, ovarian cancer, pancreatic cancer, mesothelioma, and other advancedcancers.Conventional chemotherapy works by stopping the function of cancer cells through a variety of mechanisms.Chemotherapies are usually not targeted at any specific differences between cancer cells and normal cells. Rather, theykill cancer cells because cancer cells generally grow more rapidly than normal cells and, as a result, are relatively moreaffected by the chemotherapy than normal cells. As a result, the treatments may succeed at initially decreasing tumorburden but ultimately fail to kill all of the cancer cells or effectively disrupt the tumor microenvironment, potentiallyresulting in disease progression.Our goal is to develop targeted agents that both specifically kill cancer cells and disrupt the tumormicroenvironment to enhance the efficacy of cancer treatment. Agents that can modulate the tumor microenvironment toincrease cytotoxic T-cell access to the tumor cells and decrease immunosuppressive T-cells in tumors have been soughtafter to increase the proportion of responding cancer patients and the duration of response to cancer treatment. Non-Hodgkin Lymphoma, Chronic Lymphocytic LeukemiaHematologic malignancies are cancers of the blood or bone marrow such as non-Hodgkin lymphoma (NHL) andCLL. In general, lymphomas are a disease that occurs in patients over the age of 65.The overall five-year relative survival rate for people with NHL is 69%, and the 10-year relative survival rate is59%. The type and stage of the lymphoma can often provide useful information about a person’s prognosis, but forsome types of lymphomas the stage is less informative on its own. In these cases, other factors can give doctors a betteridea about a person’s prognosis. These factors are included in the International Prognostic Index and other metricswhich take into account the patient’s age, stage of disease, presence of metastases, performance status and blood levelsof lactate dehydrogenase. In the case of indolent follicular lymphomas, the Follicular Lymphoma InternationalPrognostic Index is better suited to evaluate the prognosis of follicular lymphoma (FL) and to help guide treatmentdecisions.There have been only incremental advances in treatment options for FL beyond chemotherapy orimmunotherapies like the antibodies against CD20, such as rituximab and obinutuzumab, and the overall clinicaloutlook for patients still remains poor.6 Table of ContentsThe NCI estimates that there were 18,960 new cases of CLL in the U.S. in 2016 and that the overall five-yearsurvival rate for patients with CLL is approximately 83%. As CLL is generally a slow-growing disease, the advent ofnew oral anti-cancer therapies since 2013 have been a significant advance as treatment options beyond chemotherapy oranti-CD20 immunotherapies, including ofatumumab. Unlike in FL, the BTK and BCL-2 inhibitors have demonstrableactivity in the treatment of CLL. However, evidence coming from studies on real-world use of these agents is revealingthat a significant number of patients either relapse following treatment, become refractory to current agents, or areunable to tolerate treatment due to unmanageable side effects resulting from treatment, representing a significantmedical need. The potential of additional oral agents, particularly as a monotherapy that can be used in the generalcommunity physician’s armamentarium, may hold significant value in the treatment of patients with either CLL, SLL orFL. Ovarian CancerOvarian cancer forms in tissues of the ovary, one of a pair of female reproductive glands in which the ova, oreggs, are formed. Most ovarian cancers are either ovarian epithelial carcinoma, cancer that begins in the cells on thesurface of the ovary, or malignant germ cell tumors that begin in egg cells. According to the NCI, epithelial carcinoma ofthe ovary is one of the most common gynecologic malignancies and the fifth most frequent cause of cancer death inwomen, with 50% of all cases occurring in women older than 65 years.The American Cancer Society estimated that in 2017 there will be approximately 22,000 new cases of ovariancancer diagnosed and approximately 14,000 women will die from the disease.For patients with ovarian cancer, the most important prognostic factor is stage of the disease. Unfortunately,most patients with ovarian cancer have widespread disease at diagnosis. This may be partly explained by relatively earlyspread to the rest of the abdominal cavity. General symptoms such as abdominal pain and swelling, gastrointestinalsymptoms, and pelvic pain often go unrecognized, leading to delays in diagnosis.Most patients are treated with a combination of surgery, chemotherapy, targeted therapy and radiation therapy.Surgery is often comprehensive to remove as much of the tumor as possible and may include removal of the ovaries or atotal hysterectomy where the uterus is also removed.Unfortunately, available therapies are rarely curative in the treatment of ovarian cancer and many tumorsbecome resistant to platinum‑based chemotherapy, which is the primary treatment regimen. Further therapy withconventional chemotherapy is generally palliative, not curative, as the tumor is able to metastasize and spread to othersites in the body.Pancreatic CancerPancreatic cancer begins in the tissues of the pancreas — an organ in the abdomen that lies horizontally behindthe lower part of the stomach. The pancreas secretes enzymes that aid digestion and hormones that help regulate themetabolism of sugars. Patients present initially with vague symptoms that are often mistaken for other commonabdominal conditions and diseases. It is the 12th most common cancer diagnosed in the United States and the diseaserepresents the fourth leading cause of cancer-related death in the country.Pancreatic cancer often has a poor prognosis, even when diagnosed early. Pancreatic cancer typically spreadsrapidly and is seldom detected in its early stages, which is a major reason why it is a leading cause of cancer death. Signsand symptoms may not appear until pancreatic cancer is so advanced that complete surgical removal is not possible. Anestimated 54,000 Americans will be diagnosed with pancreatic cancer in 2017 and over 43,000 will die from the disease.Pancreatic cancer is one of the few cancers where survival has not improved significantly during the past 40 years.Pancreatic cancer has a very high mortality rate with 92.3% of patients dying within five years of their initial diagnosis.The median age for diagnosis is 70 with the disease affecting males slightly more than females.7 Table of ContentsTreatment options for pancreatic cancer are limited with surgical resection of the tumor possible in less than20% of patients. Chemotherapy or chemotherapy plus radiation is offered to patients whose tumors are unable to beremoved surgically. Immuno-oncology agents have not demonstrated a significant improvement in treatment outcomefor patients with pancreatic cancer. The limited impact of chemotherapies and immunotherapies to improve the outcomemay be due to the dense stroma that is prevalent in pancreatic tumors and the presence of CSCs in the tumor. Non-Small Cell Lung CancerAccording to the NCI, the most common types of NSCLC are squamous cell carcinoma, large cell carcinoma,and adenocarcinoma. Although NSCLCs are associated with cigarette smoke, adenocarcinomas may be found in patientswho have never smoked. As a class, NSCLCs are relatively insensitive to chemotherapy and radiation therapy comparedwith small cell lung cancer (SCLC). The NCI estimates that in 2016 there were 224,390 new cases of lung cancer (bothNSCLC and SCLC) in the United States and 158,080 deaths. Lung cancer is the leading cause of cancer‑relatedmortality in the United States. The five‑year relative survival rate from 2006 to 2012 for patients with lung cancer was17.9%.Patients with resectable disease may be cured by surgery or surgery followed by chemotherapy. Local controlcan be achieved with radiation therapy in a large number of patients with unresectable disease, but cure is seen only in asmall number of patients. Patients with locally advanced unresectable disease may achieve long‑term survival withradiation therapy combined with chemotherapy. Patients with advanced metastatic disease may achieve improvedsurvival and palliation of symptoms with chemotherapy, targeted agents, and other supportive measures. The diseasebecomes resistant to therapy and returns in the vast majority of patients. The presence of CSCs may contribute to thisresistance and eventual disease progression.MesotheliomaMesothelioma is a form of cancer most often caused by asbestos, that affects the smooth lining of the chest,lungs, heart, and abdomen. The layer of tissue surrounding these organs is made up of mesothelial cells, hence the namemesothelioma. Mesothelioma most often forms in the pleural cavity of the chest or into the abdomen. Mesotheliomaforms a solid tumor that begins as a result of insult to the tissues caused by asbestos particles, which penetrate into thepleural cavity of the chest.Pleural mesothelioma accounts for approximately 2,500 - 3,000 cases a year in the United States. This diseaseaffects the pleura, which is the thin balloon shaped lining of the lungs. In its early stages, mesothelioma is difficult todetect as it may start with a thickening of the pleural rind, or fluid, which can be associated with many other conditions.This rind is normally thin and smooth in the non-diseased state. In time it begins to demonstrate progression, forming amore pronounced irregular rind and nodules which coalesce into a crust that compresses and invades into adjacentstructures compromising lung and cardiac function.The symptoms of mesothelioma gradually become more noticeable, prompting the patient to seek a medicalconsultation. By this time the progression of the disease may already be too advanced, as the tumor may have spread tothe lymph nodes and/or begun to metastasize to remote organs of the body like the brain, spleen, liver or kidneys. PI3K Inhibition Program The PI3Ks are a family of enzymes involved in multiple cellular functions, including cell proliferation andsurvival, cell differentiation, cell migration, and immunity. PI3K-delta and PI3K-gamma are two proteins with distinctand mostly non-overlapping roles believed to support the growth and survival of malignant B-cells and T-cells.Specifically, preclinical data suggest that PI3K-delta signaling can lead to the proliferation of malignant B-cells, andthat both PI3K-gamma and PI3K-delta play an important role in the formation and maintenance of the supportive tumormicroenvironment. 8 Table of ContentsDuvelisib Our lead product candidate, duvelisib, is an oral, dual inhibitor of PI3K-delta and PI3K-gamma. Duvelisib is aninvestigational compound in clinical trials for hematologic malignancies, and its safety and efficacy have not yet beenevaluated by the U.S. Food and Drug Administration (FDA) or any other health authority for marketing authorization. We are conducting worldwide clinical investigation of duvelisib in blood cancers initially focusing on iNHLand CLL. The investigation of duvelisib is supported by data from a Phase 1, open-label, dose-escalation study designedto evaluate the safety, pharmacokinetics and clinical activity of duvelisib in patients with advanced hematologicmalignancies. The maximum tolerated dose of duvelisib was defined at 75 mg twice daily (BID) and the trial has beencompleted. A 25 mg BID dosing regimen has been determined for further development based on efficacy, safety,pharmacokinetics and pharmacodynamics. Data from this study, presented in December 2014 at the Annual Meeting ofthe American Society for Hematology (ASH 2014), showed that duvelisib is clinically active in CLL, SLL, iNHL, and T-cell lymphoma, as well as other hematologic malignancies. Indolent Non-Hodgkin Lymphoma The FDA and European Medicines Agency (EMA) have granted orphan drug designation to duvelisib for thepotential treatment of FL, and the FDA has granted fast track designation to the investigation of duvelisib for thetreatment of patients with FL who have received at least two prior therapies. The DYNAMO study is a Phase 2, open-label, single–arm monotherapy study evaluating the safety and efficacy of duvelisib dosed at 25 mg BID in 129 patientswith iNHL. Patients in DYNAMO that continue to derive benefit remain on treatment. DYNAMO enrollment criteriaincluded patients with FL, the most common subtype of iNHL, marginal zone lymphoma (MZL) and SLL, whose diseaseis refractory to rituximab, a monoclonal antibody treatment, and to either chemotherapy or radioimmunotherapy andwho must have progressed within six months of receiving their final dose of a previous therapy. The primary endpoint ofthe study was an ORR according to the International Working Group Criteria, which includes change in target nodallesion in combination with other measurements to determine response to treatment. The results from the DYNAMO study were presented at the 2016 Annual Meeting of the American Society forHematology conference. DYNAMO achieved the primary endpoint in a heavily pre-treated, double refractory tochemotherapy and rituximab, patient population with an ORR of 46% (p=0.0001) in the intent to treat population (ITT),as assessed by an independent review committee with a median duration of response of 10 months. The breakdown ofORR in the three subtypes of iNHL for the overall study population was 41% in FL (n=83), 68% in SLL (n=28) and 33%in MZL (n=18). 83% of patients had a reduction in target lymph nodes. 9 Table of ContentsFIGURE 1*Adapted from Flinn et al., ASH 2016 FIGURE 2*Flinn et al., ASH 2016 10 Table of ContentsDuvelisib was generally well tolerated, with an expected and manageable safety profile with appropriate riskmitigation. The majority of adverse events were Grade 1 or 2 in severity, reversible and/or clinically manageable. Themost common (>5%) Grade 3 adverse effects were an increase in diarrhea (14%), anemia (10%), and neutropenia (9%).Grade 3 or 4 adverse effects of special interest included neutropenia (28%), infection (18%), diarrhea (15%),thrombocytopenia (13%), anemia (12%), pneumonia (9%), hepatotoxicity (8%), rash (7%), colitis (5%), andpneumonitis (2%). Serious opportunistic infections were <5% with none being fatal. Four treatment-related adverseevents had the outcome of death (one septic shock; one viral infection; one drug reaction/eosinophilia/ systemicsymptoms, one toxic epidermal necrolysis/sepsis syndrome). Chronic Lymphocytic Leukemia The FDA and EMA have granted orphan drug designation to duvelisib for the potential treatment of CLL andSLL. The FDA has granted fast track designation to the investigation of duvelisib for the potential treatment of patientswith CLL who have received at least one prior therapy. We are evaluating duvelisib for the treatment of CLL in the DUOstudy. DUO is a randomized, Phase 3 monotherapy study designed to evaluate the safety and efficacy of duvelisib dosedat 25 mg BID compared to ofatumumab, a monoclonal antibody treatment, in approximately 300 patients with relapsedor refractory CLL. The primary endpoint of the study is progression-free survival. Enrollment of DUO was completed inNovember 2015, and we expect to report topline data mid-year 2017. The investigation of duvelisib in DUO is supported by preliminary data from a Phase 1 study that demonstratedthat duvelisib administered at 25 mg BID was clinically active in patients with relapsed or refractory CLL, with a 57%ORR (17 of 30 evaluable patients), including one complete response, as per investigator assessment. At the time of thepresentation of the study at ASH 2014, the median progression free survival in the 31 patients who received the 25 mgBID dose had not yet been reached with 66% of patients progression free at twelve months and 59% of patientsprogression free at 24 months. FIGURE 3 CR: Complete Response; PR: Partial Response; PD: Progressive Disease; TP53mut/del(17p): high-risk cytogenetic markers*O’Brien et al., ASH 2014 The majority of side effects were Grade 1 or 2 in severity, reversible and/or clinically manageable. Across alldoses evaluated in the study (n=55), the most common Grade 3 side effects were pneumonia (24%), neutropenia (18%)and anemia (16%). Grade 4 side effects included pneumonia in one patient (2%), neutropenia in 13 patients (24%) andanemia in one patient (2%).11 Table of Contents T-cell Lymphoma, Aggressive NHL and Other Lymphomas Data from the Phase 1 study presented at ASH 2014 and at the Annual T-cell Lymphoma Forum held in January 2015demonstrates that duvelisib is clinically active in advanced T-cell lymphomas. Treatment with duvelisib in heavily pre-treated patients with relapsed or refractory T-cell lymphoma resulted in an ORR of 42% (14 of 33 patients evaluable forresponse), including two complete responses and twelve partial responses. Among the 15 patients with peripheral T-celllymphoma (PTCL) who were evaluable for response, treatment with duvelisib resulted in two complete responses and sixpartial responses, for an ORR of 53%. Among the 18 patients with cutaneous T-cell lymphoma (CTCL) evaluable forresponse, treatment with duvelisib resulted in six partial responses for an ORR of 33%. Stable disease was observed inone patient with PTCL and six patients with CTCL. The Grade 3 side effects in patients with T-cell lymphoma includedincreases in aspartate transaminase (ALT) or alanine transaminase (AST) in 11 patients (31%), rash in six patients (17%)and pneumonia in five patients (14%). Two patients (6%) had Grade 4 ALT or AST increases, and one patient (3%) hadGrade 4 pneumonia.FIGURE 4CR: Complete Response; PR: Partial Response; ORR: CR + PR*Horwitz et al., T-Cell Lymphoma Forum 2015 FAK Inhibition ProgramOur product candidates that inhibit FAK utilize a multi-faceted approach to treat cancer by reducing CSCs,enhancing anti-tumor immunity, and modulating the local tumor microenvironment. Our lead FAK inhibitor is known asdefactinib (VS-6063) and our early-stage FAK inhibitor is known as VS-4718. The effects of FAK inhibition on thetumor microenvironment make defactinib a good candidate for combination therapy with immuno-oncology agents andother anti-cancer compounds. FAK expression is greater in many tumor types compared to normal tissue, particularly incancers that have a high invasive and metastatic capability. The contact between cancer cells and connective tissuestimulates FAK signaling. However, CSCs acquire the ability to survive in the absence of contact with connective tissue.We believe that FAK signaling in CSCs may be maintained through alternative mechanisms, thus providing CSCs theability to survive in the absence of cell contact. Accordingly, we believe that FAK signaling may be a centralcomponent of CSC biology that allows CSCs to survive after exiting from a tumor mass and enable metastatic growth atother sites in the body.12 Table of ContentsIn September 2015, researchers from the University of Edinburgh published a study in the journal Cell thathighlights the potential of FAK inhibition to enable the body’s immune system to fight cancer. The paper discussedresults from preclinical research showing that FAK enables cancer cells to evade attack by the immune system. Thisresearch showed that genetic knock down of FAK or oral dosing of mice with a FAK inhibitor decreasesimmunosuppressive cells called T-regulatory cells (Figure 5a) and increases cytotoxic T-cells (Figure 5b) in skin cancertumors leading to a reduction in tumor burden (Figure 5c). This work has since been expanded into pancreatic cancerand colorectal cancer models in which FAK inhibition similarly extends survival of tumor-bearing mice throughincreasing cytotoxic T-cells in the tumor and decreasing T regulatory cells as published in Nature Medicine in August,2016. Additionally, FAK inhibition was found to decrease other key immunosuppressive cell populations in tumors,known as myeloid-derived suppressor cells and M2 tumor-associated macrophages. Coincident with this immuno-modulation, FAK inhibition was shown to substantially increase survival of mice when combined with an anti-PD-1immune checkpoint antibody. These results have indicated the potential promise of FAK inhibitors in combinationwith immune checkpoint inhibitors in the clinic.FIGURE 5*Adapted from: Serrels et al. Nuclear FAK controls chemokine transcription, Tregs, and evasion of anti-tumor immunity. Cell. 2015. In the 2016 Nature Medicine paper, preclinical data were presented (Jiang, et al) demonstrating that FAKinhibition reduces stromal density and increases T-cell entry into tumors. In this study, it was discovered that treatingmice bearing pancreatic cancer tumors with a FAK inhibitor reduces stromal density. This was measured as a decrease inthe number (Figure 6a) and proliferation (Figure 6b) of tumor-associated fibroblasts, together with a decrease in collagenand other extracellular matrix proteins (Figure 6c) in the tumors. The paper’s authors went on to show that thisreduction in stromal density by FAK inhibition augments the effectiveness of the chemotherapeutic agent gemcitabine,and also allowed cytotoxic T-cells to enter the tumors (Figure 6d) to induce more durable survival of transgenic micebearing pancreatic tumors (Figure 7). We believe these data provide strong rationale for the clinical evaluation of FAKinhibitors, including defactinib, in combination with a PD-1 or PD-L1 antibody in patients with pancreatic and othercancers. Based on this research, we have initiated clinical trials to assess the combination of defactinib with eitheravelumab (anti-PD-L1) or pembrolizumab (anti-PD-1) for the treatment of patients with ovarian cancer, pancreaticcancer, mesothelioma, or NSCLC. 13 Table of ContentsFIGURE 6*Adapted from: Jiang et al. Targeting focal adhesion kinase renders pancreatic cancers responsive to checkpoint immunotherapy. NatureMedicine. 2016. FIGURE 7Vehicle: Placebo control; Immuno: Gem +/- anti-PD-1 +/- anti-CTLA-4*Adapted from: Jiang et al. Targeting focal adhesion kinase renders pancreatic cancers responsive to checkpoint immunotherapy. NatureMedicine. 2016. 14 Table of ContentsDefactinibDefactinib is an orally‑available small molecule kinase inhibitor designed to inhibit FAK signaling. We arecurrently evaluating defactinib as a potential therapy for ovarian cancer, pancreatic cancer, mesothelioma, NSCLC, andother solid tumors. Defactinib has orphan drug designation in ovarian cancer and mesothelioma in the United States, theEuropean Union, and Australia.The clinical evaluation of defactinib is supported by a growing body of preclinical research suggesting thatFAK inhibition, when combined with PD-1 inhibitors, increases the anti-tumor activity of these immunotherapeuticagents. As published in the journals Cell and Nature Medicine, FAK inhibition has been shown to increase cytotoxic(CD8+) T-cells in tumors, decrease T-cell exhaustion, decrease immunosuppressive cell populations, enhance T-cellkilling of tumor cells, and create a generally more favorable tumor microenvironment, which may allow for enhancedefficacy of immuno-oncology therapeutics.Pancreatic cancer, along with other tumors such as ovarian cancer and prostate cancer, are tumor types in whichimmunotherapeutics have achieved limited clinical benefit, possibly due to the dense desmoplastic stroma and theabundance of immunosuppressive cells. Preclinical research has demonstrated that high stromal density prevents anti-cancer agents and T-cells from entering pancreatic tumors thereby limiting efficacy. In preclinical research conducted byus and others, FAK inhibition was shown to reduce stromal density and allow cytotoxic T-cells to better penetrate thetumor and kill the cancer cells. Collectively, these data provide strong rationale for combining our FAK inhibitors withcheckpoint inhibitors in the clinic for pancreatic and other solid tumors.Phase 1/2 study with Pfizer and Merck KGaA in combination with immunotherapy in ovarian cancer. In March2016, we announced a new clinical collaboration with Pfizer and Merck KGaA to evaluate defactinib in combinationwith avelumab in patients with ovarian cancer. Avelumab is a human programmed death ligand 1 (PD-L1), blockingantibody that binds to the PD-L1 ligand expressed on tumor cells.Phase 1/2 study with Cancer Research United Kingdom (CRUK) in combination with pembrolizumab. InSeptember 2016, we announced a new clinical collaboration with CRUK and Merck & Co. to evaluate defactinib incombination with pembrolizumab in patients with NSCLC, mesothelioma, or pancreatic cancer.Phase 1/1b study in combination with immunotherapy in pancreatic cancer. Defactinib is in a dose escalationstudy in combination with Merck & Co.’s PD-1 inhibitor pembrolizumab and gemcitabine in patients with advancedpancreatic cancer. This Phase 1 clinical trial is anticipated to enroll approximately 50 patients and is being conducted atthe Washington University School of Medicine’s Division of Oncology under the direction of Andrea Wang-Gillam,M.D., Ph.D., Clinical Director of the Gastrointestinal Oncology Program. This trial is primarily designed to evaluate thesafety of the combination regimen and may also provide a greater understanding of how FAK inhibition in combinationwith immunotherapies could improve outcomes for patients with pancreatic cancer.OUR MANAGEMENT TEAM AND SCIENTIFIC CO‑FOUNDERS AND ADVISORSOur experienced management team includes our President and Chief Executive Officer, Robert Forrester, andour Chief Operating Officer, Daniel Paterson.Mr. Forrester has been the Chief Executive Officer, Chief Operating Officer and chief financial officer of bothprivate and public life science companies, including Forma Therapeutics, Inc., CombinatoRx, Inc. and ColeyPharmaceutical Group, Inc., which was acquired by Pfizer Inc. in 2007.Mr. Paterson has over 25 years of experience in management roles at healthcare and biotechnology companies,including as chief executive officer, Chief Operating Officer and Chief Business Officer, and specific expertise inoncology drug and diagnostic product development, business development, and launch planning. Mr. Paterson wasHead of Global Strategy for Specialty Market and Patient‑Level Data at IMS Health after playing a key role in theacquisition of PharMetrics by IMS Health as Vice President of Marketing and Corporate Development.15 Table of ContentsOur scientific co‑founders are recognized leaders in the field of cancer biology. Robert Weinberg, Ph.D.,Founding Member of the Whitehead Institute and Professor of Biology at MIT, has played a key role in identifying thegenetic basis of cancer. Dr. Weinberg discovered the first tumor oncogene, the first tumor suppressor gene, the role of aprotein related to the cell surface receptor HER2 in preclinical studies and the mechanisms underlying the formation ofCSCs. Eric Lander, Ph.D., Founding Director of the Broad Institute, Professor of Biology at MIT and Professor ofSystems Biology at Harvard Medical School, played a central role in the Human Genome Project.INTELLECTUAL PROPERTYWe strive to protect the proprietary technology that we believe is important to our business, including seekingand maintaining patents intended to cover our product candidates and compositions, their methods of use and processesfor their manufacture, and any other aspects of inventions that are commercially important to the development of ourbusiness. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do notconsider appropriate for, patent protection.We plan to continue to expand our intellectual property estate by filing patent applications directed tocompositions, methods of treatment and patient selection created or identified from our ongoing development of ourproduct candidates. Our success will depend on our ability to obtain and maintain patent and other proprietaryprotection for commercially important technology, inventions and know‑how related to our business, defend andenforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid andenforceable patents and proprietary rights of third parties. We also rely on know‑how, continuing technologicalinnovation and in‑licensing opportunities to develop and maintain our proprietary position. We seek to obtain domesticand international patent protection, and endeavor to promptly file patent applications for new commercially valuableinventions.The patent positions of biopharmaceutical companies like us are generally uncertain and involve complexlegal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantlyreduced before the patent is issued, and patent scope can be reinterpreted by the courts after issuance. Moreover, manyjurisdictions permit third parties to challenge issued patents in administrative proceedings, which may result in furthernarrowing or even cancellation of patent claims. We cannot predict whether the patent applications we are currentlypursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will providesufficient protection from competitors.Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for18 months or potentially even longer, and since publication of discoveries in the scientific or patent literature often lagsbehind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications.Moreover, we may have to participate in interference proceedings or derivation proceedings declared by the U.S. Patentand Trademark Office to determine priority of invention.PatentsOur patent portfolio includes issued and pending applications worldwide. These patent applications fall intothree categories: (1) PI3K inhibition program; (2) FAK inhibition program; and (3) other programs.16 Table of ContentsPI3K inhibition programWe are currently developing the PI3K inhibitor duvelisib.DUVELISIBWe have exclusively licensed a portfolio of patent applications owned by Intellikine LLC and InfinityPharmaceuticals, Inc. (Infinity), which are directed to PI3K inhibitor compounds and methods of their use, for example,in cancer. Certain patent families are related to duvelisib. These patent families include issued patents having claimscovering duvelisib generically and specifically. Also included are issued patents covering certain polymorphs ofduvelisib. Exemplary patents covering duvelisib, pharmaceutical compositions comprising duvelisib, methods of use,polymorphs, and methods of manufacture include US 8,193,182; US 8,785,456, and US 9,216,982. These U.S. patentshave issued and will expire between 2029 and 2032. Related issued and pending worldwide patents and applicationswith claims to duvelisib, pharmaceutical compounds, methods of use, polymorphs, and methods of manufacture arepending in about 40 countries. Additional patent applications related to certain methods of use and combinationtherapies, as issued, would expire between 2029 and 2036.FAK inhibition programWe are currently developing the FAK inhibitor defactinib.DEFACTINIBWe have exclusively licensed a portfolio of patent applications owned by Pfizer, which are directed to FAKinhibitor compounds and methods of their use, for example in cancer. One patent family is related generally todefactinib. This patent family includes issued patents having claims covering defactinib generically and specifically.For example, US 7,928,109 covers the composition of matter of defactinib specifically and US 8,247,411 covers thecomposition of matter of defactinib generically. Also included are issued and pending patent applications having claimsdirected to methods of treatment and methods of making defactinib. For example, US 8,440,822 covers methods ofmaking defactinib. Any U.S. patents that have issued or will issue in this family will have a statutory expiration date inApril of 2028. Related cases are pending worldwide, including for example in Europe, Brazil, Thailand, Hong Kong, andIndia, and granted in Australia, Mexico, Canada, China, Korea, Israel, New Zealand, South Africa, Singapore, Taiwan,and Japan.In addition to the issued and pending patent applications exclusively licensed from Pfizer, we own three patentfamilies covering defactinib. One family is directed to compositions (e.g., oral dosage forms) of defactinib and certainmethods of use. Any U.S. patents that will issue in this family will have a statutory expiration date in January of 2035.The other two families are directed to methods of using a FAK inhibitor in combination with another agent, such asdefactinib in combination with a mitogen-activated protein kinase kinase enzymes (MEK) inhibitor for treating apatient or defactinib in combination with an immunotherapeutic agent. Any U.S. patents that will issue in these familieswill have a statutory expiration date in February of 2035 and June of 2036.Our licensed portfolio of patent applications from Pfizer also includes four families of patent applicationsdirected to VS‑6062 and related methods of use. The patent families include issued and pending patent applicationshaving claims directed to VS‑6062, methods of manufacture, and pharmaceutical salts. Patents have issued in thesefamilies in the U.S. that will expire in December of 2023, April of 2025, and November of 2028, respectively. Relatedcases have been granted worldwide, including for example in Australia, Canada, China, Japan, and Europe.VS‑4718We have exclusively licensed a family of patent applications owned by the Scripps Research Institute, which isdirected to VS‑4718 and related methods of use. For example, US 8,501,763 covers the composition of matter ofVS‑4718. The statutory expiration of any patent that has issued or will issue pertaining to VS‑4718 has or will have astatutory expiration date in March of 2028. Related cases are pending worldwide, including for example in China andCanada. The patent has also been allowed in Japan and Europe.17 Table of ContentsPatent TermThe base term of a U.S. patent is 20 years from the filing date of the earliest‑filed non‑provisional patentapplication from which the patent claims priority. The term of a U.S. patent can be lengthened by patent termadjustment, which compensates the owner of the patent for administrative delays at the U.S. Patent and TrademarkOffice. In some cases, the term of a U.S. patent is shortened by terminal disclaimer that reduces its term to that of anearlier‑expiring patent.The term of a United States patent may be eligible for patent term extension under the Drug Price Competitionand Patent Term Restoration Act of 1984, referred to as the Hatch‑Waxman Act, to account for at least some of the timethe drug is under development and regulatory review after the patent is granted. With regard to a drug for which FDAapproval is the first permitted marketing of the active ingredient, the Hatch‑Waxman Act allows for extension of theterm of one United States patent that includes at least one claim covering the composition of matter of an FDA‑approveddrug, an FDA‑approved method of treatment using the drug, and/or a method of manufacturing the FDA‑approved drug.The extended patent term cannot exceed the shorter of five years beyond the non‑extended expiration of the patent or14 years from the date of the FDA approval of the drug. Some foreign jurisdictions, including Europe and Japan, haveanalogous patent term extension provisions, which allow for extension of the term of a patent that covers a drugapproved by the applicable foreign regulatory agency. In the future, if and when our pharmaceutical products receiveFDA approval, we expect to apply for patent term extension on patents covering those products, their methods of use,and/or methods of manufacture. LICENSESInfinity Pharmaceuticals, Inc.In November 2016, we entered into an amended and restated license agreement with Infinity, under which weacquired an exclusive worldwide license for the research, development, commercialization, and manufacture of productsin oncology indications containing duvelisib. In connection with the license agreement, we assumed operational andfinancial responsibility for certain activities that were part of Infinity’s duvelisib program, including the DUO study forpatients with relapsed/refractory CLL, and Infinity assumed financial responsibility for the shutdown of certain otherclinical studies up to a maximum of $4.5 million. We are obligated to use diligent efforts to develop and commercializea product in an oncology indication containing duvelisib. During the term of the license agreement, Infinity has agreednot to research, develop, manufacture or commercialize duvelisib in any other indication in humans or animals. Pursuant to the terms of the license agreement, we are required to make the following payments to Infinity incash or, at our election, in whole or in part, in shares of our common stock: (i) $6.0 million upon the completion of theDUO study if the results of the study meet certain pre-specified criteria and (ii) $22.0 million upon the approval of a newdrug application in the United States or an application for marketing authorization with a regulatory authority outsideof the United States for a product in an oncology indication containing duvelisib. For any portion of any of theforegoing payments that we elect to issue in shares of our common stock in lieu of cash, the number of shares of commonstock to be issued will be determined by multiplying (1) 1.025 by (2) the number of shares of common stock equal to (a)the amount of the payment to be paid in shares of common stock divided by (b) the average closing price of a share ofcommon stock as quoted on NASDAQ for a twenty-day period following the public announcement of the applicablemilestone event. The shares of common stock will be issued as unregistered securities, and we will have an obligation topromptly file a registration statement with the SEC to register such shares for resale. Any issuance of shares will besubject to the satisfaction of closing conditions, including that all material authorizations, consents, approvals and thelike necessary for such issuance shall have been obtained. We are also obligated to pay Infinity royalties on worldwide net sales of any products in an oncology indicationcontaining duvelisib ranging from the mid-single digits to the high single digits. The royalties will expire on a product-by-product and country-by-country basis until the latest to occur of (i) the last-to-expire patent right covering theapplicable product in the applicable country, (ii) the last-to-expire patent right covering the manufacture of theapplicable product in the country of manufacture of such product, (iii) the expiration of non-patent regulatoryexclusivity in such country and (iv) ten years following the first commercial sale of a product in a18 Table of Contentscountry, provided that if royalties on net sales for a product in the United States are payable solely on the basis of non-patent regulatory exclusivity, the applicable royalty on net sales for such product in the United States will be reducedby 50%. The royalties are also subject to reduction by 50% of certain third-party royalty payments or patent litigationdamages or settlements which might be required to be paid by us if litigation were to arise, with any such reductionscapped at 50% of the amounts otherwise payable during the applicable royalty payment period. In addition to the foregoing, we are obligated to pay Infinity an additional royalty of 4% on worldwide netsales of any products in an oncology indication containing duvelisib to cover the reimbursement of research anddevelopment costs owed by Infinity to Mundipharma International Corporation Limited (MICL) and PurduePharmaceutical Products L.P. (Purdue). Once Infinity has fully reimbursed MICL and Purdue, the royalty obligationswill be reduced to 1% of net sales in the United States. These trailing MICL royalties are payable until the later to occurof the last-to-expire of specified patent rights and the expiration of non-patent regulatory exclusivities in a country.Each of the above royalty rates is reduced by 50% on a product-by-product and country-by-country basis if theapplicable royalty is payable solely on the basis of non-patent regulatory exclusivity. In addition, the trailing MICLroyalties are subject to reduction by 50% of certain third-party royalty payments or patent litigation damages orsettlements which might be required to be paid by us if litigation were to arise, with any such reductions capped at 50%of the amounts otherwise payable during the applicable royalty payment period. The Scripps Research Institute In November 2011, we entered into a license agreement with Poniard Pharmaceuticals, Inc. (Poniard), underwhich we acquired an exclusive, worldwide license under patent rights and know‑how owned or controlled by Poniardto develop, make, use and sell compounds and products covered by the licensed patent rights for the diagnosis,treatment, prevention or control of all human diseases and conditions. These licensed patent rights include patent rightsowned by The Scripps Research Institute (Scripps), and licensed to Poniard. Under the agreement, we paid Poniard anupfront license fee and agreed to pay Poniard milestone payments upon the achievement of specified development andregulatory milestones.On August 2, 2013, patents and other rights which were the subject of our license agreement with Poniard weresold to Encarta, Inc. (Encarta). We purchased these assets from Encarta in an asset purchase agreement datedFebruary 21, 2014 and also entered into a securities issuance agreement. Under the terms of these agreements, we issued97,500 shares of common stock, issued a warrant to purchase 142,857 shares of common stock with an exercise priceequal to $17.16 per share and paid Encarta $25,000. All existing obligations under the license agreement, including anachieved development milestone and an obligation to issue a warrant, were settled as part of this transaction.In connection with the asset purchase agreement, we also assumed the rights and obligations under the licenseagreement by and between Scripps and Poniard, dated May 5, 2008 (the Scripps License Agreement). Pursuant to theScripps License Agreement, we acquired an exclusive, worldwide license under patent rights owned or controlled byScripps to make and have made, to use and have used, to offer to sell, to sell and have sold, and import products coveredby the licensed patent rights for the diagnosis, treatment or prevention of human diseases or conditions. The licensedpatent rights include patents covering our product candidate VS‑4718. Under the Scripps License Agreement, Scrippsretains the right to grant non‑exclusive licenses to nonprofit or academic institutions, without the right to sublicenseand to use any of the licensed patent rights for any noncommercial research or education purposes.Pursuant to the Scripps License Agreement, we are obligated to pay Scripps potential product developmentmilestone payments of up to an aggregate of $3.0 million upon the achievement of specified development andregulatory milestones. In addition, we are obligated to pay Scripps low single‑digit royalties as a percentage of net salesof licensed products. Our obligation to pay royalties on net sales is on a country-by-country basis. In the event that wechallenge a patent or patent application covered by the Scripps License Agreement, our royalties will increase by fiftypercent during the pendency of the challenge (and increase by one hundred percent in the event the challenge is notsuccessful). We also forfeit the right to recoup any royalties, sublicense payments, milestone payments, patent costs orother payments during the period of any challenge to the patents covered under the Scripps License Agreement.19 Table of ContentsIf we license or acquire technology from a third party in order to commercialize a licensed product and to paysuch third party royalties or other amounts, then we may deduct up to 50% of the amount paid to such third party fromthe payments owed to Scripps for such licensed product. This deduction is subject to specified limitations, includingthat in no event will any such deduction reduce a payment that we owe to Scripps to less than 50% of the otherwiseapplicable amount.We are required to use reasonable and diligent efforts to commercialize (directly or through sublicensearrangements) licensed products (including our product candidate VS‑4718) in either the United States, the UnitedKingdom, France, Germany or Japan.The Scripps License Agreement expires upon the last expiration of any of the licensed patent rights. We havethe right to terminate the Scripps License Agreement or any portion of our licensed rights under the Scripps LicenseAgreement for any reason upon at least 90 days prior written notice and payment of a low five‑figure termination fee. Weare not responsible for the termination fee if Scripps defaults in the performance of its material obligations and fails tocure. Scripps can terminate the Scripps License Agreement for certain material breaches by us or defaults in ourperformance of material obligations.Pfizer Inc.On July 11, 2012, we entered into a license agreement with Pfizer under which Pfizer granted us worldwide,exclusive rights to research, develop, manufacture and commercialize products containing certain of Pfizer’s inhibitorsof FAK, including defactinib, for all therapeutic, diagnostic and prophylactic uses in humans. We have the right to grantsublicenses under the foregoing licensed rights, subject to certain restrictions. We are solely responsible, at our ownexpense, for the clinical development of these products, which is to be conducted in accordance with an agreed‑upondevelopment plan. We are also responsible for all manufacturing and commercialization activities at our own expense.Pfizer provided us with an initial quantity of clinical supplies of one of the products for an agreed upon price.Upon entering into the license agreement, we made a one‑time cash payment to Pfizer in the amount of$1.5 million and issued 192,012 shares of our common stock. Pfizer is also eligible to receive up to $2.0 million indevelopmental milestones and up to an additional $125.0 million based on the successful attainment of regulatory andcommercial sales milestones. Pfizer is also eligible to receive high single to mid-double digit royalties on future netsales of the products. Our royalty obligations with respect to each product in each country begin on the date of firstcommercial sale of the product in that country, and end on the later of 10 years after the date of first commercial sale ofthe product in that country or the date of expiration or abandonment of the last claim contained in any issued patent orpatent application licensed by Pfizer to us that covers the product in that country.The license agreement will remain in effect until the expiration of all of our royalty obligations to Pfizer,determined on a product‑by‑product and country‑by‑country basis. So long as we are not in breach of the licenseagreement, we have the right to terminate the license agreement at will on a product‑by‑product and country‑by‑countrybasis, or in its entirety, upon 90 days written notice to Pfizer. Either party has the right to terminate the licenseagreement in connection with an insolvency event involving the other party or a material breach of the licenseagreement by the other party that remains uncured for a specified period of time. If the license agreement is terminatedby either party for any reason, worldwide rights to the research, development, manufacture and commercialization of theproducts revert back to Pfizer.COMPETITIONThe biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intensecompetition and a strong emphasis on proprietary products. While we believe that our technology, developmentexperience and scientific knowledge provide us with competitive advantages, we face potential competition from manydifferent sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academicinstitutions and governmental agencies and public and private research institutions. Any product candidates that wesuccessfully develop and commercialize will compete with existing therapies and new therapies that may becomeavailable in the future.20 Table of ContentsMany of our competitors may have significantly greater financial resources and expertise in research anddevelopment, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals andmarketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology anddiagnostic industries may result in even more resources being concentrated among a smaller number of our competitors.These competitors also compete with us in recruiting and retaining qualified scientific and management personnel andestablishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologiescomplementary to, or necessary for, our programs. Smaller or early stage companies may also prove to be significantcompetitors, particularly through collaborative arrangements with large and established companies.The key competitive factors affecting the success of all of our product candidates, if approved, are likely to betheir efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement fromgovernment and other third‑party payors.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercializeproducts that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensivethan any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for theirproducts more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strongmarket position before we are able to enter the market. In addition, our ability to compete may be affected in many casesby insurers or other third‑party payors seeking to encourage the use of generic products. There are many genericproducts currently on the market for the indications that we are pursuing, and additional products are expected tobecome available on a generic basis over the coming years. If our therapeutic product candidates are approved, weexpect that they will be priced at a significant premium over competitive generic products.The most common methods of treating patients with cancer are surgery, radiation and drug therapy, includingchemotherapy, hormone therapy and targeted drug therapy. There are a variety of available drug therapies marketed forcancer. In many cases, these drugs are administered in combination to enhance efficacy. While our product candidatesmay compete with many existing drug and other therapies, to the extent they are ultimately used in combination with oras an adjunct to these therapies, our product candidates will not be competitive with them. Some of the currentlyapproved drug therapies are branded and subject to patent protection, and others are available on a generic basis. Manyof these approved drugs are well established therapies and are widely accepted by physicians, patients and third‑partypayors. In general, although there has been considerable progress over the past few decades in the treatment of cancerand the currently marketed therapies provide benefits to many patients, these therapies all are limited to some extent intheir efficacy and frequency of adverse events, and none of them are successful in treating all patients. As a result, thelevel of morbidity and mortality from cancer remains high.In addition to currently marketed therapies, there are also a number of products in late stage clinicaldevelopment to treat cancer. These products in development may provide efficacy, safety, convenience and otherbenefits that are not provided by currently marketed therapies. As a result, they may provide significant competition forany of our product candidates for which we obtain market approval.Our competitors may commence and complete clinical testing of their product candidates, obtain regulatoryapprovals and begin commercialization of their products sooner than we may for our own product candidates. Thesecompetitive products may have superior safety or efficacy, or be manufactured less expensively, than our productcandidates. If we are unable to compete effectively against these companies on the basis of safety, efficacy or cost, thenwe may not be able to commercialize our product candidates or achieve a competitive position in the market. Thiswould adversely affect our business. PI3K inhibition program We believe that the following companies, among others, have developed or are in the clinical stage ofdevelopment of compounds targeting PI3K: ·Gilead Sciences, Inc. has received approval from the FDA of idelalisib for the treatment of people with CLL,SLL, or FL, and which we believe is conducting a Phase 1b clinical trial of acalisib (GS-9820);21 Table of Contents·Novartis, which we believe is conducting a Phase 2 clinical trial of buparlisib;·TG Therapeutics, Inc., which we believe is conducting multiple clinical trials of TGR-1202;·AstraZeneca, which we believe is conducting Phase 2 clinical trials of ACP 319; and·Incyte Corporation, which we believe is conducting a Phase 2 clinical trial of INCB-050465, and which we alsobelieve is conducting a Phase 2 clinical trial of INCB-040093.In addition, many companies are developing product candidates directed to disease targets such as Bruton’sTyrosine Kinase (BTK), B-cell lymphoma 2 (BCL-2), Janus Kinase (JAK), B-lymphocyte antigen CD-19, andprogrammed death 1/ligand 1 (PD-1/PD-L1), Cluster of Differentiation 79B antibody-drug conjugate (CD79B ADC),and pleiotropic pathways in the fields of hematology-oncology, including in the specific diseases for which we arecurrently developing duvelisib, or for which we may develop duvelisib or other PI3K inhibitors in the future. Suchcompanies include: ·Pharmacyclics LLC, a wholly-owned subsidiary of AbbVie, through its collaboration with Janssen Biotech,which has received approval from the FDA of ibrutinib, a BTK inhibitor, for the treatment of people with mantlecell lymphoma (MCL), CLL, MZL, SLL, or Waldenström’s macroglobulinemia, and is conducting multiple latestage clinical studies of ibrutinib in additional hematologic malignancies;·AbbVie, through its collaboration with Roche, which has received approval from the FDA of venetoclax, aBCL-2 inhibitor, for the treatment of people with CLL, and is conducting multiple late stage clinical studies ofventoclax in additional hematologic malignancies;·Celgene Corporation, which has received FDA approval of lenalidomide, an immunomodulator, for thetreatment of people with multiple myeloma, MCL, and myelodyplastic syndromes, and is conducting late stageclinical studies of lenalidomide in additional hematologic malignancies; we also believe that Celgene isconducting a Phase 1 clinical trial of CC-292, a BTK inhibitor, in patients with CLL;·AstraZeneca, which we believe is conducting a Phase 3 clinical trial of ACP-196, a BTK inhibitor, in patientswith CLL; and·Incyte Corporation, which has received FDA approval of ruxolitinib, a JAK inhibitor, in patients withintermediate or high-risk myelofibrosis, and which we believe is conducting Phase 2 clinical trials in CLL.FAK inhibition program There are other companies working to develop therapies to treat cancer including some who also target thetumor microenvironment or CSCs. These companies include divisions of large pharmaceutical companies includingAstellas Pharma Inc., Celgene, Inc., Sanofi‑Aventis U.S. LLC, GlaxoSmithKline plc, Boehringer Ingelheim GmbH,Pfizer Inc. and others. There are also biotechnology companies of various sizes that are developing therapies againstCSCs, including OncoMed Pharmaceuticals, Inc., Boston Biomedical Inc. (a division of Dainippon Sumitomo Corp),Stemline Therapeutics, Inc. and others.22 Table of ContentsMANUFACTURINGWe do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currentlyrely, and expect to continue to rely, on third parties for the manufacture of our product candidates and any products thatwe may develop, other than small amounts of compounds that we may synthesize ourselves for preclinical testing. Todate, we have obtained starting materials for our supply of the bulk drug substance and drug product for our productcandidates from third‑party manufacturers. We obtain our supplies from these manufacturers on a purchase order basisand do not have long‑term supply arrangements in place. We do not currently have arrangements in place for redundantsupply or a second source for bulk drug substance and drug product. If our current third‑party manufacturers shouldbecome unavailable to us for any reason, we believe that there are several potential replacements, although we mightincur some delay in identifying and qualifying such replacements.All of our drug candidates are organic compounds of low molecular weight, generally called small molecules.We select compounds not only on the basis of their potential efficacy and safety, but also for their ease of synthesis andreasonable cost of their starting materials. We expect to continue to develop drug candidates that can be producedcost‑effectively at third‑party manufacturing facilities.GOVERNMENT REGULATIONGovernment authorities in the United States, at the federal, state and local level, and in other countriesextensively regulate, among other things, the research, development, testing, manufacture, including any manufacturingchanges, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post‑approvalmonitoring and reporting, import and export of pharmaceutical products, such as those we are developing.United States drug approval processIn the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FDCA) andimplementing regulations. The process of obtaining regulatory approvals and the subsequent compliance withappropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time andfinancial resources. Failure to comply with the applicable United States requirements at any time during the productdevelopment process, approval process or after approval, may subject an applicant to a variety of administrative orjudicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition ofa clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production ordistribution injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminalpenalties.The process required by the FDA before a drug may be marketed in the United States generally involves thefollowing:·completion of preclinical laboratory tests, animal studies and formulation studies in compliance withthe FDA’s good laboratory practice (GLP) regulations;·submission to the FDA of an investigational new drug (IND) application, which must become effectivebefore human clinical trials may begin;·approval by an independent institutional review board (IRB) at each clinical site before each trial maybe initiated;·performance of adequate and well‑controlled human clinical trials in accordance with good clinicalpractices (GCP) to establish the safety and efficacy of the proposed drug for each indication;·submission to the FDA of a new drug application (NDA);23 Table of Contents·satisfactory completion of an FDA advisory committee review, if applicable;·satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which theproduct is produced to assess compliance with current good manufacturing practices (cGMP)requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’sidentity, strength, quality and purity; and·FDA review and approval of the NDA.Preclinical studiesPreclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro andanimal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use.The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. An INDsponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, anyavailable clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Somelong‑term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continueafter the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before thattime the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinicalhold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial canbegin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.Clinical trialsClinical trials involve the administration of the investigational new drug to human subjects under thesupervision of qualified investigators in accordance with GCP requirements, which include, among other things, therequirement that all research subjects provide their informed consent in writing before their participation in any clinicaltrial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of thestudy, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for eachclinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, anIRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before itcommences at that institution, and the IRB must conduct continuing review. The IRB must review and approve, amongother things, the study protocol and informed consent information to be provided to study subjects. An IRB mustoperate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specifictimeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:·Phase 1: The drug is initially introduced into healthy human subjects or patients with the targetdisease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution,excretion and, if possible, to gain an early indication of its effectiveness.·Phase 2: The drug is administered to a limited patient population to identify possible adverse effectsand safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases andto determine dosage tolerance and optimal dosage.·Phase 3: The drug is administered to an expanded patient population in adequate and well‑controlledclinical trials to generate sufficient data to statistically confirm the efficacy and safety of the productfor approval, to establish the overall risk‑benefit profile of the product and to provide adequateinformation for the labeling of the product.24 Table of ContentsProgress reports detailing the results of the clinical trials must be submitted at least annually to the FDA andmore frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completedsuccessfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate aclinical trial at any time on various grounds, including a finding that the research subjects are being exposed to anunacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if theclinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated withunexpected serious harm to patients.Marketing approvalAssuming successful completion of the required clinical testing, the results of the preclinical and clinicalstudies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposedlabeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product forone or more indications. Under federal law, the submission of most NDAs is additionally subject to a substantialapplication user fee, currently scheduled to exceed $2.0 million, and the sponsor of an approved NDA is also subject toannual product and establishment user fees, currently exceeding $97,000 per product and $512,000 per establishment.These fees are typically adjusted annually. User fee statutory authority expires every five years. The current authorityends on September 30, 2017, so the United States Congress will have to enact new legislation by then to continue theprogram. We cannot predict if Congress will authorize a new user fee program or what, if any, changes will be made inthe program.The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before acceptingthem for filing to determine whether they are sufficiently complete to permit substantive review. The FDA may requestadditional information rather than accept an NDA for filing. In this event, the application must be resubmitted with theadditional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Oncethe submission is accepted for filing, the FDA begins an in‑depth substantive review. The FDA has agreed to specifiedperformance goals in the review of NDAs. Under these goals, the FDA has committed to review most such applicationsfor non‑priority products within 10 months after accepting the application for filing, and most applications for priorityreview products, that is, drugs that the FDA determines represent a significant improvement over existing therapy,within six months after accepting the application for filing. The review process may be extended by the FDA for threeadditional months to consider certain information or clarification regarding information already provided in thesubmission. The FDA may also refer applications for novel drugs or products that present difficult questions of safety orefficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluationand a recommendation as to whether the application should be approved. The FDA is not bound by therecommendations of an advisory committee, but it considers such recommendations carefully when making decisions.Before approving an NDA, the FDA typically will inspect the facility or facilities where the product ismanufactured. The FDA will not approve an application unless it determines that the manufacturing processes andfacilities are in compliance with cGMP requirements and adequate to assure consistent production of the product withinrequired specifications. In addition, before approving an NDA, the FDA will typically inspect one or more clinical sitesto assure compliance with GCP and integrity of the clinical data submitted.The testing and approval process requires substantial time, effort and financial resources, and each may takemany years to complete. Data obtained from clinical activities are not always conclusive and may be susceptible tovarying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on atimely basis, or at all. We may encounter difficulties or unanticipated costs in our efforts to develop our productcandidates and secure necessary governmental approvals, which could delay or preclude us from marketing ourproducts.After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue anapproval letter or a complete response letter. An approval letter authorizes commercial marketing of the drug withspecific prescribing information for specific indications. A complete response letter generally outlines the deficienciesin the submission and may require substantial additional testing or information in order for the FDA to reconsider theapplication. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA,the FDA will issue an approval letter. The FDA has committed to reviewing such25 Table of Contentsresubmissions in two or six months depending on the type of information included. Even with submission of thisadditional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria forapproval and refuse to approve the NDA.Even if the FDA approves a product, it may limit the approved indications for use for the product, require thatcontraindications, warnings or precautions be included in the product labeling, require that post‑approval studies,including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing andsurveillance programs to monitor the product after commercialization, or impose other conditions, includingdistribution restrictions or other risk management mechanisms, which can materially affect the potential market andprofitability of the product. The FDA may prevent or limit further marketing of a product based on the results ofpost‑market studies or surveillance programs. After approval, some types of changes to the approved product, such asadding new indications, manufacturing changes and additional labeling claims, are subject to further testingrequirements and FDA review and approval.Fast track designationThe FDA is required to facilitate the development and expedite the review of drugs that are intended for thetreatment of a serious or life‑threatening condition for which there is no effective treatment and which demonstrate thepotential to address unmet medical needs for the condition. Under the fast track program, the sponsor of a new drugcandidate may request the FDA to designate the product for a specific indication as a fast track product concurrent withor after the filing of the IND for the product candidate. The FDA must determine if the product candidate qualifies forfast track designation within 60 days after receipt of the sponsor’s request.In addition to other benefits, such as the ability to use surrogate endpoints and have greater interactions withthe FDA, the FDA may initiate review of sections of a fast track product’s NDA before the application is complete. Thisrolling review is available if the applicant provides and the FDA approves a schedule for the submission of theremaining information and the applicant pays applicable user fees. However, the FDA’s time period goal for reviewing afast track application does not begin until the last section of the NDA is submitted. In addition, the fast trackdesignation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by dataemerging in the clinical trial process.Priority reviewUnder FDA policies, a product candidate may be eligible for priority review, or review within a six‑month timeframe from the time a complete application is accepted for filing. Products regulated by the FDA’s Center for DrugEvaluation and Research (CDER) are eligible for priority review if they provide a significant improvement compared tomarketed products in the treatment, diagnosis or prevention of a disease. A fast track designated product candidatewould ordinarily meet the FDA’s criteria for priority review.Accelerated approvalUnder the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life‑threateningillness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogateendpoint that is reasonably likely to predict clinical benefit. In clinical trials, a surrogate endpoint is a measurement oflaboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels,functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. Aproduct candidate approved on this basis is subject to rigorous post‑marketing compliance requirements, including thecompletion of Phase 4 or post‑approval clinical trials to confirm the effect on the clinical endpoint. Failure to conductrequired post‑approval studies, or confirm a clinical benefit during post‑marketing studies, would allow the FDA towithdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved underaccelerated regulations are subject to prior review by the FDA.26 Table of ContentsOrphan drugsUnder the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a raredisease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals inthe United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphandrug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA.Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review andapproval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particulardisease with FDA orphan drug designation is entitled to a seven‑year exclusive marketing period in the United States forthat product, for that indication. During the seven‑year exclusivity period, the FDA may not approve any otherapplications to market the same drug for the same orphan indication, except in limited circumstances, such as a showingof clinical superiority to the product with orphan drug exclusivity in that it is shown to be safer, more effective or makesa major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drugfor the same disease or condition, or the same drug for a different disease or condition. Among the other benefits oforphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.Pediatric informationUnder the Pediatric Research Equity Act of 2003, as amended and reauthorized by the Food and DrugAdministration Amendments Act of 2007 (FDAAA), an NDA or supplement to an NDA must contain data that areadequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatricsubpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safeand effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission ofsome or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatricdata requirements. Unless otherwise required by regulation, the pediatric data requirements do not apply to productswith orphan drug designation.The Hatch‑Waxman actAbbreviated new drug applicationsIn seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent withclaims that cover the applicant’s product or a method of using the product. Upon approval of a drug, each of the patentslisted in the application for the drug is then published in the FDA’s Approved Drug Products with TherapeuticEquivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be citedby potential competitors in support of approval of an abbreviated new drug application (ANDA). Generally, an ANDAprovides for marketing of a drug product that has the same active ingredients in the same strengths, dosage form androute of administration as the listed drug and has been shown to be bioequivalent through in vitro or in vivo testing orotherwise to the listed drug. ANDA applicants are not required to conduct or submit results of preclinical or clinical teststo prove the safety or effectiveness of their drug product, other than the requirement for bioequivalence testing. Drugsapproved in this way are commonly referred to as “generic equivalents” to the listed drug, and can often be substitutedby pharmacists under prescriptions written for the original listed drug.The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product inthe FDA’s Orange Book, except for patents covering methods of use for which the ANDA applicant is not seekingapproval. Specifically, the applicant must certify with respect to each patent that:·the required patent information has not been filed;·the listed patent has expired;27 Table of Contents·the listed patent has not expired, but will expire on a particular date and approval is sought after patentexpiration; or·the listed patent is invalid, unenforceable or will not be infringed by the new product.A certification that the new product will not infringe the already approved product’s listed patents or that suchpatents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listedpatents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not beapproved until all the listed patents claiming the referenced product have expired.If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also sendnotice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing bythe FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of theParagraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IVcertification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the NDA orpatent holder’s receipt of the Paragraph IV certification, expiration of the patent, settlement of the lawsuit or a decisionin the infringement case that is favorable to the ANDA applicant.The ANDA also will not be approved until any applicable non‑patent exclusivity period, such as exclusivityfor obtaining approval of a new chemical entity, for the referenced product has expired. Federal law provides a period offive years following approval of a drug containing no previously approved active moiety during which ANDAs forgeneric versions of those drugs cannot be submitted unless the submission contains a Paragraph IV challenge to a listedpatent, in which case the submission may be made four years following the original product approval. Federal lawprovides for a period of three years of exclusivity during which the FDA cannot grant effective approval of an ANDA forthe conditions of use covered by the exclusivity, but FDA requires as a condition of approval new clinical trialsconducted by or for the sponsor. This three‑year exclusivity period often protects changes to a previously approved drugproduct, such as a new dosage form, route of administration, combination or indication. Under the Best Pharmaceuticalsfor Children Act, federal law also provides that periods of patent and non‑patent marketing exclusivity listed in theOrange Book for a drug may be extended by six months if the NDA sponsor conducts pediatric studies identified by theFDA in a written request. For written requests issued by the FDA after September 27, 2007, the date of enactment of theFDAAA, the FDA must grant pediatric exclusivity no later than nine months prior to the date of expiration of patent ornon‑patent exclusivity in order for the six‑month pediatric extension to apply to that exclusivity period.Section 505(b)(2) new drug applicationsMost drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is aspecial type of NDA, commonly referred to as a Section 505(b)(2) NDA, which enables the applicant to rely, in part, onthe FDA’s previous approval of a similar product, or published literature, in support of its application.505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new usesof previously approved products. Section 505(b)(2) permits the filing of an NDA where at least some of the informationrequired for approval comes from studies not conducted by or for the applicant and for which the applicant has notobtained a right of reference. If the 505(b)(2) applicant can establish that reliance on the FDA’s previous approval isscientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product.The FDA may also require companies to perform additional studies or measurements to support the change from theapproved product. The FDA may then approve the new product candidate for all or some of the labeled indications forwhich the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2)applicant.To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approvedproduct, the applicant is required to certify to the FDA concerning any patents listed for the approved product in theOrange Book to the same extent that an ANDA applicant would. As a result, approval of a 505(b)(2) NDA can be stalleduntil all the listed patents claiming the referenced product have expired, until any non‑patent exclusivity, such asexclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced28 Table of Contentsproduct has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until theearlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to theSection 505(b)(2) applicant.Combination productsThe FDA regulates combinations of products that cross FDA centers, such as drug, biologic or medical devicecomponents that are physically, chemically or otherwise combined into a single entity, as a combination product. TheFDA center with primary jurisdiction for the combination product will take the lead in the premarket review of theproduct, with the other center consulting or collaborating with the lead center.The FDA’s Office of Combination Products (OCP) determines which center will have primary jurisdiction forthe combination product based on the combination product’s “primary mode of action.” A mode of action is the meansby which a product achieves an intended therapeutic effect or action. The primary mode of action is the mode of actionthat provides the most important therapeutic action of the combination product, or the mode of action expected to makethe greatest contribution to the overall intended therapeutic effects of the combination product.Often it is difficult for the OCP to determine with reasonable certainty the most important therapeutic action ofthe combination product. In those difficult cases, the OCP will consider consistency with other combination productsraising similar types of safety and effectiveness questions, or which center has the most expertise to evaluate the mostsignificant safety and effectiveness questions raised by the combination product.A sponsor may use a voluntary formal process, known as a Request for Designation, when the productclassification is unclear or in dispute, to obtain a binding decision as to which center will regulate the combinationproduct. If the sponsor objects to that decision, it may request that the agency reconsider that decision.Overview of FDA regulation of companion diagnosticsFDA officials have issued guidance that address issues critical to developing in vitro companion diagnostics,such as biomarker qualification, establishing clinical validity, the use of retrospective data, the appropriate patientpopulation and when the FDA will require that the device and the drug be approved simultaneously. The guidanceissued in August 2014 states that if safe and effective use of a therapeutic product depends on an in vitro diagnostic,then the FDA generally will require approval or clearance of the diagnostic at the same time that the FDA approves thetherapeutic product.The FDA previously has required in vitro companion diagnostics intended to select the patients who willrespond to the cancer treatment to obtain Pre‑Market Approval (PMA), simultaneously with approval of the drug. Basedon the draft guidance, and the FDA’s past treatment of companion diagnostics, we believe that the FDA will require oneor more of our in vitro companion diagnostics to obtain PMA for our companion diagnostics to identify patientpopulations suitable for our cancer therapies, such as the in vitro companion diagnostic for our product candidates. Thereview of these in vitro companion diagnostics in conjunction with the review of our potential cancer treatments willinvolve coordination of review by CDER and by the FDA’s Center for Devices and Radiological Health Office of InVitro Diagnostics Device Evaluation and Safety.PMA approval pathwayA medical device, including an in vitro diagnostic (IVD) to be commercially distributed in the United Statesmust receive either 510(k) clearance or PMA approval from the FDA prior to marketing. Devices deemed by the FDA topose the greatest risk, such as life‑sustaining, life supporting or implantable devices, or devices deemed notsubstantially equivalent to a previously 510(k) cleared device or a pre-amendment class III device for which PMAapplications have not been called, are placed in Class III requiring PMA approval. The PMA approval pathway requiresproof of the safety and effectiveness of the device to the FDA’s satisfaction.The PMA approval pathway generally takes from one to three years or even longer from submission of theapplication.29 Table of ContentsA PMA application for an IVD must provide extensive preclinical and clinical trial data. Preclinical data for anIVD includes many different tests, including how reproducible the results are when the same sample is tested multipletimes by multiple users at multiple laboratories. The clinical data need to establish that the test is sufficiently safe,effective and reliable in the intended use population. In addition, the FDA must be convinced that a device has clinicalutility, meaning that an IVD provides information that is clinically meaningful. A biomarker’s clinical significance maybe obvious, or the applicant may be able to rely upon published literature or submit data to show clinical utility.A PMA application also must provide information about the device and its components regarding, among otherthings, device design, manufacturing and labeling. The sponsor must pay an application fee.As part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance withQuality System Regulation (QSR) requirements, which impose elaborate testing, control, documentation and otherquality assurance procedures.Upon submission, the FDA determines if the PMA application is sufficiently complete to permit a substantivereview, and, if so, the FDA accepts the application for filing. The FDA then commences an in‑depth review of the PMAapplication. The entire process typically takes one to three years, but may take longer. The review time is oftensignificantly extended as a result of the FDA asking for more information or clarification of information alreadyprovided. The FDA also may respond with a not approvable determination based on deficiencies in the application andrequire additional clinical trials that are often expensive and time‑consuming and can substantially delay approval.During the review period, an FDA advisory committee, typically a panel of clinicians, may be convened toreview the application and recommend to the FDA whether, or upon what conditions, the device should be approved.Although the FDA is not bound by the advisory panel decision, the panel’s recommendation is important to the FDA’soverall decision making process.If the FDA’s evaluation of the PMA application is favorable, the FDA typically issues an approvable letterrequiring the applicant’s agreement to specific conditions, such as changes in labeling, or specific additionalinformation, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA concludes thatthe applicable criteria have been met, the FDA will issue an approval order, which may be for more limited indicationsthan those originally sought by the manufacturer. The approval order can include post‑approval conditions that the FDAbelieves necessary to ensure the safety and effectiveness of the device, including, among other things, restrictions onlabeling, promotion, sale and distribution. Failure to comply with the conditions of approval can result in materialadverse enforcement action, including the loss or withdrawal of the approval.Even after approval of a PMA, a new PMA or PMA supplement may be required in the event of a modificationto the device, its labeling or its manufacturing process. Supplements to a PMA often require the submission of the sametype of information required for an original PMA, except that the supplement is generally limited to the informationneeded to support the proposed change from the product covered by the original PMA.Clinical trialsA clinical trial is almost always required to support a PMA application. In some cases, one or more smallerInvestigational Device Exemption (IDE) studies may precede a pivotal clinical trial intended to demonstrate the safetyand efficacy of the investigational device.All clinical studies of investigational devices must be conducted in compliance with the FDA’s requirements. Ifan investigational device could pose a significant risk to patients pursuant to FDA regulations, the FDA must approvean IDE application prior to initiation of investigational use. IVD trials usually do not require an IDE, as the FDA doesnot judge them to be a significant risk because the results do not affect the patient’s safety in the study. The FDA hasconfirmed that one of our IVDs does not need an IDE application as it does not pose significant risk at this time. Shouldinterim clinical trial data detect a safety signal between patients who test positive or negative for the specific biomarker,then a IDE would be required.30 Table of ContentsAn IDE application must be supported by appropriate data, such as laboratory test results, showing that it is safeto test the device in humans and that the testing protocol is scientifically sound. The FDA typically grants IDE approvalfor a specified number of patients. A nonsignificant risk device does not require FDA approval of an IDE. Bothsignificant risk and nonsignificant risk investigational devices require approval from IRBs at the study centers where thedevice will be used.During the trial, the sponsor must comply with the FDA’s IDE requirements for investigator selection, trialmonitoring, reporting and record keeping. The investigators must obtain patient informed consent, rigorously follow theinvestigational plan and study protocol, control the disposition of investigational devices and comply with all reportingand record keeping requirements. Prior to granting PMA approval, the FDA typically inspects the records relating to theconduct of the study and the clinical data supporting the PMA application for compliance with applicable requirements.Although the QSR does not fully apply to investigational devices, the requirement for controls on design anddevelopment does apply. The sponsor also must manufacture the investigational device in conformity with the qualitycontrols described in the IDE application and any conditions of IDE approval that the FDA may impose with respect tomanufacturing.Post‑marketAfter a device is on the market, numerous regulatory requirements apply. These requirements include: the QSR,labeling regulations, the FDA’s general prohibition against promoting products for unapproved or “off label” uses, theMedical Device Reporting regulation, which requires that manufacturers report to the FDA if their device may havecaused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to adeath or serious injury if it were to recur, and regulations requiring manufacturers to report recalls and field actions tothe FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA.The FDA enforces these requirements by inspection and market surveillance. If the FDA finds a violation, it caninstitute a wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions such as:fines, injunctions and civil penalties; recall or seizure of products; operating restrictions, partial suspension or totalshutdown of production; refusing requests for PMA approval of new products; withdrawing PMA approvals alreadygranted; and criminal prosecution.Other regulatory requirementsAny drug manufactured or distributed by us pursuant to FDA approvals would be subject to pervasive andcontinuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodicreporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with theproduct. After approval, most changes to the approved product, such as adding new indications or other labeling claimsare subject to prior FDA review and approval.The FDA may impose a number of post‑approval requirements as a condition of approval of an NDA. Forexample, the FDA may require post‑marketing testing, including Phase 4 clinical trials, and surveillance to further assessand monitor the product’s safety and effectiveness after commercialization. Regulatory approval of oncology productsoften requires that patients in clinical trials be followed for long periods to determine the overall survival benefit of thedrug.In addition, drug manufacturers and other entities involved in the manufacture and distribution of approveddrugs are required to register their establishments with the FDA and state agencies, and are subject to periodicunannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to themanufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDAregulations also require investigation and correction of any deviations from cGMP and impose reporting anddocumentation requirements upon us and any third‑party manufacturers that we may decide to use. Accordingly,31 Table of Contentsmanufacturers must continue to expend time, money and effort in the areas of production and quality control tomaintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirementsand standards is not maintained or if problems occur after the product reaches the market. Later discovery of previouslyunknown problems with a product, including adverse events of unanticipated severity or frequency, or withmanufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approvedlabeling to add new safety information, imposition of post‑market studies or clinical trials to assess new safety risks orimposition of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy program. Otherpotential consequences include, among other things:·restrictions on the marketing or manufacturing of the product, complete withdrawal of the productfrom the market or product recalls;·fines, warning letters or holds on post‑approval clinical trials;·refusal of the FDA to approve pending applications or supplements to approved applications, orsuspension or revocation of product license approvals;·product seizure or detention, or refusal to permit the import or export of products; or·consent decrees, injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on themarket. Drugs may be promoted only for the approved indications and in accordance with the provisions of theapproved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of offlabel uses, and a company that is found to have improperly promoted off label uses may be subject to significantliability.Additional provisionsAnti‑kickback and false claims lawsIn addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federallaws have been applied to restrict certain marketing practices in the pharmaceutical industry. These laws includeanti‑kickback statutes and false claims statutes. The federal anti‑kickback statute prohibits, among other things,knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing,leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable underMedicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply toarrangements between pharmaceutical manufacturers on the one hand and various third parties, including prescribers,purchasers and health plans (including formulary managers) on the other. Violations of the anti‑kickback statute arepunishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federalhealthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certaincommon activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly,and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subjectto scrutiny if they do not qualify for an exemption or safe harbor.Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a falseclaim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have afalse claim paid. A number of pharmaceutical and other healthcare companies have been prosecuted under these laws forvarious activities, including allegedly inflating drug prices that the manufacturers report to pricing services, which inturn were used by the government to set Medicare and Medicaid reimbursement rates or providing free samples tocustomers with the expectation that the customers would bill federal programs for the product. In addition, certainmarketing practices, including off‑label promotion, may also violate false claims laws.32 Table of ContentsThe majority of states also have statutes or regulations similar to the federal anti‑kickback law and false claims laws,which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, applyregardless of the payor.Physician drug samplesAs part of the sales and marketing process, pharmaceutical companies frequently provide samples of approveddrugs to physicians. The Prescription Drug Marketing Act (PDMA) imposes requirements and limitations upon theprovision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugsunless the state licensing program meets certain federal guidelines that include minimum standards for storage, handlingand record keeping. In addition, the PDMA sets forth civil and criminal penalties for violations.Foreign regulationIn order to market any product outside of the United States, we would need to comply with numerous andvarying regulatory requirements of other countries regarding safety and efficacy and governing, among other things,clinical trials, marketing authorization, commercial sales and distribution of our products. Whether or not we obtainFDA approval for a product, we would need to obtain the necessary approvals by the comparable regulatory authoritiesof foreign countries before we can commence clinical trials or marketing of the product in those countries. The approvalprocess varies from country to country and can involve additional product testing and additional administrative reviewperiods. The time required to obtain approval in other countries might differ from and be longer than that required toobtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failureor delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.Pharmaceutical coverage, pricing and reimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any drug products for which weobtain regulatory approval. Sales of any of our product candidates, if approved, will depend, in part, on the extent towhich the costs of the products will be covered by third‑party payors, including government health programs such asMedicare and Medicaid, commercial health insurers and managed care organizations. The process for determiningwhether a payor will provide coverage for a drug product may be separate from the process for setting the price orreimbursement rate that the payor will pay for the drug product once coverage is approved. Third‑party payors may limitcoverage to specific drug products on an approved list, or formulary, which might not include all of the approved drugsfor a particular indication.In order to secure coverage and reimbursement for any product that might be approved for sale, we may need toconduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost‑effectiveness ofthe product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. We may also needto provide discounts to purchasers, private health plans or government healthcare programs. Our product candidates maynot be considered medically necessary or cost‑effective. A payor’s decision to provide coverage for a drug product doesnot imply that an adequate reimbursement rate will be approved. Third‑party reimbursement may not be sufficient toenable us to maintain price levels high enough to realize an appropriate return on our investment in productdevelopment.The containment of healthcare costs has become a priority of federal, state and foreign governments, and theprices of drugs have been a focus in this effort. Third‑party payors are increasingly challenging the prices charged formedical products and services and examining the medical necessity and cost‑effectiveness of medical products andservices, in addition to their safety and efficacy. If these third‑party payors do not consider our products to becost‑effective compared to other available therapies, they may not cover our products after approval as a benefit undertheir plans or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit. The U.S.government, state legislatures and foreign governments have shown significant interest in implementing costcontainment programs to limit the growth of government‑paid health care costs, including price controls, restrictions onreimbursement and requirements for substitution of generic products for branded prescription drugs. Adoption of suchcontrols and measures, and tightening of restrictive policies in jurisdictions33 Table of Contentswith existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we aredeveloping and could adversely affect our net revenue and results.Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drugproducts may be marketed only after a reimbursement price has been agreed. Some countries may require the completionof additional studies that compare the cost‑effectiveness of a particular product candidate to currently availabletherapies. For example, the European Union provides options for its member states to restrict the range of drug productsfor which their national health insurance systems provide reimbursement and to control the prices of medicinal productsfor human use. European Union member states may approve a specific price for a drug product or may instead adopt asystem of direct or indirect controls on the profitability of the company placing the drug product on the market. Othermember states allow companies to fix their own prices for drug products, but monitor and control company profits. Thedownward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result,increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross‑borderimports from low‑priced markets exert competitive pressure that may reduce pricing within a country. There can be noassurance that any country that has price controls or reimbursement limitations for drug products will allow favorablereimbursement and pricing arrangements for any of our products.The marketability of any products for which we receive regulatory approval for commercial sale may suffer ifthe government and third‑party payors fail to provide adequate coverage and reimbursement. In addition, an increasingemphasis on managed care in the United States has increased and we expect will continue to increase the pressure ondrug pricing. Coverage policies, third‑party reimbursement rates and drug pricing regulation may change at any time.Even if favorable coverage and reimbursement status is attained for one or more products for which we receiveregulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.New legislation and regulationsFrom time to time, legislation is drafted, introduced and passed in the United States Congress that couldsignificantly change the statutory provisions governing the testing, approval, manufacturing and marketing of pharmaceutical products. For example, in December 2016, Congress enacted and President Obama signed into law the21 Century Cures Act, that amends a number of sections of the FDCA, including provisions related to medical deviceapproval. In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency inways that may significantly affect our business and our products. It is impossible to predict whether further legislativechanges will be enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect ofsuch changes, if any, may be. The United States and state governments also continue to propose and pass legislation designed to reduce the cost ofhealthcare. For example, in March 2010, Congress enacted the Patient Protection and Affordable Care Act and theHealth Care and Education Reconciliation Act (the Healthcare Reform Act) which includes changes to the coverage andreimbursement of drug products under government health care programs, including increased rebates for drugsdispensed to Medicaid beneficiaries, extension of such Medicaid rebates to Medicaid managed care plans, mandatorydiscounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales tofederal health care programs. Modifications to or repeal of all or certain provisions of the Healthcare Reform Act areexpected as a result of the outcome of the recent presidential election and Republicans maintaining control of Congress,consistent with statements made by Donald Trump and members of Congress during the presidential campaign andfollowing the election. We cannot predict the ultimate content, timing or effect of any changes to the Healthcare ReformAct or other federal and state reform efforts. There is no assurance that federal or state health care reform will notadversely affect our future business and financial results. EMPLOYEESAs of March 15, 2017, we had 32 full‑time equivalent employees, including a total of 6 employees with M.D. orPh.D. degrees. Of these full‑time employees, 18 employees are engaged in research and development activities. None ofour employees is represented by a labor union or covered by a collective bargaining agreement. We consider ourrelationship with our employees to be good.34 stTable of ContentsBUSINESS—EXECUTIVE OFFICERS OF THE REGISTRANTThe following table sets forth the name, age and position of each of our executive officers as of March 15,2017.Name Age Position Robert Forrester 53 President, Chief Executive Officer Daniel Paterson 56 Chief Operating Officer Robert Forrester has served has served as our Chief Executive Officer since July 2013, as our Chief OperatingOfficer from March 2011 until July 2013 and our President since January 2013. Mr. Forrester has previously heldexecutive level positions at both private and public life sciences companies. Prior to joining us, Mr. Forrester served asChief Operating Officer of Forma Therapeutics, Inc. from 2010 until 2011. Previously he served as Interim President andChief Executive Officer of CombinatoRx, Inc. from 2009 until 2010 and as its Executive Vice President and ChiefFinancial Officer from 2004 to 2009. Mr. Forrester served as Senior Vice President, Finance and Corporate Developmentat Coley Pharmaceuticals Group, Inc. from 2000 to 2003. He earned his LL.B. from Bristol University in England.Daniel Paterson has served as our Chief Operating Officer since December 2014, our Chief Business Officerfrom July 2013 to December 2014 and as our Vice President, Head of Corporate Development and Diagnostics fromMarch 2012 until July 2013. Prior to joining us, Mr. Paterson was a consultant in 2011 until joining us in 2012. From2009 through 2010, Mr. Paterson was the COO of On‑Q‑ity. Mr. Paterson was the President and CEO of The DNA RepairCompany from 2006 until 2009, when it was acquired by On‑Q‑ity. Previously, he held senior level positions at IMSHealth, CareTools, OnCare and Axion.OUR CORPORATE INFORMATIONWe were incorporated under the laws of the State of Delaware in August 2010. Our principal executive officesare located at 117 Kendrick Street, Suite 500, Needham, Massachusetts 02494 and our telephone number is(781) 292‑4200.ADDITIONAL INFORMATIONWe maintain a website at www.verastem.com. We make available, free of charge on our website, our annualreports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and all amendments to those reportsfiled or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the ExchangeAct) as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the SEC. We alsomake available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10%stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of thosefilings are provided to us by those persons. The information contained on, or that can be accessed through, our websiteis not a part of or incorporated by reference in this Annual Report on Form 10‑K.35 Table of Contents ITEM 1A. Risk Factors. RISKS RELATED TO OUR LICENSE AGREEMENT WITH INFINITY If we do not realize the anticipated benefits of our license agreement with Infinity for the duvelisib program, ourbusiness could be adversely affected. Our license agreement with Infinity for the duvelisib program may fail to further our business strategy asanticipated or to achieve anticipated benefits and success. We may make or have made assumptions relating to theimpact of the acquisition of the duvelisib program on our financial results relating to numerous matters, including:·transaction and integration costs;·the cost of development and commercialization of duvelisib products; and·other financial and strategic risks related to the license agreement with Infinity.Further, we may incur higher than expected operating, transaction and integration costs, and we may encountergeneral economic and business conditions that adversely affect us relating to our license agreement with Infinity. If oneor more of these assumptions are incorrect, it could have an adverse effect on our business and operating results, and thebenefits from our license agreement with Infinity for the duvelisib program may not be realized or be of the magnitudeexpected. For instance, if the results of the DUO study fail to meet certain pre-specified criteria we may not be able toreceive regulatory approval of duvelisib.RISKS RELATED TO THE DISCOVERY, DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTCANDIDATESPreclinical testing and clinical trials of our product candidates may not be successful. In the near term, we aredependent on the success of our PI3K inhibitor program. If we are unable to complete the clinical development of,obtain marketing approval for or successfully commercialize duvelisib, or any of our other product candidates or if weexperience significant delays in doing so, our business will be materially harmed. We have invested a significant portion of our efforts and financial resources in the research and development ofour product candidates, including duvelisib and defactinib, for which we are conducting clinical trials in multipleindications. Our ability to generate product revenues will depend heavily on the successful development and potentialcommercialization of our product candidates. The success of our product candidates will depend on several factors,including the following: ·initiation and successful enrollment and completion of our clinical trials;·receipt of marketing approvals from the U.S. Food and Drug Administration (FDA) and other regulatoryauthorities for our product candidates, including pricing approvals where required;·establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;·obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our productcandidates;·establishing commercial capabilities, including hiring and training a sales force, and launching commercialsales of the products, if and when approved, whether alone or in collaboration with others;·acceptance of the products, if and when approved, by patients, the medical community and third-party payors;·effectively competing with other therapies; and·a continued acceptable safety profile of the products following approval.36 Table of ContentsMany of these factors are beyond our control, including clinical development, the regulatory submissionprocess, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of anycollaborator. If we do not achieve one or more of these factors in a timely manner or at all, we could experiencesignificant delays or an inability to successfully commercialize our product candidates, which would materially harmour business.If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatoryauthorities or do not otherwise produce positive results, we may incur additional costs or experience delays incompleting, or ultimately be unable to complete, the development and commercialization of our product candidates. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we mustcomplete extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinicaltesting is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome.A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and earlyclinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do notnecessarily predict final results. For example, a further review and analysis of this data may change the conclusionsdrawn from this unaudited data indicating less promising results than we currently anticipate. In some instances, there can be significant variability in safety and/or efficacy results between different trials ofthe same product candidate due to numerous factors, including changes in trial protocols, differences in size and type ofthe patient populations, adherence to the dosing regimen and other trial protocols and the rate of dropout amongclinical trial participants. We do not know whether any Phase 2, Phase 3 or other clinical trial we may conduct willdemonstrate consistent or adequate efficacy and safety sufficient to obtain regulatory approval to market our productcandidates.In addition, the design of a clinical trial may determine whether its results will support approval of a productand flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Moreover,preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies thathave believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonethelessfailed to obtain marketing approval of their products.A failure of one or more clinical trials could indicate a higher likelihood that subsequent clinical trials of thesame product candidate in the same or other indications or subsequent clinical trials of other related product candidateswill be unsuccessful for the same reasons as the unsuccessful clinical trials.We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay orprevent our ability to receive marketing approval or commercialize our product candidates, including:·regulators or institutional review boards may not authorize us or our investigators to commence a clinical trialor conduct a clinical trial at a prospective trial site;·we may have delays in reaching or fail to reach agreement on clinical trial contracts or clinical trial protocolswith prospective trial sites;·clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, orregulators may require us, to conduct additional clinical trials or abandon product development programs;·the number of patients required for clinical trials of our product candidates may be larger than we anticipate,enrollment in these clinical trials may be slower than we anticipate or participants may drop out of theseclinical trials at a higher rate than we anticipate;·our third-party contractors may fail to comply with regulatory requirements or meet their contractualobligations to us in a timely manner, or at all;37 Table of Contents·regulators or institutional review boards may require that we or our investigators suspend or terminate clinicaltrials for various reasons, including noncompliance with regulatory requirements or a finding that theparticipants are being exposed to unacceptable health risks;·the cost of clinical trials of our product candidates may be greater than we anticipate;·the supply or quality of our product candidates or other materials necessary to conduct clinical trials of ourproduct candidates may be insufficient or inadequate; and·our product candidates may have undesirable side effects or other unexpected characteristics, causing us or ourinvestigators, regulators or institutional review boards to suspend or terminate the trials.If we are required to conduct additional clinical trials or other testing of our product candidates beyond thosethat we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or othertesting, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns,we may:·be delayed in obtaining marketing approval for our product candidates;·not obtain marketing approval at all;·obtain approval for indications or patient populations that are not as broad as intended or desired;·obtain approval with labeling that includes significant use or distribution restrictions including imposition andmonitoring of a Risk Evaluation and Mitigation Strategy (REMS), or safety warnings, including boxedwarnings;·be subject to additional post marketing testing requirements; or·have the product removed from the market after obtaining marketing approval.The FDA and foreign regulatory authorities may determine that the results from our ongoing and future trials donot support regulatory approval and may require us to conduct an additional clinical trial or trials. If these agencies takesuch a position, the costs of development of our product candidates could increase materially and their potential marketintroduction could be delayed. The regulatory agencies could also require that we conduct additional clinical,nonclinical or manufacturing validation studies and submit that data before it will consider a New Drug Application.Our product development costs will also increase if we experience delays in clinical testing or marketing approvals. Wedo not know whether any clinical trials will begin as planned, will need to be restructured or will be completed onschedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have theexclusive right to commercialize our product candidates or allow our competitors to bring products to market before wedo and impair our ability to successfully commercialize our product candidates and may harm our business and resultsof operations.If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessaryregulatory approvals could be delayed or prevented.We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locateand enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similarregulatory authorities outside the United States. In addition, there are a number of ongoing clinical trials beingconducted by other companies for product candidates treating cancer. Patients who would otherwise be eligible for ourclinical trials may instead enroll in clinical trials of our competitors’ product candidates, particularly if they view suchtreatments to be more conventional and established.Patient enrollment is affected by other factors including:·the size and nature of the patient population;·severity of the disease under investigation;·eligibility criteria for the study in question;·perceived risks and benefits of the product candidate under study in relation to other available treatmentsincluding any new treatments that may be approved for the indications we are investigating;38 Table of Contents·efforts to facilitate timely enrollment in clinical trials;·patient referral practices of physicians;·the ability to monitor patients adequately during and after treatment; and·proximity and availability of clinical trial sites for prospective patients.Furthermore, enrolled patients may drop out of a clinical trial, which could impair the validity or statisticalsignificance of the clinical trial. A number of factors can influence the patient discontinuation rate, including, but notlimited to:·the inclusion of a placebo arm in a trial;·possible inactivity or low activity of the product candidate being tested at one or more of the dose levels beingtested;·the occurrence of adverse side effects, whether or not related to the product candidate; and·the availability of numerous alternative treatment options, including clinical trials evaluating competingproduct candidates, that may induce patients to discontinue their participation in the trial.Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays ormay require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result inincreased development costs for our product candidates, which would cause the value of our company to decline andlimit our ability to obtain additional financing.If serious adverse or unexpected side effects are identified during the development of our product candidates, we mayneed to abandon or limit our development of some of our product candidates.All of our product candidates are in various stages of clinical development and their risk of failure is high. It isimpossible to predict when or if any of our product candidates will prove effective or safe in humans or will receivemarketing approval. If our product candidates are associated with undesirable side effects or have characteristics that areunexpected, we may need to abandon their development or limit development to certain uses or subpopulations inwhich the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a riskbenefit perspective. A small percentage of patients in our clinical trials have experienced serious adverse events (SAEs)deemed by us and the clinical investigator to be related to our product candidates. SAEs generally refer to adverseevents (AEs) that result in death, are life threatening, require hospitalization or prolonging of hospitalization, or cause asignificant and permanent disruption of normal life functions, congenital anomalies or birth defects, or requireintervention to prevent such outcomes.Duvelisib is in our Phase 3 DUO study and the development program continues to progress. Duvelisib hassuccessfully completed the Phase 2 DYNAMO study, in which duvelisib was generally well tolerated, with amanageable safety profile with appropriate risk mitigation.Defactinib is in our Phase 1 and Phase 2 clinical trials and the development program continues to progress. Thetoxicities reported thus far are consistent with other drugs in this class. As a result of adverse events observed to date, or further safety or toxicity issues that we may experience in ourclinical trials in the future, we may not receive approval to market any product candidates, which could prevent us fromever generating revenue from the sale of products or achieving profitability. Results of our trials could reveal anunacceptably high severity and prevalence of side effects. In such an event, our trials could be suspended or terminatedand the FDA or comparable foreign regulatory authorities could order us to cease further development of or denyapproval of our products candidates for any or all targeted indications.39 Table of ContentsMany compounds that initially showed promise in early stage testing for treating cancer have later been foundto cause side effects that prevented further development of the compound. In addition, while we and our clinical trialinvestigators currently determine if serious adverse or unacceptable side effects are drug related, the FDA or other non-U.S. regulatory authorities may disagree with our or our clinical trial investigators’ interpretation of data from clinicaltrials and the conclusion that a serious adverse effect or unacceptable side effect was not drug related.Preclinical studies and preliminary and interim data from clinical trials of our product candidates are not necessarilypredictive of the results or success of ongoing or later clinical trials of our product candidates. If we cannot replicatethe results from our preclinical studies and clinical trials of our product candidates, we may be unable to successfullydevelop, obtain regulatory approval for and commercialize our product candidates. Preclinical studies and any positive preliminary and interim data from our clinical trials of our productcandidates may not necessarily be predictive of the results of ongoing or later clinical trials. Even if we are able tocomplete our planned clinical trials of our product candidates according to our current development timeline, thepositive results from clinical trials of our product candidates may not be replicated in subsequent clinical trial results.Also, our later stage clinical trials could differ in significant ways from earlier stage clinical trials, which could cause theoutcome of the later stage trials to differ from our earlier stage clinical trials. For example, these differences may includechanges to inclusion and exclusion criteria, efficacy endpoints and statistical design. Many companies in thepharmaceutical and biotechnology industries, including us, have suffered significant setbacks in late stage clinical trialsafter achieving positive results in an earlier stage of development. If we fail to produce positive results in our plannedclinical trials of any of our product candidates, the development timeline and regulatory approval andcommercialization prospects for our product candidates, and, correspondingly, our business and financial prospects,would be materially adversely affected. Our approach to the treatment of cancer through the killing of cancer cells and disruption of the tumor micro-environment is unproven, and we do not know whether we will be able to develop any products of commercial value. We are discovering and developing product candidates to treat cancer by using targeted agents to kill cancercells or disrupt the tumor microenvironment and thereby thwart their growth and proliferation of cancer cells. Researchon the use of small molecules to inhibit PI3K and FAK signaling pathways and disrupt the tumor microenvironment isan emerging field and, consequently, there is uncertainty about whether duvelisib and defactinib are effective inimproving outcomes for patients with cancer. With respect to our FAK inhibition program, there is some debate in thescientific community regarding cancer stem cells (CSCs), the existence of these cells, the defining characteristics ofthese cells, as well as whether targeting such cells is an effective approach to treating cancer. Some believe that targetingCSCs as part of our multi-faceted approach should be sufficient for a positive clinical outcome, while others believethat, at times or always, the use of FAK inhibitors that reduce CSCs should be coupled with conventionalchemotherapies for a positive clinical outcome. Any products that we develop may not effectively target cancer cells, enhance anti-tumor immunity, ormodulate the local tumor microenvironment. While we are currently conducting clinical trials for product candidatesthat we believe will attack cancer cells through the inhibition of the PI3K or FAK signaling pathways and potentiallydisrupt the tumor microenvironment, we may not ultimately be successful in demonstrating their efficacy, alone or incombination with other treatments. The approval of our product candidates as part of a combination therapy for the treatment of certain cancers may bemore costly than our prior clinical trials, may take longer to achieve regulatory approval, may be associated with new,more severe or serious and unanticipated adverse events, and may have a smaller market opportunity.Part of our current business model involves conducting clinical trials to study the effects of combining ourproduct candidates with other approved and investigational targeted therapies, chemotherapies, and immunotherapies totreat patients with cancer. Regulatory approval for a combination treatment generally requires clinical trials to evaluatethe activity of each component of the combination treatment. As a result, it may be more difficult and costly to obtainregulatory approval of our product candidate for use as part of a combination treatment than obtaining regulatoryapproval of our product candidates alone. In addition, we also risk losing the supply of any40 Table of Contentsapproved or investigational product being combined with our product candidate in these clinical trials. Furthermore, thepotential market opportunity for our product candidates is difficult to estimate precisely. For instance, if one of ourproduct candidates receives regulatory approval from a combination study, it may be approved solely for use incombination with the approved or investigational product in a particular indication and the market opportunity ourproduct candidate would be dependent upon the continued use and availability of the approved or investigationalproduct. In addition, because physicians, patients and third-party payors may be sensitive to the addition of the cost ofour product candidates to the cost of treatment with the other products, we may experience downward pressure on theprice that we can charge for our product candidates if they receive regulatory approval. Further, we cannot be sure thatphysicians will view our product candidates, if approved as part of a combination treatment, as sufficiently superior to atreatment regimen consisting of only the approved or investigational product. Additionally, the adverse side effects ofour product candidates may be enhanced when combined with other products. If such adverse side effects areexperienced, we could be required to conduct additional pre-clinical and clinical studies and if such adverse side effectsare severe, we may not be able to continue the clinical trials of the combination therapy because the risks may outweighthe therapeutic benefit of the combination.We may not be successful in our efforts to identify or discover additional potential product candidates.Part of our strategy involves identifying or discovering product candidates. Our research programs may initiallyshow promise in identifying potential product candidates, yet fail to yield product candidates for clinical developmentfor a number of reasons, including:·the research methodology used may not be successful in identifying potential product candidates;·potential product candidates may, on further study, be shown to have harmful side effects or othercharacteristics that indicate that they are unlikely to be products that will receive marketing approval andachieve market acceptance; or·potential product candidates may not be effective in treating their targeted diseases.Research programs to identify new product candidates require substantial technical, financial and humanresources. We may choose to focus our efforts and resources on a potential product candidate that ultimately proves tobe unsuccessful.If we are unable to identify suitable compounds for preclinical and clinical development, we will not be able toobtain product revenues in future periods, which likely would result in significant harm to our financial position andadversely impact our stock price.We may not be successful in obtaining necessary rights to compounds and product candidates for our developmentpipeline through acquisitions and in-licenses.We may seek to acquire new compounds and product candidates from other pharmaceutical and biotechnologycompanies, academic scientists and other researchers, such as our recent exclusive in-license from Infinity to research,develop, commercialize, and manufacture products in oncology indications containing duvelisib. The success of thisstrategy depends partly upon our ability to identify, select, discover and acquire promising pharmaceutical productcandidates and products. The process of proposing, negotiating and implementing a license or acquisition of a productcandidate or approved product is lengthy and complex. Other companies, including some with substantially greaterfinancial, marketing and sales resources, may compete with us for the license or acquisition of product candidates andapproved products. In addition, companies that perceive us to be a competitor may be unwilling to assign or licenserights to us. We have limited resources to identify and execute the acquisition or in-licensing of third-party products,businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources topotential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipatedbenefits of such efforts. We also may be unable to license or acquire the relevant compound or product candidate onterms that would allow us to make an appropriate return on our investment. Any product candidate that we acquire mayrequire additional development efforts prior to commercial sale, including manufacturing, pre-clinical testing, extensiveclinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are proneto risks of failure typical of pharmaceutical product development.41 Table of ContentsIn addition, future product or business acquisitions may entail numerous operational and financial risks,including:·exposure to unknown liabilities;·disruption of our business and diversion of our management’s time and attention to develop acquired products,product candidates or technologies;·higher than expected acquisition and integration costs;·increased amortization expenses; and·incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions.·Future business acquisitions may also entail certain additional risks, such as:·difficulty in combining the operations and personnel of any acquired businesses with our operations andpersonnel;·impairment of relationships with key suppliers or customers of any acquired businesses due to changes inmanagement and ownership; and·inability to motivate key employees of any acquired businesses.If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market ourproducts in those jurisdictions.We intend to seek regulatory approval for our product candidates in a number of countries outside of theUnited States and expect that these countries will be important markets for our products, if approved. Marketing ourproducts in these countries will require separate regulatory approvals in each market and compliance with numerous andvarying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval proceduresvary from country to country and may require additional testing. Moreover, the time required to obtain approval maydiffer from that required to obtain FDA approval. In addition, in many countries outside the United States, a drug mustbe approved for reimbursement before it can be approved for sale in that country. Approval by the FDA does not ensureapproval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authoritydoes not ensure approval by regulatory authorities in other foreign countries or by the FDA. Failure to obtain regulatoryapproval in one country may have a negative effect on the regulatory approval process in others. The foreign regulatoryapproval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreignregulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and may not receivenecessary approvals to commercialize our products in any foreign market.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize onproduct candidates or indications that may be more profitable or for which there is a greater likelihood of success.Because we have limited financial and managerial resources, we focus on research programs and productcandidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities withother product candidates or for other indications that later prove to have greater commercial potential. Our resourceallocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.Our spending on current and future research and development programs and product candidates for specific indicationsmay not yield any commercially viable products.Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of marketacceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercialsuccess.If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient marketacceptance by physicians, patients, healthcare payors and others in the medical community. If our product candidates donot achieve an adequate level of acceptance, we may not generate significant product revenues and we42 Table of Contentsmay not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale,will depend on a number of factors, including:·efficacy and potential advantages compared to alternative treatments;·the ability to offer our products for sale at competitive prices;·convenience and ease of administration compared to alternative treatments;·the willingness of the target patient population to try new therapies and of physicians to prescribe thesetherapies;·whether our products are designated under physician treatment guidelines as a first, second or third linetherapy;·changes in the standard of care for the targeted indications for our products;·limitations or warnings, including distribution or use restrictions, contained in the approved labeling for any ofour products;·the strength of marketing and distribution support;·sufficient third-party coverage or reimbursement;·safety concerns with similar products marketed by others; and·the prevalence and severity of any side effects.If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third partiesto sell and market our product candidates, we may not be successful in commercializing our product candidates if andwhen they are approved.We do not have a sales or marketing infrastructure and have limited experience in the sale, marketing ordistribution of pharmaceutical products. To achieve commercial success for any approved product, we must eitherdevelop a sales and marketing organization or outsource these functions to third parties. In the future, we may choose tobuild a focused sales and marketing infrastructure to market or co-promote some of our product candidates if and whenthey are approved.There are risks involved with both establishing our own sales and marketing capabilities and entering intoarrangements with third parties to perform these services. For example, recruiting and training a sales force is expensiveand time consuming and could delay any product launch. If the commercial launch of a product candidate for which werecruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would haveprematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment wouldbe lost if we cannot retain or reposition our sales and marketing personnel.Factors that may inhibit our efforts to commercialize our products on our own include:·our inability to recruit and retain adequate numbers of effective sales and marketing personnel;·the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians toprescribe any future products;·the lack of complementary products to be offered by sales personnel, which may put us at a competitivedisadvantage relative to companies with more extensive product lines; and·unforeseen costs and expenses associated with creating an independent sales and marketing organization.If we enter into arrangements with third parties to perform sales, marketing and distribution services, ourproduct revenues or the profitability of these product revenues to us are likely to be lower than if we were to market andsell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements withthird parties to sell and market our product candidates or may be unable to do so on terms that are favorable to us. Welikely will have little control over such third parties, and any of them may fail to devote the necessary43 Table of Contentsresources and attention to sell and market our products effectively. If we do not establish sales and marketingcapabilities successfully, either on our own or in collaboration with third parties, we will not be successful incommercializing our product candidates.We face substantial competition, which may result in others discovering, developing or commercializing productsbefore or more successfully than we do.The development and commercialization of new drug products is highly competitive. We face competitionwith respect to our current product candidates and will face competition with respect to any product candidates that wemay seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceuticalcompanies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnologycompanies that currently market and sell products or are pursuing the development of products for the treatment of thedisease indications for which we are developing our product candidates, including Gilead Sciences, Inc., Abbvie,Pharmacyclics LLC, Roche, Celgene Corporation, AstraZeneca, Incyte Corporation, TG Therapeutics, Inc., Novartis andothers. Some of these competitive products and therapies are based on scientific approaches that are the same as orsimilar to our approach, and others are based on entirely different approaches. Potential competitors also includeacademic institutions, government agencies and other public and private research organizations that conduct research,seek patent protection and establish collaborative arrangements for research, development, manufacturing andcommercialization.We are developing our product candidates for the treatment of cancer. There are a variety of available therapiesmarketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. Some of thesedrugs are branded and subject to patent protection, and others are available on a generic basis. Many of these approveddrugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers andother third-party payors may also encourage the use of generic products. We expect that if any of our product candidatesare approved, they will be priced at a significant premium over competitive generic products. Many of our competitors have significantly greater financial resources and expertise in research anddevelopment, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals andmarketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industriesmay result in even more resources being concentrated among a smaller number of our competitors. Smaller and otherearly stage companies may also prove to be significant competitors, particularly through collaborative arrangementswith large and established companies. These third parties compete with us in recruiting and retaining qualified scientificand management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as inacquiring technologies complementary to, or necessary for, our programs.In addition, to the extent that product or product candidates of our competitors demonstrate serious adverseside effects or are determined to be ineffective in clinical trials, the development of our product candidates could benegatively impacted.Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricingregulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.The regulations that govern marketing approvals, pricing and reimbursement for new drug products varywidely from country to country. In the United States, recently passed legislation may significantly change the purchaseof pharmaceutical products, resulting in lower prices and a reduction in product demand. Some countries requireapproval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins aftermarketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricingremains subject to continuing governmental control even after initial approval is granted. As a result, we might obtainmarketing approval for a product in a particular country, but then be subject to price regulations that delay ourcommercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able togenerate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup ourinvestment in one or more product candidates, even if our product candidates obtain marketing approval.44 Table of ContentsOur ability to commercialize any products successfully also will depend in part on the extent to whichreimbursement for these products and related treatments will be available from government health administrationauthorities, private health insurers and other organizations. Government authorities and third-party payors, such asprivate health insurers and health maintenance organizations, decide which medications they will pay for and establishreimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Governmentauthorities and third-party payors have attempted to control costs by limiting coverage and the amount ofreimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies providethem with predetermined discounts from list prices and are challenging the prices charged for medical products. Wecannot be sure that reimbursement will be available for any product that we commercialize and, if reimbursement isavailable, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidatefor which we obtain marketing approval. Obtaining reimbursement for our products may be particularly difficult becauseof the higher prices often associated with drugs administered under the supervision of a physician. If reimbursement isnot available or is available only to limited levels, we may not be able to successfully commercialize any productcandidate for which we obtain marketing approval.There may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may bemore limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside theUnited States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at arate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursementlevels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent.Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be basedon reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for otherservices. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcareprograms or private payors and by any future relaxation of laws that presently restrict imports of drugs from countrieswhere they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coveragepolicy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverageand profitable payment rates from both government-funded and private payors for any approved products that wedevelop could have a material adverse effect on our operating results, our ability to raise capital needed tocommercialize products and our overall financial condition.Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization ofany products that we may develop.We face an inherent risk of product liability exposure related to the testing of our product candidates in humanclinical trials and will face an even greater risk if we commercially sell any products that we may develop. If we cannotsuccessfully defend ourselves against claims that our product candidates or products caused injuries, we will incursubstantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:·decreased demand for any product candidates or products that we may develop;·injury to our reputation and significant negative media attention;·withdrawal of clinical trial participants;·significant costs to defend the related litigation;·substantial monetary awards to trial participants or patients;·loss of revenue; and·the inability to commercialize any products that we may develop.We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incidentlimit of $10.0 million, which may not be adequate to cover all liabilities that we may incur. We may need to increase ourinsurance coverage as we initiate additional clinical trials in the United States and around the world or upon thecommercialization of our product candidates, if ever. Insurance coverage is increasingly expensive. We may not be ableto maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.45 Table of ContentsIf we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines orpenalties or incur costs that could have a material adverse effect on the success of our business.We are subject to numerous environmental, health and safety laws and regulations, including those governinglaboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Ouroperations involve the use of hazardous and flammable materials, including chemicals and biological materials. Ouroperations also produce hazardous waste products. We generally contract with third parties for the disposal of thesematerials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event ofcontamination or injury resulting from our use of hazardous materials, we could be held liable for any resultingdamages, and any liability could exceed our resources. We also could incur significant costs associated with civil orcriminal fines and penalties.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due toinjuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequatecoverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims thatmay be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.In addition, we may incur substantial costs in order to comply with current or future environmental, health andsafety laws and regulations. These current or future laws and regulations may impair our research, development orproduction efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties orother sanctions.RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITALWe have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and maynever achieve or maintain profitability.Since inception, we have incurred significant operating losses. As of December 31, 2016, we had anaccumulated deficit of $235.3 million. To date, we have not generated any revenues and have financed our operationsthrough private placements of our preferred stock, public offerings of our common stock, and sales of our common stockpursuant to our at-the-market equity offering program. In March 2017, Verastem, Inc. (Borrower) entered into a term loanfacility with Hercules Capital, Inc. (Hercules), the proceeds of which will be used for our ongoing research anddevelopment programs and for general corporate purposes. We have devoted substantially all of our efforts to researchand development. Our product candidates, including duvelisib and defactinib, are in clinical trials. We expect tocontinue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incurmay fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and aswe:·continue our ongoing clinical trials with our product candidates, including duvelisib and defactinib;·initiate additional clinical trials for our product candidates;·ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for whichwe may obtain marketing approval;·continue our preclinical research or acquire or in-license additional product candidates;·maintain, expand and protect our intellectual property portfolio;·hire additional clinical, development and scientific personnel; and·add operational, financial and management information systems and personnel, including personnel to supportour product development and planned future commercialization efforts.To become and remain profitable, we must develop and eventually commercialize a product or products withsignificant market potential. This will require us to be successful in a range of challenging activities, includingcompleting preclinical testing and clinical trials of our product candidates, obtaining marketing approval for theseproduct candidates and manufacturing, marketing and selling those products for which we may obtain marketing46 Table of Contentsapproval. We may never succeed in these activities and, even if we do, may never generate revenues that are significantor large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increaseprofitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of thecompany and could impair our ability to raise capital, maintain our research and development efforts, expand ourbusiness or continue our operations. A decline in the value of our company could also cause you to lose all or part ofyour investment.We will continue to need substantial additional funding. If we are unable to raise capital when needed, we would beforced to delay, reduce or eliminate our product development programs or commercialization efforts.We expect our expenses to increase in connection with our ongoing activities, particularly as we continue theclinical development of our product candidates. In addition, if we obtain marketing approval for any of our productcandidates, we expect to incur significant commercialization expenses related to product sales, marketing,manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection withour continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced todelay, reduce or eliminate our clinical development programs or commercialization efforts.We expect our existing cash, cash equivalents and investments will enable us to fund our current operatingplan and capital expenditure requirements for at least the next twelve months from the date of filing of this AnnualReport on Form 10-K and into 2018. Our future capital requirements will depend on many factors, including:·the scope, progress and, results of our other ongoing clinical trials and potential future clinical trials;·the extent to which we acquire or in‑license other product candidates;·the costs, timing and outcome of regulatory review of our other product candidates (including our efforts toseek approval and fund the preparation and filing of regulatory submissions) and the costs of futurecommercialization activities for such product candidates, for which we receive marketing approval;·revenue, if any, received from commercial sales of our product candidates, should any of our product candidatesreceive marketing approval;·the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectualproperty rights and defending intellectual property related claims;·whether we realize the full amount of any projected cost savings associated with our organizationalrestructuring; and·our ability to establish collaborations or partnerships on favorable terms, if at all.Conducting clinical trials is a time consuming, expensive and uncertain process that takes years to complete,and we may never generate the necessary data or results required to obtain marketing approval and achieve productsales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues,if any, will be derived from sales of products that may not be commercially available for several years, if at all.Accordingly, even if we receive regulatory approval of one of our product candidates, it will take several years toachieve peak sales and we will need to continue to rely on additional financing to further our clinical developmentobjectives. Adequate additional financing may not be available to us on acceptable terms, or at all.Raising additional capital or entering into certain licensing arrangements may cause dilution to our stockholders,restrict our operations or require us to relinquish rights to our product candidates.Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needsthrough a combination of equity offerings, debt financings, collaborations, grants and government funding, strategicalliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity orconvertible debt, the ownership interest of our existing stockholders will be diluted, and the terms of these securitiesmay include liquidation or other preferences that adversely affect the rights of our existing stockholders. To the extentthat we enter into certain licensing arrangements, the ownership interest of our existing stockholders may be diluted ifwe elect to make certain payments in shares of our common stock. For example, pursuant to the47 Table of Contentsterms of our license agreement with Infinity, we may elect to make certain milestone payments in shares of commonstock in lieu of cash, according to a formula set forth in the license agreement. Debt financing, if available, may involveagreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additionaldebt, making capital expenditures or declaring dividends. For example, see our risk factors under the heading “RisksRelated to Our Indebtedness.”If we raise additional funds through collaborations, strategic alliances or licensing arrangements with thirdparties, we may have to relinquish future revenue streams or valuable rights to product candidates or to grant licenses onterms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings whenneeded, we may be required to delay, limit, reduce or terminate our product development or future commercializationefforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and marketourselves.RISKS RELATED TO OUR INDEBTEDNESS Our level of indebtedness and debt service obligations could adversely affect our financial condition, and may make itmore difficult for us to fund our operations. In March 2017, the Borrower entered into a Loan and Security Agreement (the Loan Agreement), withHercules. Under the Loan Agreement, Hercules will provide access to term loans with an aggregate principal amount ofup to $25.0 million (the Term Loan). Concurrently with the closing of the Loan Agreement, the Borrower borrowed aninitial tranche of $2.5 million. All obligations under the Loan Agreement are secured by substantially all of the Borrower’s existing propertyand assets, excluding its intellectual property. This indebtedness may create additional financing risk for the Borrower,particularly if its business or prevailing financial market conditions are not conducive to paying off or refinancing itsoutstanding debt obligations at maturity. This indebtedness could also have important negative consequences,including: ·the Borrower will need to repay its indebtedness by making payments of interest and principal, which willreduce the amount of money available to finance our operations, our research and development efforts andother general corporate activities; and·the Borrower’s failure to comply with the restrictive covenants in the Loan Agreement could result in an eventof default that, if not cured or waived, would accelerate its obligation to repay this indebtedness, and Herculescould seek to enforce its security interest in the assets securing such indebtedness. To the extent additional debt is added to the Borrower’s current debt levels, the risks described above couldincrease. The Borrower may not have cash available in an amount sufficient to enable it to make interest or principal paymentson its indebtedness when due. Failure to satisfy the Borrower’s current and future debt obligations under the Loan Agreement, or breachingany of its covenants under the Loan Agreement, subject to specified cure periods with respect to certain breaches, couldresult in an event of default and, as a result, Hercules could accelerate all of the amounts due. In the event of anacceleration of amounts due under the Loan Agreement as a result of an event of default, the Borrower may not haveenough available cash or be able to raise additional funds through equity or debt financings to repay such indebtednessat the time of such acceleration. In that case, the Borrower may be required to delay, limit, reduce or terminate itsproduct candidate development or commercialization efforts or grant to others rights to develop and market productcandidates that it would otherwise prefer to develop and market itself. Hercules could also exercise its rights as collateralagent to take possession and dispose of the collateral securing the term loans for its benefit, which collateral includessubstantially all of the Borrower’s property other than its intellectual property. The Borrower’s business, financialcondition and results of operations could be materially adversely affected as a result of any of these events. TheBorrower is subject to certain restrictive covenants which, if breached, could have a material adverse effect on itsbusiness and prospects.48 Table of Contents The Loan Agreement imposes operating and other restrictions on the Borrower. Such restrictions will affect, and inmany respects limit or prohibit, the Borrower’s ability and the ability of any future subsidiary to, among other things: ·dispose of certain assets;·change its lines of business; ·engage in mergers, acquisitions or consolidations; ·incur additional indebtedness; ·create liens on assets; ·pay dividends and make distributions or repurchase our capital stock; and·engage in certain transactions with affiliates.RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIESWe rely in part on third parties to conduct our clinical trials and preclinical testing, and if they do not properly andsuccessfully perform their obligations to us, we may not be able to obtain regulatory approvals for our productcandidates.We rely on third parties, such as contract research organizations (CROs), clinical data managementorganizations, medical institutions and clinical investigators, to conduct, provide monitors for and manage data from allof our clinical trials. We compete with many other companies for the resources of these third parties.Any of these third parties may terminate their engagements with us at any time. If we need to enter intoalternative arrangements, it would delay our product development activities and ultimately the commercialization ofour product candidates.Our reliance on these third parties for research and development activities will reduce our control over theseactivities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each ofour clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover,the FDA and other regulatory agencies require us to comply with standards, commonly referred to as Good ClinicalPractices (GCP) for conducting, recording and reporting the results of clinical trials to assure that data and reportedresults are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principalinvestigators and trial sites. If we or any of our CROs fail to comply with applicable GCP requirements, the clinical datagenerated in our clinical trials may be deemed unreliable and the FDA or other regulatory authorities may require us toperform additional clinical trials before approving our marketing applications. We cannot assure you that uponinspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trialscomply with GCP requirements. We also are required to register ongoing clinical trials and post the results of completedclinical trials on government‑sponsored databases, such as ClinicalTrials.gov, within certain timeframes. Failure to do socan result in fines, adverse publicity and civil and criminal sanctions.If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conductour clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, ormay be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayedin our efforts to, successfully commercialize our product candidates.49 Table of ContentsWe intend to rely on third parties to conduct investigator sponsored clinical trials of our product candidates. Anyfailure by a third party to meet its obligations with respect to the clinical development of our product candidates maydelay or impair our ability to obtain regulatory approval for our product candidates.We intend to rely on academic and private non-academic institutions to conduct and sponsor clinical trialsrelating to our product candidates. We will not control the design or conduct of the investigator sponsored trials, and itis possible that the FDA or non-U.S. regulatory authorities will not view these investigator-sponsored trials as providingadequate support for future clinical trials, whether controlled by us or third parties, for any one or more reasons,including elements of the design or execution of the trials or safety concerns or other trial results.Such arrangements will provide us certain information rights with respect to the investigator sponsored trials,including access to and the ability to use and reference the data, including for our own regulatory filings, resulting fromthe investigator sponsored trials. However, we do not have control over the timing and reporting of the data frominvestigator sponsored trials, nor do we own the data from the investigator sponsored trials. If we are unable to confirmor replicate the results from the investigator sponsored trials or if negative results are obtained, we would likely befurther delayed or prevented from advancing further clinical development of our product candidates. Further, ifinvestigators or institutions breach their obligations with respect to the clinical development of our product candidates,or if the data proves to be inadequate compared to the firsthand knowledge we might have gained had the investigatorsponsored trials been sponsored and conducted by us, then our ability to design and conduct any future clinical trialsourselves may be adversely affected.Additionally, the FDA or non-U.S. regulatory authorities may disagree with the sufficiency of our right ofreference to the preclinical, manufacturing or clinical data generated by these investigator-sponsored trials, or ourinterpretation of preclinical, manufacturing or clinical data from these investigator-sponsored trials. If so, the FDA orother non-U.S. regulatory authorities may require us to obtain and submit additional preclinical, manufacturing, orclinical data before we may initiate our planned trials and/or may not accept such additional data as adequate to initiateour planned trials.We contract with third parties for the manufacture of our product candidates and for compound formulation research,and these third parties may not perform satisfactorily.We do not have any manufacturing facilities or personnel. We currently obtain all of our supply of our productcandidates for clinical development from third-party manufacturers or third-party collaborators, and we expect tocontinue to rely on third parties for the manufacture of clinical and, if necessary, commercial quantities of our productcandidates. In addition, we currently rely on third parties for the development of various formulations of our productcandidates. We obtain our supplies from these manufacturers on a purchase order basis, and we do not have any longterm supply agreements in place. This reliance on third parties increases the risk that we will not have sufficientquantities of our product candidates or such quantities at an acceptable cost or quality, which could delay, prevent orimpair our development or commercialization efforts.Any of these third parties may terminate their engagement with us at any time. We do not currently havearrangements in place for redundant supply or a second source for bulk drug substance. Even if we are able to establishagreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:·reliance on the third party for regulatory compliance and quality assurance;·the possible breach of the manufacturing agreement by the third party, including the misappropriation of ourproprietary information, trade secrets and know how;·the possible termination or nonrenewal of the agreement by the third party at a time that is costly orinconvenient for us; and·disruptions to the operations of our manufacturers or suppliers caused by conditions unrelated to our businessor operations, including the bankruptcy of the manufacturer or supplier or a catastrophic event affecting ourmanufacturers or suppliers.50 Table of ContentsThird-party manufacturers may not be able to comply with current good manufacturing practices (cGMP)regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-partymanufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines,injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls ofproduct candidates or products, operating restrictions and criminal prosecutions, any of which could significantly andadversely affect supplies of our products and harm our business and results of operations.Any products that we may develop may compete with other product candidates and products for access tomanufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and thatmight be capable of manufacturing for us.If our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer.Although we believe that there are several potential alternative manufacturers who could manufacture our productcandidates, we may incur added costs and delays in identifying and qualifying any such replacement, as well asproducing the drug product. In addition, we have to enter into technical transfer agreements and share our know howwith the third-party manufacturers, which can be time consuming and may result in delays.Our current and anticipated future dependence upon others for the manufacture of our product candidates orproducts may adversely affect our future profit margins and our ability to commercialize any products that receivemarketing approval on a timely and competitive basis.If we are not able to establish collaborations, we may have to alter our development and commercialization plans.Our drug development programs and the potential commercialization of our product candidates will requiresubstantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate withpharmaceutical and biotechnology companies for the development and potential commercialization of those productcandidates.We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreementfor a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise,the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number offactors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similarregulatory authorities outside the United States, the potential market for the subject product candidate, the costs andcomplexities of manufacturing and delivering such product candidate to patients, the potential of competing products,the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to suchownership without regard to the merits of the challenge and industry and market conditions generally. The collaboratormay also consider alternative product candidates or technologies for similar indications that may be available tocollaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.Collaborations are complex and time consuming to negotiate and document. In addition, there have been a significantnumber of recent business combinations among large pharmaceutical companies that have resulted in a reduced numberof potential future collaborators.We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unableto do so, we may have to curtail the development of certain product candidates, reduce or delay our developmentprograms, delay potential commercialization or reduce the scope of any sales or marketing activities, or increase ourexpenditures and undertake development or commercialization activities at our own expense. If we elect to increase ourexpenditures to fund development or commercialization activities on our own, we may need to obtain additionalcapital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not beable to further develop our product candidates or bring them to market and generate product revenue.51 Table of ContentsWe may depend on collaborations with third parties for the development and commercialization of our productcandidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of theseproduct candidates.We may seek third-party collaborators for the development and commercialization of our product candidates.We anticipate that we may seek to enter into a collaboration for marketing and commercialization of our productcandidates in certain territories worldwide at the appropriate time in the future. Our likely collaborators for anycollaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceuticalcompanies and biotechnology companies. If we do enter into any such arrangements with any third parties, we willlikely have limited control over the amount and timing of resources that our collaborators dedicate to the developmentor commercialization of our product candidates. Our ability to generate revenues from these arrangements will dependon our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.Collaborations involving our product candidates would pose the following risks to us:·collaborators have significant discretion in determining the efforts and resources that they will apply to thesecollaborations;·collaborators may not pursue development and commercialization of our product candidates or may elect not tocontinue or renew development or commercialization programs based on clinical trial results, changes in thecollaborator’s strategic focus or available funding or external factors such as an acquisition that divertsresources or creates competing priorities;·collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinicaltrial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of aproduct candidate for clinical testing;·collaborators could independently develop, or develop with third parties, products that compete directly orindirectly with our products or product candidates if the collaborators believe that competitive products aremore likely to be successfully developed or can be commercialized under terms that are more economicallyattractive than ours;·a collaborator with marketing and distribution rights to one or more products may not commit sufficientresources to the marketing and distribution of such product or products;·collaborators may not properly maintain or defend our intellectual property rights or may use our proprietaryinformation in such a way as to invite litigation that could jeopardize or invalidate our proprietary informationor expose us to potential litigation;·disputes may arise between the collaborators and us that result in the delay or termination of the research,development or commercialization of our products or product candidates or that result in costly litigation orarbitration that diverts management attention and resources; and·collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue furtherdevelopment or commercialization of the applicable product candidates.Collaboration agreements may not lead to development or commercialization of product candidates in the mostefficient manner or at all. If a future collaborator of ours were to be involved in a business combination, the continuedpursuit and emphasis on our product development or commercialization program could be delayed, diminished orterminated.52 Table of ContentsRISKS RELATED TO OUR INTELLECTUAL PROPERTYIf we fail to comply with our obligations under our intellectual property licenses with third parties, we could loselicense rights that are important to our business.We are a party to a number of intellectual property license agreements with third parties, including Infinity,Scripps and Pfizer, and expect to enter into additional license agreements in the future. Our existing license agreementsimpose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty,insurance and other obligations on us. For example, under our license agreements with Infinity, Scripps, and Pfizer, weare required to use diligent or commercially reasonable efforts to develop and commercialize licensed products underthe agreement and to satisfy other specified obligations. If we fail to comply with our obligations under these licenses,our licensors may have the right to terminate these license agreements, in which event we might not be able to marketany product that is covered by these agreements, or to convert the exclusive licenses to non-exclusive licenses, whichcould materially adversely affect the value of the product candidate being developed under these license agreements.Termination of these license agreements or reduction or elimination of our licensed rights may result in our having tonegotiate new or reinstated licenses with less favorable terms, which may not be possible. If Scripps were to terminate itslicense agreement with us for any reason, we would lose our rights to VS‑4718. If Pfizer were to terminate its licenseagreement with us for any reason, we would lose our rights to defactinib. If Infinity were to terminate its licenseagreement with us for any reason, we would lose our rights to duvelisib.If we are unable to obtain and maintain patent protection for our products, or if our licensors are unable to obtainand maintain patent protection for the products that we license from them, or if the scope of the patent protectionobtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical toours, and our ability to successfully commercialize our products may be adversely affected.Our success depends in large part on our and our licensors’ ability to obtain and maintain patent protection inthe United States and other countries with respect to our products. We and our licensors seek to protect our proprietaryposition by filing patent applications in the United States and abroad related to our products that are important to ourbusiness. We cannot be certain that any patents will issue with claims that cover our product candidates.The patent prosecution process is expensive and time consuming, and we may not be able to file and prosecuteall necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we willfail to identify patentable aspects of our research and development output before it is too late to obtain patentprotection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecutionof patent applications, or to maintain the patents, covering products that we license from third parties and are reliant onour licensors. For example, we do not control the prosecution of the patent applications owned by Scripps. Therefore, wecannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with thebest interests of our business. If such licensors fail to maintain such patents, or lose rights to those patents, the rights wehave licensed may be reduced or eliminated.The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involvescomplex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance,scope, validity, enforceability and commercial value of our and our licensors’ patent rights are highly uncertain. Our andour licensors’ pending and future patent applications may not result in patents being issued which protect our productsor which effectively prevent others from commercializing competitive products. Changes in either the patent laws orinterpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrowthe scope of our patent protection.The laws of foreign countries may not protect our rights to the same extent as the laws of the United States.Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications inthe United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not atall. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned orlicensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection ofsuch inventions.53 Table of ContentsAssuming the other requirements for patentability are met, in the United States, for patents that have aneffective filing date prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, whileoutside the United States, the first to file a patent application is entitled to the patent. In March 2013, the United Statestransitioned to a first inventor to file system in which, assuming the other requirements for patentability are met, the firstinventor to file a patent application will be entitled to the patent. We may be subject to a third party pre issuancesubmission of prior art to the U.S. Patent and Trademark Office, or become involved in opposition, derivation,reexamination, inter parties review or interference proceedings challenging our patent rights or the patent rights ofothers. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, orinvalidate, our patent rights, allow third parties to commercialize our products and compete directly with us, withoutpayment to us, or result in our inability to manufacture or commercialize products without infringing third-party patentrights.Even if our owned and licensed patent applications issue as patents, they may not issue in a form that willprovide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us withany competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developingsimilar or alternative technologies or products in a non-infringing manner.The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and ourowned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Suchchallenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or heldunenforceable, which could limit our ability to stop others from using or commercializing similar or identical products,or limit the duration of the patent protection of our products. Given the amount of time required for the development,testing and regulatory review of new product candidates, patents protecting such candidates might expire before orshortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provideus with sufficient rights to exclude others from commercializing products similar or identical to ours.We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming andunsuccessful.Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, a courtmay decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using thetechnology at issue on the grounds that our patents do not cover the technology in question. An adverse result in anylitigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation,there is a risk that some of our confidential information could be compromised by disclosure during this type oflitigation. In addition, our licensors may have rights to file and prosecute such claims and we are reliant on them.54 Table of ContentsThird parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, theoutcome of which would be uncertain and could have a material adverse effect on the success of our business.Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture,market and sell our product candidates without infringing the proprietary rights of third parties. We have yet to conductcomprehensive freedom to operate searches to determine whether our use of certain of the patent rights owned by orlicensed to us would infringe patents issued to third parties. We may become party to, or threatened with, futureadversarial proceedings or litigation regarding intellectual property rights with respect to our products, includinginterference proceedings before the U.S. Patent and Trademark Office. Third parties may assert infringement claimsagainst us based on existing patents or patents that may be granted in the future. If we are found to infringe a thirdparty’s intellectual property rights, we could be required to obtain a license from such third party to continuedeveloping and marketing our products. However, we may not be able to obtain any required license on commerciallyreasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving ourcompetitors access to the same technologies licensed to us. We could be forced, including by court order, to ceasecommercializing the infringing product. In addition, we could be found liable for monetary damages. A finding ofinfringement could prevent us from commercializing our product candidates or force us to cease some of our businessoperations, which could materially harm our business. Claims that we have misappropriated the confidential informationor trade secrets of third parties could have a similar negative impact on our business.We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their formeremployers.Many of our employees were previously employed at universities or other biotechnology or pharmaceuticalcompanies, including our competitors or potential competitors. Although we try to ensure that our employees do not usethe proprietary information or know how of others in their work for us, we may be subject to claims that we or theseemployees have used or disclosed intellectual property, including trade secrets or other proprietary information, of anysuch employee’s former employer. Litigation may be necessary to defend against these claims. If we fail in defendingany such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights orpersonnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and bea distraction to management.Intellectual property litigation could cause us to spend substantial resources and distract our personnel from theirnormal responsibilities.Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims maycause us to incur significant expenses, and could distract our technical and management personnel from their normalresponsibilities. In addition, there could be public announcements of the results of hearings, motions or other interimproceedings or developments and if securities analysts or investors perceive these results to be negative, it could have asubstantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increaseour operating losses and reduce the resources available for development activities or any future sales, marketing ordistribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation orproceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectivelythan we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation ofpatent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would beharmed.In addition to seeking patents for some of our products, we also rely on trade secrets, including unpatentedknow how, technology and other proprietary information, to maintain our competitive position. We seek to protect thesetrade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access tothem, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers,consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignmentagreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreementsand disclose our proprietary information, including our trade secrets, and we may not be able55 Table of Contentsto obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated atrade secret is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, some courtsinside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets wereto be lawfully obtained or independently developed by a competitor, we would have no right to prevent them fromusing that technology or information to compete with us. If any of our trade secrets were to be disclosed to orindependently developed by a competitor, our competitive position would be harmed.RISKS RELATED TO REGULATORY APPROVAL OF OUR PRODUCT CANDIDATES AND OTHER LEGALCOMPLIANCE MATTERSIf we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able tocommercialize our product candidates, and our ability to generate revenue will be materially impaired.Our product candidates and the activities associated with their development and commercialization, includingtheir design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion,sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the UnitedStates and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidatewill prevent us from commercializing the product candidate. We have not received approval to market any of ourproduct candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing andsupporting the applications necessary to gain marketing approvals and expect to rely on third-party contract researchorganizations to assist us in this process. Securing FDA approval requires the submission of extensive preclinical andclinical data and supporting information to the FDA for each therapeutic indication to establish the product candidate’ssafety and efficacy. Securing FDA approval also requires the submission of information about the productmanufacturing process to, and inspection of manufacturing facilities by, the FDA. Our product candidates may not beeffective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities orother characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may takemany years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upona variety of factors, including the type, complexity and novelty of the product candidates involved. Changes inmarketing approval policies during the development period, changes in or the enactment of additional statutes orregulations, or changes in regulatory review for each submitted product application, may cause delays in the approval orrejection of an application. The FDA has substantial discretion in the approval process and may refuse to accept anyapplication or may decide that our data is insufficient for approval and require additional preclinical, clinical or otherstudies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limitor prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited orsubject to restrictions or post approval commitments that render the approved product not commercially viable.If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, thecommercial prospects for our product candidates may be harmed and our ability to generate revenues will be materiallyimpaired.We have received orphan disease status for certain of our product candidates, but there can be no assurance that wewill be able to prevent third parties from developing and commercializing products that are competitive to theseproduct candidates.We received orphan drug designation in the United States, the European Union, and Australia for the use of defactinib in mesothelioma and ovarian cancer, and in the United States and European Union for the use of duvelisib inFL, CLL and SLL. If duvelisib or defactinib obtains marketing authorization, it will receive orphan drug exclusivity.Orphan drug exclusivity grants seven years of marketing exclusivity under the Federal Food, Drug and Cosmetic Act (FDCA), up to ten years of marketing exclusivity in Europe, and five years of marketing exclusivity in Australia. Acompetitor may receive orphan drug marketing authorization prior to us for the same indication for which we aredeveloping duvelisib or defactinib. Other companies have received orphan drug designations for compounds other than duvelisib or defactinib for the same indications for which we may have received orphan drug56 Table of Contentsdesignation in corresponding territories. While orphan drug exclusivity for duvelisib or defactinib would providemarket exclusivity against the same active ingredient for the same indication, we would not be able to exclude othercompanies from manufacturing and/or selling drugs using the same active ingredient for the same indication beyondthat timeframe on the basis of orphan drug exclusivity. Furthermore, the marketing exclusivity in Europe can be reducedfrom ten years to six years if the initial designation criteria have significantly changed since the market authorization ofthe orphan medicinal product. We cannot guarantee that another company also with orphan drug designation will notreceive marketing authorization for the same active ingredient and same indication before we do. If that were to happen,our applications for that indication may not be approved until the competing company’s period of exclusivity hasexpired. Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstancesunder which the FDA may approve a competing product for the same indication during the seven-year period ofmarketing exclusivity, such as if the later product is the same compound as our product but is shown to be clinicallysuperior to our product, or if the later product is a different drug than our product candidate. Further, the seven-yearmarketing exclusivity would not prevent competitors from obtaining approval of the same compound for otherindications or of another compound for the same use as the orphan drug.Though we have received fast track designation by the FDA for duvelisib in certain indications, that designation maynot actually lead to a faster development or regulatory review or approval process, and it does not ensure that we willreceive marketing approval.The FDA has granted fast track designation to the investigation of duvelisib for the treatment of patients with FL whohave received at least two prior therapies and for the potential treatment of patients with CLL who have received at leastone prior therapy. Any drug sponsor may apply for such designation if its product candidate is intended for thetreatment of a serious or life-threatening disease or condition and the product candidate demonstrates the potential toaddress an unmet medical need. The FDA has broad discretion whether or not to grant fast track designation. Althoughduvelisib has received such designation, this may not actually result in a faster development process, review or approvalcompared to standard FDA procedures. The FDA may withdraw fast track designation if it believes that the clinicaldevelopment program does not continue to meet the criteria for fast track designation. Any product candidate for which we obtain marketing approval could be subject to restrictions or withdrawal fromthe market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experienceunanticipated problems with our products, when and if any of them are approved.Any product candidate for which we obtain marketing approval, along with the manufacturing processes, postapproval clinical data, labeling, advertising and promotional activities for such product, will be subject to continualrequirements of and review by the FDA and other regulatory authorities. These requirements include submissions ofsafety and other post marketing information and reports, registration and listing requirements, cGMP requirementsrelating to quality control, quality assurance and corresponding maintenance of records and documents, requirementsregarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a productcandidate is granted, the approval may be subject to limitations on the indicated uses for which the product may bemarketed or to the conditions of approval, or contain requirements for costly post marketing testing and surveillance tomonitor the safety or efficacy of the product, including the imposition of a REMS. The FDA closely regulates the postapproval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and inaccordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’communications regarding off label use and if we do not market our products for their approved indications, we may besubject to enforcement action for off label marketing.In addition, later discovery of previously unknown problems with our products, manufacturers ormanufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:·restrictions on such products, manufacturers or manufacturing processes;·restrictions on the labeling or marketing of a product;·restrictions on product distribution or use;·requirements to conduct post marketing clinical trials;57 Table of Contents·warning or untitled letters;·withdrawal of the products from the market;·refusal to approve pending applications or supplements to approved applications that we submit;·recall of products;·fines, restitution or disgorgement of profits or revenue;·suspension or withdrawal of marketing approvals;·refusal to permit the import or export of our products;·product seizure; or·injunctions or the imposition of civil or criminal penalties.The FDA’s and other regulatory authorities’ policies may change and additional government regulations maybe enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable toadapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able tomaintain regulatory compliance, we may fail to obtain any marketing approvals, lose any marketing approval that wemay have obtained and we may not achieve or sustain profitability.Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuseand other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractualdamages, reputational harm and diminished profits and future earnings.Healthcare providers, physicians and third-party payors play a primary role in the recommendation andprescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws andregulations that may constrain the business or financial arrangements and relationships through which we market, selland distribute our products for which we obtain marketing approval. Restrictions under applicable federal and statehealthcare laws and regulations, include the following:·the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly andwillfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, toinduce or reward either the referral of an individual for, or the purchase, order or recommendation of, any goodor service, for which payment may be made under federal and state healthcare programs such as Medicare andMedicaid;·the federal False Claims Act (FCA) imposes criminal and civil penalties on individuals or entities forknowingly presenting, or causing to be presented, to the federal government, claims for payment that are falseor fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to thefederal government and actions under the FCA may be brought by private whistleblowers as well as thegovernment;·the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes criminal and civilliability for executing a scheme to defraud any healthcare benefit program and HIPAA, as amended by theHealth Information Technology for Economic and Clinical Health Act, also establishes requirements related tothe privacy, security and transmission of individually identifiable health information which apply to manyhealthcare providers, physicians and third-party payors with whom we interact;·the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up amaterial fact or making any materially false statement in connection with the delivery of or payment forhealthcare benefits, items or services;·the FDCA, which among other things, strictly regulates drug product and medical device marketing, prohibitsmanufacturers from marketing such products for off-label use and regulates the distribution of samples;·federal laws that require pharmaceutical manufacturers to report certain calculated product prices to thegovernment or provide certain discounts or rebates to government authorities or private entities, often as a58 Table of Contentscondition of reimbursement under government healthcare programs;·the federal transparency requirements under the Health Care Reform Act requires manufacturers of drugs,devices, biologics and medical supplies to report to the Department of Health and Human Services informationrelated to payments and other transfers of value to physicians and teaching hospitals, as well as physicianownership and investment interests; and·analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales ormarketing arrangements and claims involving healthcare items or services reimbursed by non-governmentalthird-party payors, including private insurers, and some state laws regulate interactions between pharmaceuticalcompanies and health care providers and require pharmaceutical companies to comply with the pharmaceuticalindustry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federalgovernment in addition to requiring drug manufacturers to report information related to payments to physiciansand other health care providers or marketing expenditures and pricing information.Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare lawsand regulations will involve substantial costs. It is possible that governmental authorities will conclude that ourbusiness practices may not comply with current or future statutes, regulations or case law involving applicable fraud andabuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or anyother governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrativepenalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, andthe curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom weexpect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil oradministrative sanctions, including exclusions from government funded healthcare programs.Our employees, independent contractors, principal investigators, CROs, consultants and vendors may engage inmisconduct or other improper activities, including non-compliance with regulatory standards and requirements,which could cause significant liability for us and harm our reputation.We are exposed to the risk that our employees, independent contractors, principal investigators, CROs,consultants and vendors may engage in fraud or other misconduct, including intentional failures to: comply with FDAregulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDAor comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply withfederal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established andenforced by comparable foreign regulatory authorities, report financial information or data accurately or discloseunauthorized activities to us. Such misconduct could also involve the improper use of information obtained in thecourse of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not alwayspossible to identify and deter misconduct by employees and other third parties, and the precautions we take to detectand prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting usfrom governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with suchlaws, standards or regulations. If any such actions are instituted against us, and we are not successful in defendingourselves or asserting our rights, those actions could have a significant impact on our business and results of operations,including the imposition of significant fines or other sanctions.Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval ofand commercialize our product candidates and affect the prices we may obtain.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatorychanges and proposed changes regarding the healthcare system that could prevent or delay marketing approval of ourproduct candidates, restrict or regulate post approval activities and affect our ability to profitably sell any productcandidates for which we obtain marketing approval.The U.S. healthcare industry generally and U.S. government healthcare programs in particular are highlyregulated and subject to frequent and substantial changes. The U.S. government and individual states have been59 Table of Contentsaggressively pursuing healthcare reform. In March 2010, President Obama signed into law the Health Care Reform Act, asweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending,enhance remedies against fraud and abuse, add new transparency requirements for health care and health insuranceindustries, impose new taxes and fees on the health industry and impose additional health policy reforms. The law, forexample, increased drug rebates under state Medicaid programs for brand name prescription drugs and extending thoserebates to Medicaid managed care and assessed a fee on manufacturers and importers of brand name prescription drugsreimbursed under certain government programs, including Medicare and Medicaid. Substantial new provisionsaffecting compliance have also been enacted, which may affect our business practices with health care practitioners.Within the U.S., significant healthcare reform efforts are anticipated under the new Trump Administration andCongress. For example, Republican leaders recently presented a plan to replace the Health Care Reform Act. We cannotpredict the ultimate content, timing or effect of any changes to the Health Care Reform Act or any other reform efforts.We cannot be sure whether additional legislative changes will be enacted, or whether the regulations, guidanceor interpretations will be changed, or what the impact of such changes on the marketing approvals of our productcandidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process maysignificantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and postmarketing testing and other requirements.RISKS RELATED TO EMPLOYEE MATTERS AND MANAGING GROWTHOur future success depends on our ability to retain our chief executive officer and other key executives and to attract,retain and motivate qualified personnel.We are highly dependent on Robert Forrester, our President and Chief Executive Officer, and Daniel Paterson,our Chief Operating Officer, as well as the other principal members of our management and scientific teams. Althoughwe have formal employment agreements with Robert Forrester and Daniel Paterson, these agreements do not preventthem from terminating their employment with us at any time. We do not maintain “key person” insurance for any of ourexecutives or other employees. The loss of the services of any of these persons could impede the achievement of ourresearch, development and commercialization objectives.Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel willalso be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given thecompetition among numerous pharmaceutical and biotechnology companies, universities and research institutions forsimilar personnel. Although we have implemented a retention plan for certain key employees, our retention plan maynot be successful in incentivizing these employees to continue their employment with us. In addition, we rely onconsultants and advisors, including scientific and clinical advisors, to assist us in formulating our research anddevelopment and commercialization strategy. Our consultants and advisors, including our scientific co-founders, maybe employed by employers other than us and may have commitments under consulting or advisory contracts with otherentities that may limit their availability to us.60 Table of ContentsWe may expand our development, regulatory and future sales and marketing capabilities over time, and as a result, wemay encounter difficulties in managing our growth, which could disrupt our operations.We may experience significant growth over time in the number of our employees and the scope of ouroperations, particularly in the areas of drug development, regulatory affairs and sales and marketing. To manage ouranticipated future growth, we may continue to implement and improve our managerial, operational and financialsystems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limitedfinancial resources and the limited experience of our management team in managing a company with such anticipatedgrowth, we may not be able to effectively manage the expansion of our operations or recruit and train additionalqualified personnel when we expand. The physical expansion of our operations may lead to significant costs and maydivert our management and business development resources. Any inability to manage growth could delay the executionof our business plans or disrupt our operations.Our business and operations may be materially adversely affected in the event of computer system failures.Despite the implementation of security measures, our internal computer systems, and those of our contractresearch organizations and other third parties on which we rely, are vulnerable to damage from computer viruses,unauthorized access, natural disasters, fire, terrorism, war and telecommunication and electrical failures. If such an eventwere to occur and cause interruptions in our operations, it could result in a material disruption of our clinicaldevelopment programs. For example, the loss of clinical trial data from ongoing or planned clinical trials could result indelays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To theextent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriatedisclosure of confidential or proprietary information, we could incur liability and the further development of ourproduct candidates could be delayed.RISKS RELATED TO OUR COMMON STOCKProvisions in our corporate charter documents and under Delaware law could make an acquisition of us, which maybe beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or removeour current management.Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition orother change in control of us that stockholders may consider favorable, including transactions in which you mightotherwise receive a premium for your shares. These provisions could also limit the price that investors might be willingto pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Inaddition, because our board of directors is responsible for appointing the members of our management team, theseprovisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management bymaking it more difficult for stockholders to replace members of our board of directors. Among other things, theseprovisions:·establish a classified board of directors such that not all members of the board are elected at one time;·allow the authorized number of our directors to be changed only by resolution of our board of directors;·limit the manner in which stockholders can remove directors from the board;·establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetingsand nominations to our board of directors;·require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions byour stockholders by written consent;·limit who may call stockholder meetings;·authorize our board of directors to issue preferred stock without stockholder approval, which could be used toinstitute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer,effectively preventing acquisitions that have not been approved by our board of directors; and·require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled tocast to amend or repeal certain provisions of our charter or bylaws.61 Table of ContentsMoreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of theDelaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding votingstock from merging or combining with us for a period of three years after the date of the transaction in which the personacquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribedmanner.The market price of our common stock has been, and may continue to be, highly volatile.Our stock price has been volatile. Since January 27, 2012, when we became a public company, the price for oneshare of our common stock has reached a high of $18.82 and a low of $1.05 through March 15, 2017. We cannot predictwhether the price of our common stock will rise or fall. The market price for our common stock may be influenced bymany factors, including:·the success of competitive products or technologies;·results of clinical trials of our product candidates or those of our competitors;·regulatory or legal developments in the United States and other countries;·developments or disputes concerning patent applications, issued patents or other proprietary rights;·the recruitment or departure of key personnel;·the level of expenses related to any of our product candidates or clinical development programs;·the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;·actual or anticipated changes in estimates as to financial results, development timelines or recommendations bysecurities analysts;·variations in our financial results or those of companies that are perceived to be similar to us;·changes in the structure of healthcare payment systems;·market conditions in the pharmaceutical and biotechnology sectors;·general economic, industry and market conditions; and·the other factors described in this “Risk Factors” section.In addition, the stock market in general and the market for small pharmaceutical companies and biotechnologycompanies in particular have experienced extreme price and volume fluctuations that have often been unrelated ordisproportionate to the operating performance of particular companies. Broad market and industry factors maynegatively affect the market price of our common stock, regardless of our actual operating performance. In the past,following periods of volatility in the market, securities class action litigation has often been instituted againstcompanies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’sattention and resources, which could materially and adversely affect our business and financial condition.Failure to comply with The NASDAQ Global Market continued listing requirements may result in our common stockbeing delisted from The NASDAQ Global Market.If our stock price falls below $1.00 per share, we may not continue to qualify for continued listing on TheNASDAQ Global Market. To maintain listing, we are required, among other things, to maintain a minimum closing bidprice of $1.00 per share. If the closing bid price of our common stock is below $1.00 per share for 30 consecutivebusiness days, we will receive a deficiency notice from NASDAQ advising us that we have a certain period of time,typically 180 days, to regain compliance by maintaining a minimum closing bid price of at least $1.00 for at least tenconsecutive business days, although NASDAQ could require a longer period.The delisting of our common stock would significantly affect the ability of investors to trade our common stockand negatively impact the liquidity and price of our common stock. In addition, the delisting of our common stockcould materially adversely impact our ability to raise capital on acceptable terms or at all. Delisting from The62 Table of ContentsNASDAQ Global Market could also have other negative results, including the potential loss of confidence by ourcurrent or prospective third-party providers and collaboration partners, the loss of institutional investor interest, andfewer licensing and partnering opportunities.Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capitalappreciation, if any, will be the source of gain for our stockholders.We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of ourfuture earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debtagreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock willbe the sole source of gain for our stockholders for the foreseeable future.We are an “emerging growth company,” and our election to delay adoption of new or revised accounting standardsapplicable to public companies may result in our financial statements not being comparable to those of other publiccompanies. As a result of this and other reduced disclosure requirements applicable to emerging growth companies,our common stock may be less attractive to investors. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (JOBS Act) andmay remain an emerging growth company for up to five years, until December 31, 2017. For so long as we remain anemerging growth company, we are permitted and intend to rely on exemptions from certain reporting requirements thatare applicable to other public companies that are not emerging growth companies. These exemptions include not beingrequired to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002, notbeing required to comply with any requirement that may be adopted by the Public Company Accounting OversightBoard regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional informationabout the audit and the financial statements, reduced disclosure obligations regarding executive compensation in ourperiodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote onexecutive compensation and stockholder approval of any golden parachute payments not previously approved.Among other provisions, the JOBS Act provides that an emerging growth company can take advantage of theextended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying withnew or revised accounting standards. This allows an emerging growth company to delay the adoption of certainaccounting standards until those standards would otherwise apply to private companies. We may elect to delay theadoption of certain new or revised accounting standards, and as a result, we may not comply with new or revisedaccounting standards on the relevant dates on which adoption of such standards is required for public companies thatare not emerging growth companies. As a result of such election, our financial statements may not be comparable to thefinancial statements of other public companies.We cannot predict whether investors will find our common stock less attractive because we will rely on theseexemptions. If some investors find our common stock less attractive as a result, there may be a less active trading marketfor our common stock and our stock price may be more volatile. Item 1B. Unresolved Staff CommentsNone. Item 2. PropertiesWe occupy approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts undera lease that expires in September 2019. We believe that our facility is sufficient to meet our current needs and thatsuitable additional space will be available as and when needed. Item 3. Legal ProceedingsNone. Item 4. Mine Safety DisclosuresNot applicable.63 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of EquitySecuritiesMARKET INFORMATIONOur common stock is publicly traded on The NASDAQ Global Market under the symbol “VSTM.” Thefollowing table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported onThe NASDAQ Global Market.Year Ended December 31, 2016 High Low First quarter $1.89 $1.05 Second quarter $1.93 $1.19 Third quarter $1.66 $1.27 Fourth quarter $1.55 $1.05 Year Ended December 31, 2015 High Low First quarter $12.35 $6.78 Second quarter $10.67 $6.84 Third quarter $8.07 $1.50 Fourth quarter $2.43 $1.56 HOLDERSAs of March 15, 2017, there were 18 holders of record of our common stock and the closing price of ourcommon stock on the NASDAQ Global Market as of that date was $1.44. The number of holders of record does notinclude beneficial owners whose shares are held by nominees in street name.DIVIDENDSWe have never declared or paid cash dividends on our common stock, and we do not expect to pay any cashdividends on our common stock in the foreseeable future.PERFORMANCE GRAPHThe following performance graph and related information shall not be deemed to be “soliciting material” or tobe “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under theSecurities Act, except to the extent that we specifically incorporate it by reference into such filing.The following graph compares the performance of our common stock to the NASDAQ Composite Index and tothe NASDAQ Biotechnology Index from January 27, 2012 (the first date that shares of our common stock were publiclytraded) through December 31, 2016. The comparison assumes $100 was invested after the market closed on January 27,2012 in our common stock and in each of the foregoing indices, and it assumes reinvestment of dividends, if any.64 Table of ContentsCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Verastem, Inc., the NASDAQ Composite Index, and the NASDAQ Biotechnology Index *$100 invested on 1/27/12 in stock or 12/31/11 in index, including reinvestment of dividends. Fiscal year endingDecember 31, 2016.Cumulative Total Return Comparison January27, December 31, 2012 2012 2013 2014 2015 2016 Verastem, Inc. 100.00 79.26 102.80 82.42 16.77 10.10 NASDAQ Composite 100.00 116.41 165.47 188.69 200.32 216.54 NASDAQ Biotechnology 100.00 134.68 232.37 307.67 328.76 262.08 PURCHASE OF EQUITY SECURITIESWe did not purchase any of our equity securities during the period covered by this Annual Report onForm 10‑K.65 Table of Contents Item 6. Selected Financial DataYou should read the following selected financial data together with our consolidated financial statements andthe related notes appearing elsewhere in this Annual Report on Form 10‑K and the “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10‑K. The selectedhistorical financial information in this section is not intended to replace our financial statements and the related notestherein. Our historical results for any prior period are not necessarily indicative of results to be expected in any futureperiod. Year Ended December 31, Statement of operations data: 2016 2015 2014 2013 2012 (in thousands, except share and per share amounts) Operating expenses: Research and development $19,779 $40,565 $35,448 $25,930 $21,712 General and administrative 17,223 17,634 18,159 15,472 10,518 Total operating expenses 37,002 58,199 53,607 41,402 32,230 Loss from operations (37,002) (58,199) (53,607) (41,402) (32,230) Interest income 562 334 242 200 246 Net loss (36,440) (57,865) (53,365) (41,202) (31,984) Accretion of preferred stock — — — — (6) Net loss applicable to common stockholders $(36,440) $(57,865) $(53,365) $(41,202) $(31,990) Net loss per share applicable to common stockholders—basic and diluted $(0.99) $(1.61) $(2.07) $(1.82) $(1.70) Weighted‑average number of common shares used innet loss per share applicable to common stockholders—basic and diluted 36,988 35,932 25,804 22,680 18,765 As of December 31, Balance sheet data: 2016 2015 2014 2013 2012 (in thousands) Cash, cash equivalents and investments $80,897 $110,258 $92,675 $123,656 $91,520 Working capital 70,304 100,734 86,112 94,151 54,683 Total assets 83,629 113,094 98,649 125,261 92,923 Accumulated deficit (235,323) (198,883) (141,018) (87,653) (46,451) Total stockholders’ equity 72,297 102,469 88,766 117,446 90,466 66 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read the following discussion and analysis of our financial condition and results of operationstogether with our consolidated financial statements and related notes appearing elsewhere in this Annual Report onForm 10‑K. The following discussion contains forward‑looking statements that involve risks and uncertainties. Ouractual results and the timing of certain events could differ materially from those anticipated in these forward‑lookingstatements as a result of certain factors, including those discussed below and as set forth under “Risk Factors.” Pleasealso refer to the section under the heading “Forward‑Looking Statements.”OVERVIEWWe are a biopharmaceutical company focused on discovering and developing drugs to improve outcomes forpatients with cancer. Our most advanced product candidates, duvelisib and defactinib (VS-6063), utilize a multi-facetedapproach to treat cancers originating either in the blood or major organ systems. We are currently evaluating thesecompounds in both preclinical and clinical studies as potential therapies for certain cancers, including leukemia,lymphoma, lung cancer, ovarian cancer, mesothelioma, and pancreatic cancer. We believe that these compounds may bebeneficial as therapeutics either as single agents or when used in combination with immuno-oncology agents or othercurrent and emerging standard of care treatments in aggressive cancers that are poorly served by currently availabletherapies.Duvelisib targets the Phosphoinositide 3-kinase (PI3K) and defactinib targets the Focal Adhesion Kinase (FAK)signaling pathways. The PI3K signaling pathway plays a central role in cancer proliferation and survival. Duvelisib is aninvestigational oral therapy designed to attack both malignant B-cells and T-cells and disrupt the tumormicroenvironment to help thwart their growth and proliferation for patients with lymphatic cancers through the dualinhibition of PI3K delta and gamma. FAK is a non-receptor tyrosine kinase encoded by the PTK-2 gene that is involvedin cellular adhesion and, in cancer, metastatic capability. Defactinib is a targeted inhibitor of the FAK signalingpathway. Similar to duvelisib, defactinib is also orally available and designed to be a potential therapy for patients totake at home under the advice of their physician. Duvelisib is currently being studied in the DUO™ study, which is a Phase 3, randomized, open-label, two-armtrial of duvelisib versus treatment with ofatumumab. This study will evaluate the safety and efficacy of duvelisib ascompared to ofatumumab in approximately 300 patients with relapsed or refractory chronic lymphocytic leukemia(CLL) or small lymphocytic lymphoma (SLL).Duvelisib has successfully completed the Phase 2 DYNAMO™ study which is an open-label, single-arm trial ofduvelisib that evaluated the safety and efficacy of duvelisib in 129 patients with refractory indolent non-Hodgkinlymphoma (iNHL). This study met its primary endpoint of overall response rate (ORR) and the majority of reported sideeffects were expected, reversible and clinically manageable.Defactinib is currently being evaluated in a Phase 1b study in combination with Merck & Co.’s PD-1 inhibitorpembrolizumab and gemcitabine in patients with advanced pancreatic cancer, a Phase 1/2 clinical collaboration withPfizer Inc. (Pfizer) and Merck KGaA to evaluate defactinib in combination with avelumab, an anti-PD-L1 antibody, inpatients with ovarian cancer, and a Phase 1/2 study in collaboration with Cancer Research UK and Merck & Co. for thecombination of defactinib and pembrolizumab in patients with non-small cell lung cancer (NSCLC), mesothelioma orpancreatic cancer.In addition to duvelisib and defactinib, we have additional earlier-stage programs that have undergonepreliminary clinical testing, including clinical trials of the FAK inhibitor VS-4718 and the PI3K/mTOR inhibitor VS-5584. Though both of these programs are slated to complete their Phase 1 testing, we have no plans for furtherdevelopment at this time as we focus our resources on duvelisib and defactinib. Our operations to date have been organizing and staffing our company, business planning, raising capital,acquiring and developing our technology, identifying potential product candidates and undertaking preclinical studiesand clinical trials for our product candidates. To date, we have not generated any revenues and have financed ouroperations with net proceeds from the private placement of our preferred stock, our initial public offering in67 Table of ContentsFebruary 2012, our follow‑on offerings in July 2013 and January 2015 and sales of our common stock under ourat‑the‑market equity offering program.As of December 31, 2016, we had an accumulated deficit of $235.3 million. Our net loss was $36.4 million,$57.9 million and $53.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. We expect toincur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increasein connection with our ongoing activities, particularly as we continue the research and development and clinical trialsof, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of ourproduct candidates, we expect to incur significant commercialization expenses related to product sales, marketing,manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection withour continuing operations. Adequate additional financing may not be available to us on acceptable terms, or at all. If weare unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate ourresearch and development programs or any future commercialization efforts. We will need to generate significantrevenues to achieve profitability, and we may never do so.FINANCIAL OPERATIONS OVERVIEWRevenueTo date, we have not generated any revenues. Our ability to generate product revenues will depend heavily onthe successful development and potential commercialization of our product candidates.Research and development expensesResearch and development expenses consist of costs associated with our research activities, including our drugdiscovery efforts, and the development of our product candidates. Our research and development expenses consist of:·employee‑related expenses, including salaries, benefits, travel and stock‑based compensation expense;·external research and development expenses incurred under arrangements with third parties, such ascontract research organizations (CROs), clinical sites, manufacturing organizations and consultants,including our scientific advisory board;·license fees; and·facilities, depreciation and other allocated expenses, which include direct and allocated expenses forrent and maintenance of facilities, depreciation of leasehold improvements and equipment, andlaboratory and other supplies.We expense research and development costs to operations as incurred. We account for nonrefundable advancepayments for goods and services that will be used in future research and development activities as expenses when theservice has been performed or when the goods have been received, rather than when the payment is made.68 Table of ContentsWe allocate the expenses related to external research and development services, such as CROs, clinical sites,manufacturing organizations and consultants by project. The table below summarizes our external allocation of researchand development expenses to our clinical programs, including duvelisib, defactinib, VS‑4718 and VS‑5584, for theyears ended December 31, 2016, 2015 and 2014. We use our employee and infrastructure resources across multipleresearch and development projects. Our project costing methodology does not allocate personnel and other indirectcosts to specific clinical programs. These unallocated research and development expenses are summarized in the tablebelow and include $3.9 million, $7.3 million and $5.9 million of personnel costs for the years ended December 31,2016, 2015 and 2014, respectively. Year ended December 31, 2016 2015 2014 (in thousands) (in thousands) (in thousands) Defactinib $3,934 $20,713 $16,186 Duvelisib 3,326 — — VS-4718 2,314 2,545 2,921 VS-5584 1,197 2,739 2,679 Unallocated and other research and development expense 7,934 12,158 9,935 Unallocated stock-based compensation expense 1,074 2,410 3,727 Total research and development expense $19,779 $40,565 $35,448 Due to the uncertainty in drug development and the stage of development of our product candidates, we areunable to predict the requirements, specific timing and estimated costs to complete the development of our productcandidates or the timing of when material cash inflows may commence, if ever.We anticipate that our research and development expenses will increase significantly in future periods as weundertake costlier development activities for our existing and future product candidates, including larger and later‑stageclinical trials.The successful development of our product candidates is highly uncertain. At this time, we cannot reasonablyestimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete development ofour product candidates or the period, if any, in which material net cash inflows from our product candidates maycommence. This is due to the numerous risks and uncertainties associated with developing drugs, including theuncertainty of:·clinical trial results;·the scope, rate of progress and expense of our research and development activities, includingpreclinical research and clinical trials;·the potential benefits of our product candidates over other therapies;·our ability to market, commercialize and achieve market acceptance for any of our product candidatesthat we receive regulatory approval for;·the terms and timing of regulatory approvals; and·the expense of filing, prosecuting, defending and enforcing patent claims and other intellectualproperty rights.A change in the outcome of any of these variables with respect to the development of a product candidatecould mean a significant change in the costs and timing associated with the development of that product candidate. Forexample, if the U.S. Food and Drug Administration or other regulatory authority were to require us to conduct clinicaltrials beyond those which we currently anticipate will be required for the completion of clinical development of aproduct candidate or if we experience significant delays in enrollment in any clinical trials, we could be required toexpend significant additional financial resources and time on the completion of clinical development.69 Table of ContentsGeneral and administrative expensesGeneral and administrative expenses consist primarily of salaries and related costs for personnel, includingstock‑based compensation expense, in our executive, finance and business development functions. Other general andadministrative expenses include allocated facility costs and professional fees for legal, patent, investor and publicrelations, consulting, insurance premiums, audit, tax and other public company costs.CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATESOur management’s discussion and analysis of our financial condition and results of operations is based on ourconsolidated financial statements, which we have prepared in accordance with U.S. generally accepted accountingprinciples (GAAP). The preparation of these consolidated financial statements requires us to make estimates andjudgments that affect the reported amounts of certain assets, liabilities and expenses and the disclosure of contingentassets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments,including those related to accrued expenses and stock‑based compensation described in greater detail below. We baseour estimates on our limited historical experience, known trends and events and various other factors that we believe arereasonable under the circumstances, the results of which form the basis for making judgments about the carrying valuesof assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimatesunder different assumptions or conditions.Our significant accounting policies are described in more detail in the notes to our consolidated financialstatements appearing elsewhere in this Annual Report on Form 10‑K. However, we believe that the following accountingpolicies are the most critical to aid you in fully understanding and evaluating our financial condition and results ofoperations.Accrued research and development expensesAs part of the process of preparing our consolidated financial statements, we are required to estimate ouraccrued expenses. This process involves reviewing contracts, identifying services that have been performed on ourbehalf and estimating the level of service performed and the associated cost incurred when we have not yet beeninvoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears forservices performed or when contractual milestones are met. We make estimates of our accrued expenses as of eachbalance sheet date in our financial statements based on facts and circumstances known to us at that time. Weperiodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Thesignificant estimates in our accrued research and development expenses include fees paid to CROs in connection withresearch and development activities for which we have not yet been invoiced.We base our expenses related to CROs on our estimates of the services received and efforts expended pursuantto quotes and contracts with CROs that conduct research and development on our behalf. The financial terms of theseagreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Theremay be instances in which payments made to our vendors will exceed the level of services provided and result in aprepayment of the research and development expense. In accruing service fees, we estimate the time period over whichservices will be performed and the level of effort to be expended in each period. If the actual timing of the performanceof services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Although we donot expect our estimates to be materially different from amounts actually incurred, our understanding of the status andtiming of services performed relative to the actual status and timing of services performed may vary and could result inus reporting amounts that are too high or too low in any particular period. To date, there have been no materialdifferences between our estimates of such expenses and the amounts actually incurred.70 Table of ContentsStock‑based compensationWe recognize stock‑based compensation expense for stock options issued to employees based on the grant datefair value of the awards on a straight‑line basis over the requisite service period. We record stock‑based compensationexpense for stock options issued to non‑employees based on the estimated fair value of the services received or of theequity instruments issued, whichever is more reliably measured, based on the vesting date fair value of the awards on astraight‑line basis over the vesting period.We estimate the fair value of stock option awards using the Black‑Scholes option‑pricing model. Determiningthe fair value of share‑based awards requires the use of subjective assumptions, including the expected term of the awardand expected stock price volatility. The assumptions used in determining the fair value of share‑based awards representmanagement’s best estimates, which involve inherent uncertainties and the application of management judgment. As aresult, if factors change, and we use different assumptions, our share‑based compensation could be materially different inthe future. The risk‑free interest rate used for each grant is based on a U.S. Treasury instrument whose term is consistentwith the expected term of the stock option. Because we do not have a sufficient history to estimate the expected term, weuse the simplified method as described in Securities and Exchange Commission Staff Accounting Bulletin Topic 14.D.2for estimating the expected term. The simplified method is based on the average of the vesting tranches and thecontractual life of each grant. Because there was no public market for our common stock prior to our initial publicoffering, we lacked company‑specific historical and implied volatility information. Therefore, we used the historicalvolatility of a representative group of public biotechnology and life sciences companies with similar characteristics tous. Our current computation of expected volatility is based on the historical volatility of five companies equallyweighted, including our own and a representative group of four public biotechnology and life sciences companies withsimilar characteristics to us, including similar stage of product development and therapeutic focus. We have not paidand do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield isassumed to be zero. We also recognize compensation expense for only the portion of options that are expected to vest.Accordingly, we have estimated expected forfeitures of stock options based on our historical forfeiture rate, adjusted forknown trends, and used these rates in developing a future forfeiture rate.We have also granted performance‑based restricted stock units (RSUs) and stock options with terms that allowthe recipients to vest in a specific number of shares based upon the achievement of performance‑based milestones asspecified in the grants. Share‑based compensation expense associated with these performance‑based RSUs and stockoptions is recognized if the performance condition is considered probable of achievement using management’s bestestimates of the time to vesting for the achievement of the performance‑based milestones. If the actual achievement ofthe performance‑based milestones varies from our estimates, share‑based compensation expense could be materiallydifferent than what is recorded in the period. The cumulative effect on current and prior periods of a change in theestimated time to vesting for performance‑based RSUs and stock options will be recognized as compensation cost in theperiod of the revision, and recorded as a change in estimate.While the assumptions used to calculate and account for share‑based compensation awards representmanagement’s best estimates, these estimates involve inherent uncertainties and the application of management’sjudgment. As a result, if revisions are made to our underlying assumptions and estimates, our share‑based compensationexpense could vary significantly from period to period.As of December 31, 2016, there was approximately $4.9 million of unrecognized stock‑based compensation,net of estimated forfeitures, related to stock options, which are expected to be recognized over a weighted‑averageperiod of 1.5 years. There is no unrecognized stock‑based compensation related to RSUs or restricted common stock.The total unrecognized share‑based compensation cost will be adjusted for future changes in estimated forfeitures. SeeNotes 2 and 7 to our consolidated financial statements located in this Annual Report on Form 10‑K for furtherdiscussion of share‑based compensation.71 Table of ContentsRESULTS OF OPERATIONSAll financial information presented has been consolidated and includes the accounts of our wholly ownedsubsidiary, Verastem Securities Company. All intercompany balances and transactions have been eliminated inconsolidation.Comparison of the Year Ended December 31, 2016 to the Year Ended December 31, 2015Research and development expense. Research and development expense for the year ended December 31, 2016(2016 Period) was $19.8 million compared to $40.6 million for the year ended December 31, 2015 (2015 Period). The$20.8 million decrease from the 2015 Period to the 2016 Period was primarily related to a decrease of $15.6 million inexternal CRO expense for outsourced biology, chemistry, development and clinical services, which includes our clinicaltrial costs, a $3.4 million decrease in personnel related costs, primarily due to the reduction in workforce in October2015, a decrease of $1.3 million in stock-based compensation expense and a decrease of $1.5 million in lab supplies,travel and other research and development expense. These decreases were partially offset by an increase ofapproximately $947,000 in consulting and professional fees.General and administrative expense. General and administrative expense for the 2016 Period was$17.2 million compared to $17.6 million for the 2015 Period. The approximate $411,000 decrease from the 2015 Periodto the 2016 Period primarily resulted from a decrease of $2.1 million in stock-based compensation expense. Thisdecrease was partially offset by increases of $1.1 million in consulting and professional fees, approximately $280,000 inpersonnel costs, and a net increase of approximately $306,000 of other general and administrative costs.Interest income. Interest income increased to approximately $562,000 for the 2016 Period from approximately$334,000 for the 2015 Period. This increase was primarily due to higher interest rates on investments in the 2016 Periodcompared to the 2015 Period.Comparison of the Year Ended December 31, 2015 to the Year Ended December 31, 2014Research and development expense. Research and development expense for the 2015 Period was $40.6 millioncompared to $35.4 million for the year ended December 31, 2014 (2014 Period). The $5.2 million increase from the2014 Period to the 2015 Period was primarily related to an increase of approximately $5.8 million in external CROexpense for outsourced biology, chemistry, development and clinical services, which includes our clinical trial costs, a$1.4 million increase in personnel related costs, primarily due to increased headcount and salaries (before ourrestructuring) and to restructuring costs associated with the reduction in workforce in October 2015, and an increase ofapproximately $558,000 in consulting expense. These increases were partially offset by a decrease of $1.3 million instock-based compensation expense, $1.2 million in license fees related to the Encarta asset purchase in the 2014 Periodand $126,000 in lab supplies.General and administrative expense. General and administrative expense for the 2015 Period was$17.6 million compared to $18.2 million for the 2014 Period. The approximate $525,000 decrease from the 2014 Periodto the 2015 Period primarily resulted from a decrease of approximately $1.1 million in stock-based compensationexpense and a decrease in professional fees of approximately $446,000, primarily related to lower intellectual propertyand general legal costs. These decreases were partially offset by an increase of approximately $856,000 in personnelcosts, due to increased headcount and salaries (before our restructuring) and to restructuring costs associated with thereduction in workforce in October 2015, and an increase in consulting fees of approximately $189,000.Interest income. Interest income increased to approximately $334,000 for the 2015 Period from approximately$242,000 for the 2014 Period. This increase was primarily due to a higher average investment balance for the 2015Period compared to the 2014 Period.72 Table of ContentsLIQUIDITY AND CAPITAL RESOURCESSources of liquidityTo date, we have not generated any revenues. We have financed our operations to date through privateplacements of preferred stock, our initial public offering in February 2012, our follow-on offerings in July 2013 andJanuary 2015 and sales of common stock under our at-the market equity offering program. As of December 31, 2016, wehad $80.9 million in cash, cash equivalents and investments. We primarily invest our cash, cash equivalents andinvestments in a U.S. Government money market fund, overnight repurchase agreements collateralized by governmentagency securities or U.S. Treasury securities, corporate bonds and commercial paper of publicly traded companies.Cash flowsThe following table sets forth the primary sources and uses of cash for each of the periods set forth below (inthousands): Year Ended December 31, 2016 2015 2014 Net cash provided by (used in) Operating activities $(29,484) $(45,559) $(36,902) Investing activities 36,968 (27,057) 43,140 Financing activities (5) 63,585 8,774 Net increase (decrease) in cash and cash equivalents $7,479 $(9,031) $15,012 Operating activities. The use of cash in all periods resulted primarily from our net losses adjusted for non-cashcharges and changes in the components of working capital. The $16.1 million decrease in cash used in operatingactivities for the 2016 Period compared to the 2015 Period was primarily due to a decrease in research and developmentexpenses related to our ongoing clinical trials, including the closeout of our COMMAND trial, and development of ourlead product candidates. The $8.7 million increase in cash used in operating activities for the 2015 Period compared tothe 2014 Period was primarily due to an increase in research and development expenses related to clinical trials anddevelopment of our lead product candidates. In October 2015, we announced a reduction in our workforce of approximately 50% to 20 full time employees.All affected employees received severance pay and outplacement assistance. As a result of the reduction in force andassociated costs, we estimated annual savings of approximately $5.1 million in cash operating expenses on a goingforward basis, with one-time severance and related costs of $1.1 million. Of these one-time severance and related costs,approximately $349,000 was paid through December 31, 2015 and approximately $713,000 was paid in the 2016Period. As of December 31, 2016, all one-time severance and related costs have been paid and no liability remains.Investing activities. The cash provided by investing activities for the 2016 Period reflects net maturities ofinvestments of $37.0 million. The cash used for investing activities for the 2015 Period primarily reflects the netpurchases of investments of $26.8 million. The cash provided by investing activities for the 2014 Period reflects netmaturities of investments of $45.7 million, partially offset by $2.4 million of property and equipment purchasesprimarily associated with the buildout of the Needham facility. In November 2016, we entered into an amended and restated license agreement with Infinity Pharmaceuticals,Inc. (Infinity), under which we acquired an exclusive worldwide license for the research, development,commercialization, and manufacture of products in oncology indications containing duvelisib. In connection with thelicense agreement, we assumed operational and financial responsibility for certain activities that were part of Infinity’sduvelisib program, including the DUO study for patients with relapsed/refractory CLL, and Infinity assumed financialresponsibility for the shutdown of certain other clinical studies up to a maximum of $4.5 million. We are obligated touse diligent efforts to develop and commercialize a product in an oncology indication containing duvelisib. During theterm of the license agreement, Infinity has agreed not to research, develop, manufacture or commercialize duvelisib inany other indication in humans or animals. 73 Table of ContentsPursuant to the terms of the license agreement, we are required to make the following payments to Infinity incash or, at our election, in whole or in part, in shares of our common stock: (i) $6.0 million upon the completion of theDUO study if the results of the DUO study meet certain pre-specified criteria and (ii) $22.0 million upon the approval ofa new drug application in the United States or an application for marketing authorization with a regulatory authorityoutside of the United States for a product in an oncology indication containing duvelisib. For any portion of any of theforegoing payments that we elect to issue in shares of our common stock in lieu of cash, the number of shares of commonstock to be issued will be determined by multiplying (1) 1.025 by (2) the number of shares of common stock equal to (a)the amount of the payment to be paid in shares of common stock divided by (b) the average closing price of a share ofcommon stock as quoted on NASDAQ for a twenty day period following the public announcement of the applicablemilestone event. The shares of common stock will be issued as unregistered securities, and we will have an obligation topromptly file a registration statement with the SEC to register such shares for resale. Any issuance of shares will besubject to the satisfaction of closing conditions, including that all material authorizations, consents, approvals and thelike necessary for such issuance shall have been obtained. We are also obligated to pay Infinity royalties on worldwide net sales of any products in an oncologyindication containing duvelisib ranging from the mid-single digits to the high single-digits. The royalties will expire ona product-by-product and country-by-country basis until the latest to occur of (i) the last-to-expire patent right coveringthe applicable product in the applicable country, (ii) the last-to-expire patent right covering the manufacture of theapplicable product in the country of manufacture of such product, (iii) the expiration of non-patent regulatoryexclusivity in such country and (iv) ten years following the first commercial sale of a product in a country, provided thatif royalties on net sales for a product in the United States are payable solely on the basis of non-patent regulatoryexclusivity, the applicable royalty on net sales for such product in the United States will be reduced by 50%. Theroyalties are also subject to reduction by 50% of certain third-party royalty payments or patent litigation damages orsettlements which might be required to be paid by us if litigation were to arise, with any such reductions capped at 50%of the amounts otherwise payable during the applicable royalty payment period. In addition to the foregoing, we are obligated to pay Infinity an additional royalty of 4% on worldwide netsales of any products in an oncology indication containing duvelisib to cover the reimbursement of research anddevelopment costs owed by Infinity to Mundipharma International Corporation Limited (MICL) and PurduePharmaceutical Products L.P. (Purdue). Once Infinity has fully reimbursed MICL and Purdue, the royalty obligationswill be reduced to 1% of net sales in the United States. These trailing MICL royalties are payable until the later to occurof the last-to-expire of specified patent rights and the expiration of non-patent regulatory exclusivities in a country.Each of the above royalty rates is reduced by 50% on a product-by-product and country-by-country basis if theapplicable royalty is payable solely on the basis of non-patent regulatory exclusivity. In addition, the trailing MICLroyalties are subject to reduction by 50% of certain third-party royalty payments or patent litigation damages orsettlements which might be required to be paid by the us if litigation were to arise, with any such reductions capped at50% of the amounts otherwise payable during the applicable royalty payment period.Financing activities. The cash used in financing activities for the 2016 Period primarily representsapproximately $5,000 used to satisfy the tax withholding obligations on certain RSUs that were net settled byemployees. The cash provided by financing activities for the 2015 Period primarily represents net proceeds of $63.9million from the sale of shares of our common stock in our January 2015 follow-on offering and our at-the-market equityoffering program, offset in part by approximately $417,000 of cash used to satisfy the tax withholding obligations oncertain RSUs that were net settled by employees. The cash provided by financing activities in the 2014 Period isprimarily related to $9.6 million of net proceeds from our at-the-market equity offering program offset by approximately$780,000 of cash used to satisfy the tax withholding obligations on certain RSUs that were net settled by employees. On March 21, 2017 (Closing Date), Verastem, Inc. (Borrower) entered into a term loan facility of up to $25.0million (Term Loan) with Hercules Capital, Inc., a Maryland corporation (Hercules), the proceeds of which will be usedfor its ongoing research and development programs and for general corporate purposes. The Term Loan is governed by aloan and security agreement, dated March 21, 2017 (Loan Agreement), which provides for up to four separateadvances. The first tranche of $2.5 million was drawn on the Closing Date. The second tranche of $2.5 million and thethird tranche of $5.0 million may be drawn, at the Borrower’s option but subject to the Borrower receiving favorabledata from its ongoing Phase III clinical study evaluating the safety and efficacy of74 Table of Contentsduvelisib in patients with relapsed/refractory chronic leukemia or small lymphocytic lymphoma on or prior toSeptember 20, 2017 (Milestone Event), during the period beginning on the Closing Date and ending on the earliest tooccur of the date that is 90 days after the Milestone Event and December 20, 2017. The fourth tranche of $15.0 millionmay be drawn, at the Borrower’s option and at the sole discretion of Hercules, on or prior to June 30, 2018. The Term Loan will mature on December 1, 2020 (Loan Maturity Date). Each advance accrues interest at afloating per annum rate equal to the greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x)10.5% plus (y) (A) the prime rate minus (B) 4.5%. The Term Loan provides for interest-only payments until November1, 2018. The interest-only period may be extended to May 1, 2019 if the Borrower obtains minimum cash proceeds of$20.0 million from a sale of equity securities or subordinated debt and/or ongoing commercial partnerships. Thereafter,amortization payments will be payable monthly in twenty-six installments (or, if the period requiring interest-onlypayments has been extended to May 1, 2019, in twenty installments) of principal and interest (subject to recalculationupon a change in prime rates). Any advance may be prepaid in whole or in part upon seven business days’ prior writtennotice to Hercules, subject to a prepayment charge of 3.0%, if such advance is prepaid in any of the first twelve (12)months following the Closing Date, 2.0%, if such advance is prepaid after twelve (12) months following the ClosingDate but on or prior to twenty-four (24) months following the Closing Date, and 1.0% thereafter. In addition, a finalpayment equal to 4.5% of the greater of (a) $5.0 million and (b) the total principal amount of the Term Loan extendedby Hercules which is due on the Loan Maturity Date, or such earlier date specified in the Loan Agreement. Amountsoutstanding during an event of default shall be payable on demand and shall accrue interest at an additional rate of5.0% per annum of the past due amount outstanding. The Term Loan is secured by a lien on substantially all of the assets of the Borrower, other than intellectualproperty and contains customary covenants and representations, including a liquidity covenant, financial reportingcovenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers oracquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The events of default under the Loan Agreement include, without limitation, and subject to customary graceperiods, (1) the Borrower’s failure to make any payments of principal or interest under the Loan Agreement, promissorynotes or other loan documents, (2) the Borrower’s breach or default in the performance of any covenant under the LoanAgreement, (3) the Borrower making a false or misleading representation or warranty in any material respect, (4) theBorrower’s insolvency or bankruptcy, (5) certain attachments or judgments on the Borrower’s assets, or (6) theoccurrence of any material default under certain agreements or obligations of the Borrower involving indebtedness, or(7) the occurrence of a material adverse effect. If an event of default occurs, Hercules is entitled to take enforcementaction, including acceleration of amounts due under the Loan Agreement. The Loan Agreement also contains other customary provisions, such as expense reimbursement andconfidentiality. Hercules has indemnification rights and the right to assign the Term Loan.In December 2013, we established an at-the-market equity offering program pursuant to which we are able tooffer and sell up to $35.0 million of our common stock at then current market prices from time to time through CantorFitzgerald & Co., as sales agent. In November 2014, we commenced sales under this program. Through December 31,2015, we sold 2,536,155 shares under this program for net proceeds of approximately $22.5 million (after deductingcommissions and other offering expenses), of which 1,189,479 shares were sold in the 2015 Period for net proceeds of$10.9 million (after deducting commissions and other offering expenses). Of the cumulative net proceeds throughDecember 31, 2015, $9.6 million was received in the 2014 Period and $12.9 million was received in the 2015Period. No proceeds were received and no additional sales of our common stock were made under this program duringthe 2016 Period. In January 2015, we completed a follow-on offering in which we sold 8,337,500 shares of our common stock tothe public at a price of $6.50 per share, including 1,087,500 shares issued pursuant to the exercise of the underwriters’option to purchase additional shares. The net proceeds from this offering were $50.9 million, after deductingunderwriting discounts and commissions.75 Table of ContentsFunding requirementsWe expect to continue to incur significant expenses and operating losses for the foreseeable future. Weanticipate that our expenses and operating losses will increase substantially if and as we:·continue our ongoing clinical trials, including with our most advanced product candidates duvelisiband defactinib;·initiate additional clinical trials for our product candidates;·maintain, expand and protect our intellectual property portfolio;·acquire or in-license other products and technologies;·hire additional clinical, development and scientific personnel;·add operational, financial and management information systems and personnel, including personnel tosupport our product development and planned future commercialization efforts; and·ultimately establish a sales, marketing and distribution infrastructure to commercialize any productsfor which we may obtain marketing approval.We expect our existing cash, cash equivalents and investments will be sufficient to fund our current operatingplan for at least the next twelve months from the date of filing of this Annual Report on Form 10-K and into 2018. Wehave based this estimate on assumptions that may prove to be wrong and we could use our available capital resourcessooner than we currently expect. Because of the numerous risks and uncertainties associated with the development andcommercialization of our product candidates, and the extent to which we may enter into collaborations with third partiesfor development and commercialization of our product candidates, we are unable to estimate the amounts of increasedcapital outlays and operating expenses associated with completing the development of our current product candidates.Our future capital requirements will depend on many factors, including:·the rate and size of enrollment, results and cost of completing our ongoing clinical trials;·the scope, progress and results of our ongoing and potential future clinical trials;·the extent to which we acquire or in-license other products and technologies;·the costs, timing and outcome of regulatory review and/or approval of our product candidates;·the costs and timing of future commercialization activities for our product candidates, for which wereceive marketing approval;·revenue, if any, received from commercial sales of our product candidates for which we receivemarketing approval;·the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing ourintellectual property rights and defending intellectual property-related claims; and·our ability to establish collaborations on favorable terms, if at all.Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needsthrough a combination of equity offerings, debt financings, collaborations, strategic alliances and licensingarrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities,76 Table of Contentsthe ownership interest of our existing stockholders will be diluted, and the terms of these securities may includeliquidation or other preferences that adversely affect the rights of our existing stockholders. Debt financing, if available,may involve agreements that include covenants limiting or restricting our ability to take specific actions, such asincurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds throughcollaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rightsto our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that maynot be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we maybe required to delay, limit, reduce or terminate our product development or future commercialization efforts or grantrights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.CONTRACTUAL OBLIGATIONS AND COMMITMENTSThe following table summarizes our contractual obligations at December 31, 2016:(in thousands) Total 2017 2018 -2019 2020 -2021 Thereafter Operating lease obligations $1,484 $527 $957 $ — $— License agreements (1) — — — — — (1)As discussed in Note 10 to the consolidated financial statements appearing elsewhere in this Annual Report onForm 10 K, we are party to several agreements to license intellectual property. The license agreements mayrequire us to pay upfront license fees, ongoing annual license maintenance fees, milestone payments, minimumroyalty payments, as well as reimbursement of certain patent costs incurred by the licensors, as applicable. Wehave not included these payments in the table above as: there were no upfront license fees payable in futureperiods; annual license maintenance fees, which total $15,000 per year beginning in 2017, are perpetual andthe agreements are cancelable by us at any time upon prior written notice to the licensor; we cannot estimate ifmilestone and/or royalty payments will occur in future periods; and patent cost reimbursement costs areperpetual and the agreements are cancelable by us at any time upon prior written notice to the licensor.In November 2016, we entered into an amended and restated license agreement with Infinity, under which weacquired an exclusive worldwide license for the research, development, commercialization, and manufacture of productsin oncology indications containing duvelisib. In connection with the license agreement, we assumed operational andfinancial responsibility for certain activities that were part of Infinity’s duvelisib program, including the DUO study forpatients with relapsed/refractory CLL, and Infinity assumed financial responsibility for the shutdown of certain otherclinical studies up to a maximum of $4.5 million. We are obligated to use diligent efforts to develop and commercializea product in an oncology indication containing duvelisib. During the term of the license agreement, Infinity has agreednot to research, develop, manufacture or commercialize duvelisib in any other indication in humans or animals. Pursuant to the terms of the license agreement, we are required to make the following payments to Infinity incash or, at our election, in whole or in part, in shares of our common stock: (i) $6.0 million upon the completion of theDUO study if the results of the DUO study meet certain pre-specified criteria and (ii) $22.0 million upon the approval ofa new drug application in the United States or an application for marketing authorization with a regulatory authorityoutside of the United States for a product in an oncology indication containing duvelisib. For any portion of any of theforegoing payments that we elect to issue in shares of our common stock in lieu of cash, the number of shares of commonstock to be issued will be determined by multiplying (1) 1.025 by (2) the number of shares of common stock equal to (a)the amount of the payment to be paid in shares of common stock divided by (b) the average closing price of a share ofcommon stock as quoted on NASDAQ for a twenty day period following the public announcement of the applicablemilestone event. The shares of common stock will be issued as unregistered securities, and we will have an obligation topromptly file a registration statement with the SEC to register such shares for resale. Any issuance of shares will besubject to the satisfaction of closing conditions, including that all material authorizations, consents, approvals and thelike necessary for such issuance shall have been obtained. 77 Table of ContentsWe are also obligated to pay Infinity royalties on worldwide net sales of any products in an oncologyindication containing duvelisib ranging from the mid-single digits to the high single-digits. The royalties will expire ona product-by-product and country-by-country basis until the latest to occur of (i) the last-to-expire patent right coveringthe applicable product in the applicable country, (ii) the last-to-expire patent right covering the manufacture of theapplicable product in the country of manufacture of such product, (iii) the expiration of non-patent regulatoryexclusivity in such country and (iv) ten years following the first commercial sale of a product in a country, provided thatif royalties on net sales for a product in the United States are payable solely on the basis of non-patent regulatoryexclusivity, the applicable royalty on net sales for such product in the United States will be reduced by 50%. Theroyalties are also subject to reduction by 50% of certain third-party royalty payments or patent litigation damages orsettlements which might be required to be paid by us if litigation were to arise, with any such reductions capped at 50%of the amounts otherwise payable during the applicable royalty payment period. In addition to the foregoing, we are obligated to pay Infinity an additional royalty of 4% on worldwide netsales of any products in an oncology indication containing duvelisib to cover the reimbursement of research anddevelopment costs owed by Infinity to Mundipharma International Corporation Limited (MICL) and PurduePharmaceutical Products L.P. (Purdue). Once Infinity has fully reimbursed MICL and Purdue, the royalty obligationswill be reduced to 1% of net sales in the United States. These trailing MICL royalties are payable until the later to occurof the last-to-expire of specified patent rights and the expiration of non-patent regulatory exclusivities in a country.Each of the above royalty rates is reduced by 50% on a product-by-product and country-by-country basis if theapplicable royalty is payable solely on the basis of non-patent regulatory exclusivity. In addition, the trailing MICLroyalties are subject to reduction by 50% of certain third-party royalty payments or patent litigation damages orsettlements which might be required to be paid by the us if litigation were to arise, with any such reductions capped at50% of the amounts otherwise payable during the applicable royalty payment period. In July 2012, we entered into a license agreement with Pfizer under which Pfizer granted us worldwide,exclusive rights to research, develop, manufacture and commercialize products containing certain of Pfizer’s inhibitorsof FAK (the FAK Products), including defactinib (VS‑6063), for all therapeutic, diagnostic and prophylactic uses inhumans. We have the right to grant sublicenses under the foregoing licensed rights, subject to certain restrictions. Weare solely responsible, at our own expense, for the clinical development of the FAK Products, which is to be conductedin accordance with an agreed‑upon development plan. We are also responsible for all manufacturing andcommercialization activities at our own expense. Pfizer was required to provide us with an initial quantity of clinicalsupply of one of the FAK Products for an agreed upon price. We made a one‑time cash payment to Pfizer in the amountof $1.5 million and issued 192,012 shares of our common stock. Pfizer is also eligible to receive up to $2.0 million indevelopmental milestones and up to an additional $125.0 million based on the successful attainment of regulatory andcommercial sales milestones. Pfizer is also eligible to receive high single to mid double digit royalties on future netsales of the FAK Products. Our royalty obligations with respect to each of the FAK Product in each country begin on thedate of first commercial sale of the FAK Product in that country, and end on the later of 10 years after the date of firstcommercial sale of the FAK Product in that country or the date of expiration or abandonment of the last claim containedin any issued patent or patent application licensed by Pfizer to us that covers the Product in that country. Under our license agreement with Poniard that we entered into in November 2011 relating to VS‑4718 andcertain other compounds, we paid an upfront license fee and agreed to pay Poniard milestone payments upon theachievement of specified development and regulatory milestones. In February 2014, we purchased the assets which werethe subject of our license agreement with Poniard from Encarta, Inc. (Encarta), who had previously purchased thoseassets in 2013. In consideration for the assets, we issued 97,500 shares of common stock, a warrant to purchase 142,857shares of common stock with an exercise price equal to $17.16 per share and paid $25,000. All existing obligationsunder the license agreement, including an achieved development milestone and an obligation to issue a warrant, weresettled as part of this transaction. In connection with the asset purchase agreement, we also assumed the rights andobligations under the Scripps License Agreement. Pursuant to the Scripps License Agreement, we are obligated to payScripps potential product development milestone payments of up to an aggregate of $3.0 million upon the achievementof specified development and regulatory milestones. In addition, we are obligated to pay Scripps low single‑digitroyalties as a percentage of net sales of licensed products, subject to adjustments in certain circumstances. Ourobligation to pay royalties on net sales is on a country-by-country basis. 78 Table of ContentsOFF‑BALANCE SHEET ARRANGEMENTSWe did not have during the periods presented, and we do not currently have, any off‑balance sheetarrangements, as defined under Securities and Exchange Commission rules.TAX LOSS CARRYFORWARDSAs of December 31, 2016, we had federal and state net operating loss carryforwards of $184.2 million and$182.8 million, respectively, which are available to reduce future taxable income. We also had federal and state taxcredits of $7.4 million and $1.4 million, respectively, which may be used to offset future tax liabilities. The netoperating loss and tax credit carryforwards will expire at various dates through 2035. Net operating loss and tax creditcarryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authoritiesand may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest ofsignificant stockholders over a three‑year period in excess of 50%, as defined under Sections 382 and 383 of the InternalRevenue Code, as well as similar state provisions. This could limit the amount of tax attributes that can be utilizedannually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based onthe value of our company immediately prior to the ownership change. Subsequent ownership changes may further affectthe limitation in future years. At December 31, 2016, we recorded a 100% valuation allowance against our net operatingloss and tax credit carryforwards of $85.9 million, as we believe it is more likely than not that the tax benefits will not befully realized. In the future, if we determine that a portion or all of the tax benefits associated with our tax carryforwardswill be realized, net income would increase in the period of determination.RECENTLY ADOPTED ACCOUNTING STANDARDSIn January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update(ASU) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 clarifies thedefinition of a business, provides a screen to determine when a set of assets is not a business and narrows the definitionof the term output. ASU 2017-01 is effective for the interim and annual periods after December 15, 2016. Early adoptionis permitted. We have elected to early adopt ASU 2017-01 and to apply it to any transactions which occurred prior to theissuance date that have not been reported in financial statements that have been issued or made available for issuance. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern:Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (Subtopic 205-40). ASU 2014-15requires management to assess an entity’s ability to continue as a going concern every reporting period, and providecertain disclosures if management has substantial doubt about the entity’s ability to operate as a going concern, or anexpress statement if not, by incorporating and expanding upon certain principles that are currently in U.S. auditingstandards. ASU 2014-15 is effective for the interim and annual periods after December 15, 2016. Early adoption ispermitted. The Company adopted ASU 2014-15 effective October 1, 2016. We have evaluated the impact of theadoption of ASU 2014-15 on our year ended December 31, 2016 consolidated financial statements and determined thatthere is not substantial doubt about our ability to continue as a going concern for at least one year from the issuance ofthe December 31, 2016 consolidated financial statements. Item 7A. Quantitative and Qualitative Disclosures About Market RiskWe are exposed to market risk related to changes in interest rates. We had cash, cash equivalents andinvestments of $80.9 million and $110.3 million as of December 31, 2016 and 2015, respectively, consisting of cash,U.S. Government money market funds, overnight repurchase agreements collateralized by government agency securitiesor U.S. Treasury securities, corporate bonds and commercial paper of publicly traded companies. Our primary exposureto market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates,particularly because most of our investments are interest bearing. Our available for sale securities are subject to interestrate risk and will fall in value if market interest rates increase. Due to the short‑term duration most of our investmentportfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would nothave a material effect on the fair market value of our portfolio.79 Table of ContentsWe contract with CROs and contract manufacturers globally which may be denominated in foreign currencies.We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactionsdenominated in currencies other than the functional currency are recorded based on exchange rates at the time suchtransactions arise. As of December 31, 2016, an immaterial amount of our total liabilities was denominated in currenciesother than the functional currency. Item 8. Consolidated Financial Statements and Supplementary DataOur consolidated financial statements, together with the report of our independent registered public accountingfirm, appear on pages F‑1 through F‑25 of this Annual Report on Form 10‑K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur Chief Executive Officer and our principal financial and accounting officer evaluated the effectiveness ofour disclosure controls and procedures, as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act, as of theend of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our principalfinancial and accounting officer concluded that our disclosure controls and procedures as of the end of the periodcovered by this report were effective.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over our financialreporting. Internal control over financial reporting is defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Actas the process designed by, or under the supervision of, our Chief Executive Officer and our principal financial andaccounting officer, and effected by our board of directors, management and other personnel, to provide reasonableassurance regarding the reliability of our financial reporting and the preparation of our financial statements for externalpurposes in accordance with GAAP, and includes those policies and procedures that:(1)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of assets;(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with GAAP, and that receipts and expenditures are being madeonly in accordance with the authorizations of management and directors; and(3)provide reasonable assurance regarding the prevention or timely detection of unauthorizedacquisition, use or disposition of assets that could have a material effect on our financial statements.Under the supervision and with the participation of our management, including our Chief Executive Officerand our principal financial and accounting officer, we conducted an evaluation of the effectiveness of our internalcontrol over financial reporting based on the framework provided in Internal Control—Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this evaluation,our management concluded that our internal control over financial reporting was effective as of December 31, 2016.Changes in Internal Control Over Financial ReportingThere has been no change in our internal control over financial reporting occurred during the fiscal quarterended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’sinternal control over financial reporting.80 Table of Contents Item 9B. Other InformationOn March 21, 2017 (Closing Date), Verastem, Inc. (Borrower) entered into a term loan facility of up to $25.0million (Term Loan) with Hercules Capital, Inc., a Maryland corporation (Hercules), the proceeds of which will be usedfor its ongoing research and development programs and for general corporate purposes. The Term Loan is governed by aloan and security agreement, dated March 21, 2017 (Loan Agreement), which provides for up to four separateadvances. The first tranche of $2.5 million was drawn on the Closing Date. The second tranche of $2.5 million and thethird tranche of $5.0 million may be drawn, at the Borrower’s option but subject to the Borrower receiving favorabledata from its ongoing Phase III clinical study evaluating the safety and efficacy of duvelisib in patients withrelapsed/refractory chronic leukemia or small lymphocytic lymphoma on or prior to September 20, 2017 (MilestoneEvent), during the period beginning on the Closing Date and ending on the earliest to occur of the date that is 90 daysafter the Milestone Event and December 20, 2017. The fourth tranche of $15.0 million may be drawn, at the Borrower’soption and at the sole discretion of Hercules, on or prior to June 30, 2018. The Term Loan will mature on December 1, 2020 (the Loan Maturity Date). Each advance accrues interest at afloating per annum rate equal to the greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x)10.5% plus (y) (A) the prime rate minus (B) 4.5%. The Term Loan provides for interest-only payments until November1, 2018. The interest-only period may be extended to May 1, 2019 if the Borrower obtains minimum cash proceeds of$20.0 million from a sale of equity securities or subordinated debt and/or ongoing commercial partnerships. Thereafter,amortization payments will be payable monthly in twenty-six installments (or, if the period requiring interest-onlypayments has been extended to May 1, 2019, in twenty installments) of principal and interest (subject to recalculationupon a change in prime rates). Any advance may be prepaid in whole or in part upon seven business days’ prior writtennotice to Hercules, subject to a prepayment charge of 3.0%, if such advance is prepaid in any of the first twelve (12)months following the Closing Date, 2.0%, if such advance is prepaid after twelve (12) months following the ClosingDate but on or prior to twenty-four (24) months following the Closing Date, and 1.0% thereafter. In addition, a finalpayment equal to 4.5% of the greater of (a) $5.0 million and (b) the total principal amount of the Term Loan extendedby Hercules which is due on the Loan Maturity Date, or such earlier date specified in the Loan Agreement. Amountsoutstanding during an event of default shall be payable on demand and shall accrue interest at an additional rate of5.0% per annum of the past due amount outstanding. The Term Loan is secured by a lien on substantially all of the assets of the Borrower, other than intellectualproperty and contains customary covenants and representations, including a liquidity covenant, financial reportingcovenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers oracquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The events of default under the Loan Agreement include, without limitation, and subject to customary graceperiods, (1) the Borrower’s failure to make any payments of principal or interest under the Loan Agreement, promissorynotes or other loan documents, (2) the Borrower’s breach or default in the performance of any covenant under the LoanAgreement, (3) the Borrower making a false or misleading representation or warranty in any material respect, (4) theBorrower’s insolvency or bankruptcy, (5) certain attachments or judgments on the Borrower’s assets, (6) the occurrenceof any material default under certain agreements or obligations of the Borrower involving indebtedness, or (7) theoccurrence of a material adverse effect. If an event of default occurs, Hercules is entitled to take enforcement action,including acceleration of amounts due under the Loan Agreement. The Loan Agreement also contains other customary provisions, such as expense reimbursement andconfidentiality. Hercules has indemnification rights and the right to assign the Term Loan. The foregoing description of the Term Loan does not purport to be complete and is qualified in its entirety by referenceto the Loan Agreement, a copy of which is filed as Exhibit 10.26 to this Annual Report on Form 10-K and isincorporated herein by reference.81 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEDIRECTORS AND EXECUTIVE OFFICERSThe following table sets forth the name, age and position of each of our directors and executive officers as ofMarch 15, 2017.Name Age PositionRobert Forrester 53 President, Chief Executive Officer and DirectorMichael Kauffman, M.D., Ph.D. 53 Lead DirectorTimothy Barberich 69 DirectorPaul A. Friedman, M.D. 74 DirectorAlison Lawton 55 DirectorS. Louise Phanstiel 58 DirectorBruce Wendel 63 DirectorDaniel Paterson 56 Chief Operating Officer Robert Forrester, age 53, is a Class III director who has served as a member of our Board of Directors since July2013. Mr. Forrester has served as our Chief Executive Officer since July 2013, as our Chief Operating Officer from March2011 until July 2013 and as our President since January 2013. Mr. Forrester has previously held executive levelpositions at both private and public life sciences companies. Prior to joining us, Mr. Forrester served as Chief OperatingOfficer of Forma Therapeutics, Inc. from 2010 until 2011. Previously, he served as Interim President and Chief ExecutiveOfficer of CombinatoRx, Inc. from 2009 until 2010 and as its Executive Vice President and Chief Financial Officer from2004 to 2009. Mr. Forrester served as Senior Vice President, Finance and Corporate Development at ColeyPharmaceuticals Group, Inc. from 2000 to 2003. Prior to his operating roles, Mr. Forrester was a managing director of theProprietary Investment Group at MeesPierson, part of the Fortis Group, investing in life science companies. Prior toMeesPierson, Mr. Forrester worked for the investment banks, BZW (now Barclays Capital) and UBS, in the corporatefinance groups undertaking mergers and acquisitions and public and private financing transactions. Mr. Forrester startedhis career as a lawyer with Clifford Chance in London and Singapore. He earned his LL.B. from Bristol University inEngland. The Board of Directors believes that Mr. Forrester’s qualifications to sit on the Board include his previousexperience serving in leadership positions within the biopharmaceutical industry and his position as our President andChief Executive Officer.Michael Kauffman M.D., age 53, is a Class I director who has served as a member of our Board of Directorssince November 2012. Dr. Kauffman has been the President and Chief Executive Officer of Karyopharm TherapeuticsInc., a publicly traded biotechnology company, since January 2011 and was a Science Advisor to Bessemer VenturePartners from 2008 to 2011. Dr. Kauffman was the Chief Medical Officer of Onyx Pharmaceuticals, Inc., a publiclytraded biotechnology company, from November 2009 until December 2010. Dr. Kauffman was the Chief Medical Officerof Proteolix, Inc., a privately held pharmaceutical company, from April 2009 until November 2009, when it wasacquired by Onyx. From September 2002 until July 2008, Dr. Kauffman was the President and Chief Executive Officer ofEPIX Pharmaceuticals, Inc., a publicly traded biotechnology company that underwent liquidation proceedings in 2009.Dr. Kauffman joined Predix Pharmaceuticals, Inc., the predecessor to EPIX, in September 2002, as President and ChiefExecutive Officer. From 1997 to 2002, he held a number of senior medical and program leadership positions atMillennium Pharmaceuticals, Inc., then a publicly traded biotechnology company, including Vice President, Medicineand VELCADE Program Leader as well as co-founder and Vice President of Medicine at Millennium PredictiveMedicine, a wholly-owned subsidiary of Millennium. Dr. Kauffman also served as Medical Director at BiogenCorporation (now Biogen Inc., a publicly traded biotechnology company). Dr. Kauffman has served on the board ofdirectors of Zalicus, Inc., on the board of directors of Karyopharm since January 2011, and on the board of directors ofKezar Life Sciences Inc. In the past five years, Dr. Kauffman has also served on the board of directors of EPIX. Dr.Kauffman received an M.D. and Ph.D. in molecular biology and biochemistry from Johns Hopkins University and holdsa B.A. in biochemistry from Amherst College. Dr. Kauffman trained in Internal Medicine at Beth Israel Deaconess andMassachusetts General Hospitals. He is board certified in internal medicine. The Board of Directors believes that Dr.Kauffman’s82 Table of Contentsqualifications to sit on the Board include the combination of his significant business and leadership experience atpublic life sciences companies and his medical and scientific background.Timothy Barberich, age 69, is a Class II director who has served as a member of our Board of Directors sinceMarch 2014. Mr. Barberich is founder and former Chairman and Chief Executive Officer of Sepracor Inc., a publiclytraded, research-based, pharmaceutical company based in Marlborough, Massachusetts, which was acquired byDainippon Sumitomo Pharma Co., Ltd. in 2009. He founded Sepracor in 1984 and served as Chief Executive Officerfrom 1984 to May 2007 and as Chairman of the Board from 1990 to 2009. Mr. Barberich has been Chairman ofBioNevia Pharmaceuticals since June 2008 and Chief Executive Officer since 2014. He currently serves on the boards ofdirectors of publicly traded GI Dynamics, Inotek Pharmaceuticals Corporation and Verastem, and on the boards ofdirectors of the privately held companies Neurovance Inc. and Frequency, Inc. He has also served on the boards ofdirectors of HeartWare, International, Inc., Tokai Pharmaceuticals, BioSphere Medical, Inc. and GeminXPharmaceuticals. Mr. Barberich has also served on the board of trustees of Boston Medical Center and the board of thePharmaceutical Research and Manufacturers’ Association (PhRMA). Prior to founding Sepracor, Mr. Barberich spent 10years as a senior executive at Bedford, Massachusetts-based Millipore Corporation. Mr. Barberich is a graduate of KingsCollege and holds a Bachelors of Science degree in Chemistry. The Board of Directors believes that Mr. Barberich’squalifications to sit on the Board include his significant experience in the development and commercialization ofpharmaceutical products, his leadership experience at other pharmaceutical companies and his service on other boardsof directors.Paul A. Friedman M.D., age 74, is a Class I director who has served as a member of our Board of Directors sinceMay 2014. Dr. Friedman was the Chief Executive Officer of Incyte Corporation from November 2001 until his retirementin January 2014 and oversaw the development and commercialization of Jakafi®. Dr. Friedman joined Incyte fromDuPont Pharmaceuticals Research Laboratories where he served as President. Previously, he served as President ofResearch and Development of The DuPont Merck Pharmaceutical Company and Senior Vice President at MerckResearch Laboratories. During his career, Dr. Friedman was involved in the discovery and/or development of a numberof successful pharmaceutical products, including Jakafi®, Aggrastat®, Trusopt®, Crixivan®, Sustiva®, Pedvax®,Pneumovax®, Vaqta®, Varivax® Cozaar®/Hyzaar® and Fosamax®. Dr. Friedman earned his M.D. from HarvardMedical School where he subsequently became an Associate Professor of Medicine and Pharmacology and was apracticing physician at New York-Presbyterian Hospital, College of Physicians and Surgeons. Dr. Friedman currentlyserves as Chairman and Chief Executive Officer of Madrigal Pharmaceuticals and also serves on the boards of directorsof two other publicly traded companies, Incyte and Cerulean Pharma, Inc., and on the boards of directors of twoprivately held companies, Gliknik, Inc. and Navitor Pharmaceuticals, Inc. Dr. Friedman also currently serves as adiplomat of the American Board of Internal Medicine and a Member of the American Society of Clinical Investigation.He has authored or co-authored over 100 scientific publications. The Board of Directors believes that Dr. Friedman’squalifications to sit on the Board include his medical background, his significant experience in the development andcommercialization of pharmaceutical products and his leadership experience at other pharmaceutical companies.Alison Lawton, age 55, is a Class II director who has served as a member of our Board of Directors sinceNovember 2012. Ms. Lawton has been Chief Operating Officer at Aura Biosciences since January 2015 and prior to thiswas Chief Operating Officer of OvaScience, Inc., a publicly traded life sciences company, from January 2013 untilDecember 2013. From 1991 to 2012, Ms. Lawton worked at various positions of increasing responsibility at GenzymeCorporation (Genzyme) and subsequently at Sanofi-Aventis, following its 2011 acquisition of Genzyme, each a globalbiopharmaceutical company. Ms. Lawton served as head of Genzyme Biosurgery, where she was responsible forGenzyme’s global orthopedics, surgical and cell therapy and regenerative medicine businesses. Prior to that, Ms. Lawtonoversaw Global Market Access at Genzyme, which included Global Regulatory Affairs, Global Health Outcomes andStrategic Pricing, Global Public Policy, and Global Product Safety & Risk Management. Before joining Genzyme, Ms.Lawton worked for seven years in the United Kingdom at Parke-Davis, a pharmaceutical company. Ms. Lawton serves onthe boards of directors of ProQR Therapeutics and CoLucid Pharmaceuticals, Inc., both publicly tradedbiopharmaceutical companies. She also served on the board of directors of Cubist Pharmaceuticals for three years untilits acquisition by Merck & Co., Inc. in 2015. Ms. Lawton also serves on the board of a private biotechnology company,Follica, the Scientific Advisory Board of the private biotechnology company X4 Pharmaceuticals and is a corporateadvisor to PIC Therapeutics Inc. She is a former President and Chair of the Board of Regulatory Affairs ProfessionalSociety and former FDA Advisory Committee member for Cell and Gene Therapy Committee. The Board of Directorsbelieves that Ms. Lawton’s qualifications to83 Table of Contentssit on the Board include significant operational, international, regulatory and senior management experience within thepharmaceutical and biotechnology industries and her experience serving on boards of directors within the industry.S. Louise Phanstiel, age 58, is a Class I director who has served as a member of our Board of Directors sinceSeptember 2012. Ms. Phanstiel held several important positions at WellPoint, Inc. from 1996 to 2007, includingPresident, Specialty Products (2003 to 2007), Senior Vice President, Chief of Staff and Corporate Planning in the Officeof the Chairman (2000 to 2003), and Senior Vice President, Chief Accounting Officer, Controller, and Chief FinancialOfficer for all WellPoint, Inc. subsidiaries, including Blue Cross of California (1996 to 2000). Previously, Ms. Phanstielwas a partner at the international services firm of Coopers & Lybrand, where she served clients in life andproperty/casualty insurance, high technology, and higher education. Ms. Phanstiel has served on the board of directorsof Myriad Genetics since September 2009, and formerly served on the boards of directors of Inveresk Research Group,Inc. and Charles River Laboratories, Inc. Ms. Phanstiel received a B.A. degree in Accounting from Golden GateUniversity and is a Certified Public Accountant. The Board of Directors believes that Ms. Phanstiel’s qualifications to siton the Board include her significant financial, investment, and management expertise, and her experience managing andserving as a director of publicly traded companies.Bruce Wendel, age 63, is a Class III director who has served as a member of our Board of Directors since June2016. Mr. Wendel has been Chief Strategic Officer of Hepalink USA, the U.S. subsidiary of Shenzhen HepalinkPharmaceutical Company, since June 2012. Prior to this, Mr. Wendel served as Vice Chairman and Chief ExecutiveOfficer of Abraxis BioScience, LLC, from January 2010 to December 2010, where he oversaw the development andcommercialization of Abraxane®. He also led the negotiations that culminated in the acquisition of Abraxis by Celgenein a deal valued at over $2.9 billion. Prior to Abraxis, Mr. Wendel served in business and corporate development roles ofincreasing responsibility at American Pharmaceutical Partners, IVAX Corporation and Bristol-Myers Squibb. Mr.Wendel currently serves on the board of directors of ProMetic Life Sciences, Inc., a publically traded biopharmaceuticalcompany. Mr. Wendel earned a juris doctorate degree from Georgetown University Law School, and a B.S. from CornellUniversity. The Board of Directors believes that Mr. Wendel's qualifications to sit on the Board include his experiencebuilding companies and bringing oncology drugs to the market, his oversight of the development andcommercialization of Abraxane®, and his life sciences industry experience and knowledge.Dan Paterson, age 56, has served as our Chief Operating Officer since December 2014, our Chief BusinessOfficer from July 2013 to December 2014 and as our Vice President, Head of Corporate Development and Diagnosticsfrom March 2012 until July 2013. Prior to joining us in March 2012, Mr. Paterson was a consultant in 2011. From 2009through 2010, Mr. Paterson was the Chief Operating Officer of On-Q-ity. Mr. Paterson was the President and ChiefExecutive Officer of The DNA Repair Company from 2006 until 2009, when it was acquired by On-Q-ity. Previously, heheld senior level positions at IMS Health, CareTools, OnCare, and Axion.Section 16(a) Beneficial Ownership Reporting ComplianceOur directors, executive officers and beneficial owners of more than 10% of our common stock are requiredunder Section 16(a) of the Securities Exchange Act of 1934, as amended, to file reports of ownership and changes inownership of our securities with the Securities and Exchange Commission (SEC). We believe that, during the year endedDecember 31, 2016, our directors, executive officers and beneficial owners of more than 10% of the Company’s commonstock complied with all Section 16(a) filing requirements.Code of Business Conduct and EthicsWe have adopted a written code of business conduct and ethics that applies to our directors, officers andemployees, including our principal executive officer, principal financial officer, principal accounting officer orcontroller, or persons performing similar functions. A current copy of the code is posted on the “Investors — CorporateGovernance” section of our website, which is located at www.verastem.com. In addition, we intend to post on ourwebsite all disclosures that are required by law, the rules of the SEC or NASDAQ stock market listing standardsconcerning any amendments to, or waivers from, any provision of the code.84 Table of ContentsBoard CommitteesOur board of directors has established an audit committee, a nominating and corporate governance committee,and a compensation committee, each of which operates under a charter that has been approved by our board. Our boardof directors has determined that all of the members of the audit committee, the compensation committee and thenominating and corporate governance committee are independent as defined under NASDAQ Marketplace Rules,including, in the case of all the members of our audit committee, the independence requirements contemplated by Rule10A-3 under the Securities Exchange Act of 1934. No changes have been made to the procedures by which ourstockholders may recommend nominees to our board of directors.Audit committee The members of our audit committee are Louise Phanstiel, Timothy Barberich, and Michael Kauffman. Ourboard of directors has determined that Louise Phanstiel is an “audit committee financial expert” as defined in theapplicable SEC rules. Nominating and corporate governance committee The members of our nominating and corporate governance committee are Paul A. Friedman, TimothyBarberich, and Bruce Wendel. Compensation committee The members of our compensation committee are Alison Lawton, Michael Kauffman, and Bruce Wendel. ITEM 11. EXECUTIVE COMPENSATIONNAMED EXECUTIVE OFFICER COMPENSATION,COMPENSATION DISCUSSION AND ANALYSIS Our named executive officers for the fiscal year ended December 31, 2016 were:·Robert Forrester, our President and Chief Executive Officer;·Daniel Paterson, our Chief Operating Officer; and·Gregory Berk, M.D., our former Chief Medical Officer.85 Table of Contents2016 Summary Compensation TableThe following table provides information regarding the total compensation for services rendered in allcapacities that was earned during the fiscal year indicated by our named executive officers for 2016. Option Non-Equity All Other Awards Incentive Compensation Name and Principal Position Year Salary ($) ($)(1) Plans ($)(2) ($)(3) Total ($)Robert Forrester 2016 525,000 245,844 321,000 12,690 1,104,534Chief Executive Officer 2015 524,385 1,972,828 — 12,504 2,509,717Daniel Paterson 2016 377,000 167,412 151,000 13,290 708,702Chief Operating Officer 2015 376,169 1,042,812 — 12,504 1,431,485Gregory Berk 2016 270,769 452,472 106,667 187,893 1,017,801Chief Medical Officer (4) (1)The amounts reflect the aggregate grant date fair value of option awards granted during the year computed inaccordance with the provisions of Financial Accounting Standards Board Accounting Standard Codification Topic718 (FASB ASC Topic 718), excluding the effect of estimated forfeitures. For information regarding assumptionsunderlying the value of stock awards, see Note 7 to our financial statements and the discussion under Part II, Item 7“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical AccountingPolicies—Stock-Based Compensation,” of this Annual Report on Form 10-K for the year ended December 31, 2016.(2)The amounts shown for non-equity incentive plan compensation represent amounts earned for the fiscal yearsended December 31, 2016 and 2015. No bonuses were granted to our executives, including our named executiveofficers, for 2015. Amounts earned for 2016 were paid in 2017.(3)The amounts shown represent the sum of 401(k) contributions, Health Savings Account contributions, and thedollar value of life insurance premiums paid by the Company for the applicable named executive officer. Theamount for Dr. Berk also includes $175,000 of fees paid in connection with consulting services provided prior tojoining us in April 2016.(4)Dr. Berk served as our Chief Medical Officer from April 15, 2016 to January 19, 2017.Narrative Discussion of Summary Compensation TableEmployment AgreementsWe have entered into an employment agreement with each of our named executive officers. Each of theemployment agreements provides that employment will continue for an indefinite period until either the Company orthe employee provides written notice of termination in accordance with the terms of the agreement.Robert Forrester Pursuant to his amended and restated employment agreement, as of July 1, 2013, Mr. Forrester was entitled toan initial base salary of $490,000, subject to increase from time to time by the Board of Directors. As of January 1, 2017,Mr. Forrester’s annual base salary is $535,000. Mr. Forrester is eligible to receive a bonus of 60% of his current annualbase salary. Subject to Mr. Forrester’s execution of an effective release of claims, Mr. Forrester would be entitled to theseverance payments described below if we terminate his employment without cause, as defined in his employmentagreement, or if Mr. Forrester terminates his employment for good reason, as defined in his employment agreement.If Mr. Forrester’s employment is terminated by us without cause or by Mr. Forrester for good reason, absent achange in control, as defined in his employment agreement, we would be obligated, (1) to pay Mr. Forrester his basesalary for a period of 12 months following the termination of his employment, (2) to accelerate the vesting86 Table of Contentsof the portion of any equity awards granted prior to the date of his amended and restated employment agreement thatwould have vested during the 12-month period following the termination of his employment and (3) to the extentallowed by applicable law and the applicable plan documents, to continue to provide Mr. Forrester with all health anddental benefits that he was receiving at the time of the termination of his employment for a period of 12 monthsfollowing termination (or, if earlier, until the time when Mr. Forrester becomes eligible to enroll in the health or dentalplan of a new employer).If Mr. Forrester’s employment is terminated by us without cause or by Mr. Forrester for good reason, in eachcase within 90 days prior to, or within one year following, a change in control, we would be obligated (1) to pay Mr.Forrester a lump sum amount equal to two times the sum of his then current annual base salary plus an amount equal tohis target bonus, (2) to accelerate the vesting of all outstanding equity awards and (3) to the extent allowed byapplicable law and the applicable plan documents, continue to provide Mr. Forrester with all health and dental benefitsthat he was receiving at the time of the termination of his employment for a period of 24 months following suchtermination (provided that such benefits shall end when Mr. Forrester becomes eligible to enroll in the health or dentalplan of a new employer).To the extent that any severance or compensation payable to Mr. Forrester pursuant to his employmentagreement or otherwise in connection with a change in control of the Company would be subject to the excise taximposed under Section 4999 of the Internal Revenue Code, Mr. Forrester would be entitled to an additional cashpayment equal to an amount calculated by multiplying the grossed-up amount of such payments (i.e., an amount suchthat net amount retained by Mr. Forrester after payment of all applicable taxes, interest and penalties thereon is equal tothe total payments payable to him) by a fraction, the numerator of which is the portion of such payments related toequity awards granted prior to the execution of his employment agreement and the denominator of which is the portionof such payments related to all equity awards granted to him. However, if it would result in a greater amount payable toMr. Forrester, Mr. Forrester would instead be entitled to either the full amount of the total payments payable inconnection with a change in control or a reduced amount of the total payments payable in connection with a change incontrol, whichever results in the greater economic benefit for Mr. Forrester.Daniel PatersonPursuant to his employment agreement, Mr. Paterson was entitled to an initial base salary of $300,000, subjectto increase from time to time by the Board of Directors. As of January 1, 2017, Mr. Paterson’s annual base salary is$390,000. Mr. Paterson is also eligible to receive a bonus of 40% of his current annual base salary. Subject to Mr.Paterson’s execution of an effective release of claims, Mr. Paterson would be entitled to the severance paymentsdescribed below if we terminate his employment without cause, as defined in his employment agreement, or if Mr.Paterson terminates his employment for good reason, as defined in his employment agreement.If Mr. Paterson’s employment is terminated by us without cause or by Mr. Paterson for good reason, absent achange in control, as defined in his employment agreement, we would be obligated (1) to pay Mr. Paterson his basesalary for a period of nine months following such termination of employment, (2) to accelerate the vesting of the portionof any equity awards granted prior to the Company’s initial public offering that would have vested during the nine-month period following such termination and (3) to the extent allowed by applicable law and the applicable plandocuments, to continue to provide Mr. Paterson with all health and dental benefits that he was receiving at the time ofthe termination of his employment for a period of nine months following such termination (provided that such benefitsshall end when Mr. Paterson becomes eligible to enroll in the health or dental plan of a new employer).If Mr. Paterson’s employment is terminated by us without cause or by Mr. Paterson for good reason, in each casewithin 90 days prior to, or within 18 months following, a change in control, we would be obligated (1) to pay Mr.Paterson a lump sum amount equal to his then current annual base salary, (2) to accelerate the vesting of all outstandingequity awards and (3) to the extent allowed by applicable law and the applicable plan documents, to continue toprovide Mr. Paterson with all health and dental benefits that he was receiving at the time of the termination of hisemployment for a period of 12 months following such termination (provided that such benefits shall end when Mr.Paterson becomes eligible to enroll in the health or dental plan of a new employer).87 Table of ContentsGregory Berk, M.D.Pursuant to his employment agreement, Dr. Berk was entitled to a base salary of $400,000 per year, subject toincrease from time to time by the Board of Directors. He was eligible to receive a bonus of 40% of his annual basesalary. Pursuant to the terms of his employment agreement, Dr. Berk was entitled to be granted a stock option topurchase 370,000 shares of our common stock and an additional performance-based stock option to purchase 92,500shares of our common stock (which was increased to 100,000 shares of our common stock at the discretion of our Boardof Directors).Subject to Dr. Berk’s execution of an effective release of claims, Dr. Berk’s employment agreement entitled himto the severance payments and benefits described below if we had terminated his employment without cause, as definedin his employment agreement, or if Dr. Berk terminated his employment for good reason, as defined in his employmentagreement.If Dr. Berk’s employment had been terminated by us without cause or by Dr. Berk for good reason, absent achange in control, as defined in his employment agreement, he would have been entitled to payment of (1) a lump sumamount equal to 75% of his annual base salary, (2) a lump sum amount equal to nine times the full monthly premiumcost of Dr. Berk’s participation in our group health and/or dental plans, (3) any base salary earned but not paid throughthe date of termination, and (4) any bonus awarded but not yet paid on the date of termination, paid at such time whenbonuses are paid to our executives generally.If Dr. Berk’s employment had been terminated by us without cause or by Dr. Berk for good reason, in each casewithin 90 days prior to, or within 18 months following, a change in control, he would have been entitled to (in lieu ofthe payments described above) (1) payment of a lump sum amount equal to his then-current annual base salary, (2)accelerated vesting of all outstanding unvested equity awards that vest only based on the passage of time, (3) paymentof a lump sum amount equal to twelve times the full monthly premium cost of Dr. Berk’s participation in our grouphealth and/or dental plans, (4) payment of any base salary earned but not paid through the date of termination, and (5)payment of any bonus awarded but not yet paid on the date of termination, paid at such time when bonuses are paid toour executives generally.Dr. Berk resigned from the Company and entered into a separation agreement with us, effective as of January19, 2017. Pursuant to the separation agreement, Dr. Berk is entitled to (1) payment of cash severance in the amount of$303,750 (with 50% of such amount paid as a lump sum and 50% paid over the six-month period following January 19,2017), (2) payment of his 2016 bonus in the amount of approximately $106,667, (3) payment of an amount equal to thefull monthly premium cost of Dr. Berk’s participation in our group health and/or dental plans for a period of up to ninemonths, and (4) continued vesting of the equity awards previously granted to Dr. Berk in April and June 2016, duringsuch time when Dr. Berk serves as a consultant to the Company pursuant to a consulting agreement entered intocontemporaneously with the separation agreement. Pension Benefits and Deferred CompensationWe maintain a defined contribution employee retirement plan for our employees. Our 401(k) plan is intended to qualifyas a tax-qualified plan under Section 401(a) of the Code. Employee contributions may be made on a pre-tax basis orafter-tax (Roth) basis. The 401(k) plan provides for employer matching contributions equal to (1) 100% of employeedeferral contributions up to a deferral rate of 3% of eligible compensation plus (2) 50% of employee deferralcontributions up to a deferral rate of an additional 2% of eligible compensation.88 Table of ContentsOutstanding Equity Awards at Fiscal Year-End The following table provides information regarding equity awards held by each of our named executive officersthat were outstanding as of December 31, 2016. Option Awards Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Option Options Options Exercise ExpirationName Exercisable (#) Unexercisable (#) Price ($) DateRobert Forrester 234,375 15,625(1) 9.85 1/15/2023 40,625 9,375(2) 14.18 9/17/2023 187,500 62,500(3) 13.59 1/7/2024 218,750 31,250(4) 13.59 1/7/2024 118,341 152,147(5) 9.19 1/8/2025 134,000 134,000(6) 2.13 11/8/2025 66,000 66,000(7) 1.86 1/1/2026 50,000 50,000(8) 1.37 6/14/2026Daniel Paterson 75,000 5,000(1) 9.85 1/15/2023 87,500 12,500(3) 13.59 1/7/2024 75,000 25,000(4) 13.59 1/7/2024 63,345 81,441(5) 9.19 1/8/2025 67,000 67,000(6) 2.13 11/8/2025 33,000 33,000(7) 1.86 1/1/2026 50,000 50,000(8) 1.37 6/14/2026Gregory Berk 370,000(9) 1.51 4/15/2026 50,000 50,000(8) 1.37 6/14/2026(1)This option was granted on January 15, 2013. The option vests as to 25% of the shares underlying the option onthe first anniversary of the grant date and, thereafter, as to 6.25% of the shares underlying the option at the end ofeach successive three-month period following the first anniversary of the grant date until the fourth anniversary ofthe grant date.(2)This option was granted on September 17, 2013. The option vests as to 6.25% of the shares underlying the optionon October 1, 2013 and, thereafter, as to 6.25% of the shares underlying the option at the end of each successivethree-month period until July 1, 2017.(3)This option was granted on January 7, 2014. The option vests as to 25% of the shares underlying the option on July1, 2014 and, thereafter, as to 6.25% of the shares underlying the option on the last day of each calendar quarter aftersuch date, through June 30, 2017.(4)This option was granted on January 7, 2014. The option vests as to 25% of the shares underlying the option on thefirst anniversary of the grant date and, thereafter, as to 6.25% of the shares underlying the option on the last day ofeach calendar quarter after such date, through December 31, 2017.(5)This option was granted on January 8, 2015. The option vests as to 25% of the shares underlying the option on thefirst anniversary of the grant date and, thereafter, as to 6.25% of the shares underlying the option at the end of eachsuccessive three-month period following the first anniversary of the grant date until the fourth anniversary of thegrant date.89 Table of Contents(6)This option was granted on November 9, 2015. The option vests as to 50% of the shares underlying the option onthe first anniversary of the grant date and, thereafter, as to the remaining 50% of the shares underlying the optionon the second anniversary of the grant date.(7)This option was granted on January 1, 2016. The option vests as to 50% of the shares underlying the option onNovember 9, 2016 and, thereafter, as to the remaining 50% of the shares underlying the option on November 9,2017.(8)This option was granted on June 14, 2016. The option vests as to 50% of the shares underlying the option uponsatisfaction of a certain performance milestone by June 2017, and, thereafter, as to the remaining 50% of the sharesunderlying the option upon satisfaction of a certain performance milestone by June 2018.(9)This option was granted on April 15, 2016. The option vests as to 25% of the shares underlying the option on thefirst anniversary of the grant date and, thereafter, as to 6.25% of the shares underlying the option at the end of eachsuccessive three-month period following the first anniversary of the grant date until the fourth anniversary of thegrant date.DIRECTOR COMPENSATION2016 Director CompensationThe following table summarizes the compensation paid to or earned by our directors during the year endedDecember 31, 2016: Fees Earned Option or Paid in Awards Name Cash ($) ($)(1)(2) Total ($)Timothy Barberich 53,000 22,794 75,794Paul Friedman, M.D. 47,738 22,794 70,532Michael Kauffman, M.D., Ph.D. 67,688 22,794 90,482Alison Lawton 50,928 22,794 73,722S. Louise Phanstiel 60,000 22,794 82,794Stephen Sherwin, M.D., Ph.D. (3) 37,414 — 37,414Henri Termeer 33,938 — 33,938Bruce Wendel 27,923 45,589 73,512Christopher Westphal 18,100 — 18,100(1)Amounts shown represent the aggregate grant date fair value of stock option awards granted to the director andcalculated in accordance with FASB ASC Topic 718, disregarding adjustments for forfeiture assumptions. Forinformation regarding assumptions underlying the value of stock awards, see Note 7 to our financial statements andthe discussion under Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Critical Accounting Policies—Stock-Based Compensation,” of this Annual Report on Form 10-K forthe year ended December 31, 2016.(2)The number of stock options awarded to any non-employee director who received a grant during 2016 was 25,000,with the exception of Mr. Wendel who received 50,000 stock options as a result of his new appointment to ourBoard of Directors.(3)Fees earned by Dr. Sherwin consist of $24,887 earned as a director and $12,527 earned as an advisor to theCompany after his resignation from our Board of Directors on June 14, 2016.90 Table of ContentsThe following table sets forth, as of December 31, 2016, the aggregate number of exercisable and unexercisablestock option awards held by our directors: Option Awards Name Exercisable (#) Unexercisable (#) Total (#)Timothy Barberich 85,099 12,498 97,597Paul Friedman, M.D. 81,997 12,498 94,495Michael Kauffman, M.D., Ph.D. 99,478 12,498 111,976Alison Lawton 99,478 12,498 111,976S. Louise Phanstiel 101,841 12,498 114,339Stephen Sherwin, M.D., Ph.D. 83,585 — 83,585Henri Termeer — — —Bruce Wendel 25,002 24,998 50,000Christopher Westphal — — — Non-Employee Director CompensationUnder our non-employee director compensation policy, each non-employee director receives an annual baseretainer of $40,000. In addition, our non-employee directors receive the following cash compensation for Boardservices, as applicable:·the non-executive Lead Director of the Board of Directors receives an additional annual retainer of$25,000;·each chairperson of our Audit, Compensation and Nominating and Corporate Governance Committeesreceives an additional annual retainer of $20,000, $15,000 and $10,000, respectively; and·each member of our Audit, Compensation and Nominating and Corporate Governance Committees receivesan additional retainer of $8,000, $6,000 and $5,000, respectively.All amounts are paid in quarterly installments.In addition, our non-employee directors receive stock options as compensation for their service on our Board ofDirectors. Newly appointed non-employee directors receive a one-time initial award of options to purchase 50,000shares of our common stock, which vest monthly over a one-year period subject to the director’s continued service onthe Board of Directors. Thereafter, each non-employee director who was serving on the Board of Directors as of the prioryear’s annual meeting of the Company’s shareholders, receives an annual award of options to purchase shares of ourcommon stock, which vest monthly over a one-year period, subject to the director’s continued service on the Board ofDirectors (Annual Grant). Additionally, each non-employee director who has served 12 months on the Board of Directorsas of the date of the annual meeting of the Company’s shareholders, but has not yet received an Annual Grant alsoreceives a pro-rated grant (based on the Annual Grant for such year) to reflect the time such director has served on theBoard of Directors since the 12-month anniversary of the commencement of such director’s service, which vests monthlyover a one-year period, subject to the director’s continued service on the Board of Directors. In 2016, the Annual Grantconsisted of options to purchase 25,000 shares of our common stock.Mr. Forrester, our President and Chief Executive Officer, does not receive compensation for his service as adirector. Mr. Forrester’s compensation is described under the heading “Executive Compensation.”91 Table of Contents ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS Equity Compensation Plan InformationThe following table contains information about our equity compensation plans as of December 31, 2016. Number of securities Weighted- to be issued upon average exercise Number of securities exercise of price of remaining available outstanding stock outstanding options, for future issuance options, warrants and warrants and under equity Plan category rights rights compensation plans Equity compensation plans approved by securityholders(1) 5,343,470 $6.67 1,845,158(3)Equity compensation plans not approved by securityholders(2) 505,000 $3.04 750,000 (1)Includes information regarding our 2010 Equity Incentive Plan and 2012 Incentive Plan.(2)In December 2014, the Board of Directors has authorized and reserved 750,000 shares of common stock that may beissued pursuant to stock options granted or to be granted to new employees in accordance with NASDAQ ListingRule 5635(c)(4), as an inducement material to such employees entering into employment with the Company. Theterms of these stock options are consistent with stock options granted under the Company’s 2012 IncentivePlan. As of December 31, 2016, 580,000 shares had been granted and 75,000 shares had been cancelled under thisprogram. In December 2016, the Board of Directors authorized and reserved 580,000 additional shares of commonstock that may be issued pursuant to stock options granted or to be granted to new employees in accordance withNASDAQ Listing Rule 5635(c)(4), as an inducement material to such employees entering into employment with theCompany.(3)Does not include 1,285,714 shares added to the 2012 Incentive Plan under the evergreen provision on January 1,2017.92 Table of ContentsSECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT The following table sets forth certain information as of March 15, 2017 (unless otherwise specified), withrespect to the beneficial ownership of our common stock by each person who is known to own beneficially more than5% of the outstanding shares of common stock, each person currently serving as a director, each nominee for director,each named executive officer (as set forth in the Summary Compensation Table above), and all directors and executiveofficers as a group. Shares of common stock subject to options, RSUs or other rights to purchase which are now exercisable or areexercisable within 60 days after March 15, 2017 are to be considered outstanding for purposes of computing thepercentage ownership of the persons holding these options or other rights but are not to be considered outstanding forthe purpose of computing the percentage ownership of any other person. As of March 15, 2017 there were 36,992,418shares of common stock outstanding. Number of shares Percentage of shares Name and address of beneficial owner beneficially owned beneficially owned 5% stockholders: CHP III, L.P. (1) 2,079,121 5.62%230 Nassau Street Princeton, NJ 08542 Eastern Capital Limited (2) 1,967,857 5.32%10 Market Street, #773 Grand Cayman, KY1-9006 Cayman Islands Directors and Executive Officers Robert Forrester (3) 1,355,262 3.55%Daniel Paterson (4) 559,175 1.49%Timothy Barberich (5) 134,976 * Paul Friedman, M.D. (6) 95,412 * Michael Kauffman, M.D., Ph.D. (7) 109,893 * Alison Lawton (8) 112,393 * S. Louise Phanstiel (9) 138,756 * Bruce Wendel (10) 45,834 * All executive officers and directors as a group (Eight persons) (11) 2,551,701 6.51%*Represents beneficial ownership of less than one percent of our outstanding common stock.(1)Consists of 2,079,121 shares of common stock as of March 15, 2017.(2)Information is based on a Schedule 13G filed with the SEC on January 30, 2015 by Eastern Capital Limited,Portfolio Services Ltd. and Kenneth B. Dart, reporting as of January 28, 2015. According to the Schedule 13G, eachentity has shared voting and dispositive power over all of these shares. The address for these entities is listed in theSchedule 13G as 10 Market Street #773, Camana Bay, Grand Cayman, KY1-9006 Cayman Islands.(3)Consists of 218,734 shares of common stock held by Mr. Forrester and 1,136,528 shares of common stock issuableupon the exercise of stock options within 60 days of March 15, 2017.(4)Consists of 72,732 shares of common stock held by Mr. Paterson and 486,443 shares of common stock issuableupon the exercise of stock options within 60 days of March 15, 2017.(5)Consists of 39,462 shares of common stock held by Mr. Barberich and 95,514 shares of common stock issuableupon the exercise of stock options within 60 days of March 15, 2017.93 Table of Contents(6)Consists of 3,000 shares of common stock held by Dr. Friedman and 92,412 shares of common stock issuable uponthe exercise of stock options within 60 days of March 15, 2017.(7)Consists of 109,893 shares of common stock issuable upon the exercise of stock options within 60 days of March15, 2017.(8)Consists of 2,500 shares of common stock held by Ms. Lawton and 109,893 shares of common stock issuable uponthe exercise of stock options within 60 days of March 15, 2017.(9)Consists of 26,500 shares of common stock held by The Phanstiel Trust and 112,256 shares of common stockissuable upon the exercise of stock options within 60 days of March 15, 2017.(10)Consists of 45,834 shares of common stock issuable upon the exercise of stock options within 60 days of March 15,2017.(11)Includes shares of common stock issuable upon exercise of stock options within 60 days of March 15, 2017. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Policies and Procedures for Related Person TransactionsOur Board of Directors has adopted written policies and procedures for the review of any transaction,arrangement or relationship in which the Company is a participant, the amount involved exceeds $120,000 and one ofour executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each ofwhom we refer to as a “related person,” has a direct or indirect material interest.Transactions with related personsIf a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a“related person transaction,” the related person must report the proposed related person transaction to our principalfinancial officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate,approved by our Audit Committee. Whenever practicable, the reporting, review and approval will occur prior to entryinto the transaction. If advance review and approval is not practicable, the Audit Committee will review, and, in itsdiscretion, may ratify the related person transaction. The policy also permits the chairman of the Audit Committee toreview and, if deemed appropriate, approve proposed related person transactions that arise between Audit Committeemeetings, subject to ratification by the Audit Committee at its next meeting. Any related person transactions that areongoing in nature will be reviewed annually.A related person transaction reviewed under the policy will be considered approved or ratified if it is authorizedby the Audit Committee after full disclosure of the related person’s interest in the transaction. As appropriate for thecircumstances, the Audit Committee will review and consider:·the related person’s interest in the related person transaction;·the approximate dollar value of the amount involved in the related person transaction;·the approximate dollar value of the amount of the related person’s interest in the transaction without regardto the amount of any profit or loss;·whether the transaction was undertaken in the ordinary course of our business;·whether the terms of the transaction are no less favorable to us than terms that could have been reachedwith an unrelated third party;94 Table of Contents·the purpose of, and the potential benefits to us of, the transaction; and·any other information regarding the related person transaction or the related person in the context of theproposed transaction that would be material to investors in light of the circumstances of the particulartransaction.The Audit Committee may approve or ratify the transaction only if the Audit Committee determines that, underall of the circumstances, the transaction is in our best interests. The Audit Committee may impose any conditions on therelated person transaction that it deems appropriate.In addition to the transactions that are excluded by the instructions to the SEC’s related person transactiondisclosure rule, our Board of Directors has determined that the following transactions do not create a material direct orindirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of thispolicy:·interests arising solely from the related person’s position as an executive officer of another entity (whetheror not the person is also a director of such entity) that is a participant in the transaction, where (a) therelated person and all other related persons own in the aggregate less than a 10% equity interest in suchentity, (b) the related person and his or her immediate family members are not involved in the negotiationof the terms of the transaction and do not receive any special benefits as a result of the transaction and (c)the amount involved in the transaction is less than the greater of $200,000 or 5% of the annual grossrevenues of the company receiving payment under the transaction; and·a transaction that is specifically contemplated by provisions of our charter or bylaws.The policy provides that transactions involving compensation of executive officers shall be reviewed andapproved by the Compensation Committee in the manner specified in its charter.Director IndependenceAs required by the listing standards of the NASDAQ Global Market (NASDAQ), the Board of Directors hasaffirmatively determined, upon the recommendation of the Nominating and Corporate Governance Committee, that eachof our directors and nominees for director other than Robert Forrester, our President and Chief Executive Officer, isindependent. To make this determination, our Board of Directors reviews all relevant transactions or relationshipsbetween each director and Verastem, its senior management and its independent registered public accounting firm.During this review, the Board considers whether there are any transactions or relationships between directors or anymember of their immediate family (or any entity of which a director or an immediate family member is an executiveofficer, general partner or significant equity holder) and members of our senior management or their affiliates. The Boardconsults with Verastem’s outside corporate counsel to ensure that the Board’s determinations are consistent with allrelevant securities and other laws and regulations regarding the definition of “independent,” including those set forth inpertinent Nasdaq listing standards, as in effect from time to time.95 Table of Contents ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPrincipal Accountant Fees and ServicesWe regularly review the services and fees of our independent accountants. These services and fees are alsoreviewed by the Audit Committee on an annual basis. The aggregate fees billed and accrued for the fiscal years endedDecember 31, 2016 and 2015 for each of the following categories of services are as follows:Fee Category 2016 ($) 2015 ($)Audit Fees 357,500 291,691Audit-Related Fees 50,000 —Tax Fees — —All Other Fees — —Total Fees 407,500 291,691 Audit Fees. Consist of fees billed and accrued for professional services rendered for the audit of our annualfinancial statements, the review of interim financial statements and services provided in connection with our registrationstatements.Audit-Related Fees. Consist of fees billed for assurance and related services that are reasonably related to theperformance of the audit or review of our financial statements and are not reported under “Audit Fees.”Tax Fees. Consist of fees billed for tax compliance, tax advice and tax planning and includes fees for tax returnpreparation.All Other Fees. Consist of fees billed for products and services, other than those described above under AuditFees, Audit-Related Fees and Tax Fees.96 Table of Contents PART IV Item 15. Exhibits and Financial Statement SchedulesConsolidated Financial StatementsSee Part II, Item 8 for the Financial Statements required to be included in this Annual Report on Form 10‑K.Consolidated Financial Statement SchedulesAll financial statement schedules are omitted because they are not applicable or the required information isincluded in the consolidated financial statements or notes thereto.ExhibitsThose exhibits required to be filed by Item 601 of Regulation S‑K are listed in the Exhibit Index immediatelypreceding the exhibits hereto and such listing is incorporated herein by reference.Item 16. Form 10-K SummaryNone. 97 Table of Contents SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 23 day ofMarch 2017. VERASTEM, INC. By:/s/ Robert Forrester Robert Forrester Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by thefollowing persons on behalf of the registrant in the capacities and on the dates indicated.Signature Title Date/s/ Robert Forrester Robert Forrester Chief Executive Officer and Director (Principal executive officer) March 23, 2017 /s/ Joseph Chiapponi Joseph Chiapponi Vice President, Finance (Principal financial and accounting officer) March 23, 2017 /s/ Timothy Barberich Timothy Barberich Director March 23, 2017 /s/ Paul A. Friedman, M.D. Paul A. Friedman, M.D. Director March 23, 2017 /s/ Michael Kauffman, M.D.,Ph.D. Michael Kauffman, M.D., Ph.D. Director March 23, 2017 /s/ Alison Lawton Alison Lawton Director March 23, 2017 /s/ S. Louise Phanstiel S. Louise Phanstiel Director March 23, 2017 /s/ Bruce Wendel Bruce Wendel Director March 23, 2017 98 rdTable of ContentsVerastem, Inc.CONSOLIDATED FINANCIAL STATEMENTSCONTENTSReport of Independent Registered Public Accounting Firm F‑2Consolidated Financial Statements Consolidated Balance Sheets F‑3Consolidated Statements of Operations and Comprehensive Loss F‑4Consolidated Statements of Stockholders’ Equity F‑5Consolidated Statements of Cash Flows F‑6Notes to Consolidated Financial Statements F‑7 Table of ContentsVerastem, Inc.Report of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ofVerastem, Inc. We have audited the accompanying consolidated balance sheets of Verastem, Inc. as of December 31, 2016 and2015, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cashflows for each of the three years in the period ended December 31, 2016. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statementsbased on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. We were not engaged to perform an audit of theCompany’s internal control over financial reporting. Our audits included consideration of internal control overfinancial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Verastem, Inc. as of December 31, 2016 and 2015, and the consolidated results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2016 in conformity with U.S.generally accepted accounting principles. /s/ Ernst & Young LLP Boston, MassachusettsMarch 23, 2017 F-2 Table of ContentsVerastem, Inc.CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts) December 31, December 31, 2016 2015 Assets Current assets: Cash and cash equivalents $32,349 $24,870 Short-term investments 48,548 85,388 Prepaid expenses and other current assets 398 585 Total current assets 81,295 110,843 Property and equipment, net 1,417 2,048 Restricted cash 162 203 Other assets 755 — Total assets $83,629 $113,094 Liabilities and stockholders’ equity Current liabilities: Accounts payable $4,095 $3,942 Accrued expenses 6,896 6,098 Liability classified stock-based compensation awards — 69 Total current liabilities 10,991 10,109 Other liabilities 341 516 Stockholders’ equity: Preferred stock, $0.0001 par value; 5,000 shares authorized, no shares issuedand outstanding at December 31, 2016 and 2015, respectively — — Common stock, $0.0001 par value; 100,000 shares authorized, 36,992 and 36,941shares issued and outstanding at December 31, 2016 and 2015, respectively 4 4 Additional paid-in capital 307,587 301,305 Accumulated other comprehensive income 29 43 Accumulated deficit (235,323) (198,883) Total stockholders’ equity 72,297 102,469 Total liabilities and stockholders’ equity $83,629 $113,094 See accompanying notes to the consolidated financial statements.F-3 Table of ContentsVerastem, Inc.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(in thousands, except per share amounts) Year Ended December 31, 2016 2015 2014 Operating expenses: Research and development $19,779 $40,565 $35,448 General and administrative 17,223 17,634 18,159 Total operating expenses 37,002 58,199 53,607 Loss from operations (37,002) (58,199) (53,607) Interest income 562 334 242 Net loss $(36,440) $(57,865) $(53,365) Net loss per share—basic and diluted $(0.99) $(1.61) $(2.07) Weighted-average number of common shares used in net loss per share—basic anddiluted 36,988 35,932 25,804 Net loss $(36,440) $(57,865) $(53,365) Unrealized (loss) gain on available-for-sale securities (14) 32 (17) Comprehensive loss $(36,454) $(57,833) $(53,382) See accompanying notes to the consolidated financial statements.F-4 Table of ContentsVerastem, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(in thousands, except share data) Accumulated other Additional comprehensive Total Common stock paid-in (loss) Accumulated stockholders' Shares Amount capital income deficit equity Balance at December 31, 2013 25,328,450 $3 $205,068 $28 $(87,653) $117,446 Net loss — — — — (53,365) (53,365) Unrealized loss on available-for-sale marketable securities — — — (17) — (17) Issuance of common stock, net of issuance costs of $43 1,346,676 — 11,646 — — 11,646 Vesting of restricted stock 321,287 — 9 — — 9 Issuance of common stock resulting from exerciseof stock options 30,451 — 20 — — 20 Issuance of common stock resulting from vestingof restricted stock units and payment of tax withholdings 135,008 — (780) — — (780) Shares issued for technology rights 97,500 — 1,447 — — 1,447 Stock-based compensation expense — — 12,360 — — 12,360 Balance at December 31, 2014 27,259,372 $3 $229,770 $11 $(141,018) $88,766 Net loss — — — — (57,865) (57,865) Unrealized gain on available-for-sale marketable securities — — — 32 — 32 Issuance of common stock resulting from follow-onoffering 8,337,500 1 50,941 — — 50,942 Issuance of common stock resulting from at-the-markettransactions, net of issuance costs of $53 1,189,479 — 10,911 — — 10,911 Vesting of restricted stock 7,995 — 2 — — 2 Issuance of common stock resulting from exerciseof stock options 33,658 — 13 — — 13 Issuance of common stock resulting from vestingof restricted stock units and payment of tax withholdings 113,257 — (417) — — (417) Stock-based compensation expense — — 10,085 — — 10,085 Balance at December 31, 2015 36,941,261 $4 $301,305 $43 $(198,883) $102,469 Net loss — — — — (36,440) (36,440) Unrealized loss on available-for-sale marketable securities — — — (14) — (14) Issuance of common stock resulting from exerciseof stock options 1,605 — — — — — Issuance of common stock resulting from vestingof restricted stock units and payment of tax withholdings 49,552 — (5) — — (5) Stock-based compensation expense — — 6,287 — — 6,287 Balance at December 31, 2016 36,992,418 $4 $307,587 $29 $(235,323) $72,297 See accompanying notes to the consolidated financial statements.F-5 Table of ContentsVerastem, Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2016 2015 2014 Operating activities Net loss $(36,440) $(57,865) $(53,365) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 670 754 427 Stock-based compensation expense 6,287 10,085 12,360 Amortization of premiums and discounts on available-for-sale marketablesecurities (140) 264 290 Non-cash expense related to the purchase of technology rights — — 1,197 Loss on disposal of fixed assets — 46 4 Changes in operating assets and liabilities: Prepaid expenses, other current assets and other assets (568) 276 27 Accounts payable 153 863 287 Accrued expenses and other liabilities 623 418 2,119 Liability classified stock-based compensation awards (69) (400) (248) Net cash used in operating activities (29,484) (45,559) (36,902) Investing activities Purchases of property and equipment (39) (211) (2,429) Purchases of investments (82,101) (199,851) (39,361) Maturities of investments 119,067 173,005 85,047 Decrease (increase) in restricted cash 41 — (117) Net cash provided by (used in) investing activities 36,968 (27,057) 43,140 Financing activities Proceeds from the exercise of stock options — 13 20 Net proceeds from the issuance of common stock and restricted common stock — 63,989 9,534 Cash used to settle restricted stock liability (5) (417) (780) Net cash (used in) provided by financing activities (5) 63,585 8,774 Increase (decrease) in cash and cash equivalents 7,479 (9,031) 15,012 Cash and cash equivalents at beginning of period 24,870 33,901 18,889 Cash and cash equivalents at end of period $32,349 $24,870 $33,901 Supplemental disclosure of non-cash investing and financing activities Proceeds from the issuance of common stock included in prepaid expenses andother current assets $ — $ — $2,085 Purchases of property and equipment in accounts payable $ — $ — $196 See accompanying notes to the consolidated financial statements. F-6 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of businessVerastem, Inc. (the Company) is a biopharmaceutical company focused on discovering and developing drugs toimprove outcomes for patients with cancer. The Company’s operations to date have been limited to organizing andstaffing the Company, business planning, raising capital, acquiring and developing its technology, identifying potentialproduct candidates and undertaking preclinical and clinical studies of its product candidates.The Company is subject to a number of risks similar to other life science companies, including, but not limitedto, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, inability toobtain marketing approval of product candidates, competitors developing new technological innovations, marketacceptance of the Company’s products and protection of proprietary technology. If the Company does not successfullycommercialize any of its product candidates, it will be unable to generate product revenue or achieve profitability.As of December 31, 2016, the Company had cash, cash equivalents and investments of $80.9 million andaccumulated deficit of $235.3 million. Although the Company has incurred recurring losses and expects to continue toincur losses for the foreseeable future, the Company expects its cash, cash equivalents and investments to be sufficientto fund its current operating plan for at least the next twelve months from the date of issuance of these consolidatedfinancial statements and into 2018.2. Significant accounting policiesBasis of consolidationThe consolidated financial statements include the accounts of Verastem Securities Company, a wholly ownedsubsidiary of the Company. All financial information presented has been consolidated and includes the accounts of theCompany and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated inconsolidation. Use of estimatesThe preparation of the Company’s financial statements in conformity with U.S. generally accepted accountingprinciples requires management to make estimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes. On an ongoing basis, management evaluates its estimates, including estimatesrelated to accruals and stock‑based compensation expense. The Company bases its estimates on historical experienceand other market‑specific or other relevant assumptions that it believes to be reasonable. Actual results could differ fromsuch estimates. Segment and geographic informationOperating segments are defined as components of an enterprise about which separate discrete information isavailable and regularly reviewed by the chief operating decision maker, or decision‑making group, in deciding how toallocate resources and in assessing performance. The Company views its operations and manages its business in oneoperating segment, which is the business of developing drugs for the treatment of cancer. All material long-lived assetsof the Company reside in the United States. Cash and cash equivalentsThe Company considers all highly liquid investments with an original or remaining maturity of three months orless at the date of purchase to be cash equivalents. Cash equivalents consist of a U.S. Government money market fund,overnight repurchase agreements collateralized by government agency securities or U.S. Treasury securities, corporatebonds and commercial paper of publicly traded companies. Cash equivalents are reported at fair value.F-7 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair value of financial instrumentsThe Company determines the fair value of its financial instruments based upon the fair value hierarchy, whichprioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to thevaluation inputs used in determining the reported fair value of the investments and is not a measure of the investmentcredit quality. The hierarchy defines three levels of valuation inputs:Level 1 inputs Quoted prices in active markets for identical assets or liabilities that the Company can access at themeasurement date. Level 2 inputs Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly or indirectly. Level 3 inputs Unobservable inputs that reflect the Company’s own assumptions about the assumptions marketparticipants would use in pricing the asset or liability. The following table presents information about the Company’s financial instruments that are measured at fairvalue on a recurring basis (in thousands): December 31, 2016 Description Total Level 1 Level 2 Level 3 Financial assets Cash equivalents $30,540 $20,540 $10,000 $ — Short-term investments 48,548 — 48,548 — Total financial assets $79,088 $20,540 $58,548 $ — December 31, 2015 Description Total Level 1 Level 2 Level 3 Financial assets Cash equivalents $23,036 $11,464 $11,572 $ — Short-term investments 85,388 — 85,388 — Total financial assets $108,424 $11,464 $96,960 $ — Financial liabilities Liability classified stock-based compensation awards $69 $69 $ — $ — Total financial liabilities $69 $69 $ — $ — F-8 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) These investments and cash equivalents have been initially valued at the transaction price and subsequentlyvalued, at the end of each reporting period, utilizing third party pricing services or other market observable data. Thepricing services utilize industry standard valuation models, including both income and market based approaches andobservable market inputs to determine value. These observable market inputs include reportable trades, benchmarkyields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. TheCompany validates the prices provided by third party pricing services by reviewing their pricing methods and matrices,obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that therelevant markets are active. After completing its validation procedures, the Company did not adjust or override any fairvalue measurements provided by the pricing services as of December 31, 2016 and 2015.The Company’s liability classified stock-based compensation awards were comprised of restricted stock units(RSUs) that allowed for greater than minimum statutory tax withholdings. These awards were valued based on the fairvalue of the Company’s common stock underlying the awards, which is traded on an active market. During the firstquarter of 2013, the Company amended the terms of certain RSUs to allow for cash tax withholdings greater than theminimum required statutory withholding amount. As a result of this change in the terms of the awards, the outstandingRSUs were considered to be liability instruments. As a result of this modification, the Company recorded a liability forthe fair value of the awards as of each reporting date with the change in fair value recorded through the statement ofoperations. The Company recorded stock-based compensation expense equal to the greater of the original grant date fairvalue of the awards or the settlement date fair value. All such RSUs were fully vested as of February 1, 2016. During theyears ended December 31, 2016 and 2015, the Company made approximate deposits to the taxing authorities of $5,000and $417,000, respectively, to settle the tax liability for awards that settled during such periods.InvestmentsInvestments and cash equivalents consist of investments in a U.S. Government money market fund, overnightrepurchase agreements collateralized by government agency securities or U.S. Treasury securities, corporate bonds andcommercial paper of publicly traded companies that are classified as available‑for‑sale pursuant to AccountingStandards Codification (ASC) Topic 320, Investments—Debt and Equity Securities. The Company classifies investmentsavailable to fund current operations as current assets on its consolidated balance sheets. Investments are classified aslong‑term assets on the consolidated balance sheets if (i) the Company has the intent and ability to hold the investmentsfor a period of at least one year and (ii) the contractual maturity date of the investments is greater than one year.Investments are carried at fair value with unrealized gains and losses included as a component of accumulated othercomprehensive income (loss), which is a separate component of stockholders’ equity (deficit), until such gains andlosses are realized. The fair value of these securities is based on quoted prices for identical or similar assets. If a declinein the fair value is considered other‑than‑temporary, based on available evidence, the unrealized loss is transferred fromother comprehensive loss to the consolidated statements of operations and comprehensive loss.The Company reviews investments for other‑than‑temporary impairment whenever the fair value of aninvestment is less than the amortized cost and evidence indicates that an investment’s carrying amount is notrecoverable within a reasonable period of time. To determine whether an impairment is other‑than‑temporary, theCompany considers the intent to sell, or whether it is more likely than not that the Company will be required to sell, theinvestment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includesreasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of theimpairment and changes in value subsequent to year end. As of December 31, 2016 and 2015, there were no investmentswith a fair value that was significantly lower than the amortized cost basis or any investments that had been in anunrealized loss position for a significant period. There were no other‑than‑temporary declines in fair value of short‑terminvestments for the years ended December 31, 2016, 2015 and 2014. Realized gains and losses are determined using thespecific identification method and are included in interest income in the consolidated statements of operations andcomprehensive loss. There were no realized gains or losses recognized for the years ended December 31, 2016, 2015 and2014.F-9 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Cash, cash equivalents and investments consist of the following (in thousands): December 31, 2016 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts$22,349$ —$ —$22,349Overnight repurchase agreements 10,000 $ — $ — 10,000 Total cash and cash equivalents $32,349 $ — $ — $32,349 Investments: Corporate bonds and commercial paper (due within 1 year) 48,519 53 (24) 48,548 Total investments $48,519 $53 $(24) $48,548 Total cash, cash equivalents, and investments $80,868 $53 $(24) $80,897 December 31, 2015 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts $13,298 $ — $ — $13,298 Government-sponsored enterprise securities (originalmaturities within 90 days) 2,000 — — 2,000 Corporate bonds and commercial paper (original maturitieswithin 90 days) 9,572 — — 9,572 Total cash and cash equivalents $24,870 $ — $ — $24,870 Investments: Government-sponsored enterprise securities (due within1 year) $11,932 $5 $ — $11,937 Treasury securities (due within 1 year) 1,005 — — 1,005 Corporate bonds and commercial paper (due within 1 year) 72,408 57 (19) 72,446 Total investments $85,345 $62 $(19) $85,388 Total cash, cash equivalents, and investments $110,215 $62 $(19) $110,258 Concentrations of credit risk and off‑balance sheet riskCash and cash equivalents and investments are financial instruments that potentially subject the Company toconcentrations of credit risk. The Company mitigates this risk by maintaining its cash and cash equivalents andinvestments with high quality, accredited financial institutions. The management of the Company’s investments is notdiscretionary on the part of these financial institutions. As of December 31, 2016, the Company’s cash, cash equivalentsand investments were deposited at two financial institutions and it has no significant off‑balance sheet concentrations ofcredit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. F-10 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Property and equipmentProperty and equipment consists of laboratory equipment, office furniture, computer equipment and leaseholdimprovements. Expenditures for repairs and maintenance are recorded to expense as incurred, whereas major bettermentsare capitalized as additions to property and equipment. Depreciation and amortization is calculated using thestraight‑line method over the following estimated useful lives of the assets:Laboratory equipment 5 yearsFurniture 5 yearsComputer equipment 3 yearsLeasehold Improvements Lesser of useful life or life of leaseUpon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removedfrom the accounts and any resulting gain or loss is recognized.The Company reviews its long‑lived assets for impairment whenever events or changes in businesscircumstances indicate that the carrying value of assets may not be recoverable. Recoverability is measured bycomparison of the asset’s book value to future net undiscounted cash flows that the assets are expected to generate. Ifsuch assets are considered to be impaired, the impairment to be recognized is measured by the amount by which thebook value of the assets exceed their fair value, which is measured based on the projected discounted future net cashflows arising from the assets. No material impairment losses have been recorded through December 31, 2016. Other assetsPursuant to the license agreement between the Company and Infinity Pharmaceuticals, Inc. (Infinity) amendedand restated on November 1, 2016, effective as of October 29, 2016 (the License Agreement), the Company assumed therights to the remaining balance of certain prepaid amounts as of December 31, 2016 on contracts with contract researchorganizations (CROs). The License Agreement also requires the Company to reimburse Infinity for these prepaid CROexpenses. The prepaid CRO expenses and corresponding liability of approximately $755,000 are recorded as otherassets and accrued expenses on the consolidated balance sheets as of December 31, 2016. Research and development costsThe Company expenses research and development costs to operations as incurred. Research and developmentexpenses consist of:·employee‑related expenses, including salaries, benefits, travel and stock‑based compensation expense;·external research and development expenses incurred under arrangements with third parties, such as CROs,clinical trial sites, manufacturing organizations and consultants, including the scientific advisory board;·license fees; and·facilities, depreciation and other expenses, which include direct and allocated expenses for rent andmaintenance of facilities, depreciation of equipment, and laboratory supplies.F-11 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company accounts for nonrefundable advance payments for goods and services that will be used in futureresearch and development activities as expenses when the services have been performed or when the goods have beenreceived rather than when the payment is made. Stock‑based compensationThe Company expenses the fair value of employee stock-based awards over the requisite service period, whichtypically is the vesting period. Compensation expense is measured using the fair value of the award at the grant date, netof estimated forfeitures, and is adjusted annually to reflect actual forfeitures. Awards subject to performance basedvesting requirements are expensed utilizing an accelerated attribution model if achievement of the performance criteriais determined to be probable.The grant date fair value of employee stock options is estimated using the Black‑Scholes option pricing modelthat takes into account the fair value of its common stock, the exercise price, the expected life of the option, theexpected volatility of its common stock, expected dividends on its common stock, and the risk-free interest rate over theexpected life of the option. The Company uses the simplified method described in the Securities and ExchangeCommission Staff Accounting Bulletin Topic 14.D.2 to calculate the expected term as it does not have sufficienthistorical exercise data to provide a reasonable basis upon which to estimate the expected term for options granted toemployees. The expected term is applied to the stock option grant group as a whole, as the Company does not expectsubstantially different exercise or post‑vesting termination behavior among its employee population. The computationof expected volatility is based on the historical volatility of five companies equally weighted, including the Companyand a representative group of four public biotechnology and life sciences companies with similar characteristics to theCompany, including similar stage of product development and therapeutic focus. The risk‑free interest rate is based on atreasury instrument whose term is consistent with the expected term of the stock options. Management assesses expectedforfeitures based on the experience of the Company coupled with comparison to data from the representative group ofcompanies and recognizes compensation costs only for those equity awards expected to vest.Stock‑based awards issued to nonemployees, including directors for non‑board related services, are accountedfor based on the fair value of such services received or of the equity instruments issued, whichever is more reliablymeasured. Stock option awards to non-employees are revalued at each reporting date and upon vesting using theBlack‑Scholes option pricing model and are expensed on a straight‑line basis over the vesting period.Stock‑based compensation awards which allowed for greater than the minimum statutory tax withholdings wereclassified as liabilities. These awards were revalued at each reporting date and were expensed on a straight‑line basisover the vesting period. Upon settlement, the awards were revalued and the amounts were reclassified to additionalpaid‑in capital. Shares were withheld to cover the tax withholding and amounts paid to settle the tax liability wererecorded as a reduction of additional paid‑in capital. Income taxesThe Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilitiesare recognized for the future tax consequences attributable to differences between the financial statement carryingamounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year inwhich the differences are expected to affect taxable income. Tax benefits are recognized when it is more likely than notthat a tax position will be sustained during an audit. Deferred tax assets are reduced by a valuation allowance if currentevidence indicates that it is considered more likely than not that these benefits will not be realized. F-12 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Net loss per shareBasic and diluted net loss per common share is calculated by dividing net loss applicable to commonstockholders by the weighted‑average number of common shares outstanding during the period, without considerationfor common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options,restricted stock units, unvested restricted stock and the warrant issued in 2014 are considered to be common stockequivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. Allpotentially dilutive securities were excluded from the calculation of diluted net loss per share as the securities wereanti‑dilutive for all periods presented.The following potentially dilutive securities were excluded from the calculation of diluted net loss per sharedue to their anti‑dilutive effect: Year Ended December 31, 2016 2015 2014 Outstanding stock options 5,848,470 5,390,130 4,206,440 Outstanding warrants 142,857 142,857 142,857 Unvested restricted stock units — 53,751 293,747 Unvested restricted stock — — 7,995 5,991,327 5,586,738 4,651,039 Recently Issued Accounting Standards Updates In November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update(ASU) 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that a statement of cashflows explain the change during the period in the total of cash, cash equivalents and amounts generally described asrestricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cashequivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual and interim periodsbeginning after December 15, 2017, with early adoption permitted. The Company has not chosen to early adopt thisstandard and is currently evaluating the impact the adoption will have on its consolidated financial statements andrelated disclosures. In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through RelatedParties That Are under Common Control. ASU 2016-17 updates ASU 2015-02. Under the amendments, a single decisionmaker is not required to consider indirect interests held through related parties that are under common control with thesingle decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is requiredto include those interests on a proportionate basis consistent with indirect interests held through other related parties.ASU 2016-17 is effective for annual and interim periods beginning after December 15, 2016, with early adoptionpermitted. The Company has not chosen to early adopt this standard and is currently evaluating the impact the adoptionwill have on its consolidated financial statements and related disclosures. In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of CertainCash Receipts and Cash Payments. ASU 2016-15 adds or clarifies guidance on the classification of certain cash receiptsand payments in the statement of cash flows. The standard is effective for annual and interim periods beginning afterDecember 15, 2017, with early adoption permitted. The Company has not chosen to early adopt this standard and iscurrently evaluating the impact the adoption will have on its consolidated financial statements and related disclosures. F-13 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvementsto Employee Share-Based Payment Accounting. ASU 2016-09 simplifies the accounting for share-based compensationarrangements, including the income tax impact and classification on the statement of cash flows. The standard iseffective for annual and interim periods beginning after December 15, 2016 with early adoption permitted. TheCompany has not chosen to early adopt this standard and is currently evaluating the impact the adoption will have onits consolidated financial statements and related disclosures.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance underFASB ASC Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. ASU 2016-02 requires lesseesto recognize in the statement of financial position a liability to make lease payments and a right-of-use assetrepresenting its right to use the underlying asset for the lease term for both finance and operating leases. The guidancealso eliminates the current real estate-specific provisions for all entities. ASU 2016-02 is effective for fiscal years, andinterim periods within those years, beginning after December 15, 2018 with early adoption permitted. The Company hasnot chosen to early adopt this standard and is currently evaluating the impact the adoption will have on its consolidatedfinancial statements and related disclosures.Recently Adopted Accounting Standards Updates In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definitionof a Business. ASU 2017-01 clarifies the definition of a business, provides a screen to determine when a set of assets isnot a business and narrows the definition of the term output. ASU 2017-01 is effective for the interim and annual periodsafter December 15, 2016. Early adoption is permitted. The Company has elected to early adopt ASU 2017-01 and toapply it to the November 2016 amended and restated license agreement with Infinity, under which it acquired anexclusive worldwide license for the research, development, commercialization, and manufacture of products inoncology indications containing duvelisib. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern:Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (Subtopic 205-40). ASU 2014-15requires management to assess an entity’s ability to continue as a going concern every reporting period, and providecertain disclosures if management has substantial doubt about the entity’s ability to operate as a going concern, or anexpress statement if not, by incorporating and expanding upon certain principles that are currently in U.S. auditingstandards. ASU 2014-15 is effective for the interim and annual periods after December 15, 2016. Early adoption ispermitted. The Company adopted ASU 2014-15 effective October 1, 2016. The Company has evaluated the impact ofthe adoption of ASU 2014-15 on its year ended December 31, 2016 consolidated financial statements and determinedthat there is not substantial doubt about the Company’s ability to continue as a going concern for at least one year fromthe issuance of the December 31, 2016 consolidated financial statements.F-14 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Property and equipment, netProperty and equipment and related accumulated depreciation are as follows (in thousands): December31, December31, 2016 2015 Leasehold improvements $2,104 $2,104 Laboratory equipment 908 908 Furniture and fixtures 325 325 Computer equipment 279 240 3,616 3,577 Less: accumulated depreciation (2,199) (1,529) $1,417 $2,048 Approximate total depreciation and amortization expenses amounted to $670,000, $754,000, and $427,000 forthe years ended December 31, 2016, 2015 and 2014, respectively.4. Prepaid expenses and other current assetsPrepaid expenses and other current assets consist of the following (in thousands): December31, December31, 2016 2015 Interest receivable $204 $154 Prepaid contract research organization costs 96 404 Prepaid insurance 65 25 Prepaid other 33 2 $398 $585 5. Accrued expensesAccrued expenses consist of the following (in thousands): December 31,2016 December 31,2015 Contract research organization costs $3,258 $3,782 Compensation and related benefits 2,505 1,802 Consulting fees 527 — Professional fees 403 260 Deferred rent 175 160 Other 28 94 $6,896 $6,098 F-15 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6. Common stockAs of December 31, 2016 and 2015, the Company had reserved the following shares of common stock for theissuance of common stock for vested restricted stock units, the exercise of stock options, and an outstanding warrant (inthousands): December31, December31, 2016 2015 Shares reserved under equity compensation plans 7,189 5,958 Shares reserved for inducement grants 1,255 750 Shares reserved for outstanding warrants 143 143 8,587 6,851 Each share of common stock is entitled to one vote. The holders of the common stock are also entitled toreceive dividends whenever funds are legally available and when declared by the board of directors.At-the-market equity offering programIn December 2013, the Company established an at-the-market equity offering program pursuant to which it wasable to offer and sell up to $35.0 million of its common stock at then current market prices from time to time. InNovember 2014, the Company commenced sales under this program. During the year ended December 31, 2015, theCompany sold 1,189,479 shares of common stock under this program with net proceeds (after deducting commissionsand other offering expenses) of $12.9 million. No additional sales of the Company’s common stock were made underthis program and no proceeds were received during the year ended December 31, 2016.WarrantIn February 2014, in connection with the acquisition of intellectual property rights from Encarta, Inc. (Encarta),the Company issued a warrant to purchase 142,857 shares of common stock exercisable at a price of $17.16 per sharethat expires 3 years from the issuance date. The warrant expired unexercised in February 2017.7. Stock‑based compensationStock‑based compensation expense as reflected in the Company’s consolidated statements of operations andcomprehensive loss was as follows (in thousands): Year Ended December 31, 2016 2015 2014 Research and development $1,073 $2,411 $3,727 General and administrative 5,145 7,273 8,385 Total stock-based compensation expense $6,218 $9,684 $12,112 Of the $6.2 million of stock-based compensation expense recorded during the year ended December 31, 2016,$6.3 million was recorded to additional paid-in capital and approximately $69,000 was recorded as a decrease inliability classified awards. Of the $9.7 million of stock-based compensation expense recorded during the year endedDecember 31, 2015, $10.1 million was recorded to additional paid-in capital and approximately $400,000 was recordedas a decrease in liability classified awards. Of the $12.1 million of stock-based compensation expense recorded duringthe year ended December 31, 2014, approximately $12.3 million was recorded to additional paid-in capital andapproximately $248,000 was recorded as a decrease in liability classified awards.F-16 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company has awards outstanding under two equity compensation plans, the 2012 Incentive Plan (the 2012Plan) and the 2010 Equity Incentive Plan (the 2010 Plan), as well as the inducement award program. Terms of stockaward agreements, including vesting requirements, are determined by the board of directors, subject to the provisions ofthe individual plans. To date, most options granted by the Company vest twenty-five percent (25%) one year fromvesting start date and six and a quarter percent (6.25%) for each successive three-month period, thereafter (subject toacceleration of vesting in the event of certain change of control transactions) and are exercisable for a period of ten yearsfrom the date of grant.2012 Incentive PlanThe 2012 Plan became effective immediately upon the closing of the Company’s IPO in February 2012. Uponeffectiveness of the 2012 Plan, the Company ceased making awards under the 2010 Plan. The 2012 Plan initiallyallowed the Company to grant awards for up to 3,428,571 shares of common stock, plus the number of shares of commonstock available for grant under the 2010 Plan as of the effectiveness of the 2012 Plan (which was an additional 30,101shares), plus that number of shares of common stock related to awards outstanding under the 2010 Plan which terminateby expiration, forfeiture, cancellation or otherwise. The 2012 Plan includes an “evergreen provision” that allows for anannual increase in the number of shares of common stock available for issuance under the 2012 Plan. The annualincrease is added on the first day of each year beginning in 2013 and each subsequent anniversary until the expirationof the 2012 Plan, and is equal to the lower of 1,285,714 shares of common stock, 4.0% of the number of shares ofcommon stock outstanding and an amount determined by the board of directors. On January 1, 2016 and 2015, thenumber of shares available for issuance under the 2012 Plan increased by 1,285,714 and 1,081,045, respectively, underthis provision. Subsequently, on January 1, 2017, the number of shares available for issuance under the 2012 Planincreased by 1,285,714 under this provision. Awards under the 2012 Plan may include the following award types: incentive stock options, nonqualifiedstock options, stock appreciation rights, restricted stock awards, restricted stock units (RSUs), other stock‑based orcash‑based awards and any combination of the foregoing. As of December 31, 2016, under the 2012 Plan, the Companyhas granted stock options for 7,874,773 shares of common stock, of which 2,672,751 have been forfeited and restrictedstock units for 909,918 shares of common stock, of which 150,101 have been forfeited. The exercise price of each optionhas been equal to the closing price of a share of our common stock on the grant date. Inducement Award ProgramIn December 2014, the Company established an inducement award program (in accordance with NASDAQListing Rule 5635(c)(4)) under which it may grant non-statutory stock options to purchase up to an aggregateof 750,000 shares of common stock to new or prospective employees as inducement to enter into employment with theCompany. In December 2016, the Board of Directors authorized and reserved 580,000 additional shares of commonstock under this program. The program is governed by the terms of the 2012 Plan but does not fall under the 2012 Plan.As of December 31, 2016 and 2015, the Company had granted 580,000 and 210,000 shares of common stock under theprogram, respectively. As of December 31, 2016 and 2015, 75,000 of the options issued under this program had beencancelled and 750,000 remain available for future issuance. F-17 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock Options A summary of the Company’s stock option activity and related information for the year ended December 31,2016 is as follows: Weighted-average Weighted-average remaining Aggregate exercise price per contractual term intrinsic value Shares share (years) (in thousands) Outstanding at December 31, 2015 5,390,130 $8.71 8.1 $175 Granted 1,913,280 $1.53 Exercised (1,605) $0.28 Forfeited/cancelled (1,453,335) $8.73 Outstanding at December 31, 2016 5,848,470 $6.35 8.0 $62 Vested at December 31, 2016 3,444,586 $7.94 7.5 $61 Vested and expected to vest at December 31,2016(1) 5,415,064 $6.70 7.9 $62 (1)This represents the number of vested options as of December 31, 2016, plus the number of unvested optionsexpected to vest as of December 31, 2016, based on the unvested options at December 31, 2016, adjusted forthe estimated forfeiture rate.The fair value of each employee stock option was estimated at the date of grant using a Black‑Scholesoption‑pricing model with the following assumptions: Year Ended December 31, 2016 2015 2014Risk-free interest rate 1.48% 1.75% 1.99%Volatility 75% 73% 81%Dividend yield — — — Expected term (years) 5.9 6.0 6.0 The Company recorded stock‑based compensation expense associated with employee stock options of $6.1million, $7.9 million, and $7.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. Theweighted‑average grant date fair value of options granted in the years ended December 31, 2016, 2015 and 2014 was$0.99, $3.80, and $8.61 per share, respectively. The fair value of options that vested during the years ended December31, 2016, 2015 and 2014 was $6.9 million, $9.5 million, and $6.6 million, respectively. In June 2016, the Company granted stock options to purchase a total of 500,000 shares of common stock tocertain employees that vest only upon the achievement of specified performance conditions. The grant date fair value ofthese options was approximately $445,000. The Company determined that 50% of performance conditions had beenachieved during the year ended December 31, 2016. As a result, 250,000 shares vested in October 2016 and theCompany recognized stock-based compensation expense related to these awards of approximately $222,000 for the yearended December 31, 2016. The Company determined that the remaining 50% of the performance conditions were notconsidered probable of achievement as of December 31, 2016 and as a result, has not recognized any stock-basedcompensation expense related to the remaining unvested awards. At December 31, 2016, there was $4.9 million of total unrecognized compensation cost related to unvestedstock options and the Company expects to recognize this cost over a remaining weighted-average period of 1.5 years.F-18 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Restricted Stock Units A summary of the Company’s RSU activity and related information for the year ended December 31, 2016 is asfollows: Shares Weighted-averagegrant datefair valueper share Unvested at December 31, 2015 53,751 $11.00 Vested (53,751) $11.00 Unvested at December 31, 2016 — $ — No restricted stock units were granted during the years ended December 31, 2016, 2015 and 2014. The total fairvalue of restricted stock units vested during the years ended December 31, 2016, 2015 and 2014 was approximately$65,000, $1.6 million and $2.2 million, respectively. As of December 31, 2016, there was no unrecognized stock‑basedcompensation expense related to unvested RSUs granted under the 2012 Plan.During 2012, the Company issued a restricted stock unit for 103,306 shares to an employee. The award vests upto 25% per year based on the achievement of stated objectives. The objectives related to 2015 were established onJanuary 8, 2015. In December 2015, the Board of Directors elected not to approve any payment under this award for theyear ended December 31, 2015. The Company did not record any stock-based compensation expense for this awardduring the year ended December 31, 2015. The objectives related to 2014 were established on January 7, 2014 and theobjectives were determined to be met on January 8, 2015. The Company recorded $158,000 of stock-basedcompensation expense for this award during the year ended December 31, 2014 based on the achievement of the statedobjectives.During the first quarter of 2013, the Company amended the terms of certain RSUs related to a total of 697,060shares of common stock to allow for tax withholdings greater than the minimum required statutory withholding amount.As a result of this change in the terms of the awards, the outstanding RSUs were considered to be liability instruments.As a result of this modification, the Company recorded a liability for the fair value of the awards as of each reportingdate with the change in fair value recorded through the consolidated statements of operations and comprehensive loss.The Company recorded stock‑based compensation expense equal to the greater of the original grant date fair value ofthe awards or the settlement date fair value. All RSUs were fully vested as of February 1, 2016. During the year endedDecember 31, 2016, 2015 and 2014, the Company deposited approximately $5,000, $417,000, and $780,000,respectively, with tax authorities to settle the tax liability for awards that settled during the respective periods. Therewas no liability related to these awards as of December 31, 2016. The liability related to these awards of approximately$69,000 was recorded as liability classified stock‑based compensation awards on the consolidated balance sheets as ofDecember 31, 2015.Restricted Common StockIn connection with the Company’s formation, the founders purchased an aggregate of 2,857,138 shares ofCompany’s common stock at fair value on the date of issuance. The shares were issued subject to restricted stockagreements between the Company and each founder, which allow the Company, at its discretion, to repurchase unvestedshares if the founder’s relationship with the Company is terminated. Under these agreements, twenty-five percent (25%)of the shares vested immediately and the remaining seventy-five percent (75%) of shares vest ratably in quarterlyinstallments over the subsequent four years.The Company records stock‑based compensation expense for the common stock subject to repurchase, orrestricted common stock grants, based on the grant date fair value for employees and the reporting date and uponvesting fair value for non‑employees. The fair value of the award is considered the intrinsic value as of eachF-19 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) measurement date. All of the restricted shares were issued at a purchase price equal to the fair value of the common stockon the date of issuance. The Company recorded stock‑based compensation expense associated with restricted commonstock grants of $1.7 million for the year ended December 31, 2014. The Company did not record any stock-basedcompensation expense related to restricted common stock grants in the years ended December 31, 2016 and 2015.No restricted common stock was granted during the years ended December 31, 2016, 2015 and 2014. The totalfair value of shares vested during the years ended December 31, 2015 and 2014 was approximately $59,000 and$2.2 million, respectively. All restricted common stock grants were fully vested as of December 31, 2015.8. Income TaxesAs of December 31, 2016, the Company had federal and state net operating loss carryforwards of approximately$184.2 million and $182.8 million, respectively, which are available to reduce future taxable income. The Companyalso had federal and state tax credits of $7.4 million and $1.4 million, respectively, which may be used to offset futuretax liabilities. The net operating loss (NOL) and tax credit carryforwards will expire at various dates through 2035. NOLand tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state taxauthorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownershipinterest of significant stockholders over a three‑year period in excess of 50%, as defined under Sections 382 and 383 ofthe Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax attributes that can beutilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determinedbased on the value of the Company immediately prior to the ownership change. Subsequent ownership changes mayfurther affect the limitation in future years.A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operationsfollows: Year Ended December 31, 2016 2015 Income tax benefit using U.S. federal statutory rate 34.00% 34.00%State tax benefit, net of federal benefit 3.43% 5.91%Research and development tax credits 4.42% 1.49%Permanent items (3.88)% (3.02)%Change in the valuation allowance (36.71)% (41.90)%Other (1.26)% 3.52% —% —%The principal components of the Company’s deferred tax assets are as follows (in thousands): December 31, 2016 2015 Deferred tax assets: Net operating loss carryforwards $72,285 $61,606 Capitalized research and development 1,836 1,984 Research and development credits 8,298 4,087 Stock-based compensation 3,083 4,401 Other 429 478 Gross deferred tax assets 85,931 72,556 Valuation allowance (85,931) (72,556) Net deferred tax asset $ — $ — F-20 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company has recorded a valuation allowance against its deferred tax assets at December 31, 2016 and2015 because the Company’s management believes that it is more likely than not that these assets will not be fullyrealized. The increase in the valuation allowance of $13.4 million and $24.2 million in the years ended December 31,2016 and 2015, respectively, primarily relates to the net loss incurred by the Company.The Company’s reserves related to taxes are based on a determination of whether and how much of a tax benefittaken by the Company in its tax filings or positions is more likely than not to be realized following resolution of anypotential contingencies present related to the tax benefit. From inception and through December 31, 2016, the Companyhad no unrecognized tax benefits or related interest and penalties accrued. The Company has not conducted a study ofresearch and development (R&D) credit carryforwards. This study may result in an adjustment to the Company’s R&Dcredit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presentedas an uncertain tax position. A full valuation allowance has been provided against the Company’s R&D credits and, ifan adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, therewould be no impact to the consolidated balance sheet or statement of operations if an adjustment were required. TheCompany would recognize both accrued interest and penalties related to unrecognized benefits in income tax expense.The Company’s uncertain tax positions are related to years that remain subject to examination by relevant taxauthorities. Since the Company is in a loss carryforward position, the Company is generally subject to examination bythe U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available.9. Commitments and contingenciesOn April 15, 2014, the Company entered into a lease agreement for approximately 15,197 square feet of officeand laboratory space in Needham, Massachusetts. The lease term commenced on April 15, 2014 and expires onSeptember 30, 2019. The Company began using the leased premises as its corporate headquarters and commenced rentpayments effective September 22, 2014. The Company agreed to pay an initial annual base rent of approximately$493,000, which base rent increases after every twelve-month period during the lease term to approximately $554,000for the last twelve-month period. The Company is recording rent expense on a straight-line basis, beginning in April2014. The Company also received a tenant improvement allowance of approximately $684,000 in connection with thelease. The Company has accounted for the allowance as a lease incentive, which is being recorded as a reduction to rentexpense over the lease term. Deferred rent and the lease incentive obligation are included in accrued expenses (currentportion) and other liabilities (noncurrent portion) in the consolidated balance sheets. The Company has also agreed topay its proportionate share of increases in operating expenses and property taxes for the building in which the leasedspace is located. The Company has provided a security deposit in the form of a letter of credit in the amount ofapproximately $203,000, which was reduced to approximately $162,000 on April 15, 2016. The amount is included inlong term restricted cash on the consolidated balance sheets as of December 31, 2016.The minimum aggregate future lease commitments are as follows (in thousands):2017 $527 2018 542 2019 415 2020 — 2021 — Thereafter — Total $1,484 The Company recorded rent expense of approximately $352,000, $352,000 and $541,000 for the years endedDecember 31, 2016, 2015 and 2014, respectively.F-21 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Pursuant to the terms of various agreements, the Company may be required to pay various development,regulatory and commercial milestones. In addition, if any products related to these agreements are approved for sale, theCompany may be required to pay significant royalties on future sales. The payment of these amounts, however, iscontingent upon the occurrence of various future events, which have a high degree of uncertainty of occurring.10. License agreementsIn November 2016, the Company entered into an amended and restated license agreement with Infinity, underwhich it acquired an exclusive worldwide license for the research, development, commercialization, and manufacture ofproducts in oncology indications containing duvelisib. In connection with the license agreement, the Companyassumed operational and financial responsibility for certain activities that were part of Infinity’s duvelisib program,including the DUO study for patients with relapsed/refractory CLL, and Infinity assumed financial responsibility for theshutdown of certain other clinical studies up to a maximum of $4.5 million. The Company is obligated to use diligentefforts to develop and commercialize a product in an oncology indication containing duvelisib. During the term of thelicense agreement, Infinity has agreed not to research, develop, manufacture or commercialize duvelisib in any otherindication in humans or animals. Pursuant to the terms of the license agreement, the Company is required to make the following payments toInfinity in cash or, at our election, in whole or in part, in shares of our common stock: (i) $6.0 million upon thecompletion of the DUO study if the results of the DUO study meet certain pre-specified criteria and (ii) $22.0 millionupon the approval of a new drug application in the United States or an application for marketing authorization with aregulatory authority outside of the United States for a product in an oncology indication containing duvelisib. For anyportion of any of the foregoing payments that it elects to issue in shares of our common stock in lieu of cash, the numberof shares of common stock to be issued will be determined by multiplying (1) 1.025 by (2) the number of shares ofcommon stock equal to (a) the amount of the payment to be paid in shares of common stock divided by (b) the averageclosing price of a share of common stock as quoted on NASDAQ for a twenty day period following the publicannouncement of the applicable milestone event. The shares of common stock will be issued as unregistered securities,and the Company will have an obligation to promptly file a registration statement with the SEC to register such sharesfor resale. Any issuance of shares will be subject to the satisfaction of closing conditions, including that all materialauthorizations, consents, approvals and the like necessary for such issuance shall have been obtained. The Company is also obligated to pay Infinity royalties on worldwide net sales of any products in an oncologyindication containing duvelisib ranging from the mid-single digits to the high single-digits. The royalties will expire ona product-by-product and country-by-country basis until the latest to occur of (i) the last-to-expire patent right coveringthe applicable product in the applicable country, (ii) the last-to-expire patent right covering the manufacture of theapplicable product in the country of manufacture of such product, (iii) the expiration of non-patent regulatoryexclusivity in such country and (iv) ten years following the first commercial sale of a product in a country, provided thatif royalties on net sales for a product in the United States are payable solely on the basis of non-patent regulatoryexclusivity, the applicable royalty on net sales for such product in the United States will be reduced by 50%. Theroyalties are also subject to reduction by 50% of certain third-party royalty payments or patent litigation damages orsettlements which might be required to be paid by us if litigation were to arise, with any such reductions capped at 50%of the amounts otherwise payable during the applicable royalty payment period. In addition to the foregoing, the Company is obligated to pay Infinity an additional royalty of 4% onworldwide net sales of any products in an oncology indication containing duvelisib to cover the reimbursement ofresearch and development costs owed by Infinity to Mundipharma International Corporation Limited (MICL) andPurdue Pharmaceutical Products L.P. (Purdue). Once Infinity has fully reimbursed MICL and Purdue, the royaltyobligations will be reduced to 1% of net sales in the United States. These trailing MICL royalties are payable until thelater to occur of the last-to-expire of specified patent rights and the expiration of non-patent regulatory exclusivities in acountry. Each of the above royalty rates is reduced by 50% on a product-by-product and country-by-country basis if theapplicable royalty is payable solely on the basis of non-patent regulatory exclusivity. InF-22 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) addition, the trailing MICL royalties are subject to reduction by 50% of certain third-party royalty payments or patentlitigation damages or settlements which might be required to be paid by the us if litigation were to arise, with any suchreductions capped at 50% of the amounts otherwise payable during the applicable royalty payment period. The Company evaluated the license agreement with Infinity under ASC Topic 805, Business Combinations andASU 2017-01 and concluded that as substantially all of the fair value of the gross assets acquired is concentrated in asingle identifiable asset or group of similar assets, the transaction did not meet the requirements to be accounted for as abusiness combination and therefore was accounted for as an asset acquisition. All consideration to be paid under theLicense Agreement is contingent in nature and will be recognized when the respective contingency is resolved. On July 11, 2012, the Company entered into a license agreement with Pfizer Inc. (Pfizer), under which Pfizergranted the Company worldwide, exclusive rights to research, develop, manufacture and commercialize productscontaining certain of Pfizer’s inhibitors of focal adhesion kinase (the FAK Products) for all therapeutic, diagnostic andprophylactic uses in humans. The Company is solely responsible, at its expense, for the clinical development of the FAKProducts, which is to be conducted in accordance with an agreed upon development plan. The Company is alsoresponsible for all manufacturing and commercialization activities at its own expense. Pfizer is required to provide theCompany with an initial quantity of clinical supply of one of the FAK Products for an agreed upon price. Under theagreement, the Company made a one-time cash payment to Pfizer in the amount of $1.5 million and issued 192,012shares of its common stock. Pfizer is also eligible to receive up to $2.0 million in developmental milestones and up to anadditional $125.0 million based on the successful attainment of regulatory and commercial sales milestones. Pfizer isalso eligible to receive high single to mid-double digit royalties on future net sales of the FAK Products. TheCompany’s royalty obligations with respect to each FAK Product in each country begin on the date of first commercialsale of the FAK Product in that country, and end on the later of 10 years after the date of first commercial sale of the FAKProduct in that country or the date of expiration or abandonment of the last claim contained in any issued patent orpatent application licensed by Pfizer to the Company that covers the FAK Product in that country. The Companyaccounted for the license agreement as the licensing of in process research and development with no alternative futureuse. Under the license agreement with Poniard that the Company entered into in November 2011 relating to VS-4718 and certain other compounds, the Company paid an upfront license fee and agreed to pay Poniard milestonepayments upon the achievement of specified development and regulatory milestones. In February 2014, the Companypurchased the assets which were the subject of the license agreement with Poniard from Encarta, who had previouslypurchased these assets in 2013. In consideration for these assets, the Company issued 97,500 shares of common stock, awarrant to purchase 142,857 shares of common stock with an exercise price equal to $17.16 per share and paid $25,000.All existing obligations under the license agreement, including an achieved development milestone and an obligationto issue a warrant, were settled as part of this transaction. The Company incurred $1.2 million of research anddevelopment expense in 2014 as a result of this transaction. In connection with the asset purchase agreement, theCompany also assumed the rights and obligations under the Scripps License Agreement. Pursuant to the Scripps LicenseAgreement, the Company is obligated to pay Scripps potential product development milestone payments of up to anaggregate of $3.0 million upon the achievement of specified development and regulatory milestones. In addition, theCompany is obligated to pay Scripps low-single digit royalties as a percentage of net sales of licensed products, subjectto adjustments in certain circumstances. The Company’s obligation to pay royalties on net sales is on a country-by-country basis.11. Employee benefit planIn June 2011, the Company adopted a 401(k) retirement and savings plan (the 401(k) Plan) covering allemployees. The 401(k) Plan allows employees to make pre‑tax or post‑tax contributions up to the maximum allowableamount set by the Internal Revenue Service. Under the 401(k) Plan, the Company may make discretionary contributionsas approved by the board of directors. The Company made approximate contributions to the 401(k) Plan of $162,000,$295,000 and $219,000 for the years ended December 31, 2016, 2015 and 2014, respectively.F-23 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Reduction in forceIn October 2015, the Company announced a reduction of workforce by approximately 50% to 20 full timeemployees. All affected employees received severance pay and outplacement assistance. As a result of the reduction inforce and associated costs, the Company paid one-time severance and related costs of $1.1 million. Of these one-timeseverance and related costs, approximately $713,000 and approximately $349,000 was paid during the years endedDecember 31, 2016 and 2015, respectively.13. Quarterly financial information (unaudited, in thousands, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter Ended Ended Ended Ended March 31, June 30, September 30, December 31, 2016 2016 2016 2016 Operating expenses: Research and development $4,179 $4,492 $4,216 $6,892 General and administrative 4,255 4,217 3,843 4,908 Total operating expenses 8,434 8,709 8,059 11,800 Loss from operations (8,434) (8,709) (8,059) (11,800) Interest income 140 140 137 145 Net loss $(8,294) $(8,569) $(7,922) $(11,655) Net loss per share —basic and diluted $(0.22) $(0.23) $(0.21) $(0.32) Weighted-average number of common sharesused in net loss per share —basic and diluted 36,975 36,992 36,992 36,992 First Quarter Second Quarter Third Quarter Fourth Quarter Ended Ended Ended Ended March 31, June 30, September 30, December 31, 2015 2015 2015 2015 Operating expenses: Research and development $10,528 $11,045 $11,304 $7,688 General and administrative 4,714 4,417 4,230 4,273 Total operating expenses 15,242 15,462 15,534 11,961 Loss from operations (15,242) (15,462) (15,534) (11,961) Interest income 62 85 89 98 Net loss $(15,180) $(15,377) $(15,445) $(11,863) Net loss per share —basic and diluted $(0.46) $(0.42) $(0.42) $(0.32) Weighted-average number of common shares usedin net loss per share —basic and diluted 33,323(a)(b) 36,522(b) 36,898(b) 36,935 (a)In January 2015, the Company closed a public offering in which it sold 8,337,500 shares of its common stock at aprice of $6.50 per share, including 1,087,500 shares issued pursuant to the exercise of the underwriters’ option topurchase additional shares, which resulted in net proceeds of $50.9 million.(b)In the first, second and third quarters of 2015, the Company sold 470,309, 690,370 and 28,800 shares of itscommon stock under the Company’s at-the-market equity offering program, which resulted in net proceeds of $4.4million, $6.2 million and approximately $250,000, respectively F-24 Table of ContentsVerastem, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Subsequent eventsThe Company reviews all activity subsequent to year end but prior to the issuance of the consolidated financialstatements for events that could require disclosure or that could impact the carrying value of assets or liabilities as of theconsolidated balance sheets date. The Company is not aware of any material subsequent events other than thefollowing:On March 21, 2017 (Closing Date), Verastem, Inc. (Borrower) entered into a term loan facility of up to $25.0million (Term Loan) with Hercules Capital, Inc., a Maryland corporation (Hercules), the proceeds of which will be usedfor its ongoing research and development programs and for general corporate purposes. The Term Loan is governed by aloan and security agreement, dated March 21, 2017 (Loan Agreement), which provides for up to four separateadvances. The first tranche of $2.5 million was drawn on the Closing Date. The second tranche of $2.5 million and thethird tranche of $5.0 million may be drawn, at the Borrower’s option but subject to the Borrower receiving favorabledata from its ongoing Phase III clinical study evaluating the safety and efficacy of duvelisib in patients withrelapsed/refractory chronic leukemia or small lymphocytic lymphoma on or prior to September 20, 2017 (MilestoneEvent), during the period beginning on the Closing Date and ending on the earliest to occur of the date that is 90 daysafter the Milestone Event and December 20, 2017. The fourth tranche of $15.0 million may be drawn, at the Borrower’soption and at the sole discretion of Hercules, on or prior to June 30, 2018.The Term Loan will mature on December 1, 2020 (Loan Maturity Date). Each advance accrues interest at afloating per annum rate equal to the greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x)10.5% plus (y) (A) the prime rate minus (B) 4.5%. The Term Loan provides for interest-only payments until November1, 2018. The interest-only period may be extended to May 1, 2019 if the Borrower obtains minimum cash proceeds of$20.0 million from a sale of equity securities or subordinated debt and/or ongoing commercial partnerships. Thereafter,amortization payments will be payable monthly in twenty-six installments (or, if the period requiring interest-onlypayments has been extended to May 1, 2019, in twenty installments) of principal and interest (subject to recalculationupon a change in prime rates). Any advance may be prepaid in whole or in part upon seven business days’ prior writtennotice to Hercules, subject to a prepayment charge of 3.0%, if such advance is prepaid in any of the first twelve (12)months following the Closing Date, 2.0%, if such advance is prepaid after twelve (12) months following the ClosingDate but on or prior to twenty-four (24) months following the Closing Date, and 1.0% thereafter. In addition, a finalpayment equal to 4.5% of the greater of (a) $5.0 million and (b) the total principal amount of the Term Loan extendedby Hercules which is due on the Loan Maturity Date, or such earlier date specified in the Loan Agreement. Amountsoutstanding during an event of default shall be payable on demand and shall accrue interest at an additional rate of5.0% per annum of the past due amount outstanding. The Term Loan is secured by a lien on substantially all of the assets of the Borrower, other than intellectualproperty and contains customary covenants and representations, including a liquidity covenant, financial reportingcovenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers oracquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.The events of default under the Loan Agreement include, without limitation, and subject to customary graceperiods, (1) the Borrower’s failure to make any payments of principal or interest under the Loan Agreement, promissorynotes or other loan documents, (2) the Borrower’s breach or default in the performance of any covenant under the LoanAgreement, (3) the Borrower making a false or misleading representation or warranty in any material respect, (4) theBorrower’s insolvency or bankruptcy, (5) certain attachments or judgments on the Borrower’s assets, or (6) theoccurrence of any material default under certain agreements or obligations of the Borrower involving indebtedness, or(7) the occurrence of a material adverse effect. If an event of default occurs, Hercules is entitled to take enforcementaction, including acceleration of amounts due under the Loan Agreement. F-25 Table of Contents EXHIBIT INDEXExhibitnumber Description of exhibit3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 toAnnual Report on Form 10‑K (File No. 001‑35403) filed by the Registrant on March 30, 2012) 3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.4 toAmendment No. 3 to the Registration Statement on Form S‑1 (File No. 333‑177677) filed by theRegistrant on January 13, 2012) 4.1 Specimen certificate evidencing shares of common stock (incorporated by reference to Exhibit 4.1 toAmendment No. 3 to the Registration Statement on Form S‑1 (File No. 333‑177677) filed by theRegistrant on January 13, 2012) 4.2 Common Stock Warrant Agreement between the Registrant and Encarta, Inc. dated February 21, 2014(incorporated by reference to Exhibit 4.1 of the Quarterly Report on Form 10‑Q (File No. 001‑35403)filed by the Registrant on May 8, 2014) 10.1# 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registration Statementon Form S‑1 (File No. 333‑177677) filed by the Registrant on November 3, 2011) 10.2# 2012 Incentive Plan (incorporated by reference to Exhibit 10.2 to Amendment No. 3 to theRegistration Statement on Form S‑1 (File No. 333‑177677) filed by the Registrant on January 13,2012) 10.3# Form of Incentive Stock Option Agreement under 2012 Incentive Plan (incorporated by reference toExhibit 10.3 to Amendment No. 3 to the Registration Statement on Form S‑1 (File No. 333‑177677)filed by the Registrant on January 13, 2012) 10.4# Form of Nonqualified Stock Option Agreement under 2012 Incentive Plan (incorporated by referenceto Exhibit 10.4 to Amendment No. 3 to the Registration Statement on Form S‑1 (File No. 333‑177677)filed by the Registrant on January 13, 2012) 10.5# Form of Restricted Stock Unit Agreement under 2012 Incentive Plan (incorporated by reference toExhibit 10.16 to Amendment No. 3 to the Registration Statement on Form S‑1 (File No. 333‑177677)filed by the Registrant on January 13, 2012) 10.6# Amended and Restated Employment Agreement between the Registrant and Robert Forrester(incorporated by reference to Exhibit 10.5 to Amendment No. 3 to the Registration Statement onForm S‑1 (File No. 333‑177677) filed by the Registrant on January 13, 2012) 10.7# Amended and Restated Employment Agreement between the Registrant and Jonathan Pachter(incorporated by reference to Exhibit 10.6 to Amendment No. 3 to the Registration Statement onForm S‑1 (File No. 333‑177677) filed by the Registrant on January 13, 2012) 10.8# Form of Indemnification Agreement between the Registrant and each director (incorporated byreference to Exhibit 10.7 to Amendment No. 1 to the Registration Statement on Form S‑1 (FileNo. 333‑177677) filed by the Registrant on December 7, 2011) 10.9 Lease Agreement, dated April 15, 2014, between the Registrant and Intercontinental Fund III 117Kendrick Street LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8‑K(File No. 001‑35403, filed by the Registrant on April 18, 2014) 89 Table of Contents10.10† License Agreement dated May 5, 2008 by and between The Scripps Research Institute and PoniardPharmaceuticals, Inc. (Registrant assumed the rights and obligations of Encarta, Inc., which previouslyassumed the rights and obligations from Poniard Pharmaceuticals, Inc., on February 21, 2014)(incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10‑Q (File No. 001‑35403)filed by the Registrant on May 8, 2014) 10.11† Letter Agreement, dated October 1, 2010, between the Registrant and the Broad Institute (incorporatedby reference to Exhibit 10.11 to the Registration Statement on Form S‑1 (File No. 333‑177677) filedby the Registrant on November 3, 2011) 10.12# Letter Agreement, dated August 20, 2010, between the Registrant and Eric Lander, Ph.D. (incorporatedby reference to Exhibit 10.13 to the Registration Statement on Form S‑1 (File No. 333‑177677) filedby the Registrant on November 3, 2011) 10.13# Letter Agreement, dated July 30, 2010, as amended October 18, 2010, between the Registrant andRobert Weinberg, Ph.D. (incorporated by reference to Exhibit 10.14 to the Registration Statement onForm S‑1 (File No. 333‑177677) filed by the Registrant on November 3, 2011) 10.14# Employment Agreement, dated March 1, 2012, between the Registrant and Daniel Paterson(incorporated by reference to Exhibit 10.18 to Annual Report on Form 10‑K (File No. 001‑35403) filedby the Registrant on March 26, 2013) 10.15† Asset Purchase Agreement, dated May 10, 2012, by and between the Registrant and S*Bio Pte Ltd.(incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10‑Q (File No. 001‑35403)filed by the Registrant on August 13, 2012) 10.16† License Agreement, dated July 11, 2012, by and between the Registrant and Pfizer Inc. (incorporatedby reference to Exhibit 10.2 to Quarterly Report on Form 10‑Q (File No. 001‑35403) filed by theRegistrant on August 13, 2012) 10.17# Amendment to Form of Restricted Stock Unit Agreement under 2012 Incentive Plan (incorporated byreference to Exhibit 10.25 to Annual Report on Form 10‑K (File No. 001‑35403) filed by theRegistrant on March 26, 2013) 10.18# Letter Agreement, dated June 6, 2013, by and between the Registrant and Robert Forrester(incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10‑Q (File No. 001‑35403)filed by the Registrant on August 13, 2013) 10.19† Letter Agreement, dated December 7, 2012, by and between the Registrant and Pfizer Inc.(incorporated by reference to Exhibit 10.31 to Annual Report on Form 10‑K (File No. 001‑35403) filedby the Registrant on March 6, 2014) 10.20# Amended and Restated Employment Agreement, dated November 22, 2013, by and between theRegistrant and Robert Forrester (incorporated by reference to Exhibit 10.32 to Annual Report onForm 10‑K (File No. 001‑35403) filed by the Registrant on March 6, 2014) 10.21# Letter Agreement with Robert Forrester, dated June 6, 2013 (incorporated by reference to Exhibit 10.2to Quarterly Report on Form 10‑Q (File No. 001‑35403) filed by the Registrant on August 13, 2013) 10.22# Employment Agreement between the Registrant and Gregory Berk (incorporated by reference toExhibit 10.2 to the Quarterly Report on Form 10‑Q (File No. 001‑35403) filed by the Registrant onMay 9, 2016) 10.23*# Separation Agreement between the Registrant and Gregory Berk, effective January 19, 2017 90 Table of Contents10.24*# Consulting Agreement between the Registrant and Gregory Berk, effective January 20, 2017 10.25*‡ Amended and Restated License Agreement, dated November 1, 2016, by and between the Registrantand Infinity Pharmaceuticals, Inc. 10.26* Loan and Security Agreement, dated March 21, 2017, by and between the Registrant and HerculesCapital, Inc. 21.1* Subsidiaries of the Registrant 23.1* Consent of Ernst & Young LLP 31.1* Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a‑14(a) 31.2* Certification of the Vice President, Finance pursuant to Exchange Act Rule 13a‑14(a) 32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes‑Oxley Act of 2002 32.2* Certification of the Vice President, Finance pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes‑Oxley Act of 2002 99.1* Press Release issued by Verastem, Inc. on March 23, 2017 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document*Filed herewith.†Confidential treatment granted as to portions of the exhibit. Confidential materials omitted and filed separately withthe Securities and Exchange Commission.‡Confidential treatment requested under 17 C.F.R. §200.80(b)(4) and Rule 24b‑2. The confidential portions of thisexhibit have been omitted and are marked accordingly. The confidential portions have been provided separately tothe SEC pursuant to the confidential treatment request.#Management contract or compensatory plan, contract or agreement. 91Exhibit 10.23 January 19, 2017Gregory Berk, M.D.133 Claybrook RoadDover, MA 02030Dear Greg:As we have discussed, your employment with Verastem, Inc. (the Company”) has terminated,effective January 19, 2017 (the “Separation Date”). The purpose of this letter (the “Agreement”) is toconfirm the terms concerning your separation from employment, as follows:1. Final Salary and Vacation Pay. In signing this Agreement, you acknowledge that you havereceived pay for all work you have performed for the Company through the Separation Date, to the extentnot previously paid. Since, in accordance with Company policy, you have no accrued vacation days as ofthe Separation Date, you will not receive any pay for such vacation time. You will receive the paymentsdescribed in this Section 1 regardless of whether or not you elect to sign this Agreement.2. Severance Benefits. In consideration of your acceptance of this Agreement and subject to yourmeeting in full your obligations hereunder and under the Employee Agreement (as defined below), and infull satisfaction of any rights that you have under the Employment Agreement between you and theCompany, dated as of April 15, 2016 (the “Employment Agreement”), the Company will provide you withthe following severance benefits:a. The Company will pay you the gross amount of One Hundred Fifty-One Thousand EightHundred Seventy-Five Dollars ($151,875) on the Company’s next regular payday for executives thatfollows the Effective Date.b. The Company will also pay you the aggregate gross amount of One Hundred Fifty-OneThousand Eight Hundred Seventy-Five Dollars ($151,875) in substantially equal payments over a periodof six (6) months following the Separation Date. Payments will be made through the Company’s payrollsystem and on the Company’s regular payroll schedule, and will begin on the Company’s next regularpayday for executives that follows the Effective Date. The first payment made will be retroactive to theday immediately following the Separation Date.c. For the avoidance of doubt, to the extent it has not already been paid as of the SeparationDate, the Company will pay you your bonus for 2016 in the gross amount of One Hundred Six ThousandSix Hundred Sixty-Six Dollars and Sixty-Seven Cents ($106,666.67) promptly following the EffectiveDate (as defined below).d. If you are enrolled in the Company’s group medical and/or dental plans on the SeparationDate, you may elect to continue your participation and that of your eligible dependents in those plans for aperiod of time under the federal law known as “COBRA.” You may make such an election whether or notyou accept this Agreement. However, if you accept this Agreement and you timely elect to continue yourparticipation and that of your eligible dependents in the plans, the Company will add to the paymentsdescribed in Section 2(b) hereof  amounts equal to the premium cost of that participation until the earlier of the conclusion of nine monthsfollowing the Separation Date or the date that you become eligible to enroll in the health (or, if applicable,dental) plan of a new employer. Payments will begin on the Company’s next regular payday forexecutives that follows the expiration of sixty (60) calendar days from the Separation Date. The firstpayment will be retroactive to the day immediately following the Separation Date. If the Company’scontributions end before your entitlement to coverage under COBRA concludes, you may continue suchcoverage by paying the full premium cost yourself. Notwithstanding the foregoing, in the event that theCompany’s payment of the COBRA premium contributions, as described under this Section 2(b), wouldsubject the Company to any tax or penalty under the Patient Protection and Affordable Care Act (asamended from time to time, the “ACA”) or Section 105(h) of the Internal Revenue Code of 1986, asamended (“Section 105(h)”), or applicable regulations or guidance issued under the ACA or Section105(h), you and the Company agree to work together in good faith and enter into a substitute arrangementpursuant to which the Company will not be subjected or exposed to taxes or penalties and you will beprovided with payments or benefits with an economic value that is no less than the economic value of thepremium costs described herein.3. Acknowledgement of Full Payment and Withholding. a. You acknowledge and agree that the payments provided under Section 1, 2, and 4 of thisAgreement are in complete satisfaction of any and all compensation and benefits due to you from theCompany, whether for services provided to the Company or otherwise, through the Separation Date andthat, except as expressly provided under this Agreement, no further compensation or benefits are owed orwill be paid or provided to you.b. All payments made by the Company under this Agreement shall be reduced by any tax orother amounts required to be withheld by the Company under applicable law and all other lawfuldeductions authorized by you. 4. Status of Employee Benefits, Paid Time Off, Expenses and Equity. a. Except as otherwise provided in Section 2 or required by applicable law, your participationin all employee benefit plans of the Company will end as of the Separation Date, in accordance with theterms of those plans. You will not continue to earn vacation, paid time off or other similar benefits after theSeparation Date or be reimbursed for any expenses incurred after the Separation Date that have nototherwise been approved in writing by the Company. You will receive information about your COBRAcontinuation rights under separate cover. b. You agree that, within two (2) weeks of the effective date of this Agreement, you willsubmit your final expense reimbursement statement reflecting all business expenses you incurred throughthe Separation Date, if any, for which you seek reimbursement, and, in accordance with Company policy,reasonable substantiation and documentation for the same. The Company will reimburse you for yourauthorized and documented expenses pursuant to its regular business practice. For avoidance of doubt, forexpenses incurred before the Separation Date in connection with business travel or events scheduled totake place after the Separation Date, you will be reimbursed for only those expenses listed in the attachedExhibit A, provided that you provide proof of cancellation for each flight and hotel reservation, and only tothe extent-2-  that you (i) are not reimbursed for such expenses by the applicable airline or hotel and (ii) do not make useof such airline tickets or hotel reservation. In the event you are reimbursed for any portion of suchexpenses by the applicable airline or hotel, you agree to promptly pay over to the Company the amountsreimbursed. In the event that you make use of any airline tickets or hotel reservation, you agree topromptly pay over to the Company the full amount reimbursed by the Company for such tickets orreservation.c. You and the Company are contemporaneously entering into a separate consultingagreement, setting forth the terms of your continued service to the Company as an independent contractorimmediately following the Separation Date (the “Consulting Agreement”). In accordance with theprovisions of the Company’s 2012 Incentive Plan and the terms of the Stock Option Agreement betweenyou and the Company dated April 15, 2016 and the Stock Option Agreement between you and theCompany dated June 14, 2016 (each, an “Award Agreement”), the stock options granted to you undereach Award Agreement will continue to vest during your service to the Company under the ConsultingAgreement. 5. Confidentiality, Non-Disparagement, and Continuing Obligations. a. You acknowledge and agree that you will continue to comply your obligations under theEmployee Non-Solicitation, Non-Competition, Confidential Information and Inventions AssignmentAgreement between you and the Company dated as of April 15, 2016 (the “Employee Agreement”) thatsurvive the termination of your employment by necessary implication or the terms thereof. b. Subject to Section 7(b) of this Agreement, you agree that you will not disclose thisAgreement or any of its terms or provisions, directly or by implication, except to members of yourimmediate family and your legal and tax advisors, and then only on condition that they agree not to furtherdisclose this Agreement or any of its terms or provisions to others.c. Subject to Section 7(b) of this Agreement and except as may be required by applicable lawor legal process, you agree that you will never disparage or criticize the Company, its Affiliates (as definedin the Employment Agreement), their business, their management or their products or services, specificallyincluding without limitation duvelisib, and that you will not otherwise do or say anything that couldreasonably be expected to disrupt the good morale of employees of the Company. The Company agrees toinstruct its directors and officers not to disparage or criticize you, except as may be required by applicablelaw or legal process.d. You agree that you will not make any written or oral statement about your employmentwith the Company or the termination thereof except for the statement attached hereto as Exhibit B.6. Return of Company Documents and Other Property. In signing this Agreement you representand warrant that you have complied with Section 5 of the Employee Agreement. You also agree that if youshould later discover any document or other property of the Company or any of its Affiliates in yourpossession, you will immediately return it to the Company. You agree that you will not, following theSeparation Date, for any purpose, attempt to access or use-3-  any computer or computer network or system of the Company or any of its Affiliates, including withoutlimitation the electronic mail system. Further, you acknowledge that you have disclosed to the Companyall passwords necessary or desirable to obtain access to, or that would assist in obtaining access to, allinformation which you have password-protected on any computer equipment, network or system of theCompany or any of its Affiliates. It is, however, understood and agreed that you may retain possession ofand access to certain Company property, equipment, and documents as expressly directed by the Companyin order to fulfill your obligations under the Consulting Agreement. 7. General Release and Waiver of Claims.a. For and in consideration of the special severance pay and other benefits provided to youunder this Agreement, which are conditioned on your signing of this Agreement and to which you wouldnot otherwise be entitled, and other good and valuable consideration, the receipt and sufficiency of whichis hereby acknowledged, on your own behalf and that of your heirs, executors, administrators,beneficiaries, representatives and assigns, and all others connected with or claiming through you, herebyrelease and forever discharge the Company and its subsidiaries and other affiliates and all of theirrespective past, present and future officers, directors, trustees, shareholders, employees, agents, employeebenefit plans, general and limited partners, members, managers, investors, joint venturers, representatives,successors and assigns, and all others connected with any of them, both individually and in their officialcapacities, from any and all causes of action, rights and claims of any type or description, known orunknown, which you have had in the past, now have, or might now have, through the date of your signingof this Agreement, in any way related to, connected with or arising out of your employment or itstermination (including without limitation any claims under Title VII of the Civil Rights Act of 1964, theAge Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, theEmployee Retirement Income Security Act of 1974 (“ERISA”), the Americans with Disabilities Act,and/or the wage and hour, wage payment and fair employment practices statute of the state or states inwhich you were previously employed by the Company or otherwise had a relationship with the Companyor any of its subsidiaries or other affiliates, each as amended from time to time). This Agreement shall notapply to (a) any claim that arises after you sign this Agreement, (b) any claim that may not be waivedpursuant to applicable law, (c) claims for indemnification in your capacity as an officer or director of theCompany under the Company’s Certificate of Incorporation, By-laws or agreement, if any, providing fordirector or officer indemnification, (d) rights to receive insurance coverage and payments under anyinsurance policy maintained by the Company and (e) rights to equity compensation or to receive retirementbenefits that are accrued and fully vested as of the Separation Date and rights under any plans protected byERISA. b. Notwithstanding the foregoing, nothing contained in this Agreement shall be construed toprohibit you from filing a charge with or participating in any investigation or proceeding conducted by thefederal Equal Employment Opportunity Commission or a comparable state or local agency, except that youhereby agree to waive your right to recover monetary damages or other individual relief in any suchcharge, investigation or proceeding, or any related complaint or lawsuit filed by you or anyone else onyour behalf. Further, nothing contained in this Agreement or the Employee Agreement limits, restricts orin any other way affects your communicating with any governmental agency or entity, or communicatingwith any-4-  official or staff person of a governmental agency or entity, concerning matters relevant to the governmentalagency or entity.c. In signing this Agreement, you acknowledge your understanding that you may consider theterms of this Agreement for up to twenty-one (21) days from the date you receive it. You alsoacknowledge that you are hereby advised by the Company to seek the advice of an attorney prior tosigning this Agreement; that you have had sufficient time to consider this Agreement and to consult with anattorney, if you wished to do so, or to consult with any other person of your choosing before signing; andthat you are signing this Agreement voluntarily and with a full understanding of its terms. d. You further acknowledge that, in signing this Agreement, you have not relied on anypromises or representations, express or implied, that are not set forth expressly in this Agreement. Youunderstand that you may revoke this Agreement at any time within seven (7) days of the date of yoursigning by written notice to the Chairman of the Company’s Board of Directors and that this Agreementwill take effect only upon the expiration of such seven-day revocation period and only if you have nottimely revoked it (the “Effective Date”).8. Miscellaneous.a. This Agreement, together with the Consulting Agreement and your Award Agreements,constitutes the entire agreement between you and the Company and its Affiliates and supersedes all priorand contemporaneous communications, agreements and understandings, whether written or oral, withrespect to your employment, its termination and all related matters, excluding only the EmployeeAgreement, which shall remain in full force and effect in accordance with its terms, and your rights andobligations with respect to your vested options. b. This Agreement may not be modified or amended, and no breach shall be deemed to bewaived, unless agreed to in writing by you and an authorized representative of the Company. The captionsand headings in this Agreement are for convenience only, and in no way define or describe the scope orcontent of any provision of this Agreement.c. The obligation of the Company to make payments to you or on your behalf under thisAgreement, and your right to retain the same, is expressly conditioned upon your continued fullperformance of your obligations under this Agreement and the Employee Agreement. d. This is a Massachusetts contract and shall be governed and construed in accordance withthe laws of the Commonwealth of Massachusetts, without regard to any conflict of laws principles thatwould result in the application of the laws of another jurisdiction. You agree to submit to the exclusivejurisdiction of the courts of and in the Commonwealth of Massachusetts in connection with any disputearising out of this Agreement. -5-  If the terms of this Agreement are acceptable to you, please sign, date and return it to Cathy Carewwithin twenty-one (21) days of the date you receive it. You may revoke this Agreement at any time duringthe seven-day period immediately following the date of your signing by notifying the Chairman of theCompany’s Board of Directors in writing of your revocation within that period. If you do not revoke thisAgreement, then, on the eighth day following the date that you signed it, this Agreement shall take effect asa legally binding agreement between you and the Company on the basis set forth above. The enclosedcopy of this letter, which you should also sign and date, is for your records. Sincerely, Verastem, Inc. By:/s/ Robert Forrester Robert Forrester President and Chief Executive Officer Accepted and agreed: Signature:/s/ Gregory Berk, M.D. Gregory Berk Date:19 JAN 2017  Exhibit A1. Deposit to Intercontinental, San Franciso for room rental/dinner T-cell advisory board $2647.40 +$39.00 ticketing fee (Charged to Berk’s AMEX on 1/10/2017)…expense report has been submitted2. Airfare to EHA conference 6/20/2017…Iberia airlines Boston > Madrid $2447.96 (Charged toBerk’s AMEX on 11/9/2016)….expense report submitted in December, awaiting reimbursement.3. Airfare to ESMO World GI Congress, 6/26/2017…Iberia airlines $2967.40 + $39.00 ticketing fee(Charged to Berk’s AMEX on 12/17/2016)…expense report submitted.4. Hotel for ESMO GI congress (Hotel Arts) … discounted advanced purchase rate which isnonrefundable $2013.56 (Charged to Berk’s AMEX 12/27/2016)…expense report submitted.5. Airfare to T-cell lymphoma advisory board, San Fran, Jet Blue $1196.20 (Charged to Berk’sAMEX 12/20/2016)…expense report submitted.  Exhibit BI am transitioning from being a full-time employee of Verastem back to being a consultant, focused onhelping Verastem to progress duvelisib and the rest of its portfolio of drugs. I have also joined Verastem’sclinical and scientific advisory board. I enjoyed working with the Verastem team and I look forward tocontinuing the relationship in my new capacity. I wish them every success with duvelisib and defactinib,and hope together we can bring some new therapies to patients. Exhibit 10.24 CONSULTANT:■ Greg Berk., M.D.VERASTEM, INC. CONTACT:■ Robert C. ForresterEFFECTIVE DATE:■ January 20 2017 CONSULTING AGREEMENTThis Consulting Agreement (together with its attachments, this “Agreement”) made as of the date written above(the “Effective Date”) is between Verastem, Inc. a Delaware corporation having an address at 117 Kendrick Street,Suite 500, Needham, MA 02494 (the “Company”), and Greg Berk, residing at 133 Claybrook Road, Dover, MA02030, (“Consultant”). The Company desires to have the benefit of Consultant's knowledge and experience, andConsultant desires to provide Consulting Services (defined below) to the Company, all as provided in this Agreement.1. Consulting Services. The Company hereby retains Consultant and Consultant agrees to provide ConsultingServices to the Company (the “Consulting Services”) as it may from time to time reasonably request and as specified inthe Business Terms attached to this Agreement as Exhibit A (“Business Terms”). Any changes to the ConsultingServices or Business Terms (and any related compensation adjustments) must be agreed upon in writing betweenConsultant and the Company prior to implementation of such changes.1.1 Performance. Consultant agrees to render the Consulting Services to the Company, or to its designee,(a) at such reasonably convenient times and places as the Company may direct, and (b) on a best effortsbasis. Consultant will comply with all rules, procedures and standards promulgated from time to time bythe Company with regard to Consultant’s access to and use of the Company’s property, information,equipment and facilities. Consultant agrees to furnish the Company with written reports with respect tothe Consulting Services if and when requested by the Company.1.2 Third Party Confidential Information. Consultant agrees not to use or disclose any trade secrets orother confidential information of any other person, firm, corporation, institution or other entity inconnection with any of the Consulting Services without such third party’s express written consent. 1.3 Compliance with Policies. If Consultant is a faculty member at or employee of a university or hospital(“Institution”) or of another company, Consultant represents and warrants that, pursuant to Institution’sor company’s policies concerning professional consulting and additional workload, Consultant ispermitted to enter into this Agreement. If Consultant is required by Consultant’s Institution to discloseto it any proposed agreements with industry, Consultant has made such disclosure. If Institution’s priorapproval of this Agreement is required by Institution policies, Consultant has obtained or will obtain anddeliver to the Company, Institution’s consent on the form attached to this Agreement prior tocommencing the Consulting Services. 1.4 Consultant Personnel. In the event that others are, or may hereafter become, associated withConsultant or are used by Consultant in connection with the Consulting Services (“ConsultantPersonnel”), Consultant agrees to procure from them agreements containing obligations substantiallyidentical in form and content to those contained in this Agreement, and Consultant agrees to cooperatewith the Company in procuring execution by them of such assignments and other papers as may berequired by the terms of this Agreement. 2. Compensation. In consideration for the Consulting Services rendered by Consultant to the Company, theCompany agrees to pay Consultant the fees set forth in the Business Terms attached hereto. Unless otherwise specifiedin the Business Terms, undisputed payments will be made by the Company within thirty (30) days from the Company’sreceipt of Consultant’s invoice. Invoices will contain such detail as the Company may reasonably require, and will bepayable in U.S. Dollars in accordance with the terms and provisions of the Business Terms. The Company willreimburse Consultant for reasonable and pre-approved business expenses incurred by Consultant in the performance ofthe Consulting Services as specified in the Business Terms.3. Inventions.3.1 Definition. “Inventions” means all inventions, discoveries, improvements, ideas, designs, processes,products, computer programs, works of authorship, databases, gene sequences, cell lines, samples,chemical compounds, assays, biological materials, mask works, trade secrets, know-how, research andcreations (whether or not patentable or subject to copyright or trade secret protection) that Consultantmakes, conceives or reduces to practice, either alone or jointly with others, and that (a) result from theperformance of the Consulting Services, and/or (b) result from use of facilities, equipment, supplies,Research Materials (defined below), or Confidential Information (defined below) of the Company. 3.2 Ownership. Consultant will promptly disclose all Inventions in confidence to the Company. Consultantagrees to irrevocably transfer and assign and hereby does irrevocably transfer and assign to theCompany or its successors or designees the entire right, title and interest now existing or that may existin the future in and to all right, title and interest in and to all Inventions and any and all related patents,patent applications, copyrights, copyright applications, trademarks, trade names, trade secrets and otherproprietary and moral rights in the United States and throughout the world (“Work Product”). All WorkProduct will be the exclusive property of the Company. For purposes of the copyright laws of theUnited States, all Work Product will constitute “works made for hire”, except to the extent suchInventions cannot by law be “works made for hire”. Consultant agrees to execute, at the Company’srequest and expense, all documents and other instruments necessary or desirable to confirm suchassignment. In the event that Consultant does not, for any reason, execute such documents within areasonable time of the Company’s request, Consultant hereby irrevocably appoints the Company asConsultant’s attorney-in-fact for the purpose of executing such documents on Consultant’s behalf,which appointment is coupled with an interest. Consultant shall not attempt to register any workscreated by Consultant pursuant to this Agreement at the U.S. Copyright Office, the U.S. Patent &Trademark Office, or any foreign copyright, patent, or trademark registry. Consultant retains no rightsin the Work Product and agrees not to challenge the Company’s ownership of the rights embodied in theWork Product. Consultant further agrees to assist the Company in every proper way to enforce theCompany’s rights relating to the Work Product in any and all countries, including, but not limited to, executing, verifying and delivering such documents and performing such other acts(including appearing as a witness) as the Company may reasonably request for use in obtaining,perfecting, evidencing, sustaining and enforcing the Company’s rights relating to the Work Product.3.3 Moral Rights. If Consultant has any rights, including without limitation “artist’s rights” or “moralrights” in the Work Product which cannot be assigned (the “Non-Assignable Rights”), Consultant agreesto waive enforcement worldwide of such rights against the Company. In the event that Consultant hasany such rights that cannot be assigned or waived, Consultant hereby grants to the Company a royalty-free, paid-up, exclusive, worldwide, irrevocable, perpetual license under the Non-Assignable Rights to(i) use, make, sell, offer to sell, have made, commercialize, and further sublicense the Work Product,and (ii) reproduce, distribute, create derivative works of, publicly perform and publicly display the WorkProduct in any medium or format, whether now known or later developed.3.4 Research Materials. For Consulting Services which involve laboratory work or experiments,“Research Materials” means all materials (a) furnished by the Company, (b) developed by Consultant inconnection with the Consulting Services, or (c) the cost of which are reimbursed to Consultant by theCompany. Research Materials include, in the case of biological materials, all progeny and unmodifiedderivatives of those materials, and in the case of chemical materials, all analogs, formulations, mixturesand compositions of those materials. Research Materials are the sole property of theCompany. Consultant agrees not to use or evaluate Research Materials for any purpose other than asdirected by the Company, and not to transfer the Research Materials to any third party without the priorwritten consent of the Company. Consultant will use the Research Materials in strict compliance with alllaws and regulations. 3.5 Records. Consultant shall make and maintain adequate and current written records of all Inventions,which records shall be available to and remain the property of the Company at all times. 3.6 Agreement with Institution. This Agreement is made subject to the understanding that Consultant, ifaffiliated with an Institution, may be required to fulfill certain obligations, including teaching, directinglaboratory operations, conducting research, and publishing work. It is further understood thatConsultant may have signed an agreement concerning inventions with Institution, under whichConsultant may be obligated to assign to Institution certain inventions which arise out of or otherwiserelate to Consultant’s work at or for Institution or from Consultant’s use of certain of its facilities orintellectual property. In performing the Consulting Services, Consultant agrees not to utilize Institutionfacilities or intellectual property if the result of such use is that any Inventions will not be assignablesolely to the Company. Use of Institution's telephone, fax machines or computers for communicationpurposes, however, will not constitute use of Institution's facilities under this Agreement.3.7 Work at Third Party Facilities. Consultant agrees not to make use of any funds, space, personnel,facilities, equipment or other resources of a third party in performing the Consulting Services, andfurther agrees not to take any other action that would result in a third party owning or having a right inany Inventions, unless agreed upon in writing in advance by the Company. 4. Confidential Information.4.1 Definition. “Confidential Information” means information with respect to the facilities and methodsof the Company, Research Materials, trade secrets, Inventions, systems, patents and patent applications,procedures, manuals, confidential reports, financial or legal information, business plans, prospects, oropportunities, personnel information, lists of customers and suppliers, and information of third partiesprovided by the Company to Consultant. Confidential Information does not include information which(i) is in the public domain or which becomes part of the public domain through no wrongful act onConsultant’s part but only after it becomes so publicly known, (ii) is already in Consultant’s possessionat the time of disclosure by the Company, other than by previous disclosure by the Company, asevidenced by written or electronic records, or (iii) that becomes known to Consultant through disclosureby a third party having the right to disclose the information, as evidenced by written or electronicrecords. 4.2 Obligations of Confidentiality. Consultant will not directly or indirectly publish, disseminate orotherwise disclose, use for Consultant’s own benefit or for the benefit of a third party, deliver or makeavailable to any third party, any Confidential Information, other than in furtherance of the purposes ofthis Agreement, and only then with the prior written consent of the Company, and it is agreed andunderstood that all Confidential Information shall remain the sole property of the Company. Without theCompany’s prior written approval, Consultant will not directly or indirectly disclose to anyone theexistence or terms of this Agreement or the fact that Consultant has this arrangement with theCompany. If required, Consultant may disclose the Confidential Information to a governmentalauthority or by order of a court of competent jurisdiction, provided that such disclosure is subject to allapplicable governmental or judicial protection available for like material and reasonable advance noticeof such compulsory disclosure is given to the Company. Consultant will exercise all reasonableprecautions to protect the physical integrity and confidentiality of the Confidential Information, and willnot remove any Confidential Information or copies or derivations thereof from the Company’s premisesexcept to the extent necessary to fulfill the Consulting Services, and then only with the Company’s priorconsent. Consultant may disseminate or permit access to Confidential Information only to ConsultantPersonnel who have a need to know such Confidential Information in the course of the performance oftheir duties under this Agreement and who are bound to protect the confidentiality of the ConfidentialInformation consistent with the terms of this Agreement. Consultant agrees to be responsible for anybreach of this Agreement by any of the Consultant Personnel. The Company will be entitled toinjunctive relief as a remedy for any breach of the terms of this Section 4. Consultant cannot be heldcriminally or civilly liable under any federal or state trade secret law for disclosing a trade secret (i) inconfidence to a federal, state, or local government official, either directly or indirectly, or to an attorney,solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint orother document filed under seal in a lawsuit or other proceeding. Notwithstanding this immunity fromliability, Consultant may be held liable if he unlawfully accesses trade secrets by unauthorized means.4.3 Third Party Confidential Information. Consultant recognizes that the Company has received and inthe future will receive from third parties confidential and proprietary information (“Third PartyInformation”) subject to a duty on the Company’s part to maintain the confidentiality of suchinformation and to use it only for certain limited purposes. Consultant agrees that Consultant owes theCompany and such third parties, during the term of this Agreement and thereafter, a duty to hold Third Party Information in the strictestconfidence in accordance with the Company’s obligations to such third party, and agrees not to discloseit to any person, firm or corporation or use it except in carrying out the Consulting Services for theCompany consistent with the Company’s agreement with such third party. 5. Restrictions. 5.1 While Consultant is engaged by the Company and for a period of twelve (12) months after thetermination or cessation of such engagement for any reason, Consultant will not:(i) within the United States or any other geographic region in which the Company conducts itsbusiness, and in any capacity, whether individually or as an employee, consultant, director, officer,agent, advisor or otherwise, for or on behalf of any entity (a “Competing Organization”), engage in anybusiness activities that are competitive with any of the material business activities of the Company,including without limitation the research, development, sale or marketing of any competitive product ofthe Company, unless Consultant’s duties at such Competing Organization do not include duties relatingto any product, process, service or business activity that competes or is reasonably expected to competewith a material product, process, service or business activity in existence or being conducted, providedor developed by the Company, and provided that Consultant has delivered to the Company a writtenstatement, confirmed by Consultant’s prospective employer or consulting client, as the case may be,describing Consultant’s duties and stating that such duties are consistent with Consultant’s obligationsunder this Agreement; or,(ii) whether directly or indirectly, solicit, attempt to solicit or in any manner assist any other party tosolicit any employee, independent contractor, or consultant of the Company to terminate or diminish his,her or its relationship with the Company in order to become an employee, consultant, or independentcontractor to or for any other person or entity.5.2 As used in this Section 5, “competitive” activities means discovering, developing or commercializingdrugs that selectively target cancer stem cells, “competitive” products means drugs that selectively targetcancer stem cells, and an “employee,” “independent contractor” or “consultant” of the Company is anyperson who holds or at any time during the six-month period prior to the termination of Consultant’sengagement by Company held such status with Company.6. Representations and Warranties. 6.1 No Conflicts. Consultant is under no contractual or other obligation or restriction which is inconsistentwith Consultant’s execution of this Agreement or the performance of the Consulting Services. Duringthe Term (as defined below), Consultant will not enter into any agreement, either written or oral, inconflict with Consultant’s obligations under this Agreement. Consultant will arrange to provide theConsulting Services in such manner and at such times that the Consulting Services will not conflict withConsultant’s responsibilities under any other agreement, arrangement or understanding or pursuant toany employment relationship Consultant has at any time with any third party. 6.2 Absence of Debarment. Consultant represents that (a) neither Consultant nor any ConsultantPersonnel has been debarred, and to the best of Consultant’s knowledge is not under consideration to bedebarred, by the U.S. Food and Drug Administration (“FDA”) from working in or providing consultingservices to any pharmaceutical or biotechnology company under Section 306(a) or 306(b) of the federalFood, Drug and Cosmetic Act (codified at 21 U.S.C. §§ 335a(a) and 335a(b)); (b) no debarred personwill in the future be employed by Consultant to perform any services hereunder in connection with anyapplication for approval of a drug by the FDA; and (c) neither Consultant nor any Consultant Personnelhas a conviction on their record for which a person can be debarred as decribed in Sections 306(a) or306(b) of the federal Food, Drug and Cosmetic Act. Consultant further represents and warrants thatshould Consultant or any Consultant Personnel be convicted in the future of any act for which a personcan be debarred as described in Sections 306(a) or 306(b) of the federal Food, Drug and Cosmetic Act,Consultant shall immediately notify Company of such conviction in writing.6.3 Assignment of Ownership in Work Product. Consultant represents and warrants that (i) Consultanthas the right and unrestricted ability to assign the Work Product to the Company as set forth in Section 3(including without limitation the right to assign any Work Product created by Consultant’s employees orcontractors); (ii) the Work Product has not heretofore been published in whole or in part; and (iii) theWork Product will not infringe upon any copyright, patent, trademark, right of publicity or privacy, orany other proprietary or intellectual property right of any person, whether contractual, statutory orcommon law. 6.4 Compliance with Law. Consultant covenants that the services to be provided hereunder shall be incompliance with all applicable laws, rules and regulations. Consultant acknowledges that Consultant issubject to the Company’s insider trading policy, a copy of which can be found on the Company’swebsite at www.verastem.com.6.5 No Conflicting Agreements. Consultant represents that Consultant’s performance of all the terms ofthis Agreement and as a provider of services to the Company does not and will not breach anyagreement to keep in confidence proprietary information, knowledge or data acquired by Consultant inconfidence or in trust prior to or during this Agreement, and Consultant has not and will not disclose tothe Company or induce the Company to use any confidential or proprietary information or materialbelonging to any previous employers or other third parties. When performing the Consulting Services,Consultant agrees to use only such materials and information of any kind that Consultant has rightfullyobtained and that are not considered proprietary or confidential by any third party unless agreed tootherwise by the Company in writing.7. Term and Termination. 7.1 Term. This Agreement will commence on the Effective Date and continue for the term specified on theBusiness Terms (the “Term”), unless sooner terminated pursuant to the express terms of this Section 7 orextended by mutual agreement of the parties.7.2 Termination for Breach. If either party breaches in any material respect any of its obligations underthis Agreement, in addition to any other right or remedy, the non-breaching party may terminate thisAgreement in the event that the breach is not cured within ten (10) days after receipt by that party ofwritten notice of the breach. 7.3 Termination by Either Party. Either party may terminate this Agreement (a) immediately at any timeupon written notice to the other party in the event of a breach of this Agreement by non-terminatingparty which cannot be cured (e.g., breach of the confidentiality obligation) and/or (b) at any timewithout cause upon not less than thirty (30) days’ prior written notice to the other party. In addition, theCompany may terminate this Agreement immediately at any time upon written notice to Consultant inthe event Consultant revokes his acceptance of the Separation Agreement (as defined below).7.4 Effect of Expiration/Termination. Upon expiration or termination of this Agreement, neither theCompany nor Consultant will have any further obligations under this Agreement, except (a) forliabilities accrued through the date of termination, and (b) the obligations under Sections 3, 4, 5, 6, 7and 8 hereof will survive. Upon expiration or termination, and in any case upon the Company’s request,Consultant will return immediately to the Company all tangible Confidential Information and all tangibleThird Party Information, including all copies, reproductions and derivations thereof, and all of theCompany’s property, equipment, and documents. Consultant will not copy, delete, or alter anyinformation contained on any Company property, equipment, or documents before returning such to theCompany. In addition, if Consultant has used any personal computer, server, electronic device, or e-mail system to receive, store, review, prepare or transmit any Confidential Information or Third PartyInformation, Consultant will provide the Company with a computer-useable copy of all suchConfidential Information and Third Party Information and then will delete any such ConfidentialInformation or Third Party Information from Consultant’s computer storage or any other media(including, but not limited to, online and off-line libraries). Consultant agrees to provide the Companyaccess to its system as reasonably requested to verify that the necessary copying and/or deletion hasbeen completed. Consultant further agrees that any property situated on Company premises and ownedby the Company will be subject to inspection by the Company’s personnel at any time with or withoutnotice. Consultant will, promptly upon expiration or termination, certify in writing that it has compliedwith the requirements of this section ; provided, however, that Consultants obligations under thisAgreement will continue even if Consultants fails or declines to provide such written certification.8. Miscellaneous.8.1 Independent Contractor. All Consulting Services will be rendered by Consultant as an independentcontractor, and this Agreement does not create an employer-employee, partnership, agency or jointventure relationship between the Company and Consultant. Consultant will have no rights to receiveany employee benefits, such as health and accident insurance, sick leave or vacation which are accordedto regular Company employees, except as may be required by COBRA. Consultant will not in any wayrepresent himself to be an employee, partner, joint venturer, or agent of the Company. Consultant is notauthorized to make any representation, contract, or commitment on behalf of the Company or incur anyliabilities or obligations of any kind in the name of or on behalf of the Company. Consultant shall workindependently, without day-to-day direction from the Company, and may adopt such arrangements asConsultant desires with regard to the details of the Consulting Services performed under this Agreement,the hours during which the Consulting Services will be provided, and the place or places where theConsulting Services are to be furnished; provided that: (a) such arrangements, details, hours and locationof services shall be consistent with the proper accomplishment of the agreed objectives of the Company; and (b) such services by Consultant shall be performed in amanner calculated to obtain the most satisfactory results for the Company.8.2 Taxes. Consultant and the Company agree that the Company will treat Consultant as an independentcontractor for purposes of all tax laws (local, state and federal) and file income reporting and otherforms consistent with such status. Consultant agrees that, as an independent contractor, neitherConsultant nor Consultant’s employees are entitled to unemployment benefits in the event thisAgreement terminates, or to workers’ compensation benefits in the event that Consultant, or anyemployee of Consultant, is injured in any manner while performing obligations under thisAgreement. Consultant will be solely responsible to pay any and all local, state, and/or federal income,social security and unemployment taxes for Consultant and Consultant’s employees. The Company willnot withhold any taxes or prepare W-2 Forms for Consultant, but will provide Consultant with a Form1099 if and to the extent required by law. Consultant is solely responsible for, and will timely file, alltax returns and payments required to be filed with, or made to, any federal, state or local tax authoritywith respect to the performance of services and receipt of fees under this Agreement. Consultant issolely responsible for, and must maintain adequate records of, expenses incurred in the course ofperforming services under this Agreement, except as provided herein. The Company will regularlyreport amounts paid to Consultant with the appropriate taxing authorities, as required by law. Consultantwill provide the Company with Consultant’s taxpayer identification number or social security number,as applicable. 8.3 Use of Name. Consultant consents to the use by the Company of Consultant’s name and likeness inwritten materials and oral presentations to current or prospective customers, partners, investors or others,provided that such materials or presentations accurately describe the nature of Consultant’s relationshipwith and contributions to the Company.8.4 Assignability and Binding Effect. The Consulting Services to be rendered by Consultant are personalin nature. Consultant may not assign or transfer this Agreement or any of Consultant’s rights orobligations hereunder except to a corporation of which Consultant is the sole stockholder. In no eventwill Consultant assign or delegate responsibility for actual performance of the Consulting Services toany other natural person except to Consultant Personnel as provided for under this Agreement. ThisAgreement will be binding upon and inure to the benefit of the parties and their respective legalrepresentatives, heirs, successors and permitted assigns. The Company may assign this Agreement toany other corporation or entity which acquires (whether by purchase, merger, consolidation orotherwise) all or substantially all of the business and/or assets of the Company.8.5 Headings. The section headings are included solely for convenience of reference and will not controlor affect the meaning or interpretation of any of the provisions of this Agreement.8.6 Notices. Any notices or other communications from one party to the other will be in writing and will begiven by addressing the same to the other at the address or facsimile number set forth in thisAgreement. Notices to the Company will be marked “Attention: General Counsel”. Notice will bedeemed to have been duly given when (a) deposited in the United States mail with proper postage forfirst class Registered or Certified Mail prepaid, return receipt requested, (b) sent by any reputablecommercial courier, delivery confirmation requested, (c) delivered personally, or (d) if promptly confirmed by mail or commercialcourier as provided above, when dispatched by facsimile.8.7 Amendment. This Agreement may be amended or modified only by a writing signed by authorizedrepresentatives of both parties.8.8 No Waiver. No waiver of any term or condition of this Agreement shall be valid or binding on eitherparty unless the same shall be been mutually assented to in writing by both parties. The failure of eitherparty to enforce at any time any of the provisions of this Agreement, or the failure to require at any timeperformance by the other party of any of the provisions of this Agreement, shall in no way be construedto be a present or future waiver of such provisions, nor in any way affect the right of either party toenforce each and every such provision thereafter. The express waiver by either party of any provision,condition or requirement of this Agreement shall not constitute a waiver of any future obligation tocomply with such provision, condition or requirement.8.9 Severability. In the event that any one or more of the provisions contained in this Agreement is, for anyreason, held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality orunenforceability will not affect any other provisions of this Agreement, and all other provisions willremain in full force and effect. If any provision of this Agreement is held to be excessively broad, it willbe reformed and construed by limiting and reducing it so as to be enforceable to the maximum extentpermitted by law.8.10 Entire Agreement. This Agreement, together with the Separation Agreement between the parties datedJanuary 19, 2017 (the “Separation Agreement”) and the surviving documents referenced therein,constitutes the entire agreement of the parties with regard to their subject matter, and supersede allprevious written or oral representations, agreements and understandings between the parties.8.11 Governing Law/Jurisdiction. All disputes related to or arising out of this Agreement shall be resolvedin the state or federal courts of the Commonwealth of Massachusetts, to whose exclusive jurisdictioneach party hereby consents. This Agreement will be governed by, construed and enforced inaccordance with the laws of the Commonwealth of Massachusetts applicable to contracts made and to beperformed therein, without giving effect to the principles thereof relating to the conflict of laws.8.12 Remedies. Consultant’s obligations under this Agreement are of a unique character that gives themparticular value; breach of any of such obligations will result in irreparable and continuing damage tothe Company for which there will be no adequate remedy at law; and, in the event of such breach orthreatened breach, the Company will be entitled to injunctive relief and/or a decree for specificperformance, an award of its attorney’s fees incurred, and such other and further relief as may beproper. Consultant and the Company further agree that no bond or other security shall be required inobtaining such equitable relief.8.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which will bedeemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement under seal as of the EffectiveDate.VERASTEM, INC. CONSULTANT By:/s/ Daniel Paterson By:/s/ Gregory Berk, M.D. Name:Dan Paterson Name:Gregory Berk, M.D. Title:COO Title:Medical Consultant duly authorized duly authorized Address:133 Claybrook Rd. Dover, MA 02030 INSTITUTION ACKNOWLEDGEMENTAND CONSENT FORMVerastem, Inc. (the “Company”) is prepared to enter into the foregoing Agreement with the consultant named on thepreceding signature page (“Consultant”). The Company recognizes that as a member of the institution named below(“Institution”), Consultant is responsible for ensuring that any consulting agreement Consultant enters into with a for-profit entity is not in conflict with the patent, consulting or other policies of Institution. The proposed Agreementrequires Consultant, if required by Institution policies, to disclose the proposed Agreement to Institution and/or toobtain Institution’s consent to enter into the proposed Agreement.Institution hereby acknowledges and consents to Consultant entering into the foregoing Agreement.INSTITUTION: By Print Name Title duly authorized Date EXHIBIT ABUSINESS TERMS1. Consulting Services: Consultant will render BTP-114 medical consulting services, including serving as the “24/7” medical monitor aswell as medical lead on the BTP-114 program. In this role, he will be expected to participate in site initiations,site calls, CRO team calls, cohort management calls, and safety calls. He will also serve on the Placon-Verastemjoint steering committee, and prepare regular updates on the trial progress to Verastem senior management. Asmedical lead, he will be the primary outreach contact to investigators and thought leaders involved in theprogram.2. Compensation:As full compensation for the Consulting Services rendered during the Term, the Company will pay Consultant amonthly retainer of $15,000.If the Company and the Consultant mutually decide that additional consulting services shall be provided, thisagreement will be amended accordingly.On the last day of each calendar month, Consultant will invoice the Company for Consulting Services renderedand expenses incurred during the preceding month. Invoices should reference this Agreement and should besubmitted to the following address:Accounts PayableVerastem, Inc.117 Kendrick Street, Suite 500Needham, MA 02494Or by email to: ap@verastem.com3. Term:This Agreement will be for an initial Term of 6 months beginning on the Effective Date, and may be extendedfor additional periods, at the Company’s option and with Consultant’s consent. EXHIBIT 10.25 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.AMENDED AND RESTATED LICENSE AGREEMENTBY AND BETWEENINFINITY PHARMACEUTICALS, INC.ANDVERASTEM, INC. THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.LICENSE AGREEMENTThis Amended and Restated License Agreement (this “Agreement”) is entered into as the 1 day of November,2016 and made effective as of the 29 day of October, 2016 (the “Effective Date”), by and between InfinityPharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware and having aprincipal office located at 784 Memorial Drive, Cambridge, Massachusetts 02139 (“INFI”), and Verastem, Inc., acorporation organized and existing under the laws of Delaware, having a principal office located at 117 KendrickStreet, Suite 500, Needham, Massachusetts 02494 (“Licensee”). INFI and Licensee are each referred to herein byname or as a “Party” or, collectively, as “Parties.”RECITALSWHEREAS, Licensee and INFI are parties to that certain License Agreement, dated October 29, 2016 (the“Superseded Agreement”) which Licensee and INFI wish to replace and supersede in its entirety with this Agreement;WHEREAS, Licensee possesses expertise in the Development and Commercialization (each as defined below)of pharmaceutical products;WHEREAS, INFI controls certain intellectual property related to the IPI-145 Product (as defined below); andWHEREAS, Licensee is interested in obtaining a license under such intellectual property to Develop,Manufacture and Commercialize the IPI-145 Product in the Field in the Territory (each as defined below), and INFI iswilling to grant Licensee such license on the terms and conditions set forth in this Agreement.NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and for othergood and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree asfollows:ARTICLE 1DEFINITIONSAs used in this Agreement, the following terms will have the meanings set forth in this Article 1 unless contextdictates otherwise:1.1“Affiliate” means any entity that directly or indirectly controls or is controlled by or is under commoncontrol with a Person. For purposes of this definition, “control” or “controlled” means ownership, directly orindirectly, of more than fifty percent (50%) of the shares of stock entitled to vote for the election of directors, in thecase of a corporation, or more than fifty percent (50%) of the equity interest in the case of any other type of legal entity(or if the jurisdiction where such corporation or other entity is domiciled prohibits foreign ownership of such entity, the stthTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.maximum foreign ownership interest permitted under such laws, provided, that such ownership interest provides actualcontrol over such entity), status as a general partner in any partnership, or any other arrangement whereby a Personcontrols or has the right to control the board of directors or equivalent governing body of a corporation or other entity.1.2“Annual Net Sales” means aggregate Net Sales of IPI-145 Products by Licensee, its Affiliates and/orthe Sublicensees during a given Calendar Year.1.3“Business Day” means any day other than Saturday or Sunday on which the banks in New York, NewYork, United States are open for business.1.4“Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending onMarch 31, June 30, September 30 and December 31.1.5“Calendar Year” means a period of time commencing on January 1 and ending on the followingDecember 31.1.6“Change of Control” means, with respect to a Party, any of the following: (a) the sale or disposition ofall or substantially all of the assets of such Party or its direct or indirect controlling Affiliate to a Third Party, other thanto an entity of which more than fifty percent (50%) of the voting capital stock are owned after such sale or dispositionby the Persons that were shareholders of such Party or its direct or indirect controlling Affiliate (in either case, whetherdirectly or indirectly through any parent entity) immediately prior to such transaction; or (b) (i) the acquisition by aThird Party, alone or together with any of its Affiliates, other than an employee benefit plan (or related trust) sponsoredor maintained by such Party or any of its Affiliates, of more than fifty percent (50%) of the outstanding shares of votingcapital stock of such Party or its direct or indirect controlling Affiliate, or (ii) the acquisition, merger or consolidation ofsuch Party or its direct or indirect controlling Affiliate with or into another Person, other than, in the case of this clause(b), an acquisition or a merger or consolidation of such Party or its controlling Affiliate in which the holders of sharesof voting capital stock of such Party or its controlling Affiliate, as the case may be, immediately prior to suchacquisition, merger or consolidation will beneficially own, directly or indirectly, at least fifty percent (50%) of theshares of voting capital stock of the acquiring Third Party or the surviving corporation in such acquisition, merger orconsolidation, as the case may be, immediately after such acquisition, merger or consolidation.1.7“Combination Product” means any pharmaceutical Product which contains two or more activepharmaceutical ingredients, at least one of which is an IPI-145 Compound.1.8“Commercial Sale” means any sale of a Product to a Third Party in any country in the Territory afterthe receipt of the Marketing Authorization for that country, if such Marketing Authorization is required.1.9“Commercialization” or “Commercialize” means any and all activities directed to the preparation forsale of, offering for sale of, or sale of a Compound or Product, including- 3 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.activities to secure and maintain market access (including any phase IV/post-approval clinical study that is not requiredto obtain or maintain Regulatory Approval) market, promote, distribute, and import a Product.1.10“Compound” means a compound and any references to a Compound shall include all of its variouschemical forms, including acids, bases, salts, metabolites, esters, isomers, enantiomers, pro-drug forms, hydrates,solvates, polymorphs and degradants thereof in crystal, powder or other form.1.11“Confidential Information” means (a) subject to clause (c) below, any Know-How and otherproprietary scientific marketing, financial or commercial information or data, in any form (written, oral, photographic,electronic, magnetic, or otherwise) that is disclosed, supplied or made available to a Party (the “Receiving Party”) orany of its Affiliates by the other Party (the “Disclosing Party”) or any of its Affiliates or otherwise received or accessedby the Receiving Party or any of its Affiliates in the course of performing the Receiving Party’s obligations orexercising the Receiving Party’s rights under this Agreement; (b) subject to clause (c) below, any information that wasdisclosed by INFI to Licensee or any Affiliate of Licensee prior to the Effective Date pursuant to the ConfidentialDisclosure Agreement between INFI and Licensee, dated [* * *] (the “Existing Confidentiality Agreement”), whichshall be treated as INFI’s Confidential Information, with INFI considered the Disclosing Party and Licensee consideredthe Receiving Party; (c) any Duvelisib Know-How Controlled by INFI as of the Effective Date that is solely andspecifically related to the IPI-145 Compound or IPI-145 Product, which shall be treated as INFI’s and Licensee’sConfidential Information, with each of INFI and Licensee considered the Disclosing Party and each of Licensee andINFI considered the Receiving Party; (d) any Know-How with respect to which INFI is subject to any confidentialityor non-use obligations to any Third Party Grantor pursuant to an INFI Third Party Agreement, which shall be treatedas INFI’s Confidential Information, with INFI considered the Disclosing Party and Licensee considered the ReceivingParty; (e) any reports or other information (including any information made available in connection with any audit)delivered, disclosed or made available by Licensee, its Affiliates or its Sublicensees to INFI, its Affiliates or any ThirdParty Grantor in connection with this Agreement, which shall be treated as Licensee’s Confidential Information; and (f)the terms and conditions of this Agreement, which shall be treated as the Confidential information of both INFI andLicensee.1.12 “Control” or “Controlled” means, with respect to any Know-How, Patent Right, other intellectualproperty right or any Compound, the legal authority or right (whether by ownership, license or otherwise, but withouttaking into account any rights granted by one Party to the other Party under the terms of this Agreement) of a Party or,as set forth herein, its relevant Affiliate, to grant access to, a license or a sublicense of or under such Know-How,Patent Right, intellectual property right or Compound to the other Party, or to otherwise disclose proprietary or tradesecret information to the other Party, without breaching the terms of any agreement with a Third Party, ormisappropriating the proprietary or trade secret information of a Third Party.- 4 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.1.13“Counterpart” means (a) with respect to a patent, collectively, any patent applications from which suchpatent issued, and all patents and patent applications described in clause (b) with respect to each such patentapplication; and (b) with respect to a patent application (including any provisional application), the following items,collectively: (i) all divisionals, continuations and continuations-in-part of such patent application; (ii) any patents(including certificates of correction) issuing from such patent application or any patent application described in clause(i); (iii) all patents and patent applications based on, corresponding to or claiming the priority date(s) of such patentapplication or any of the patents and patent applications described in clauses (i) or (ii); (iv) all rights derived from anyof the items described in clauses (i), (ii) or (iii) including any substitutions, extensions (including supplementalprotection certificates), registrations, confirmations, reissues, re-examinations and renewals of any of the patentsdescribed in clauses (ii) or (iii); and (v) foreign counterparts of any of the foregoing.1.14“Development” or “Develop” means, with respect to a Compound, all development activities startingwith the initiation of the first IND-enabling GLP toxicology study for such Compound, excluding Research, medicinalchemistry and Commercialization.1.15“Diligent Efforts” means the efforts that [* * *]; provided, however, that a Person required to use“Diligent Efforts” under this Agreement will not be thereby required to take actions that [* * *]. Without limiting thegenerality of the foregoing, in determining Diligent Efforts with respect to the Development and Commercialization ofthe IPI-145 Compound or IPI-145 Product, the Parties shall take into account the following: [* * *].1.16“Dollars” or “$” means the legal tender of the United States.1.17“Duvelisib IP” means the Duvelisib Know-How, the Duvelisib Patent Rights and INFI’s and itsAffiliates’ interest in any Joint IP.1.18“Duvelisib Know-How” means, subject to Section 12.6, Know-How that is (a) Controlled by INFI orany of its Affiliates on the Effective Date or thereafter during the Term (including INFI’s and its Affiliates’ interest inJoint Know-How), and (b) necessary or useful to Research, Develop, Manufacture or Commercialize any IPI-145Compound or IPI-145 Product.1.19“Duvelisib Patent Rights” means, subject to Section 12.6, Patent Rights that (a) are Controlled byINFI or any of its Affiliates on the Effective Date or thereafter during the Term (including INFI’s and its Affiliates’interest in Joint Patent Rights), and (b) claim or otherwise cover the Research, Development, Manufacture orCommercialization of any IPI-145 Compound or IPI-145 Product. Duvelisib Patent Rights include the INFIProsecution Patent Rights, the INK Prosecution Patent Rights, the INK Non-Prosecution Patent Rights and the INFIOther Patent Rights.1.20“EMA” means the European Medicines Agency and any successor agency.1.21“FDA” means the U.S. Food and Drug Administration and any successor agency.- 5 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.1.22“FD&C Act” means the United States Federal Food, Drug, and Cosmetic Act, as amended.1.23“Field” means the treatment, prevention, palliation or diagnosis of any oncology Indication in humansor animals.1.24“Good Clinical Practices” or “GCP” means the then-current standards, practices and procedures (a)promulgated or endorsed by the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good ClinicalPractice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA; (b) set forth inDirective 2001/20/EC of the European Parliament and of the Council of 4 April 2001 and Commission Directive2005//28/EC of 8 April 2005; (c) ICH Guideline for Good Clinical Practice E6; (d) equivalent Laws of an applicableRegulatory Authority; and (e) all additional Regulatory Authority documents or regulations that replace, amend,modify, supplant or complement any of the foregoing.1.25“Good Laboratory Practices” or “GLP” means the then-current good laboratory practice standardspromulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, as such regulations may be amended from timeto time, and the equivalent regulations promulgated by the equivalent Regulatory Authority in the jurisdiction wherethe relevant Research or Development activities are performed.1.26“Good Manufacturing Practices” or “GMP” means then-current standards for the manufacture ofpharmaceutical products, pursuant to (a) the FD&C Act (21 U.S.C. 321 et seq.); (b) relevant United States regulationsin Title 21 of the United States Code of Federal Regulations (including Parts 11, 210, and 211); (c) EuropeanCommunity Directives 2003/94 and 91/356/EC; (d) the European Community Guide to Good Manufacturing Practicefor Medicinal Intermediate Products; (e) ICH Q7A Good Manufacturing Practice Guidance for Active PharmaceuticalIngredients; (f) equivalent Laws of an applicable Regulatory Authority at the time of Manufacture; and (g) alladditional Regulatory Authority documents or regulations that replace, amend, modify, supplant or complement any ofthe foregoing.1.27“Governmental Authority” means any multinational, federal, state, county, local, municipal or otherentity, office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board,court, arbitral or other tribunal, official or officer, exercising executive, judicial, legislative, police, regulatory,administrative or taxing authority or functions of any nature pertaining to government.1.28“Headlicense Termination Event” means the termination of the INK Agreement by INK for a materialbreach thereof and such material breach is the direct result of Licensee’s, its Affiliates’ or Sublicensees’ acts oromissions in breach of Licensee’s obligations under this Agreement that has not been cured in a timely manner; provided, that INFI has not received notice from INK that INFI is otherwise in material breach of the INK Agreementas of the time of such termination.- 6 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.1.29“ICH” means the International Conference on Harmonization of Technical Requirements forRegistration of Pharmaceuticals for Human Use.1.30“IND” an investigational new drug application filed with the FDA or the corresponding applicationfor the investigation of a Product in any other country or group of countries, as defined in the applicable Laws andregulations and filed with the Regulatory Authority of such country or group of countries.1.31“Indication” means a disease, condition, disorder or syndrome.1.32“INFI Indemnitees” means INFI, its Affiliates and their respective directors, officers, employees andagents. 1.33“INFI Other Patent Rights” means, subject to Section 12.6, the Patent Rights Controlled by INFI as ofthe Effective Date or during the Term that are necessary or useful to Research, Develop, Manufacture orCommercialize the IPI-145 Product, but excluding the INFI Prosecution Patent Rights, INK Prosecution Patent Rightsand INK Non-Prosecution Patent Rights.1.34“INFI Prosecution Patent Rights” means, subject to Section 12.6, the Patent Rights Controlled byINFI or any of its Affiliates that are set forth on Exhibit A, and including any Counterparts thereof.1.35“INFI Product Related Contracts” means (a) the agreements identified in Exhibit F-1 and (b) any agreement between INFI (or any of its Affiliates) and any Third Party that is a clinical trial site or investigator withrespect to the Development of the IPI-145 Compound or IPI-145 Product (a “Clinical Site Agreement”). 1.36“INFI Third Party Agreements” means the INK Agreement and the MICL Agreements.1.37“INK Agreement” means the Amended and Restated Development and License Agreement, datedDecember 24, 2012, as amended, by and between INFI and Intellikine LLC (“INK”), as may be amended from time totime to the extent permitted by this Agreement.1.38“INK Prosecution Patent Rights” means, subject to Section 12.6, the Patent Rights Controlled by INFIor any of its Affiliates that are set forth on Exhibit B, and including any Counterparts thereof.1.39“INK Non-Prosecution Patent Rights” means, subject to Section 12.6, the Patent Rights Controlled,but not owned, by INFI or any of its Affiliates pursuant to a license or sublicense granted to INFI pursuant to the INKAgreement, and including all Counterparts thereof, but excluding the INFI Prosecution Patent Rights and INKProsecution Patent Rights. - 7 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.1.40 “Internal Personnel Expenses” means with respect to INFI personnel or Licensee personnel, $[* * *]per FTE year, prorated to reflect the reasonable estimated percentage of such personnel’s time spent performingactivities under this Agreement based on an 1800 hour FTE year.1.41“IPI-145 Compound” means the Compound known as IPI-145 or Duvelisib and described in ExhibitC, or, for clarity, any of its various chemical forms, including acids, bases, salts, metabolites, esters, isomers,enantiomers, pro-drug forms, hydrates, solvates, polymorphs and degradants thereof, in each case that has substantiallythe same pharmacological effect, in crystal, powder or other form.1.42“IPI-145 Product” means any Product which is, or which contains or comprises, the IPI-145Compound.1.43“IPI-443 Product” means any Product which is, or which contains or comprises the Compound setforth in Exhibit D.1.44“Joint IP” means Joint Know-How and Joint Patent Rights and other intellectual property rights (otherthan Patent Rights) covering Joint Know-How.1.45“Know-How” means all technical information, know-how and data, including inventions, discoveries,trade secrets, specifications, instructions, processes, formulae, materials, expertise and other technology applicable toformulations, compositions or products or to their manufacture, development, registration, use or marketing or tomethods of assaying or testing them or processes for their manufacture, formulations containing them or compositionsincorporating or comprising them, and including all biological, chemical, pharmacological, biochemical, toxicological,pharmaceutical, physical and analytical, safety, quality control, manufacturing, nonclinical and clinical data, regulatorydata and filings, instructions, processes, formulae, expertise and information, relevant to the research, development,manufacture, use, importation, offering for sale or sale of, or which may be useful in studying, testing, developing,producing or formulating, products, or intermediates for the synthesis thereof. Know-How excludes the Patent Rightscovering any inventions.1.46“Knowledge” means the actual knowledge, without any duty to investigate, of the INFI employeewith the specified title as of the Effective Date.1.47“Law” means any provision of any then-current multinational, federal, national, state, county, local,municipal or foreign law, statute, ordinance, order, writ, code, rule or regulation, promulgated or issued by anyGovernmental Authority, as well as with respect to either Party any binding judgments, decrees, stipulations,injunctions, determinations, awards or agreements issued by or entered into by such Party with any GovernmentalAuthority.1.48“Licensee Indemnitees” means Licensee, its Affiliates and their respective directors, officers,employees and agents.- 8 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.1.49“Licensee IP” means the Licensee Know-How and the Licensee Patent Rights, in each case, solely tothe extent arising from the Research, Development, Manufacture or Commercialization of the IPI-145 Compound orIPI-145 Product using any Duvelisib IP.1.50“Licensee Know-How” means, subject to Section 12.6, Know-How that is (a) Controlled by Licenseeor any of its Affiliates during the Term but not on the Effective Date; and (b) necessary or useful to Research, Develop,Manufacture or Commercialize any Compound that is a Target Inhibitor, or any Product containing such a Compound,in the Territory. Licensee Know-How includes Licensee’s and its Affiliates’ rights in Joint Know-How.1.51“Licensee Patent Rights” means, subject to Section 12.6, Patent Rights Controlled by Licensee duringthe Term but not on the Effective Date (and not prior to the Effective Date) and claiming Licensee Know-How. Licensee Patent Rights includes Licensee’s and its Affiliates’ interest in any Joint Patent Rights.1.52“MAA” means an application for the authorization for marketing of a Product in any country or groupof countries outside the United States, and all supplements, including all documents, data and other informationconcerning the Product, as defined in the applicable laws and regulations and filed with the Regulatory Authority of agiven country or group of countries.1.53“Manufacture” or “Manufacturing” means any activities directed to producing, manufacturing, scalingup, processing, filling, finishing, packaging, labeling, quality assurance testing and release, shipping and storage of aCompound or Product or component thereof (including production of drug substance and drug product, in bulk form,for preclinical and clinical studies and for Commercialization).1.54“Marketing Authorization” means the grant of all necessary permits, registrations, authorizations,licenses and approvals (or waivers) required for the manufacture, promotion, marketing, storage, import, export,transport, distribution, use, offer for sale, sale or other commercialization of a Product in any country.1.55“MHLW” means the Japanese Ministry of Health, Labour and Welfare and any successor agency.1.56“MICL Agreements” means (a) the Termination and Revised Relationship Agreement by and betweenINFI and Mundipharma International Corporation Limited (“MICL”), entered into as of July 17, 2012; and (b) theTermination and Revised Relationship Agreement by and between INFI and Purdue Pharmaceutical Products L.P.(“Purdue”), entered into as of July 17, 2012; each ((a) and (b)) as may be amended from time to time to the extentpermitted by this Agreement.1.57“NDA” means with respect to a Product, a new drug application and all supplements filed with theFDA with respect to such Product, including all documents, data and- 9 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.other information concerning such Product which are necessary for, or included in, a Marketing Authorization to use,sell, supply or market such Product in the United States.1.58“Net Sales” means (I) with respect to an IPI-145 Product (subject to clause (II) below, for aCombination Product) in a particular period, the gross amount invoiced by Licensee, its Affiliates and/or theSublicensees on sales or other dispositions (excluding sales or dispositions for use in clinical trials or other scientifictesting, in either case for which Licensees, its Affiliates and/or the Sublicensees receive no revenue) of such IPI-145Product to unrelated Third Parties during such period, less the following deductions (to the extent included in the grossamount invoiced or otherwise directly paid or incurred by Licensee, its Affiliates and/or its Sublicensees):(a)trade, cash and quantity discounts actually allowed and taken directly with respect tosuch sales or other dispositions;(b)tariffs, duties, excises, sales taxes or other taxes imposed upon and paid directly withrespect to the delivery, sale or use of the IPI-145 Product and included and separately stated in the applicable invoice(excluding national, state or local taxes based on income);(c)allowances for amounts repaid or credited by reason of rejections, defects, recalls orreturns or because of reasonable and customary chargebacks, refunds, coupons, patient co-pay savings cards, rebates(including related administration fees), wholesaler fee for service, reasonable amounts of physician samples, reasonableamounts of free products given to indigent patients, retroactive price reductions or any other items substantially similarin character and substance to the foregoing, with equitable adjustments to be made from time to time for anydifferences between these allowances and actual amounts;(d)amounts previously included in Net Sales of IPI-145 Products that are written-off byLicensee as uncollectible in accordance with Licensee’s standard practices for writing off uncollectible amountsconsistently applied; and(e)freight, insurance and other transportation charges incurred in shipping an IPI-145Product to Third Parties, included and separately stated in the applicable invoice;and (II) with respect to an IPI-145 Product that is a Combination Product in a particular period, Net Sales of suchCombination Product during such period (as determined in accordance with clause (I)) multiplied by (a) the fraction,A/(A+B), where A is the average sale price of the IPI-145 Product when sold separately in finished form and B is theaverage sale price of the other active pharmaceutical ingredients included in the Combination Product when soldseparately in finished form or (b) where the average sale price cannot be determined for both the IPI-145 Product andall other active pharmaceutical ingredients included in such Combination Product, the fraction, C/(C+D), where C isthe fair market value of the IPI-145 Product and D is the fair market value of all other active pharmaceutical ingredientsincluded in the Combination Product (and in such event, Licensee will in good faith make a determination of therespective fair market values of the- 10 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.IPI-145 Product and all other active pharmaceutical ingredients included in the Combination Product).There shall be no double-counting in determining the foregoing deductions.Such amounts shall be determined from the books and records of Licensee, its Affiliates and/or theSublicensees, maintained in accordance with applicable accounting principles (such as U.S. generally acceptedaccounting principles (“U.S. GAAP”) and/or International Financial Reporting Standards), consistently applied.1.59“Out-of-Pocket Expenses” means, with respect to a Party or any of its Affiliates, direct expenses paidor payable by such Party or its Affiliates to any Third Party.1.60“Patent Expenses” means reasonable and documented Internal Personnel Expenses and Out-of-PocketExpenses (including attorney’s fees, disbursements to agents in foreign jurisdictions, and government filing fees andannuity fees) incurred by or invoiced to a Party at any time on or after November 1, 2016 in connection with theProsecution and Maintenance, enforcement or defense of, or seeking Patent Term Extension with respect to, any of theProsecution Patent Rights.1.61“Patent Right” means all patents and patent applications (including provisional applications), includingall divisionals, continuations, substitutions, continuations-in-part, re-examinations, re-issues, additions, renewals,extensions, confirmations, registrations, any confirmation patent or registration patent or patent of addition based onany such patent, patent term extensions, and supplemental protection certificates or requests for continuedexaminations, foreign counterparts, and the like of any of the foregoing.1.62“Person” means any natural person, corporation, general partnership, limited partnership, joint venture,proprietorship or other business organization or a governmental agency or a political subdivision thereto.1.63“Product” means a preparation, kit, article of manufacture, composition of matter, material, compound,component or product which is, or which contains or comprises a Compound, including all formulations, modes ofadministration and dosage forms thereof.1.64“Prosecution and Maintenance” or “Prosecute and Maintain” means, with regard to a Patent Right,the preparation, filing, prosecution and maintenance of such Patent Right, as well as re-examinations, reissues, appeals,together with the initiation or defense of interferences, the initiation or defense of oppositions and other similarproceedings with respect to such Patent Right, and any appeals therefrom, including any nullity or revocationproceeding, or any of the foregoing, as applicable; provided, however, that “Prosecution and Maintenance” or“Prosecute and Maintain” shall not include any request for Patent Term Extension, any post-grant review or any otherdefense or enforcement action taken with respect to a Patent Right.- 11 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.1.65“Regulatory Approval” means, with respect to a Product, the approval of the applicable RegulatoryAuthority necessary for the marketing and sale of such Product for a particular indication in a country. RegulatoryApproval shall also include any “orphan drug” or similar designation.1.66“Regulatory Authority” means a federal, national, multinational, state, provincial or local regulatoryagency, department, bureau or other governmental entity with authority over the testing, manufacture, use, storage,import, promotion, marketing or sale of a pharmaceutical product in a country or territory, including the FDA, EMAand MHLW.1.67“Regulatory Documentation” means, with respect to any Compound or Product, all INDs, NDAs, andother regulatory applications submitted to any Regulatory Authority, copies of Regulatory Approvals, regulatorymaterials, drug dossiers, master files (including Drug Master Files, as defined in 21 C.F.R. §314.420 and any non-United States equivalents), and any other reports, records, regulatory correspondence, meeting minutes, telephone logs,and other materials relating to Regulatory Approval of such Compound or Product (including any underlying safetyand effectiveness data whether or not submitted to any Regulatory Authority), or required to Research, Develop,Manufacture or Commercialize such Compound or Product, including any information that relates to pharmacology,toxicology, chemistry, manufacturing and controls data, batch records, safety and efficacy, and any safety databaserequired to be maintained for Regulatory Authorities.1.68“Regulatory Exclusivity” means the ability to exclude Third Parties from Manufacturing orCommercializing a product that could compete with a Product in a country, either through data exclusivity rights,orphan drug designation, or such other rights conferred by a Regulatory Authority in such country other than throughPatent Rights.1.69“Reimbursement Event” means the DUO Reimbursement Event or the Approval ReimbursementEvent.1.70“Reimbursement Payment” means a payment to be made pursuant to Section 3.1.2(c)(i) uponachievement of the DUO Reimbursement Event or the Approval Reimbursement Event, as applicable.1.71“Research” means, with respect to a Compound, any activities prior to the initiation of the first IND-enabling GLP toxicology study for such Compound, excluding any medicinal chemistry activities.1.72“Royalty Term” means, with respect to an IPI-145 Product in a particular country, the period of timecommencing on the first Commercial Sale of such IPI-145 Product in such country and ending on the last to occur of(a) the date on which all Duvelisib Patent Rights containing a Valid Claim covering the composition, formulation,preparation, Manufacture, Commercialization or other use of such IPI-145 Product in the country of sale have expired,(b) the date on which all Duvelisib Patent Rights containing a Valid Claim covering the Manufacture- 12 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.in the country of actual Manufacture of such IPI-145 Product have expired, or (c) the expiration of any RegulatoryExclusivity with respect to such IPI-145 Product in such country.1.73“Senior Executive” means, in the case of INFI, the Chief Executive Officer of INFI (or a seniorexecutive officer designated by the Chief Executive Officer of INFI), and in the case of Licensee, the Chief ExecutiveOfficer of Licensee (or a senior executive officer designated by the Chief Executive Officer of Licensee).1.74“Sublicensee” means a Third Party to whom Licensee, or any of its Affiliates or any otherSublicensee, grants a sublicense as permitted under this Agreement, under any of the Duvelisib IP.1.75“Target Inhibitor” means any Compound which meets the criteria set forth in Exhibit I.1.76“Territory” means worldwide.1.77“Third Party” means any Person other than INFI, Licensee or any Affiliate of INFI or Licensee.1.78“Third Party Grantor” means INK, MICL or Purdue.1.79“United States” or “U.S.” means the United States of America and all of its territories and possessions.1.80“U.S. Bankruptcy Code” means of Title 11 of the United States Code, as amended.1.81“Valid Claim” means a claim of any issued, unexpired patent that has not been revoked or heldunenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction from which noappeal can be taken, or with respect to which an appeal is not taken within the time allowed for appeal, and that has notbeen disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. 1.82Additional Definitions. Each of the following definitions is set forth in the section of this Agreementindicated below:Definition:Section:AAA12.2.3AgreementPreambleArbitration Request12.2.1Approval Reimbursement Event3.1.2.(c)(i)(2)Audit Opinion6.6Audited Financial Statements6.6Breaching Party11.2Clinical Site Agreement1.3.6Development Plan3.1.1Disclosing Party1.10DUO Reimbursement Event3.1.2.(c)(i)(1)Effective DatePreambleExisting Confidentiality Agreement1.10Existing IPI-145 Product6.1.1(d)- 13 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Definition:Section:Existing Patents9.2.4Headlicense Breach2.5.5Holdback Payment3.1.2(b)Indemnified Party10.3Indemnifying Party10.3Independent Auditor6.6INFIPreambleINFI Acquirer12.6.1INFI Pre-Existing Affiliates12.6.1Initiating Party7.6INK1.37INK Mark7.8.1Infringed Patent Right6.1.1(d)Insurance Period10.6.1Joint Know-How7.2Joint Patent Rights7.2LicenseePreambleLicensee Common Stock3.1.2(c)(ii)Licensee Acquirer12.6.2Licensee Pre-Existing Affiliates12.6.2Losses10.1MICL1.56MICL Repayment Amount6.1.3(b)(i)MICL Royalty Payment6.1.3(b)(i)MICL Trailing Royalty Payment6.1.3(c)Non-Breaching Party11.2Paragraph IV Certification7.4Party or PartiesPreamblePatent Term Extensions7.9.1Product Mark2.5.1Prosecution Patent Rights7.3.1(a)Purdue1.56Purdue Repayment Amount6.1.3(b)(ii)Purdue Royalty Payment6.1.3(b)(ii)Receiving Party1.11Registration Statement3.1.2(c)(iv)Reimbursable Amount3.1.2(c)(i)Reimbursement Announcement Date3.1.2(c)(i)Reimbursement Notice3.1.2(c)(i)Representatives8.2.1Reviewing Party8.5Royalty Termination Date6.1.1(b)SEC3.1.2(c)(iv)SEC Financial Statements6.6Securities Act3.1.2(c)(ii)- 14 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Definition:Section:Superseded AgreementPreambleTerm11.1Third Party Infringement7.4Transition Plan3.2.1Transition Period3.2.1Unaudited Financial Statements6.6U.S. GAAP1.58 ARTICLE 2GRANT OF RIGHTS2.1License Grant to Licensee. During the Term, subject to the terms and conditions of this Agreement,INFI hereby grants Licensee an exclusive (exclusive even with respect to INFI), royalty-bearing, non-transferable(except in accordance with Section 12.5) license, with the right to sublicense (subject to Section 2.2), under theDuvelisib IP to Research, Develop, Manufacture, Commercialize and import the IPI-145 Compound and IPI-145Products in the Territory in the Field. For the avoidance of doubt, the license set forth in this Section 2.1 includesexclusive rights with respect to IPI-145 Products that are Combination Products; provided, however, that nothing setforth in this this Agreement shall grant Licensee the right to Research, perform medicinal chemistry on, Develop,Manufacture, Commercialize or import any Compound (other than the IPI-145 Compound) that is claimed or coveredby, or embodies, any Patent Right or Know-How owned by or licensed to INFI or any of its Affiliates. With respect toany exclusive license granted to Licensee under this Agreement, “exclusive” means exclusive to Licensee (even withrespect INFI and its Affiliates), except for (a) non-exclusive licenses granted by INFI to Third Parties under INFIProduct Related Contracts that will not adversely affect Licensee’s ability to Research, Develop, Manufacture andCommercialize the IPI-145 Product in accordance with this Agreement, and (b) any limitations on the rights granted toINFI by any applicable Third Party Grantor in the INFI Third Party Agreements as of the Effective Date (or asamended thereafter to the extent permitted by this Agreement).- 15 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.2.2Sublicenses.2.2.1Licensee shall have the right to grant sublicenses within the scope of the license underSection 2.1; provided, that any sublicense agreement shall be in writing and shall be consistent with the relevantrestrictions and limitations set forth in this Agreement. 2.2.2Licensee shall be liable for the failure of any of the Sublicensees to comply with therelevant obligations under this Agreement and shall, at its own cost, use Diligent Efforts to enforce compliance by theSublicensees with the terms of the sublicense agreement.2.3License Grant to INFI. Subject to the terms and conditions of this Agreement, Licensee hereby grantsto INFI a non-exclusive, perpetual, sublicensable (through multiple tiers), fully-paid up, worldwide, royalty-free licenseunder the Licensee IP to Research (including to perform medicinal chemistry), Develop, Manufacture andCommercialize Compounds that are Target Inhibitors and Products that contain one or more of such Compounds, except that, (a) such license does not extend to any Compound or Product that is Controlled by Licensee, itsAffiliates, licensees or Sublicensees as of the Effective Date, and (b) during the Term, such license does not extend tothe IPI-145 Compound or IPI-145 Products.2.4INFI Third Party Agreements. 2.4.1Licensee acknowledges and agrees, subject to the accuracy of the representations andwarranties contained in Section 9.2.9, that (a) it has received a copy of the INFI Third Party Agreements existing as ofthe Effective Date and (b) all rights granted to and obligations of Licensee hereunder are subject to the terms andconditions of the INFI Third Party Agreements. Licensee acknowledges that the Third Party Grantors retain, and theactivities conducted by Licensee, its Affiliates and the Sublicensees pursuant to this Agreement shall not limit, theThird Party Grantors’ rights with respect to the Know-How and Patent Rights as set forth in the INFI Third PartyAgreements.2.4.2 Licensee shall, and shall cause its Affiliates and Sublicensees to, comply in allmaterial respects with the INFI Third Party Agreements and take any action reasonably requested by INFI to preventany potential material breach by Licensee, its Affiliates or Sublicensees of any applicable term of any INFI Third PartyAgreements. 2.4.3INFI shall not, without Licensee’s prior written consent (which shall not beunreasonably withheld), terminate, or enter into any amendment to, any INFI Third Party Agreement whichtermination or amendment would have an adverse effect, in any material respect, on Licensee’s rights or obligationsunder this Agreement or on the Research, Development, Manufacture or Commercialization of the IPI-145 Compoundor IPI-145 Products as contemplated hereunder. To the extent permitted under the relevant INFI Third PartyAgreement, INFI shall provide Licensee with a copy of all modifications to or amendments of the INFI Third PartyAgreements, regardless of whether Licensee’s consent was required with respect thereto.- 16 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.2.4.4Each Party shall, and shall cause its Affiliates and licensees or sublicensees to, useDiligent Efforts not to perform any acts or omissions that would constitute a breach of any of the INFI Third PartyAgreements which breach would have an adverse effect, in any material respect, on the Research, Development,Manufacture or Commercialization of the IPI-145 Compound or IPI-145 Products as contemplatedhereunder. Licensee shall and shall cause its Affiliates and licensees or sublicensees to use Diligent Efforts not toperform any acts or omissions that would constitute a breach of any of the INFI Third Party Agreements which breachwould have an adverse effect, in any material respect, on the Research, Development, Manufacture orCommercialization of the Target Inhibitors as contemplated under such INFI Third Party Agreement. Each Party shallprovide the other promptly with notice of the occurrence of any such breach (or receipt of notice of an allegation of anysuch breach).2.4.5If INFI receives a notice from INK alleging that INFI has materially breached itsobligations under the INK Agreement and such material breach is a result of Licensee’s, its Affiliates’ or Sublicensees’acts or omissions in breach of Licensee’s obligations under this Agreement (such alleged material breach, a“Headlicense Breach”), then INFI shall promptly forward such notice of the Headlicense Breach to Licensee. Licenseeshall have an opportunity to cure such Headlicense Breach in accordance with the terms set forth in Section 11.2 (butwithout any extension of the cure period therein), so long as Licensee provides evidence to INFI during such cureperiod of its actions to cure such breach. If Licensee fails to cure its Headlicense Breach or to provide evidence of suchactions in accordance with the preceding sentence, then Licensee’s Headlicense Breach shall be considered a materialbreach of this Agreement by Licensee, which material breach shall not be subject to any further cure periods underSection 11.2 of this Agreement. 2.4.6[* * *]2.4.7 Licensee acknowledges and agrees that (a) INFI may provide a copy of thisAgreement, and any amendment to this Agreement, to any Third Party Grantor and (b) INFI may provide to any ThirdParty Grantor any information required to be provided to such Third Party Grantor in accordance with the applicableINFI Third Party Agreement. INFI acknowledges and agrees that Licensee may provide to any Affiliate orSublicensee a copy of the INFI Third Party Agreements; provided, that such Affiliate or Sublicensee is subject toconfidentiality and non-use obligations no less stringent than those set forth in Article 8. 2.4.8Termination of the INK Agreement.(a)Subject to the terms of this Section 2.4.8, the licenses granted toLicensee hereunder with respect to the Patent Rights and Know-How licensed to INFI pursuant to the INK Agreementshall terminate upon termination of the INK Agreement (except as provided in Section 15.1(b) therein) and theprovisions of Section 15.2 or Section 15.3, as applicable, of the INK Agreement shall, to the extent applicable toLicensee, apply, except that any such license to Licensee of the rights granted to INFI under Section 2.1 of the INKAgreement to Research, Develop, Manufacture or Commercialize the IPI-145 Compound or the IPI-145 Products shallnot- 17 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.terminate upon termination of the INK Agreement but instead shall remain in full force and effect if Licensee is notthen in material breach of this Agreement and Licensee provides to INK within thirty (30) days after termination of theINK Agreement a written agreement to be bound as the licensee under the terms and conditions of the INK Agreementas to the field and territory in which Licensee has been granted rights under this Agreement. (b)If the INK Agreement is terminated by INK solely as a direct result ofLicensee’s or any Affiliate’s or Sublicensee’s breach of this Agreement and INFI has not received notice from INKthat INFI is otherwise in material breach of the INK Agreement as of the time of such termination, then Licensee andits Affiliates shall not directly or indirectly acquire or license rights from INK or any of its Affiliates permittingLicensee or any of its Affiliates to Research, perform medicinal chemistry on, Develop, Manufacture or Commercializeany Compound that is a Target Inhibitor or any Product containing such a Compound, in each case to the extent thatsuch Compound or Product is licensed to INFI under the INK Agreement as of the date of the termination of the INKAgreement. 2.5Trademark License. 2.5.1Subject to the terms and conditions of this Agreement, INFI hereby grants Licensee anexclusive (even as to INFI), worldwide, royalty-free right and license to use and sublicense to its Affiliates andSublicensees INFI’s trademarks set forth on Exhibit E (each a “Product Mark”), solely during the Term, solely for thepurpose of Commercializing IPI-145 Products.2.5.2Licensee shall ensure that the quality of the IPI-145 Product, and the Manufacture andCommercialization thereof, marketed under the Product Marks shall be consistent with the quality of any IPI-145Product Manufactured by or on behalf of INFI prior to the Effective Date and with the standards of quality customaryin the pharmaceuticals industry. Licensee shall, and shall cause its Affiliates and the Sublicensees to, at Licensee’sexpense, submit a sample of each proposed use of a Product Mark to INFI for approval, which approval shall not beunreasonably withheld, conditioned or delayed. If INFI reasonably objects to a proposed usage of a Product Mark, itshall give written notice of such objection to Licensee within [* * *] days of receipt of such sample, specifying the wayin which such usage of the Product Mark fails to meet the quality standards, or quality control, style or usage guidelinesfor such Product or Product Mark. If Licensee, any of its Affiliates or any Sublicensee wishes to use the Product Markin the manner included in such sample, it must remedy the failure and submit further samples to INFI for approval.2.5.3Licensee shall be responsible for all of INFI’s reasonable and documented Out-of-Pocket Expenses and Internal Personnel Expenses incurred on or after November 1, 2016 associated with registering,prosecuting, maintaining and enforcing the Product Mark and shall reimburse INFI within [* * *] days of Licensee’sreceipt of an invoice therefor. Licensee shall have the first right to control the registration, prosecution, maintenanceand enforcement of the Product Mark, in INFI’s name. INFI shall, at Licensee’s request, reasonably assist Licenseewith- 18 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.respect thereto, and Licensee shall reimburse INFI for its reasonable and documented Out-of-Pocket Expenses andInternal Personnel Expenses related thereto.2.5.4If Licensee does not wish to register, prosecute, maintain or enforce a Product Mark ina country, Licensee shall notify INFI thereof. 2.5.5If INFI determines in good faith that Licensee has not registered, prosecuted,maintained or enforced a Product Mark in a country in a timely manner, and in any event if INFI reasonably believes itis in danger of losing any rights in such Product Mark, then INFI shall have the right to register, prosecute, maintain orenforce such Product Mark in such country, at INFI’s expense, and Licensee shall reasonably assist INFI with respectthereto.2.5.6As between the Parties and except as set forth in Section 2.5.7, and subject to thelicenses set forth in this Section 2.5, INFI will own the Product Marks. Subject to Section 2.5.7, Licensee, its Affiliatesand Sublicensees will not contest, oppose or challenge INFI’s ownership of any Product Mark.2.5.7At any time following Licensee’s filing of an NDA in the United States or an MAA inany other country in the Territory with respect to an IPI-145 Product, Licensee may request that INFI transferownership of the Product Mark and any goodwill associated therewith (but not any of the Duvelisib IP or any assets ofINFI or any of its Affiliates, other than the Product Mark and the Internet domain names described hereafter) and anyInternet domain names incorporating any Product Mark, or any variation or part of any Product Mark. Promptlyfollowing such request, INFI shall assign ownership of the Product Mark and any goodwill associated therewith (butnot any of the Duvelisib IP or any assets of INFI or any of its Affiliates, other than the Product Mark and such Internetdomain names) and any Internet domain names incorporating any Product to Licensee or its designee, and Licenseeshall reimburse INFI for its reasonable and documented Out-of-Pocket Expenses and Internal Personnel Expensesrelated thereto. 2.6Rights Retained by the Parties. 2.6.1Any rights of INFI not expressly granted to Licensee pursuant to this Agreement shallbe retained by INFI. Any rights of Licensee not expressly granted to INFI pursuant to this Agreement shall be retainedby Licensee. Licensee agrees not to practice any Duvelisib IP except pursuant to the licenses expressly granted toLicensee in this Agreement (it being agreed that no such license grants any right to Research, perform medicinalchemistry on, Develop, have Developed, Manufacture, have Manufactured, use, sell, offer to sell, otherwiseCommercialize or import any Compound, or any Product containing or comprising any Compound, other than the IPI-145 Compound, IPI-145 Product or a Combination Product to the extent set forth herein).2.6.2INFI shall not directly or indirectly, Research, perform medicinal chemistry on,Develop, Manufacture or Commercialize the IPI-145 Compound or any IPI-145 Product for the treatment, prevention,palliation or diagnosis of any Indication in humans or animals in the- 19 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Territory, nor collaborate with, license, sell to or enable or otherwise authorize, permit or grant any right to any ThirdParty to Research, perform medicinal chemistry on, Develop, Manufacture or Commercialize the IPI-145 Compoundor any IPI-145 Product for the treatment, prevention, palliation or diagnosis of any Indication in humans or animals inthe Territory.2.7Section 365(n) of the U.S. Bankruptcy Code. 2.7.1All rights and licenses now or hereafter granted by a Party to the other Party under orpursuant to any section of this Agreement constitute rights to “intellectual property” (as defined in the U.S. BankruptcyCode). The Parties hereto acknowledge and agree that the payments provided for in the Agreement by Licensee toINFI hereunder, other than royalty payments pursuant to Section 6.1.1, do not constitute royalties within the meaningof Section 365(n) of the U.S. Bankruptcy Code or relate to licenses of intellectual property hereunder. 2.7.2If (a) a case under the U.S. Bankruptcy Code is commenced by or against INFI, (b)this Agreement is rejected as provided in the U.S. Bankruptcy Code and (c) Licensee elects to retain its rightshereunder as provided in Section 365(n) of the U.S. Bankruptcy Code, then INFI (in any capacity, including debtor-in-possession) and its successors and assigns (including any trustee) shall provide to Licensee all intellectual propertylicensed hereunder, and agrees to grant and hereby grants to Licensee and its Affiliates a right to access and to obtainpossession of and to benefit from and, in the case of any chemical or biological material or other tangible item of whichthere is a fixed or limited quantity, to obtain a pro rata portion of, such articles and materials which were to have been,but were not, transferred as part of the Transition Plan.2.7.3 The Party against which a case under the U.S. Bankruptcy Code is commenced shallnot interfere with the exercise by the other Party or its Affiliates of rights and licenses to intellectual property licensedhereunder and embodiments thereof in accordance with this Agreement and agrees to use Diligent Efforts to assist theother Party and its Affiliates to obtain such intellectual property and embodiments thereof in the possession or controlof Third Parties as reasonably necessary or desirable for the other Party or its Affiliates or licensee or sublicensees toexercise such rights and licenses in accordance with this Agreement.2.8Infinity Exclusivity Covenants. During the Term, except pursuant to and in accordance with the termsof this Agreement, neither INFI nor any of its Affiliates shall directly or indirectly conduct clinical trials of the IPI-443Product as a therapeutic, or Commercialize the IPI-443 Product, in each case in the Field in the Territory, norcollaborate with, license, sell to, or enable or otherwise authorize, permit or grant any right to, any Third Party to Commercialize or conduct such clinical trials of the IPI-443 Product in the Field in the Territory. For the purposes ofthis Section 2.8 only, Field shall not include (a) immunotherapy treatments that treat T-cells ex-vivo or (b) any otherex-vivo uses.ARTICLE 3RESEARCH AND DEVELOPMENT- 20 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.3.1Diligence. Licensee (itself or through its Affiliates and the Sublicensees) shall use Diligent Efforts toDevelop, Manufacture and Commercialize one IPI-145 Product in the Field in the Territory.3.1.1Development Plan. The initial plan for Development activities to be conducted byLicensee (itself or through its Affiliates and the Sublicensees) with respect to the IPI-145 Product during the Term is setforth in Exhibit G (the “Development Plan”). The Development Plan may be updated or amended by Licensee fromtime to time during the Term; provided that such updated or amended Development Plan shall be sufficient to permitINFI to comply with its obligations under this Agreement and the INK Agreement. Licensee shall provide to INFI anysuch updated or amended Development Plan concurrently with the delivery of Development reports pursuant toSection 3.3. To the extent that any provision of the Development Plan conflicts with or is inconsistent with theprovisions of this Agreement, the provisions of this Agreement shall control.3.1.2Expenditures.(a)Licensee’s Diligent Efforts to Develop one IPI-145 Product will includedemonstration that it, its Affiliates and the Sublicensees, [* * *].(b)Notwithstanding anything to the contrary in this Agreement (other thanthe provisions of Section 3.1.4(b)), Licensee will be responsible for all reasonable and documented Internal PersonnelExpenses and Out-of-Pocket Expenses related to the IPI-145 Compound or IPI-145 Product in the Territory incurredby INFI on or after November 1, 2016, including all costs related to the Development, Manufacture orCommercialization of the IPI-145 Compound or IPI-145 Product and all Patent Expenses; provided, however, thatLicensee shall not have any obligation to reimburse INFI for any such costs incurred by INFI after the Effective Dateexcept for those costs incurred in accordance with this Agreement or as directed by Licensee; provided, that Licenseeshall be permitted to holdback [* * *] of all such payments incurred by INFI after the date a Key Item is to have beencompleted (as set forth in the Transition Plan) and such Key Item has not been completed (other than through anyaction or inaction of Licensee) (such payments actually withheld by Licensee, the “Holdback Payments”); further, provided, that within [* * *] days following the completion of such Key Item that entitled Licensee to holdback theHoldback Payment, Licensee shall pay the amount of such Holdback Payment to INFI. Subject to the foregoing,Licensee shall reimburse INFI for all such expenses within [* * *] days following Licensee’s receipt of an invoicetherefor.(c)Reimbursement for Pre-Effective Date Costs and Expenses.(i)The Parties agree and acknowledge that, INFI’s and itsAffiliates’ aggregate internal costs and Out-of-Pocket Expenses related to the IPI-145 Product between July 1, 2016and October 31, 2016, and INFI’s and its Affiliates’ costs related to the clinical studies described in Section3.1.4(b), are estimated at [* * *] (the “Reimbursable- 21 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Amount”). Subject to the terms and conditions of this Agreement, Licensee shall reimburse such costs by paying toINFI the following amounts:(1)Six Million Dollars ($6,000,000) upon thedetermination that the DUO clinical trial has met its [* * *], each as defined in the DUO clinical trial protocol, attachedas Exhibit H (such event, the “DUO Reimbursement Event”) and; (2)Twenty-Two Million Dollars($22,000,000) upon the approval of an NDA or MAA for an IPI-145 Product (such event, the “ApprovalReimbursement Event”).To the extent that the payments made to INFI under Sections 3.1.2(c)(1) and 3.1.2(c)(2) are less than the ReimbursableAmount, the remainder of the Reimbursable Amount shall be reimbursed to INFI through the payment of royaltiespursuant to Section 6.1.1.Licensee shall pay the amounts set forth in Section 3.1.2(c)(i)(1) and Section 3.1.2(c)(i)(2) within [* * *] days after theachievement of the relevant Reimbursement Event; provided, however, that Licensee shall have no obligation to makethe relevant Reimbursement Payment upon the achievement of the applicable Reimbursement Event until INFI shallhave completed the items marked as “Key Items” on the Transition Plan that were to have been completed (as set forthin the Transition Plan) prior to the date on which such Reimbursement Event is achieved. Within [* * *] calendar daysafter Licensee becomes aware that a Reimbursement Event has been achieved, it shall notify INFI thereof in writing(the “Reimbursement Notice”) and shall issue a public announcement of such achievement, which announcement shallhave been subject to written approval by INFI, such approval not to be unreasonably withheld, conditioned ordelayed. The date of such public announcement is hereinafter referred to as the “Reimbursement AnnouncementDate.”(ii)Form of Payment. Within [* * *] days after theachievement of the relevant Reimbursement Event set forth in Section 3.1.2(c)(i)(1) or Section 3.1.2(c)(i)(2), Licenseeshall make a Reimbursement Payment (1) in Dollars in immediately available funds, or (2) in lieu of (or as partialconsideration with) making the Reimbursement Payment in Dollars, by issuing shares of its common stock, $0.0001par value per share (“Licensee Common Stock”), such shares constituting “restricted securities” within the meaning ofRule 144 under the Securities Act of 1933, as amended (the “Securities Act”). As part of any Reimbursement Notice,Licensee shall inform INFI of its form of payment election, whether in Dollars, shares of Licensee Common Stock or acombination of any of the foregoing.(iii)Calculating Reimbursement Payments. For any portion ofany Reimbursement Payment in which Licensee elects to issue shares of Licensee Common Stock, the number ofshares of Licensee Common Stock to be so issued will be determined by multiplying (1) 1.025 by (2) the number ofshares of Licensee Common Stock equal to (a) the amount of the Reimbursement Payment to be paid in shares ofLicensee Common Stock, divided by (b) the- 22 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.average closing price of a share of Licensee Common Stock as quoted on NASDAQ for the twenty (20) day periodfollowing the Reimbursement Announcement Date.(iv)Registration Rights. If Licensee issues shares of LicenseeCommon Stock to INFI to satisfy all or a portion of a Reimbursement Payment, Licensee shall as promptly as possible,but no later than [* * *] Business Days following the issuance of such shares, file a registration statement on Form S-3(or such other registration statement then available to Licensee, each, a “Registration Statement”) with the Securitiesand Exchange Commission (the “SEC”) registering all such shares of Licensee Common Stock issued as considerationfor all or a portion of such Reimbursement Payment. Licensee shall use commercially reasonable efforts to have theapplicable Registration Statement and the related prospectuses declared effective by the SEC as soon as possiblethereafter and to prepare and file with the SEC such amendments and supplements to the registration as may benecessary to keep such Registration Statement effective until the first anniversary of the effective date of suchRegistration Statement. The obligations of the Licensee to maintain an effective Registration Statement under thisSection 3.1.2(c)(iv) for any issuance of Licensee Common Stock shall cease on the first anniversary of the effectivedate of such Registration Statement.(v)Resale Limitations. In any resales within the first threemonths after the effective date of the applicable Registration Statement, regardless of whether conducted pursuant tothe Registration Statement, INFI shall effect such sales only through [* * *] or another broker to be mutually agreedupon between INFI and Licensee.(vi)Legends. All Licensee Common Stock issued asconsideration for all or a portion of a Reimbursement Payment shall bear the following legend: THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES ANDEXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE INRELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIESACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAYNOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATIONSTATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLEEXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLESTATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TOTHE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BEREASONABLY ACCEPTABLE TO THE COMPANY.(vii)Authorizations; Approvals; Timing. The Partiesacknowledge and agree that it shall be a condition to the closing of the sale of any issuance of shares of LicenseeCommon Stock that: (i) all material authorizations, consents, orders or approvals of, or regulations, declarations orfilings with, or expirations of applicable waiting- 23 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.periods imposed by, any Governmental Authority necessary for the consummation of the sale of such shares shall havebeen obtained or filed or shall have occurred (as applicable), and (ii) INFI shall have received such customarycertificates, instruments or other similar closing deliverables as it may reasonably request. Notwithstanding anythingherein to the contrary, in no event will Licensee issue any shares of Licensee Common Stock without first obtainingapproval from its stockholders to the extent that such approval is then required as a condition to such issuance of suchshares pursuant to NASDAQ Listing Rule 5635 or any successor rule. The right of Licensee to pay all or a portion ofa Reimbursement Payment in shares of Licensee Common Stock shall immediately terminate if the closing of the saleof such shares shall not have taken place within [* * *] calendar days after the Reimbursement AnnouncementDate. In the event of such termination, Licensee shall, within a period of [* * *] Business Days thereafter, make suchReimbursement Payment to INFI in Dollars in immediately available funds.3.1.3Subcontractors. Licensee may perform its Development, Manufacturing orCommercialization rights or obligations under this Agreement through one or more subcontractors or consultants,provided, that: (a) Licensee shall remain responsible for the work allocated to, and payment to, such subcontractorsand consultants as it selects to the same extent it would if it had done such work itself; and (b) each such subcontractoror consultant shall undertake in writing obligations of confidentiality and non-use regarding INFI’s ConfidentialInformation that are no less restrictive than those undertaken by Licensee pursuant to ARTICLE 8 hereof.3.1.4Continuation of Clinical Trials. (a)Licensee shall assume all costs associated with the [* * *] clinical trialsas of [* * *] (unless Licensee provides INFI with written notice prior to [* * *] that the [* * *] clinical trial will bewound down, in which case it shall be wound down under Section 3.1.4(b)). (b)INFI shall be responsible for winding down the [* * *] clinical trials(and the [* * *] clinical trial if Licensee elects to wind down the [* * *] clinical trial pursuant to Section 3.1.4(a)) untilDecember 31, 2016, including the costs thereof, and shall use Diligent Efforts to wind down such clinical trials inaccordance with the Transition Plan. After [* * *], Licensee shall become responsible for all activities and costs towind down such clinical trials; provided, however, that INFI shall reimburse Licensee for Licensee’s reasonable anddocumented Internal Personnel Expenses and Out-of-Pocket Expenses for winding down such clinical trials (suchreimbursements to be made within [* * *] days of INFI’s receipt of invoice therefor from Licensee). In any event,INFI’s aggregate expenditures under this Section 3.1.4(b), including INFI’s reasonable and documented InternalPersonnel Expenses and Out-of-Pocket Expenses and INFI’s reimbursement of Licensee’s reasonable and documentedInternal Personnel Expenses and Out-of-Pocket Expenses, shall be capped at Four Million Five Hundred ThousandDollars ($4,500,000).(c)Following Licensee’s assumption of responsibility for the DUO clinicaltrial, Licensee shall continue the DUO clinical trial in accordance with the DUO clinical trial protocol attached asExhibit H until it is complete; provided, however, that in the event that- 24 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Licensee, a Regulatory Authority, an institutional review board or independent safety board determines that the DUOclinical trial would pose an unacceptable safety risk for subjects or patients participating in it, then Licensee shall not beobligated to continue the DUO clinical trial and Licensee shall provide INFI with an explanation of the safety issueconcerns, including those raised by such Regulatory Authority, institutional review board or independent safety boardand, if requested by INFI, reasonable documentation thereof.3.2Transfer of INFI Know-How.3.2.1Each Party shall perform its respective obligations under the transition plan attachedhereto as Exhibit F (the “Transition Plan”). Except for those obligations specified in the Transition Plan or in thisAgreement to endure past the end of the Transition Period, by the end of the Transition Period, (a) each Party shallhave performed all of its obligations under the Transition Plan, (b) INFI shall have disclosed and transferred toLicensee the process used by INFI as of the Effective Date for the Manufacture of IPI-145 Product and such otherManufacturing specifications set forth in Exhibit F-2, (c) INFI shall have provided Licensee with copies of such otherrelevant material and information included in the Duvelisib Know-How with respect to the IPI-145 Product as set forthin the Transition Plan, and (d) INFI shall have transferred control and ownership to Licensee of the materials andinventory of the IPI-145 Compound and IPI-145 Product identified in the Transition Plan in such amounts as set forthin Exhibit F-3. “Transition Period” means the period beginning on the Effective Date and ending on [* * *]. Prior tothe end of the Transition Period, INFI shall provide to Licensee a copy all of all Clinical Site Agreements.3.2.2INFI Product Related Contracts.(a)Within thirty (30) days after the Effective Date, (A) to the extent notpreviously provided to Licensee, INFI will provide Licensee with electronic copies of each INFI Product RelatedAgreement and (B) the Parties will, in good faith, mutually determine in writing which INFI Product Related Contractswill be assigned to Licensee and which will be wound down or terminated. INFI shall use Diligent Efforts to assign toLicensee, in accordance with the schedule determined in accordance with Section 3.2.2(c), the rights and obligationsunder the applicable INFI Product Related Contracts (through a novation, except that if a novation cannot be securedfor an INFI Product Related Contract, INFI shall use Diligent Efforts to assign such INFI Product Related Contract toLicensee and Licensee shall indemnify, defend and hold harmless the INFI Indemnitees from and against any and allLosses arising from such INFI Product Related Contract after the Effective Date except to the extent such Losses arecaused by INFI’s or its Affiliate’s failure to comply with the terms of such INFI Product Related Contract, breach ofany terms or conditions of this Agreement, or failure to follow Licensee’s reasonable instructions with respect to INFI’sand its Affiliates’ activities in connection therewith), and Licensee shall accept such rights and obligations and acceptall liability with respect to INFI’s obligations under such INFI Product Related Contracts other than those paymentobligations (i) incurred by INFI prior to November 1, 2016, or (ii) that do not relate to the IPI-145 Compound or IPI-145 Product; provided, however, that INFI shall have no obligation to incur any costs or payment obligations in- 25 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.order to effect such assignment, unless Licensee agrees to any bear all such costs and payment obligations. (b)With respect to each applicable INFI Product Related Contract (i.e., anINFI Product Related Contract that Licensee and INFI determined should be assigned to Licensee), until the earlier ofthe date on which such INFI Product Related Contract (i) is so assigned to Licensee, (ii) expires or (iii) is terminated,INFI shall use Diligent Efforts to provide to Licensee the benefits of such INFI Product Related Contract to the extentthat such benefits relate to the IPI-145 Compound or IPI-145 Product and enforce, at the request and expense of andfor the account and benefit of Licensee, any rights of INFI arising thereunder against any counterparty to the INFIProduct Related Contracts, including the right to seek any available remedies or to elect to terminate such INFI ProductRelated Contracts in accordance with the terms thereof upon the direction of Licensee. In connection with theforegoing, Licensee shall assume responsibility for payments incurred after the Effective Date under each such INFIProduct Related Contract and Licensee shall perform the obligations of INFI under each such INFI Product RelatedContract, in each case, to the extent related to the IPI-145 Compound or IPI-145 Product; provided, however, thatLicensee shall reimburse INFI for any amounts pre-paid by INFI under any INFI Product Related Contract as of theEffective Date, provided that such prepayments relate to the IPI-145 Compound or the IPI-145 Product. (c)With respect to each applicable INFI Product Related Contract, INFIwill use Diligent Efforts to cooperate with Licensee on determining the preferred effective dates of assignment for keyINFI Product Related Contracts and the accounting groups of each Party will cooperate with Licensee in theassessment of proper accounting treatment of the applicable INFI Product Related Contracts.3.2.3During the Transition Period, INFI shall make its relevant and available scientific andtechnical personnel reasonably available to Licensee to answer questions or provide instruction as reasonably requestedby Licensee concerning the Duvelisib Know-How delivered pursuant to this Section 3.2 in order to facilitate thetransfer of such Duvelisib Know-How to Licensee. Notwithstanding the foregoing, INFI shall have no obligation to(i) maintain any personnel or (ii) following the disclosure or transfer, as applicable, of information and materials asdescribed in Section 3.2.1, maintain any records, files or other materials, related to the IPI-145 Product or any of theinformation or materials disclosed or transferred hereunder. 3.2.4Licensee shall reimburse INFI for any reasonable and documented Internal PersonnelExpenses and Out-of-Pocket Expenses incurred by INFI pursuant to Sections 3.2.1, 3.2.2, and 3.2.3 within [* * *]days following receipt by Licensee of an invoice providing reasonable documentation of such expenses.3.3Reports. Licensee shall submit semi-annual written progress reports by December 20 and June 20 ofeach year, summarizing Licensee’s (and its Affiliates’ and the Sublicensees’) activities related to the development ofthe IPI-145 Product in the Field, including Development activities and an overview of future Development activitiesreasonably contemplated, including- 26 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.the status of obtaining Marketing Authorization for each of the United States, Europe and Japan, and planning forCommercialization in such territories (including a projection of all such activities for the next thirty days). Such reportsshall be submitted, with respect to activities for the United States, until first Commercial Sale of the IPI-145 Product inthe United States, and with respect to activities for countries or regions outside the United States, until first CommercialSale of the IPI-145 Product in any country outside the United States. ARTICLE 4REGULATORY MATTERS4.1Licensee Regulatory Responsibility.4.1.1INDs. Subject to this Section 4.1.1, INFI shall own and be responsible for preparing,filing and maintaining all INDs for the IPI-145 Compound and IPI-145 Product in the Field in the Territory as of theEffective Date and Licensee shall reimburse INFI’s reasonable and documented Internal Personnel Expenses and Out-of-Pocket Expenses related thereto. Promptly after the Effective Date and in any event no later than the end of theTransition Period, INFI and Licensee, as applicable, shall make the necessary filings with the Regulatory Authorities inthe Territory necessary to transfer the INDs for the IPI-145 Compound and IPI-145 Product to Licensee, and followingthe approval of such transfer by the applicable Regulatory Authorities (if applicable) or other effectuated transfer,Licensee shall own all such INDs and be the IND holder for the IPI-145 Compound and IPI-145 Product in theTerritory. (a)Until such time as the INDs have been transferred to Licensee, INFIshall act as Licensee’s agent to maintain the INDs and communicate with Regulatory Authorities in the Territoryrelating to the IPI-145 Compound and IPI-145 Product and Licensee shall reimburse INFI’s reasonable anddocumented Internal Personnel Expenses and Out-of-Pocket Expenses related thereto. Except with respect to non-substantive administrative correspondence with Regulatory Authorities, (i) INFI shall act on Licensee’s behalf asinstructed by Licensee with respect to submissions related to the INDs for the IPI-145 Compound and IPI-145 Productand receiving and submitting correspondence with Regulatory Authorities in the Territory related thereto and (ii) INFIwill provide to Licensee copies of all correspondence received from Regulatory Authorities within [* * *] BusinessDays of receipt or such earlier date as required by applicable Law or the relevant Regulatory Authority or if necessarygiven the circumstances of the correspondence, and INFI shall not respond to such correspondences or otherwiseinteract with the Regulatory Authorities except as instructed by Licensee. (b)With respect to the INDs for the IPI-145 Compound and IPI-145Product, Licensee will provide INFI with copies of all submissions in advance of filing so that INFI may submit suchsubmissions on behalf of Licensee. INFI will provide to Licensee copies of any material written communications to orfrom Regulatory Authorities related to the IPI-145 Compound and the IPI-145 Product within [* * *] Business Days ofreceipt or delivery of such communication, as the case may be, or such earlier date as required by applicable Law orthe relevant Regulatory Authority or if necessary given the circumstances of the correspondence. In- 27 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.addition, except for submissions which are required to meet the “Sponsor” obligations under 21 C.F.R. 312 andanalogous regulations in non-U.S. jurisdictions, during such period INFI will be responsible for all communicationsand other dealings with Regulatory Authorities in the Territory with respect to the IPI-145 Compound and the IPI-145Product, provided, however, that INFI will only communicate with the Regulatory Authorities as instructed byLicensee. To the extent permitted by applicable Law, INFI will arrange all meetings with Regulatory Authorities suchthat representatives of Licensee are able to attend and participate. Licensee shall reimburse INFI’s reasonable anddocumented Internal Personnel Expenses and Out-of-Pocket Expenses related to the activities set forth in this Section4.1.1.4.1.2Marketing Authorizations. Licensee shall, at its sole cost, use Diligent Efforts, itself orthrough its Affiliates and the Sublicensees, to prepare, file, prosecute and maintain all applications for MarketingAuthorization for the marketing, use, promotion, import, sale, distribution or commercialization of the IPI-145 Productin the Field in the Territory.4.1.3Regulatory Documentation. Except as otherwise set forth in this Section 4.1, Licenseeshall own and be responsible for preparing, filing and maintaining all Regulatory Documentation and RegulatoryApprovals that are required for the Development, Manufacture or Commercialization of the IPI-145 Compound or IPI-145 Product in the Field in the Territory; and Licensee shall be responsible for all other submissions to, andcommunications and interactions with, Regulatory Authorities in the Territory with respect to the IPI-145 Compoundor IPI-145 Product in the Field.4.2Safety Data Reporting. As set forth in the Transition Plan, until INFI has transferred all INDs toLicensee, INFI shall be responsible for reporting all adverse drug reactions/experiences with respect to the IPI-145Product in the Field to the appropriate Regulatory Authorities in the Territory in accordance with all applicableLaws. INFI shall ensure that its Affiliates comply with such reporting obligations in the Territory. Following thetransfer of all INDs to Licensee, Licensee shall be responsible for reporting all adverse drug reactions/experiences withrespect to the IPI-145 Product in the Field to the appropriate Regulatory Authorities in the Territory in accordance withall applicable Laws. Licensee shall ensure that its Affiliates and the Sublicensees comply with such reportingobligations in the Territory. Licensee shall be responsible for each Party’s reasonable and documented InternalPersonnel Expenses and Out-of-Pocket Expenses with respect the activities under this Section 4.2.ARTICLE 5COMMERCIALIZATION5.1Overview. As between the Parties, and subject to the terms and conditions of this Agreement,Licensee shall control, and bear all responsibility, costs and expenses associated with, the Commercialization of theIPI-145 Product in the Field in the Territory.- 28 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.5.2Commercial Diligence. Licensee shall, at its sole cost, use Diligent Efforts, itself or through itsAffiliates and the Sublicensees, to Commercialize the IPI-145 Product that receives Marketing Authorization in theField in the Territory.5.3Standards of Conduct. In Commercializing the IPI-145 Product under this Agreement, Licensee shall,and shall ensure that its Affiliates and the Sublicensees, comply in all respects with the INFI Third Party Agreementsand with all applicable Laws and applicable guidelines, including those concerning the advertising, sales and marketingof prescription drug products, the Foreign Corrupt Practices Act of 1977, as amended, and any applicable local anti-bribery Laws.5.4Progress Reports. Within [* * *] days after the first Commercial Sale of IPI-145 Product by Licenseeor any of its Affiliates or any Sublicensee, and by each January 20 thereafter, Licensee shall provide a forward-looking, non-binding forecast, for the relevant Calendar Year (or, with respect to the first such forecast, the remainderof the current Calendar Year), of anticipated Annual Net Sales (as defined in this Agreement) of the IPI-145 Product;provided, however, that if the first Commercial Sale of the IPI-145 Product by Licensee or any of its Affiliates or anyof the Sublicensees occurs between October 1 and December 31, the first such forecast shall cover the remainder ofthe current Calendar Year (if applicable) and the next Calendar Year, and no forecast shall be due by January 20 ofsuch next Calendar Year. By way of example and without limitation, if the first Commercial Sale of the IPI-145Product by Licensee, any of its Affiliates or any Sublicensee occurs on November 1, 2017, the first such forecast shallbe due by November 20, 2017 and shall cover the period from November 20, 2017 through December 31, 2018 andno forecast shall be due by January 20, 2018.ARTICLE 6PAYMENTS6.1Payments.6.1.1Royalties to INFI. (a)Licensee will pay royalties to INFI on Annual Net Sales of IPI-145Product at the applicable rates set forth below, subject to the provisions of this Section 6.1 and Section 6.2. For theavoidance of doubt, royalties shall be payable only once with respect to the same unit of IPI-145 Product.Annual Net Sales of IPI-145 ProductRoyaltyRateThe portion less than US$[* * *][* * *]%The portion greater than or equal to US$[* * *] and less than US$[* * *][* * *]%The portion greater than or equal to US$[* * *] and less than US$[* * *][* * *]%The portion greater than or equal to US$[* * *][* * *]% - 29 - thststthTHIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.(b)Royalties will be payable to INFI [* * *] on an IPI-145 Product-by-IPI-145 Product and country-by-country basis until the later of (i) expiration of the applicable Royalty Term or (ii) ten (10)years after the first Commercial Sale of such IPI-145 Product in such country (such later date, the “RoyaltyTermination Date”).(c)Solely with respect to Net Sales in the United States, following theexpiration of the last to expire Valid Claim of any Duvelisib Patent Right claiming or covering the composition,formulation, preparation or method of manufacture or use of the applicable IPI-145 Product (or the IPI-145 Compoundtherein) in the United States, the applicable royalty under Section 6.1.1(a) with respect to Net Sales of such IPI-145Product in the United States shall be reduced by fifty percent (50%), with the Net Sales for such IPI-145 Product in theUnited States allocated pro rata across each of the relevant royalty tiers. [* * *].(d)If Licensee (i) reasonably determines in good faith that it is required toobtain a license from a Third Party to any Patent Right that, in the absence of such license, would be infringed by theCommercialization in a particular country of the IPI-145 Product in the form in which the IPI-145 Product exists as ofthe Effective Date (the “Existing IPI-145 Product”), which Patent Right (A) is not licensed or sublicensed hereunder,(B) claims the composition of matter of the IPI-145 Compound contained in the Existing IPI-145 Product or themethod of use of such composition of matter in hematologic malignancies, and (C) is necessary (and not just useful) toCommercialize the Existing IPI-145 Product (the relevant “Infringed Patent Right”), or (ii) shall be subject to a finalcourt or other binding order or ruling that such Commercialization of the Existing IPI-145 Product infringed anInfringed Patent Right requiring any payments, including a payment of a royalty to the applicable Third Party PatentRight holder in respect of future sales of the Existing IPI-145 Product in a country in the Territory, then the amount ofLicensee’s royalty payments to INFI under Section 6.1.1(a) shall be reduced by fifty percent (50%) of the amount paidby Licensee to such Third Party with respect to such Infringed Patent Right in each applicable Calendar Quarter that isreasonably and appropriately allocable to the Existing IPI-145 Product in such country in each Calendar Quarter;provided, however, that in no event will a deduction or deductions under this Section 6.1.1(d) reduce any royaltypayment made by Licensee in respect of Net Sales (or Combination Product Net Sales) of the Existing IPI-145 Productin such country in such Calendar Quarter by more than fifty percent (50%) of the royalties otherwise payable byLicensee to INFI under Section 6.1.1(a) with respect to IPI-145 Product.(e)Notwithstanding any provision of this Agreement to the contrary, in noevent will the deductions or adjustments under Sections 6.1.1(c) or 6.1.1(d) cause the royalties due to INFI in anyapplicable Calendar Quarter with respect to any IPI-145 Product in such country to be less than fifty percent (50%) ofthe royalties otherwise payable by Licensee to INFI under Section 6.1.1(a) (without taking into account Sections6.1.1(c) or 6.1.1(d)) with respect to IPI-145 Product.6.1.2Paid Up License Following Royalty Termination Date. Except with respect to thepayments owed to INFI pursuant to Section 6.1.3, following the Royalty Termination Date on an IPI-145 Product-by-IPI-145 Product and country-by-country basis, Licensee’s licenses with- 30 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.respect to such IPI-145 Product shall continue in effect, but become fully paid-up and royalty-free and shall becomeperpetual and irrevocable upon expiration of this Agreement or termination by Licensee for INFI’s breach; provided, however, that, following the last Royalty Termination Date with respect to all IPI-145 Products, on a country-by-country basis, Licensee’s licenses with respect to all IPI-145 Compounds and IPI-145 Products shall continue in effect,but become fully paid-up, royalty-free, and shall become perpetual and irrevocable upon expiration of this Agreementor termination by Licensee for INFI’s breach.6.1.3Payments to Third Party Grantors. (a)Payments to INK. INFI shall be responsible for making all paymentsowed to INK on INFI’s Qualifying Transaction Revenue (as defined in the INK Agreement) in accordance with theterms of the INK Agreement. Licensee shall have no obligation to make any such payments to INK and the royaltiesand other amounts paid under this Agreement to INFI shall not be increased to cover such amounts owed to INK byINFI under the INK Agreement. INFI hereby covenants to make all payments owed to INK on INFI’s QualifyingTransaction Revenue. (b) Payments to Mundipharma and Purdue. (i)In addition to the royalty owed to INFI pursuant toSection 6.1.1, Licensee shall pay to INFI (for payment to MICL) an amount equal to 3.756% of Net Sales (the “MICLRoyalty Payment”) of IPI-145 Product. For purposes of this Section 6.1.3(b)(i) only, Net Sales of CombinationProducts will be calculated in accordance with Section 1.59(I) and will not be reduced by the multiplication factorreflected in Section 1.59(II). INFI shall provide Licensee with prompt notice if the Securities Purchase Agreement (asdefined in the MICL Agreements) is terminated pursuant to Section 8.1 thereof, and in such case, the MICL RoyaltyPayment shall be reduced to 2.817% of Net Sales. Licensee shall only be obligated to make the MICL RoyaltyPayment on Net Sales of IPI-145 Product until such time as MICL has received an aggregate amount equal to$244,547,850 (the “MICL Repayment Amount”) from the combination of MICL Royalty Payments made by Licenseewith respect to IPI-145 Product and other royalties paid by INFI or its Affiliates or licensees or sublicensees withrespect to any other Products subject to the royalty payments under the MICL Agreement with MICL. On an annualbasis, INFI shall inform Licensee of the remaining balance of the MICL Repayment Amount. INFI shall provideLicensee with prompt notice when such MICL Repayment Amount has been paid in full, in which case, (a) Licenseeshall no longer be required to make the MICL Royalty Payment to INFI and (b) Licensee will be required to make theMICL Trailing Royalty Payment to INFI pursuant to Section 6.1.3(c). In the event the rate of the MICL RoyaltyPayment has changed from the initial rate, as set forth in this Section 6.1.3(b)(i), and, as a result, Licensee has overpaidto INFI the MICL Royalty Payment with respect thereto, such overpaid amount shall be credited toward Licensee’sMICL Royalty Payments or MICL Trailing Royalty Payment until fully credited.(ii) In addition to the royalty owed to INFI pursuant toSection 6.1.1, Licensee shall pay to INFI (for payment to Purdue) an amount equal to 0.244% of Net Sales- 31 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.(the “Purdue Royalty Payment”) of an IPI-145 Product. For purposes of this Section 6.1.3(b)(ii) only, Net Sales ofCombination Products will be calculated in accordance with Section 1.59(I) and will not be reduced by themultiplication factor reflected in Section 1.59(II). INFI shall provide Licensee with prompt notice if the SecuritiesPurchase Agreement (as defined in the MICL Agreements) is terminated pursuant to Section 8.1 thereof, and in suchcase, the Purdue Royalty Payment shall be reduced to 0.183% of Net Sales. Licensee shall only be obligated to makethe Purdue Royalty Payment on Net Sales of IPI-145 Product until such time as Purdue has received an aggregateamount equal to $15,908,706 (the “Purdue Repayment Amount”) from the combination of Purdue Royalty Paymentsmade by Licensee with respect to IPI-145 Product and other royalties paid by INFI or its Affiliates or licensees orsublicensees with respect to any other Products subject to the royalty payments under the MICL Agreement withPurdue. On an annual basis, INFI shall inform Licensee of the remaining balance of the Purdue Repayment Amount.INFI shall provide Licensee with prompt notice when such Purdue Repayment Amount has been paid in full, in whichcase, Licensee shall no longer be required to make the Purdue Royalty Payment to INFI. In the event the rate of thePurdue Royalty Payment has changed from the initial rate, as set forth in this Section 6.1.3(b)(ii), and, as a result,Licensee has overpaid to INFI the Purdue Royalty Payment with respect thereto, such overpaid amount shall becredited toward Licensee’s Purdue Royalty Payments or, if the Purdue Repayment Amount has been paid in full, anyother payment owed by Licensee to INFI. (iii)On an IPI-145 Product-by-IPI-145 Product and country-by-country basis, if the sole basis for the continuance of a Royalty Term is the existence of Regulatory Exclusivity, theMICL Royalty Payment and the Purdue Royalty Payment shall be reduced by fifty percent (50%). (iv)INFI shall promptly pay the full amount of all MICLRoyalty Payments and Purdue Royalty Payments received from Licensee to MICL, subject only to the last sentence ofSection 6.1.3(b)(i) and the last sentence of Section 6.1.3(b)(ii).(c)Mundipharma Trailing Royalty. Once the MICL Repayment Amounthas been paid in full, Licensee shall no longer be required the pay the MICL Royalty Payment. Instead, Licensee willbe required to pay MICL an amount equal to one percent (1%) of Net Sales of IPI-145 Product in the UnitedStates (the “MICL Trailing Royalty Payment”). For purposes of this Section 6.1.3(c) only, Net Sales of CombinationProducts will be calculated in accordance with Section 1.59(I) and will not be reduced by the multiplication factorreflected in Section 1.59(II). The MICL Trailing Royalty Payment shall be paid on an IPI-145 Product-by-IPI-145Product basis until the expiration of the applicable Royalty Term in the United States. Thereafter, no further amountsshall be payable by Licensee to INFI for payment to MICL with respect to the MICL Agreements.(i)On an IPI-145 Product-by-IPI-145 Product basis, if thesole basis for the continuation of a Royalty Term in the United States is the existence of Regulatory Exclusivity, thenthe MICL Trailing Royalty Payment shall be reduced by fifty percent (50%).- 32 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.(ii) If Licensee (i) reasonably determines in good faith it, inorder to avoid infringement of any patent not licensed hereunder, it is reasonably necessary to obtain a license from aThird Party in order to Manufacture or Commercialize an IPI-145 Product in a country in the Territory and to pay aroyalty or other consideration under such license (including in connection with the settlement of a patent infringementclaim), or (ii) shall be subject to a final court or other binding order or ruling requiring any payments, including apayment of a royalty to a Third Party patent holder in respect of future sales of any IPI-145 Product in a country in theTerritory, then the amount of the MICL Trailing Royalty Payment shall be reduced by fifty percent (50%) of theamount paid by Licensee to such Third Party that is reasonably and appropriately allocable to, as applicable, such IPI-145 Product; provided, however, that in no event will a deduction or deductions under this Section 6.1.3(c) reduce theMICL Trailing Royalty Payment by more than fifty percent (50%).6.1.4Payment Terms. Except as otherwise set forth in this Agreement, all payments by oron behalf of Licensee under this Agreement shall be non-creditable (except pursuant to Section 6.5, the last sentence ofSection 6.1.3(b)(i), or the last sentence of Section 6.1.3(b)(ii))) and non-refundable.6.2Methods of Payment.6.2.1All payments due under this Agreement shall be paid in Dollars, except as expressly setforth in Section 3.1.2(c)(ii). All payments to INFI under this Agreement shall be paid by electronic wire transfer ofimmediately available funds to a bank account in the United States designated in writing by INFI. All payments toINFI pursuant to Section 6.1.1 for a [* * *] shall be due [* * *] days after the end of each [* * *]. With respect to allpayments to INFI pursuant to Sections 6.1.3(b) or 6.1.3(c), Licensee shall deliver such payments to INFI within [* * *]days after the end of each [* * *] during the applicable Royalty Term, reasonably detailed written accountings of NetSales of IPI-145 Products that are subject to payments due to MICL or Purdue, as applicable for such [* * *]. Suchaccountings shall be Confidential Information of Licensee and subject to the confidentiality provisions set forth in theMICL Agreements. Such [* * *] reports shall indicate (i) gross sales and Net Sales (including reasonable detail fordeductions from gross sales to Net Sales) on a country-by-country and IPI-145 Product-by-IPI-145 Product basis, and(ii) the calculation of the MICL Royalty, the Purdue Royalty, the MICL Trailing Royalty Payment from such grosssales and Net Sales; provided, however, such reports shall include (i) the actual information specified in this Section6.2.1 for all [* * *] other than the [* * *] and (ii) a good faith estimate of the information specified in this Section 6.2.1for the [* * *], which estimates shall be promptly reconciled with the actual information for such month in the next [* **]. On the date on which Licensee is required to have delivered such accounting to INFI, Licensee shall also deliverthe payments due for such [* * *]; provided, however, that such payments will be based on (a) the actual informationspecified in this Section 6.2.1 for all weeks in such [* * *] other than the last month of such [* * *] and (b) a good faithestimate of the information specified in this Section 6.2.1 for the last month of such [* * *], which estimates shall bepromptly reconciled with the actual information for such month in the next [* * *]. - 33 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.6.2.2For the purposes of calculating any sums due under this Agreement, Licensee shallconvert any amount expressed in a foreign currency into US Dollar equivalents, calculated using the applicablecurrency conversion rate as published in [* * *], (a) for sales, on the last Business Day of the applicable CalendarQuarter for the Calendar Quarter in which the relevant sales were made or (b) for calculations of all other paymentspayable under this Agreement, on the day the payment obligation accrued.6.3Late Payments. Without limiting any other rights or remedies available to INFI hereunder, interestshall be payable by Licensee on any amounts payable to INFI, Purdue or MICL under this Agreement which are notpaid by the due date for payment. All interest shall accrue and be calculated on a daily basis (both before and after anyjudgment) at a rate per annum equal to [* * *] percentage points above the then current “prime rate” in effect publishedin [* * *] (but in no event in excess of the maximum rate permissible under applicable Law), for the period from thedue date for payment until the date of actual payment. 6.4Taxes. 6.4.1All payments due and payable under this Agreement will be made without anydeduction or withholding for or on account of any tax except to the extent otherwise required by applicable Laws. IfLicensee is so required to withhold, Licensee will (a) promptly notify INFI of such requirement; (b) deduct from eachpayment to which such requirement relates and pay to the relevant Governmental Authority the full amount required tobe withheld promptly upon the earlier of (i) determining that such withholding is required or (ii) receiving notice thatsuch amount has been assessed against INFI or any Third Party Grantor; and (c) promptly forward to INFI an officialreceipt (or certified copy) or other documentation reasonably acceptable to INFI evidencing such payment to suchauthorities.6.4.2[* * *]6.5Books and Records; Audit Rights.6.5.1Licensee shall keep, and shall require its Affiliates and the Sublicensees to keep,complete and accurate records of the latest [* * *] years relating to gross sales, Annual Net Sales, and all revenue andexpense data relating to the calculations of any payment due under this Agreement. For the sole purpose of verifyingamounts payable to INFI, MICL or Purdue under Article 6, INFI shall have the right, [* * *], at INFI’s expense(except as set forth below), to retain an independent certified public accountant selected by INFI and reasonablyacceptable to Licensee, to review such records in the location(s) where such records are maintained by Licensee, itsAffiliates and the Sublicensees upon reasonable notice and during regular business hours. Such representatives shallexecute a suitable confidentiality agreement reasonably acceptable to Licensee prior to conducting such audit. Suchrepresentatives shall disclose to each of INFI and Licensee only their conclusions regarding the accuracy of paymentshereunder and of records related thereto. The right to audit any records underlying any royalty report shall extend for[* * *] from the end of the Calendar Year in which the royalty report was delivered. Licensee shall,- 34 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.within [* * *] days after the Parties’ receipt of the audit report, pay INFI the amount of any underpayment revealed bysuch audit together with interest calculated in the manner provided in Section 6.3. If the underpayment is equal to orgreater than [* * *] of the amount that was otherwise due, Licensee shall reimburse INFI’s reasonable Out-of-PocketExpenses of such review. If the audit demonstrates that Licensee has made an overpayment to INFI, Licensee shall beentitled to credit such amount against future payments due to INFI.6.5.2Upon the expiration of the [* * *] years following the end of any Calendar Year, thecalculation of amounts payable under Article 6 with respect to such Calendar Year shall be binding and conclusiveupon the Parties, and the Parties shall be released from any liability or accountability with respect to payments for suchCalendar Year. 6.5.3The Third Party Grantors shall have the same rights of audit and inspection withrespect to Licensee and its Affiliates and Sublicensees as granted by INFI to such Third Party Grantor pursuant to theapplicable INFI Third Party Agreement, provided, however, that any audit conducted by a Third Party Grantor shallconstitute an audit conducted by INFI for purposes of this Section 6.5 and any such audit shall be limited to the scopeset forth in this Section 6.5.6.6Financial Statements Required by Rule 3-05 of Regulation S-X. If Licensee determines in good faiththat it would be required to file with the SEC pursuant to Rule 3-05 of Regulation S-X audited annual financialstatements of the business related to the IPI-145 Product (the “Audited Financial Statements”) and/or unauditedquarterly financial statements of the business related to the IPI-145 Product (the “Unaudited Financial Statements”) forthe periods specified by Rule 3-05 of Regulation S-X (any Audited Financial Statements together with any UnauditedFinancial Statements, the “SEC Financial Statements”), then (X) Licensee will notify INFI of such determination nolater than [* * *] days after the Effective Date and (Y) INFI will deliver to Licensee as soon as reasonably practicable,but in any event no later than [* * *] days after the Effective Date, the SEC Financial Statements. The SEC FinancialStatements will be (a) prepared in accordance with the books and records of the business related to the IPI-145Product, (b) prepared in accordance with Regulation S-X and U.S. GAAP and (c) in the case of the Audited FinancialStatements, accompanied by an opinion (the “Audit Opinion”) of Ernst & Young (the “Independent Auditor”), whichopinion complies with Regulation S-X. INFI will use its commercially reasonable efforts to cause the IndependentAuditor to provide to Licensee the consents requested by Licensee no later than [* * *] Business Days prior to therequired filing date of the SEC Financial Statements to permit the inclusion of the Audit Opinion with respect to theAudited Financial Statements in Licensee’s reports and registration statements filed with the SEC for periods requiredunder applicable Law. Licensee will reimburse INFI for INFI’s costs incurred by INFI supported by reasonabledocumentation for INFI’s activities pursuant to this Section 6.6.6.7Other INFI Financial Deliverables. INFI will deliver to Licensee (a) within [* * *] after the EffectiveDate, a statement of assets acquired and liabilities assumed of the business related to the IPI-145 Product as of theEffective Date and (b) as soon as reasonably practicable, but in any event no later than [* * *] Business Days after theEffective Date, a statement of direct revenues and expenses of the business related to the IPI-145 Product (i) for theyear ended- 35 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.December 31, 2015 and (ii) for the nine (9) months ended September 30, 2016 that includes information by CalendarQuarter for each of the first three (3) Calendar Quarters of fiscal year 2016. The financial information described in thisSection 6.7 will be prepared in accordance with (X) the books and records of the business related to the IPI-145Product and (Y) U.S. GAAP; provided, however, that all such information is unaudited and may be subject tochange.ARTICLE 7OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS7.1Inventorship. For purposes of determining ownership of inventions pursuant to Section 7.2,inventorship for patentable inventions conceived or reduced to practice during the course of the performance ofactivities pursuant to this Agreement shall be determined in accordance with United States patent laws for determininginventorship.7.2Ownership. Subject to the licenses and rights granted to Licensee under this Agreement, INFI shallown the entire right, title and interest in and to any Know-How first made, authored, discovered, conceived or reducedto practice solely by employees, consultants, contractors or subcontractors of INFI, or acquired solely by INFI, anyPatent Rights claiming patentable inventions therein and any other intellectual property rights (other than Patent Rights)covering such Know-How. Licensee shall solely own the entire right, title and interest in and to any Know-How firstmade, authored, discovered, conceived or reduced to practice solely by employees, consultants, contractors orsubcontractors of Licensee or acquired solely by Licensee, any Patent Rights claiming patentable inventions thereinand any other intellectual property rights (other than Patent Rights) covering such Know-How. Subject to the licensesand rights granted under this Agreement, all Know-How first made, authored, discovered, conceived or reduced topractice jointly by (i) employees, consultants, contractors or subcontractors of Licensee or any of its Affiliates and (ii)employees, consultants, contractors or subcontractors of INFI or any of its Affiliates, (“Joint Know-How”), PatentRights claiming patentable inventions therein (“Joint Patent Rights”) and other intellectual property rights (other thanPatent Rights) covering such Know-How, shall be jointly owned by the Parties without any duty to account, and eachParty shall have the right to grant licenses and otherwise exploit the Joint IP, subject to the licenses grantedhereunder. Each Party shall, and shall ensure that its Affiliates and its and its Affiliates’ employees, consultants,contractors, subcontractors and any other agents, execute all documents necessary, and otherwise reasonably cooperatewith the other Party, to effectuate this Section 7.2.7.3Prosecution and Maintenance of Patent Rights.7.3.1Prosecution Patent Rights.(a)Licensee shall have the first right, at its sole expense, to Prosecute andMaintain the INFI Prosecution Patent Rights, the INK Prosecution Patent Rights and the Joint Patent Rights(collectively, the “Prosecution Patent Rights”) using Jones Day, Lando & Anastasi or other legal counsel reasonablyacceptable to INFI. Licensee shall (i) provide INFI and, with respect to the INK Prosecution Patent Rights, INK,copies of all prosecution filings related to the- 36 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Prosecution Patent Rights sent to or received from patent offices in the Territory, unless otherwise directed by INFI, (ii)provide INFI with a draft of each such filing reasonably in advance of submission, (iii) provide INFI an opportunity toprovide comments on and make requests of Licensee concerning such filings, (iv) consider in good faith any commentsregarding such draft application that INFI may timely provide, (v) keep INFI and, with respect to the INK ProsecutionPatent Rights, INK, regularly and reasonably informed of the status of the Prosecution Patent Rights as may berequested from time to time by INK, and (vi) provide INFI and, with respect to the INK Prosecution Patent Rights,INK, such other information related to Prosecution and Maintenance of the Prosecution Patent Rights in the Territoryas INFI or, with respect to the INK Prosecution Patent Rights, INK, may from time to time reasonably request to allowINFI and, with respect to the INK Prosecution Patent Rights, INK, to track Prosecution and Maintenance of suchPatent Rights.(b)Licensee shall bear one hundred percent (100%) of all Patent Expensesduring the Term with respect to the Prosecution and Maintenance of the Prosecution Patent Rights in accordance withSection 7.3.1(a). (c)If INK objects to Licensee’s Prosecution and Maintenance of any of the INK Prosecution Patent Rights, then, upon Licensee’s request, (i) INFI shall Prosecute and Maintain such PatentRight, in accordance with Licensee’s reasonable direction with respect thereto using mutually acceptable counselwhich, as of the Effective Date includes Jones Day and Lando & Anastasi; and (ii) INFI shall resolve such disputewith INK in accordance with the INK Agreement. Licensee shall pay, or reimburse INFI, for all reasonable anddocumented Internal Personnel Expenses and Out-of-Pocket Expenses associated with such Prosecution andMaintenance and such dispute resolution. (d)In the event Licensee decides to cease to Prosecute or Maintain anyclaim of a Prosecution Patent Right in a country of the Territory, decides to not otherwise Prosecute and Maintain anyProsecution Patent Right in a country of the Territory, or does not wish to bear the costs or expenses with respect to theProsecution or Maintenance of any Prosecution Patent Right in a country of the Territory:(i)Licensee shall give INFI prior written notice sufficientlyin advance thereof, but not less than [* * *] days before any action would be required to be taken by INFI to avoid aloss of rights in such Prosecution Patent Right, in order to allow INFI (at its discretion) to assume such Prosecution orMaintenance without a loss of rights in such Prosecution Patent Right. If INFI determines not to assume suchProsecution or Maintenance with respect to such INK Prosecution Patent Right, then INFI shall give written notice toINK in sufficient time (but no less than [* * *] days before any applicable statutory bar) to permit INK to Prosecuteand Maintain such INK Prosecution Patent Right;(ii)INFI or, with respect to the INK Prosecution PatentRights, INK (to the extent set forth in the INK Agreement), shall thereafter have the sole right to Prosecute andMaintain such Prosecution Patent Right, in INFI’s name or, with respect to the INK- 37 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Prosecution Patent Rights, INK’s name, in such country. Licensee shall use reasonable efforts to make available toINFI and, with respect to the INK Prosecution Patent Rights, INK, Licensee’s employees, authorized attorneys, agentsor representatives as are reasonably necessary to assist INFI and, with respect to the INK Prosecution Patent Rights,INK, in Prosecuting and Maintaining, such Prosecution Patent Rights. Licensee shall sign, or have signed, all legaldocuments necessary to Prosecute and Maintain such patent applications or patents in respect of such Patent Rights;and(iii)such Patent Right shall no longer be included in the INFIProsecution Patent Rights or INK Prosecution Patent Rights, as applicable, and all licenses and rights granted toLicensee hereunder with respect to such Patent Right, including the licenses granted under Section 2.1, shallautomatically terminate.7.3.2Non-Prosecution Patent Rights. Licensee shall have no right to Prosecute or Maintain,and Licensee shall not be required to bear any costs associated with the Prosecution and Maintenance of, any of theINFI Other Patent Rights or any of the INK Non-Prosecution Patent Rights.7.4Third Party Infringement. Each Party will promptly notify the other Party and, with respect to theINK Prosecution Patent Rights, the notifying Party will promptly notify INK (in accordance with the notice provisionin the INK Agreement), in writing of (a) any actual or threatened infringement or misappropriation by a Third Party ofany Prosecution Patent Right of which it becomes aware, as a result of such Third Party’s Research, Development,Manufacture, use, sale, offer for sale, other Commercialization or importation of the IPI-145 Compound or any IPI-145Product in the Territory, including any certification filed by a Third Party pursuant to 21 U.S.C. §355(b)(2)(A)(iv) or355(j)(2)(A)(vii)(IV) or any notice under comparable U.S. or foreign law (a “Paragraph IV Certification”) whichreferences the foregoing; or (b) an actual or threatened challenge to any Prosecution Patent Right by a Third Party (anysuch infringement or challenge in clause (a) or (b), a “Third Party Infringement”). The Parties will consult with eachother through each Party’s patent attorneys (and, with respect to any INK Prosecution Patent, INK, through its patentattorney, may consult with respect to any INK Prosecution Patent) to determine the response to any such infringementor challenge by a Third Party of any Prosecution Patent Right, including any Paragraph IV Certification whichreferences the foregoing.7.5Enforcement Rights.7.5.1With respect to the INFI Prosecution Patent Rights and the INK Prosecution PatentRights, Licensee shall have the first right, but not the obligation, to initiate a proceeding or take other appropriate actionin connection with the Third Party Infringement to the extent that such Third Party Infringement involves the Research, Development, Manufacture, use or Commercialization of the IPI-145 Compound or any IPI-145 Product inthe Territory. Notwithstanding the foregoing sentence, Licensee shall not initiate any lawsuit or other enforcementaction asserting any such Patent Rights without first consulting with INFI and giving good faith consideration to anyreasonable objection from INFI regarding Licensee’s proposed course of action. INFI shall have the right, at INFI’ssole expense, to be represented in any such- 38 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.action by counsel of its own choice; provided, however, that Licensee shall bear all of INFI’s costs and expenses withrespect to any activities undertaken by INFI at Licensee’s request. With respect to any INK Prosecution Patent, INKshall have the right to be represented in any such action by counsel of its own choice, at INK’s sole expense. Licenseeshall not, through any court action or proceeding, any settlement arrangement or any proceeding, filing orcommunication with any patent office, admit the invalidity of, or otherwise impair INFI’s or INK’s rights in, anyDuvelisib Patent Right without the prior written consent of INFI and, with respect to the INK Prosecution PatentRights or INK Non-Prosecution Patent Rights, INK. Any recoveries resulting from such an action brought byLicensee in accordance with this Section 7.5.1 shall be applied as follows:(a)First, to reimburse (i) INK’s out-of-pocket expenses and (ii) each Partyfor all Out-of-Pocket Expenses in connection with such proceeding (on a pro rata basis, based on each Party’srespective litigation costs, to the extent the recovery was less than all such litigation costs);(b)Second, any portion of the remainder that is attributable to lost profitswith respect to sales of the IPI-145 Product outside the Field shall be subject to a royalty payment to INK inaccordance with the INK Agreement equal to the amount that would be due if such amount were Net Sales (as definedin the INK Agreement) under the INK Agreement, and Licensee shall promptly pay such royalty payment to INK; and(c)Third, the remainder shall be retained by Licensee, shall be consideredNet Sales under this Agreement and shall be subject to the royalty obligations under this Agreement.7.5.2If Licensee decides not to, or fails to, initiate proceedings or take other appropriateaction pursuant to Section 7.5.1 with respect to a Third Party Infringement of any such Prosecution Patent Right withinthe shorter of (a) [* * *] days following Licensee’s becoming aware of the alleged infringement (which shall be [* * *]days with respect to the INK Prosecution Patent Rights) or (b) solely with respect to a Paragraph IV Certification, [* **] days following the earlier of Licensee’s or INFI’s receipt of notice thereof (which shall be [* * *] days with respectto the INK Prosecution Patent Rights), then (y) Licensee shall promptly notify INFI thereof and (z) INFI or, withrespect to the INK Prosecution Patent Rights, INK (to the extent set forth in the INK Agreement), shall have the right,but not the obligation, to bring and control any such action at its own expense and by counsel of its ownchoice. Licensee shall notify INFI and, with respect to the INK Prosecution Patent Rights, Licensee shall notify INK(in accordance with the notice provision in the INK Agreement), as soon as Licensee is aware that it will not initiatesuch proceedings or take such action within such time periods. Any recoveries resulting from such an action broughtby INFI or INK in accordance with this Section 7.5.2 will be retained by INFI or, with respect to the INK ProsecutionPatent Rights, INK (to the extent set forth in the INK Agreement).7.6Conduct of Certain Actions; Costs. The Party initiating legal action under Section 7.5 with respect toProsecution Patent Rights (the “Initiating Party”) shall have the sole and- 39 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.exclusive right to select counsel for any suit initiated by it. At the request of the Initiating Party or, with respect to theINK Prosecution Patent Rights, INK (if it is then controlling the relevant action), the other Party shall providereasonable assistance and cooperation in connection therewith. If Licensee is the Initiating Party, Licensee shall [* **]. The other Party shall reasonably cooperate in the prosecution of such suit as may be reasonably requested by theInitiating Party or, with respect to the INK Prosecution Patent Rights, INK (if it is then controlling the relevant action),including by agreeing to be joined to such legal action to the extent required in order to maintain such legal action;provided, that if Licensee is the Initiating Party, Licensee shall [* * *]. The other Party and INK (where applicablepursuant to Section 10.3(b) of the INK Agreement) shall have the right to participate and be represented in any suchlegal action (in cases where such other Party has standing) by its own counsel at its own cost.7.7Defense of Actions. In the event that a declaratory judgment or similar action alleging the invalidity ornon-infringement, or any request for, or filing or declaration of, any interference, opposition, reissue or reexamination,of any Prosecution Patent Right is initiated by any Third Party, each Party will promptly notify the other and the rightsand responsibilities for defending against any such action shall be determined in the same manner as Prosecution andMaintenance of the relevant Prosecution Patent Right pursuant to Section 7.4. INK shall have the sole right to defendagainst any declaratory judgment or similar action alleging the invalidity or non-infringement, or any request for, orfiling or declaration of, any interference, opposition, reissue or reexamination, of any INK Non-Prosecution PatentRight.7.8Trademarks.7.8.1Licensee shall have the right to brand IPI-145 Products using Licensee relatedtrademarks and trade names and any other trademarks and trade names it determines appropriate for the IPI-145Product, which may vary by country or within a country. Licensee and, if applicable, certain Licensee Affiliates orSublicensees, shall own all right, title and interest in and to such marks and all goodwill associated therewith andLicensee or such Affiliates or Sublicensees may file, seek registration and maintain such marks in the countries andregions they determine reasonably necessary, in each case solely to the extent such marks are not Product Marks or theINK Mark licensed to Licensee pursuant to this Agreement. Notwithstanding the foregoing, unless INK waives itsrelevant rights under the INK Agreement, (a) with respect to any IPI-145 Product sold in the United States after receiptof Marketing Authorization for such IPI-145 Product in the United States, Licensee shall and shall ensure that itsapplicable Affiliates and the applicable Sublicensees, to the extent permitted under applicable Law and if reasonablypracticable, include the INK name or logo (“INK Mark”) on the commercial packaging for such IPI-145 Product, anda disclosure that such IPI-145 Product is licensed from INK, and (b) Licensee and its applicable Affiliates or theapplicable Sublicensees may otherwise include the INK Mark on the IPI-145 Product or any packaging, labels,containers, advertisements and other materials related thereto; provided, however, that any use of the INK Mark shallbe in compliance with INK’s then-current reasonable trademark guidelines provided to Licensee (whether by INFI orby INK).- 40 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.7.8.2Subject to the terms and conditions of this Agreement, INFI hereby grants Licensee anon-exclusive, sublicenseable, royalty-free, transferrable (in accordance with Section 12.5) right to use the INK Markin connection with the foregoing.7.8.3INK or an Affiliate of INK shall retain the ownership of the entire right, title andinterest in and to the INK Mark, and all goodwill associated with or attached to the INK Mark arising out of the usethereof by Licensee, its Affiliates and the Sublicensees shall inure to the benefit of INK. Licensee shall not, and shallensure that its Affiliates and the Sublicensees shall not, contest, oppose or challenge INK’s ownership of the INKMark. Licensee shall not, and shall ensure that its Affiliates and the Sublicensees shall not, at any time do or suffer tobe done any act or thing that will in any way impair INK’s ownership of or rights in and to the INK Mark or anyregistration thereof or that may depreciate the value of the INK Mark or the reputation of INK.7.9Drug Price Competition and Patent Term Restoration Act.7.9.1The Parties shall cooperate with each other in an effort to avoid loss of any ProsecutionPatent Rights which may otherwise be available under the provisions of the Drug Price Competition and Patent TermRestoration Act of 1984 or comparable United States or foreign laws, including by executing any documents as maybe reasonably required. In particular, the Parties shall, at Licensee’s sole expense, cooperate in obtaining patent termrestoration or supplemental protection certificates or their equivalents in any country and region (“Patent TermExtensions”), where applicable to the Prosecution Patent Rights. INFI shall provide all reasonable assistance toLicensee, including permitting Licensee to proceed with applications for such in the name of INFI, if so required.7.9.2After consultation by Licensee with INFI and INK, Licensee shall have the sole rightto determine, if applicable, for which, if any, of the Prosecution Patent Rights the Parties will attempt to seek PatentTerm Extensions for the IPI-145 Product. INFI shall provide reasonable assistance to Licensee, at Licensee’s soleexpense, including by executing any required documents and providing any relevant patent information and otherrelevant information to Licensee, so that Licensee can obtain such extensions and additional protection and inform theFDA or other Regulatory Authority of such intended Patent Term Extension.7.9.3Licensee shall have no right to seek Patent Term Extension for any INK Non-Prosecution Patent Right or INFI Other Patent Right.7.10Orange Book Information. Licensee shall have the sole right, but not the obligation, to select andsubmit to all applicable Governmental Authorities patent information pertaining to each IPI-145 Product pursuant to 21U.S.C. § 355(b)(1)(G) (or any amendment or successor statute thereto), or any similar statutory or regulatoryrequirement in any non-U.S. country or other regulatory jurisdiction.- 41 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.7.11Patent Marking. Licensee shall, and shall ensure that its Affiliates and the Sublicensees, comply withthe patent marking statutes in each country in which a IPI-145 Product is sold by Licensee, its Affiliates or theSublicensees.ARTICLE 8CONFIDENTIALITY8.1Confidentiality; Exceptions. Except to the extent expressly authorized by this Agreement or otherwiseagreed to by the Parties in writing, the Receiving Party and its Affiliates shall keep confidential, and shall not publishor otherwise disclose or use for any purpose other than as provided for in this Agreement, any Confidential Informationof the Disclosing Party or any of its Affiliates, except to the extent that it can be established by the Receiving Party thatsuch Confidential Information:8.1.1was in the lawful knowledge and possession of the Receiving Party or any of itsAffiliates prior to the time it was disclosed to the Receiving Party or any of its Affiliates by the Disclosing Party or anyof its Affiliates;8.1.2was developed by the Receiving Party or any of its Affiliates without the aid, use, oraccess of or to Confidential Information of the Disclosing Party or any of its Affiliates, as evidenced by written recordskept in the ordinary course of business or other documentary proof of actual use by the Receiving Party or any of itsAffiliates;8.1.3was generally available to the public or otherwise part of the public domain at the timeof its disclosure to the Receiving Party or any of its Affiliates by the Disclosing Party or any of its Affiliates;8.1.4became generally available to the public or otherwise part of the public domain after itsdisclosure and other than through any act or omission of the Receiving Party or any of its Representatives in breach ofthis Agreement; or8.1.5was disclosed to the Receiving Party or any of its Affiliates, other than under anobligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party or any of its Affiliates notto disclose such information to others.8.2Authorized Disclosure. Except as expressly provided otherwise in this Agreement, a Receiving Partyor any of its Affiliates may use and disclose Confidential Information of the Disclosing Party or any of its Affiliates asfollows:8.2.1to its Affiliates, its Sublicensees (solely with respect to Licensee), and its and theirrespective employees, consultants, contractors, subcontractors, agents, legal advisors and financial advisors (all theforegoing, collectively, “Representatives”) who need to know such Confidential Information for purposes of theReceiving Party performing its obligations or exercising its rights under this Agreement, each of which Representativesshall, prior to such- 42 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.disclosure, be subject to written obligations, or professional ethical obligations, substantially similar to those in theAgreement, and the Receiving Party shall remain responsible for any failure by its Representatives to treat suchConfidential Information as required under this ARTICLE 8;8.2.2except as set forth in Section 8.2.1, in connection with the performance of itsobligations or exercise of rights granted or reserved in this Agreement, provided, that such Confidential Information isdisclosed under appropriate confidentiality provisions substantially similar to those in this Agreement and theReceiving Party shall remain responsible for any failure by any such recipient to treat such Confidential Information asrequired under this ARTICLE 8;8.2.3to the extent such disclosure is reasonably necessary in Prosecution and Maintenanceof Patent Rights in a manner not inconsistent with this Agreement, prosecuting or defending litigation, complying withapplicable Law (including the rules and regulations of any stock exchange or NASDAQ), preparing and submittingfilings to Regulatory Authorities consistent with this Agreement or is otherwise required by Law; except that if theReceiving Party or any of its Affiliates is required by Law to make any such disclosure of a Disclosing Party’s (or anyof its Affiliates’) Confidential Information (other than a disclosure to a Regulatory Authority in a filing required byLaw) the Receiving Party will, to the extent practicable, give reasonable advance notice to the Disclosing Party of suchdisclosure requirement and shall furnish only that portion of the Disclosing Party’s (or its Affiliate’s) ConfidentialInformation that the Receiving Party or its Affiliate is legally required to furnish;8.2.4by INFI to any Third Party Grantor in order to exercise INFI’s rights or comply withINFI’s obligations under the INFI Third Party Agreement, and Licensee agrees and acknowledges that such ThirdParties shall not be bound to any confidentiality or non-use information with respect to Licensee’s ConfidentialInformation other than as set forth in the relevant INFI Third Party Agreement;8.2.5by INFI to any counterparty to any INFI Product Related Contract to the extentreasonably necessary to comply with INFI’s obligations under this Agreement with respect to such INFI ProductRelated Contract, and Licensee agrees and acknowledges that such Third Parties shall not be bound to anyconfidentiality or non-use information with respect to Licensee’s Confidential Information other than as set forth in therelevant INFI Product Related Contract;8.2.6except as set forth in Section 8.2.1 or Section 8.2.4, in communications with existing orprospective acquirers, merger partners, investors, financing sources, advisors, licensees, sublicensees or collaborators orothers on a need to know basis, in each case under appropriate confidentiality provisions substantially equivalent tothose of this Agreement, and the Receiving Party shall remain responsible for any failure by any of the foregoing totreat such Confidential Information as required under this ARTICLE 8; or8.2.7to the extent agreed to in writing by the Disclosing Party.8.3Press Release; Disclosure of Agreement.- 43 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.8.3.1Neither Party shall issue any press release or make other disclosures regarding thisAgreement or the Parties’ activities hereunder, or any results or data arising hereunder, except (a) that either Party mayissue a press release agreed to in writing by the other Party, such agreement not to be unreasonably withheld,conditioned or delayed; (b) with the other Party’s prior written consent; (c) in accordance with Section 8.5; or (d) forany disclosure that is reasonably necessary to comply with applicable securities exchange listing requirements or otherapplicable Laws. Notwithstanding the foregoing, to the extent information regarding this Agreement has already beenpublicly disclosed, either Party may subsequently disclose the same information to the public without the consent of theother Party. Each Party shall be permitted to disclose the terms of this Agreement, in each case subject to Section 8.2.6and under appropriate confidentiality provisions substantially equivalent to those of this Agreement, to any actual orpotential acquirers, merger partners, licensees, sublicensees, licensors, investors, financing sources and professionaladvisors on a need to know basis.8.3.2Each Party shall, if practicable, give the other Party a reasonable opportunity to reviewapplications for confidential treatment of this Agreement filed with the United States Securities and ExchangeCommission (or any stock exchange, including NASDAQ, or any similar regulatory agency in any country other thanthe United States) prior to submission of such filings, and shall give due consideration to any reasonable comments bythe non-filing Party relating to such filing.8.4Remedies. In the event a Party breaches any of the confidentiality or non-use obligations set forth inthis ARTICLE 8, the other Party shall be entitled to seek, in addition to any other right or remedy it may have, at lawor in equity, a temporary injunction, without the posting of any bond or other security, enjoining or restraining thebreaching Party from any violation or threatened violation of this ARTICLE 8.8.5Publications. Licensee may publish the scientific results of activities undertaken by either Party, any ofits Affiliates or any Sublicensee (or, with respect to INFI, any licensee or sublicensee) with respect to the Research,Development, Manufacture and Commercialization of the IPI-145 Compound or IPI-145 Product. Except to the extentrequired by applicable Law, INFI shall not publish scientific or other results of activities undertaken by INFI withrespect to the Research, Development, Manufacture and Commercialization of the IPI-145 Compound or the IPI-145Product without the prior written consent of Licensee. 8.6Existing Third Party Agreements. The provisions of this ARTICLE 8 are subject to the terms of eachapplicable INFI Third Party Agreement or INFI Product Related Contract and shall be interpreted in a manner that isconsistent with the rights of the relevant Third Party under the relevant INFI Third Party Agreement or INFI ProductRelated Contract. Notwithstanding anything to the contrary in this ARTICLE 8, Licensee shall comply with allapplicable restrictions in the relevant INFI Third Party Agreements with respect to Licensee’s publication or disclosureof the results of any of the activities conducted by Licensee under this Agreement.- 44 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.8.7Survival. The confidentiality and non-use obligations set forth in this ARTICLE 8 shall survive for thelonger of (a) [* * *] years after the Term or (b) with respect to any Confidential Information subject to any obligationsto the relevant Third Party under any INFI Third Party Agreement or INFI Product Related Contract, such longerperiod as may be required under such agreement.ARTICLE 9REPRESENTATIONS AND WARRANTIES9.1Representations and Warranties of Both Parties. Each Party hereby represents and warrants to theother Party, as of the Effective Date, that:9.1.1such Party is duly organized, validly existing and in good standing under the Laws ofthe jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carryout the provisions hereof;9.1.2such Party has taken all necessary action on its part to authorize the execution anddelivery of this Agreement and the performance of its obligations hereunder;9.1.3this Agreement has been duly executed and delivered on behalf of such Party, andconstitutes a legal, valid, binding obligation, enforceable against it in accordance with the terms hereof;9.1.4the execution, delivery and performance of this Agreement by such Party do notconflict with any agreement or any provision thereof, or any instrument or understanding, oral or written, to which it isa party or by which it is bound, nor violate any Law of any Governmental Authority having jurisdiction over suchParty;9.1.5no government authorization, consent, approval, license, exemption of or filing orregistration with any court or governmental department, commission, board, bureau, agency or instrumentality,domestic or foreign, under any applicable Laws currently in effect, is or will be necessary for, or in connection with,the transaction contemplated by this Agreement, or for the performance by it of its obligations under this Agreement,except as necessary to conduct clinical studies, to transfer the INDs and other Regulatory Documentation inaccordance with Section 3.2 or to seek or obtain Regulatory Approvals; and9.1.6neither it nor any of its or its Affiliates’ employees or agents performing hereunder hasever been, or is currently: (a) debarred under 21 U.S.C. § 335a; (b) excluded, debarred, suspended, or otherwiseineligible to participate in Federal health care programs or in Federal procurement or non-procurement programs; (c)listed on the FDA’s Disqualified and Restricted Lists for clinical investigators; or (d) convicted of a criminal offensethat falls within the scope of 42 U.S.C. § 1320a-7(a), even if not yet excluded, debarred, suspended, or otherwisedeclared ineligible. If Licensee becomes aware that it or any of its or its Affiliates’ employees or agents performinghereunder is the subject of any investigation or proceeding that could lead to- 45 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.such Person becoming a debarred entity or individual, an excluded entity or individual or a convicted entity orindividual, Licensee shall immediately notify INFI, and INFI shall have the right to immediately terminate thisAgreement.9.2Representations and Warranties of INFI. INFI hereby represents and warrants to Licensee, as of theEffective Date:9.2.1INFI is the sole and exclusive owner of the entire right, title and interest in the INFIProsecution Patent Rights. INFI is the sole and exclusive licensee of the INK Prosecution Patent Rights. INFI is anon-exclusive licensee of the INK Non-Prosecution Patent Rights. With respect to the INFI Prosecution Patent Rightsand the INK Prosecution Patent Rights, such Patent Rights are (i) subsisting and in good standing, and (ii) beingdiligently prosecuted in the respective patent offices in the Territory in accordance with Law, and have been filed andmaintained properly and correctly and all applicable fees have been paid on or before the due date for payment.9.2.2To the Knowledge of INFI’s General Counsel and INFI’s Chief Patent Counsel, allKnow-How being used by INFI to Research, Develop, Manufacture and Commercialize the IPI-145 Compound andIPI-145 Products as of the Effective Date (a) constitutes Duvelisib Know-How and is being licensed to Licenseehereunder or (b) is generally known to the public.9.2.3To the Knowledge of INFI’s Vice President, Regulatory Affairs and QualityAssurance, true, complete, and correct copies of: (a) all Regulatory Documentation existing as of the EffectiveDate relating to the IPI-145 Product in the Field, that is to be transferred to Licensee pursuant to the Transition Plan;and (b) all material adverse information with respect to the safety and efficacy of the IPI-145 Compound known toINFI as of the Effective Date, to be transferred to Licensee pursuant to the Transition Plan, in each case ((a) and (b))have been or will be provided or made available to Licensee prior to the end of the Transition Period.9.2.4There are no claims, judgments, or settlements against, or amounts with respect thereto,owed by INFI or any of its Affiliates relating to the INFI Prosecution Patent Rights or INK Prosecution Patent Rightsexisting as of the Effective Date (the “Existing Patents”) or the Duvelisib Know-How. No claim or litigation has beenbrought or, to the Knowledge of INFI’s General Counsel and INFI’s Chief Patent Counsel, threatened by any Person(a) alleging that Existing Patents are invalid or unenforceable, (b) asserting the misuse, or non-infringement of any ofthe Existing Patents, (c) challenging INFI’s Control of the Existing Patents or (d) alleging misappropriation of theDuvelisib Know-How.9.2.5 Except as set forth in the INFI Third Party Agreements, the Existing Patent Rights arefree and clear of any liens, charges, encumbrances or, to the Knowledge of INFI’s General Counsel and INFI’s ChiefPatent Counsel, claims of ownership by an Third Party, other than (a) non-exclusive licenses granted by Infinity toThird Parties, which grants are not in conflict with, or do not preclude Licensee from exercising, the licenses granted toLicensee hereunder, or of the nature of material transfer agreements, clinical trial agreements and manufacturing- 46 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.agreements, which will not adversely affect Licensee’s ability to Develop, Manufacture or Commercialize the IPI-145Products in accordance with this Agreement and (b) the rights of the relevant Third Party Grantor and theirlicensors. INFI is entitled to grant the licenses specified in this Agreement.9.2.6No written claim of infringement of the Patent Rights or misappropriation of theKnow-How of any Third Party has been made, or to the Knowledge of INFI’s General Counsel and INFI’s PatentCounsel, threatened, against INFI or any of its Affiliates with respect to the Research, Development, Manufacture orCommercialization of the IPI-145 Compound or IPI-145 Products.9.2.7There are no judgments or settlements against or owed by INFI or, to the Knowledgeof INFI’s General Counsel and INFI’s Patent Counsel, pending litigation against INFI or litigation threatened againstINFI in writing, in each case related to the IPI-145 Product, including any relating to any Regulatory DocumentationControlled by INFI as of the Effective Date.9.2.8Neither INFI nor any of its Affiliates is or has been a party to any agreement with theU.S. federal government or an agency thereof pursuant to which the U.S. federal government or such agency providedfunding for the Development of the IPI-145 Compound or IPI-145 Product, and the inventions claimed or covered bythe Existing Patents are not a “subject invention” as that term is described in 35 U.S.C. Section 201(f).9.2.9 (a) The INFI Third Party Agreements are the only agreements between INFI and anyThird Party pursuant to which INFI has in-licensed any Patent Rights or pursuant to which INFI owes any Third Partyany royalties with respect to IPI-145 Compound or IPI-145 Products; (b) prior to the Effective Date, INFI has providedLicensee with an opportunity to review complete and correct copies of the INFI Third Party Agreements; (c) to theKnowledge of INFI’s General Counsel and INFI’s Patent Counsel, such INFI Third Party Agreements remain in fullforce and effect as of the Effective Date; (d) as of the Effective Date, INFI is in material compliance with the terms ofsuch INFI Third Party Agreements and, to the Knowledge of INFI’s General Counsel and INFI’s Patent Counsel, theThird Party Grantors are in material compliance with the terms of the applicable INFI Third Party Agreements; and(e) INFI has obtained any and all consents required under the INFI Third Party Agreements as may be necessary toperform its obligations under this Agreement. Without limiting this Section 9.2.9, the terms of this Agreement do notmaterially breach or constitute a material default under the terms of any INFI Third Party Agreement.9.2.10To the Knowledge of INFI’s Vice President, Regulatory Affairs and Quality Assurance, INFIand its Affiliates have generated, prepared, maintained, and retained all Regulatory Documentation that are required tobe maintained or retained pursuant to and in material compliance with applicable Law, and have conducted in materialcompliance with applicable Law, including GLP and GCP, (a) all Development of the IPI-145 Compound or the- 47 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.IPI-145 Products in the Field that they have conducted prior to the Effective Date and (b) all Research activities that arematerial to the receipt of Regulatory Approval for the IPI-145 Product. 9.2.11To the Knowledge of INFI’s General Counsel and INFI’s Chief Patent Counsel, no materialbreach of confidentiality has been committed by any Third Party with respect to the Duvelisib Know-How and INFIhas used reasonable measures to protect the confidentiality thereof.9.2.12(a) INFI has obtained from each of its Affiliates, employees and agents, and from the employeesand agents of its Affiliates, who have participated in the Research, Development, Manufacture or Commercialization ofthe IPI-145 Compound or IPI-145 Products, rights to any and all Know-How created by such employees and agentsthat relates to the IPI-145 Compound or IPI-145 Products, such that Licensee shall, by virtue of this Agreement,receive from INFI, without payments beyond those required by ARTICLE 6, the licenses and other rights granted toLicensee hereunder, except with respect to those Persons from whom obtaining such rights is not customary, such asacademic and non-profit Persons; (b) each Person who has or has had any ownership rights in or to any issued ExistingPatents purported to be owned solely by INFI, has assigned and has executed an agreement assigning its entire right,title, and interest in and to such Existing Patent to INFI; and (c) to the Knowledge of INFI’s General Counsel andINFI’s Patent Counsel, no current officer, employee, agent, or consultant of INFI or any of its Affiliates is in violationof any term of any assignment or other agreement, in each case, regarding the protection of Patents Rights or otherintellectual property or proprietary information of INFI or such Affiliate.9.2.13To the Knowledge of INFI’s Vice President, Regulatory Affairs and Quality Assurance, neitherINFI nor any of its Affiliates, nor any of its or their respective officers, employees, or agents has made an untruestatement of material fact or fraudulent statement to the FDA or any other Regulatory Authority with respect to theDevelopment of the IPI-145 Compound or the IPI-145 Products, failed to disclose a material fact required to bedisclosed to the FDA or any other Regulatory Authority with respect to the Development of the IPI-145 Compound orthe IPI-145 Products, or committed an act, made a statement, or failed to make a statement with respect to theDevelopment of the IPI-145 Compound or the IPI-145 Products that could reasonably be expected to provide a basisfor the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and IllegalGratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto or any analogous lawsor policies in the Territory.9.2.14Any shares of Licensee Common Stock acquired by INFI in accordance with the terms of thisAgreement will be acquired for investment for INFI’s own account, not as a nominee or agent, and not with a view tothe resale or distribution of any part thereof, and INFI has no present intention of selling, granting any participation in,or otherwise distributing the same. INFI is aware of the Licensee’s business affairs and financial condition and hasacquired sufficient information about the Licensee to reach an informed and knowledgeable decision to acquire suchshares of Licensee Common Stock. INFI is an accredited investor as defined in Rule 501(a) of Regulation Dpromulgated under the Securities Act.- 48 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.9.3Mutual Covenants. Each Party hereby covenants to the other Party that it shall not, during the Term,grant any right or license to any Third Party relating to any of the intellectual property rights it owns or Controls whichwould conflict with any of the rights or licenses granted or to be granted to the other Party hereunder.9.4Licensee Covenants. Licensee hereby covenants to INFI that:9.4.1Licensee shall comply, and shall ensure that its Affiliates and the Sublicensees comply,with all applicable Laws in connection with their activities under this Agreement and the transactions contemplatedhereby, including GCP, GLP and GMP and ICH guidelines;9.4.2All employees, consultants, contractors and subcontractors of Licensee or its Affiliatesworking under this Agreement are and will be under the obligation to automatically assign all right, title and interest inand to their inventions, discoveries and other Know-How, whether or not patentable, and all Patent Rights and otherintellectual property rights therein, to Licensee or its Affiliate as the sole owner thereof and waive all moral rightstherein;9.4.3Neither Licensee nor any of its Affiliates is subject to any non-compete or otherrestrictions that would impair its ability to Develop, Manufacture or Commercialize the IPI-145 Product in the Field inthe Territory;9.5Disclaimer. Except as otherwise expressly set forth in this Agreement, (a) NEITHER PARTYMAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESSOR IMPLIED, INCLUDING ANY WARRANTY THAT ANY PATENT RIGHTS ARE VALID ORENFORCEABLE, AND (b) EACH PARTY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. Withoutlimiting the generality of the foregoing, except as otherwise set forth in this Agreement, INFI disclaims any warrantieswith regards to: (x) the success of the IPI-145 Compound or IPI-145 Product under this Agreement; (y) the safety orusefulness for any purpose of the technology or materials, including any compounds, it provides or discovers under thisAgreement; and (z) the validity, enforceability, or non-infringement of any intellectual property rights or technology itprovides or licenses to Licensee under this Agreement.ARTICLE 10INDEMNIFICATION; LIMITATION OF LIABILITY; INSURANCE10.1Indemnification by Licensee. Licensee shall defend, indemnify and hold harmless the INFIIndemnitees from and against any and all losses, damages, fees, expenses, settlement amounts or costs (includingreasonable legal expense, attorneys’ fees and witness fees) (“Losses”) relating to or in connection with a Third Partyclaim to the extent arising out of (a) the research, development, manufacture or commercialization of the IPI-145Compound or the IPI-145 Product by Licensee, any Licensee Affiliate, any Sublicensee, INFI (to the extent properlyacting in- 49 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.accordance with Licensee’s express direction) or any of their respective employees, consultants, contractors,subcontractors or agents after the Effective Date, including any actual or alleged death, personal bodily injury ordamage to real or tangible personal property, or other product liability claimed to result from the IPI-145 ProductResearched, Developed, Manufactured or Commercialized by or on behalf of Licensee or any of its Affiliates or anySublicensee, (b) any breach by Licensee of any of its representations, warranties, covenants or obligations under thisAgreement, or (c) any negligent act or omission or willful misconduct of Licensee, any of its Affiliates or anySublicensee, or any of their respective employees, consultants, contractors, subcontractors or agents, in performingLicensee’s obligations or exercising Licensee’s rights under this Agreement; except that the foregoing indemnity shallnot apply with respect to any INFI Indemnitee to the extent that any such Losses (x) are caused by the gross negligenceor willful misconduct of any INFI Indemnitee, or (y) are otherwise subject to an obligation by INFI to indemnify theLicensee Indemnitees under Section 10.2.10.2Indemnification by INFI. INFI shall defend, indemnify and hold harmless the Licensee Indemniteesfrom and against any and all Losses relating to or in connection with a Third Party claim to the extent arising out of (a)the research, development, manufacture or commercialization of the IPI-145 Compound or the IPI-145 Product byINFI, any INFI Affiliate, any sublicensee of INFI (other than Licensee, any of its Affiliates or any Sublicensee) or anyof their respective employees, consultants, contractors, subcontractors or agents prior to the Effective Date, includingany actual or alleged death, personal bodily injury or damage to real or tangible personal property, or other productliability claimed to result from the IPI-145 Product Researched, Developed, Manufactured or Commercialized by or onbehalf of INFI, any INFI Affiliate, any sublicensee of INFI (other than Licensee, any of its Affiliates or anySublicensee), (b) any breach by INFI of its representations, warranties, covenants or obligations under this Agreement,or (c) any negligent act or omission or willful misconduct of INFI or any of its Affiliates, or any of their respectiveemployees, consultants, contractors, subcontractors or agents, in performing INFI’s obligations or exercising INFI’srights under this Agreement; except that that the foregoing indemnity shall not apply with respect to any LicenseeIndemnitee to the extent that any such Losses (x) are caused by the negligence or willful misconduct of any of theLicensee Indemnitees, or (y) are otherwise subject to an obligation by Licensee to indemnify any of the INFIIndemnitees under Section 10.1.10.3Procedure. In the event of a claim by a Third Party against any Person entitled to indemnificationunder this Agreement, the Party claiming indemnification on behalf of such Person (in such capacity, the “IndemnifiedParty”) shall promptly notify the other Party (in such capacity, the “Indemnifying Party”) in writing of the claim (itbeing understood that the failure by the Indemnified Party to give prompt notice of a Third Party claim as provided inthis Section 10.3 shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement exceptand only to the extent that such Indemnifying Party is actually prejudiced as a result of such failure to give promptnotice). Within [* * *] days after delivery of such notification, the Indemnifying Party may, upon written noticethereof to the Indemnified Party, undertake and solely manage and control, at its sole expense and with counselreasonably satisfactory to the- 50 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Indemnified Party, the defense of the claim. If the Indemnifying Party does not undertake such defense, theIndemnified Party may control such defense but shall not be entitled to indemnification hereunder if it does not thencontrol such defense. The Party not controlling such defense shall cooperate with the other Party and may, at its optionand expense, participate in such defense; provided, that if the Indemnifying Party assumes control of such defense andthe Indemnified Party in good faith concludes, based on advice from counsel, that the Indemnifying Party and theIndemnified Party (or the relevant INFI Indemnitee or Licensee Indemnitee seeking indemnification) have conflictinginterests with respect to such action, suit, proceeding or claim, the Indemnified Party’s counsel may fully participate insuch defense and the Indemnifying Party shall be responsible for the reasonable fees and expenses of counsel to theindemnified Persons solely in connection therewith. The Party controlling such defense shall keep the other Partyadvised of the status of such action, suit, proceeding or claim and the defense thereof and shall considerrecommendations made by the other Party with respect thereto. Except if the Indemnifying Party did not undertakedefense of the claim or if the Indemnifying Party and the Indemnified Party (or the relevant INFI Indemnitee orLicensee Indemnitee seeking indemnification) have conflicting interests with respect to such action, suit, proceeding orclaim and the Indemnified Party engages separate counsel, as provided above, the Indemnifying Party shall not beliable for any litigation costs or expenses incurred by the Indemnified Party (or the relevant INFI Indemnitee orLicensee Indemnitee seeking indemnification) without the Indemnifying Party’s written consent. The IndemnifiedParty and any Person seeking indemnification under this Agreement shall not settle any such action, suit, proceeding orclaim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, delayedor conditioned. The Indemnifying Party shall not settle, without the prior written consent of the Indemnified Party, anysuch action, suit, proceeding or claim, or consent to any judgment in respect thereof, that (a) does not include acomplete and unconditional release of the Indemnified Party (and the relevant INFI Indemnitees or LicenseeIndemnitees seeking indemnification) from all liability with respect thereto, (b) imposes any liability or obligation onthe Indemnified Party (or any relevant INFI Indemnitee or Licensee Indemnitee seeking indemnification), (c) permitsany injunction, declaratory judgment, other order or other non-monetary relief to be entered, directly or indirectlyagainst the Indemnified Party (or any relevant INFI Indemnitee or Licensee Indemnitee seeking indemnification), or (d)acknowledges fault by the Indemnified Party (or any relevant INFI Indemnitee or Licensee Indemnitee seekingindemnification).10.4Allocation. In the event a claim is based partially on an indemnified claim and partially on a non-indemnified claim or based partially on a claim indemnified by one Party and partially on a claim indemnified by theother Party, any payments in connection with such claims are to be apportioned between the Parties in accordance withthe degree of cause attributable to each Party.10.5EXCLUSION OF CONSEQUENTIAL DAMAGES. EXCEPT WITH RESPECT TO [* * *],NEITHER INFI NOR LICENSEE, NOR ANY OF THEIR RESPECTIVE AFFILIATES, WILL BE LIABLEFOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL,- 51 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.SPECIAL, EXEMPLARY, MULTIPLE OR PUNITIVE DAMAGES, COSTS OR EXPENSES (INCLUDINGLOST PROFITS, LOST REVENUES OR LOST SAVINGS), ARISING OUT OF THIS AGREEMENT ORRELATING TO ANY BREACH OF THIS AGREEMENT, WHETHER LIABILITY IS ASSERTED INCONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT PRODUCT LIABILITY), INDEMNITY ORCONTRIBUTION, AND IRRESPECTIVE OF WHETHER SUCH PARTY OR ANY REPRESENTATIVE OFSUCH PARTY HAS BEEN ADVISED OF, OR OTHERWISE MIGHT HAVE ANTICIPATED THEPOSSIBILITY OF, ANY SUCH LOSS OR DAMAGE. 10.6Insurance. 10.6.1Licensee’s Insurance Requirement. During the Term and thereafter for a period of at least [* **] years after the later of the expiration or termination of this Agreement or the last commercial sale of the IPI-145Product under this Agreement (the “Insurance Period”), Licensee shall maintain on an ongoing basis with a reputable,solvent insurer, comprehensive general liability insurance in the minimum amount of $[* * *] per occurrence and $[* **] annual aggregate combined single limit for bodily injury and property damage liability; clinical trial coverage withlimits and policy terms required by applicable Law in the territories where applicable clinical trials are taking place (andin any event not less than $[* * *]), which coverage shall include clinical trials using inventory or other materialsmanufactured by INFI or at INFI’s direction or otherwise provided to Licensee by INFI; and products liabilityinsurance (including contractual liability coverage on Licensee’s indemnification obligations under this Agreement) inthe amount of at least $[* * *] per occurrence and as an annual aggregate combined single limit for bodily injury andproperty damage liability; provided, however, that, (a) Licensee will not be required to procure or maintain theclinical trial coverage described above until ten days prior to transfer of the INDs for IPI-145 Product from INFI toLicensee pursuant to Section 4.1.1 and (b) commencing not later than [* * *] days prior to the reasonably anticipatedfirst Commercial Sale of the IPI-145 Product by Licensee or any of its Affiliates or any Sublicensee, and thereafterduring the Insurance Period, Licensee shall obtain and maintain on an ongoing basis products liability insurance(including contractual liability coverage on Licensee’s indemnification obligations under this Agreement) in the amountof at least $[* * *] per occurrence and as an annual aggregate combined single limit for bodily injury and propertydamage liability. All of such insurance coverage may be maintained through a self insurance plan that substantiallycomplies with the foregoing limits and requirements and may be satisfied through one or more policies, including anumbrella policy. INFI and INK shall each be named as an additional insured on such policy and Licensee shallprovide INFI with written evidence of such insurance on the Effective Date and at any other times uponrequest. Licensee shall provide INFI with written notice at least [* * *] days prior to the cancellation or non-renewal ofsuch insurance; provided, that the provision of such notice shall not permit Licensee to cancel or not renew suchinsurance contrary to the provisions of this Section 10.6.1.10.6.2INFI’s Insurance Requirement. For a period of at least [* * *] years after the Effective Date,INFI shall maintain on an ongoing basis with a reputable, solvent insurer,- 52 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.comprehensive general liability insurance in the minimum amount of $[* * *] per occurrence and $[* * *] annualaggregate combined single limit for bodily injury and property damage liability; and products liability insurance(including contractual liability coverage on INFI’s indemnification obligations under this Agreement) in the amount ofat least $[* * *] per occurrence and as an annual aggregate combined single limit for bodily injury and propertydamage liability. All of such insurance coverage may be maintained through a self insurance plan that substantiallycomplies with the foregoing limits and requirements and may be satisfied through one or more policies, including anumbrella policy. Licensee shall be named as an additional insured on such policy and INFI shall provide Licenseewith written evidence of such insurance on the Effective Date and at any other times upon request. INFI shall provideLicensee with written notice at least [* * *] days prior to the cancellation or non-renewal of such insurance; provided, that such notice shall not permit INFI to cancel or not renew such insurance contrary to the provisions of this Section10.6.2.10.6.3Additional INFI Insurance Requirement. From the Effective Date until the date that all of theINDs for the IPI-145 Compound and IPI-145 Product have transferred to Licensee, INFI shall maintain on an ongoingbasis with a reputable, solvent insurer, comprehensive general liability insurance, product liability insurance andclinical trial insurance covering the DUO clinical trial consistent with the amount and coverage INFI had prior to theEffective Date. Licensee shall reimburse INFI the premiums of such insurance.ARTICLE 11TERM AND TERMINATION11.1Term; Expiration. This Agreement shall become effective as of the Effective Date, and, shall continuein full force and effect until the Parties have no further obligations to each other hereunder, unless and until earlierterminated as provided herein (the “Term”). The Parties acknowledge and agree that this Agreement cannot beterminated except as expressly set forth herein.11.2Termination for Cause. Either Party (the “Non-Breaching Party”) may, without prejudice to any otherremedies available to it at law or in equity, terminate this Agreement if the other Party (the “Breaching Party”) shallhave materially breached or defaulted in the performance of its obligations hereunder, and such default shall havecontinued for sixty (60) days (or, in the case of a payment breach, thirty (30) days) following the Breaching Party’sreceipt of notice of such breach from the Non-Breaching Party. Any such termination of this Agreement under thisSection 11.2 shall become effective at the end of such sixty (60) day or thirty (30) day (as applicable) cure period,unless the Breaching Party has cured such breach or default prior to the expiration of such cure period. The right ofeither Party to terminate this Agreement as provided in this Section 11.2 shall not be affected in any way by suchParty’s waiver or failure to take action with respect to any previous default. Notwithstanding the foregoing, (a) if suchmaterial breach (other than a payment breach), by its nature, is curable, but is not reasonably curable within the sixty(60) day cure period, then such cure period shall be extended if the Breaching Party provides a written plan for curingsuch breach to the Non-Breaching Party and uses Diligent Efforts to cure- 53 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.such breach in accordance with such written plan; provided, that no such extension shall exceed sixty (60) dayswithout the consent of the Non-Breaching Party; and (2) if the Breaching Party disputes that it has materially breachedthis Agreement, the dispute shall be resolved pursuant to Section 12.1 and Section 12.2, as applicable. If, as a result ofthe application of such dispute resolution procedures, the Breaching Party is determined to be in material breach of thisAgreement (an “Adverse Ruling”), then if the Breaching Party fails to cure such material breach within sixty (60) daysafter such ruling (whether or not such actions are specified by the Adverse Ruling) (or thirty (30) days after such rulingin the case of a payment breach), then the Non-Breaching Party may terminate this Agreement upon written notice tothe Breaching Party as provided in this Section 11.2.11.3Termination for Patent Challenge. If Licensee or any of its Affiliates or any Sublicensee (a)commences or otherwise voluntarily determines to participate in any action or proceeding (including any patentopposition or re-examination proceeding), challenging or denying the validity or enforceability of any INFIProsecution Patent Right, INFI Other Patent Right or INK Prosecution Patent Right or any claim thereof, or (b)actively assists any other Person in bringing or prosecuting any action or proceeding (including any patent oppositionor re-examination proceeding) challenging or denying the validity or enforceability of any INFI Prosecution PatentRight, INFI Other Patent Right or INK Prosecution Patent Right or any claim thereof, then INFI shall have the right toterminate this Agreement upon thirty (30) days written notice to Licensee unless Licensee, its Affiliates andSublicensees have withdrawn such action before the end of the above notice period.11.4Licensee’s Termination for Convenience. At any time during the Term following the earlier of (a)determination whether the DUO clinical trial has or has not met its pre-specified primary endpoint as defined in theDUO clinical trial protocol, as amended, attached as Exhibit H, and (b) a determination by Licensee to discontinuethe DUO clinical trial under Section 3.1.4(c), Licensee shall have the right to terminate this Agreement in its entiretyupon not less than one hundred eighty (180) days prior written notice thereof to INFI.11.5Termination for Insolvency. In the event that either Party (a) files for protection under bankruptcy orinsolvency laws, (b) makes an assignment for the benefit of creditors, (c) appoints or suffers appointment of a receiveror trustee over substantially all of its property that is not discharged within ninety (90) days after such filing,(d) proposes a written agreement of composition or extension of its debts, (e) proposes or is a party to any dissolutionor liquidation, (f) files a petition under any bankruptcy or insolvency act or has any such petition filed against that is notdischarged within sixty (60) days of the filing thereof, or (g) admits in writing its inability generally to meet itsobligations as they fall due in the general course, then the other Party may terminate this Agreement in its entiretyeffective immediately upon written notice to such Party.11.6Effect of Termination by INFI Pursuant to Section 11.2, 11.3 or 11.5 or Licensee pursuant to Section11.4. Upon INFI’s termination of this Agreement pursuant to Section 11.2, 11.3 or 11.5 or Licensee’s termination ofthis Agreement pursuant to Section 11.4, all rights and- 54 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.licenses granted by INFI to Licensee hereunder shall terminate and Licensee shall not have any rights to use, orexercise any rights under, the Duvelisib IP. If, within thirty (30) days following the effective date of such termination, Licensee receives from INFI a written waiver of any and all claims for damages that INFI or any of its Affiliates mayhave against Licensee, its Affiliates or its Sublicensees arising from or relating to this Agreement (except, to the extentthat such termination results from a Headlicense Termination Event, such waiver will not be required to waive anydirect damages INFI suffers as a result of such Headlicense Termination Event, which may include (i) any paymentsINFI is required to make to INK resulting from termination of the INK Agreement, (ii) any reasonable costs associatedwith INFI’s obtaining a replacement for the INK Agreement, or (iii) the difference between the economic terms of suchnew agreement with INK and the economic terms of the INK Agreement (provided that INFI uses commerciallyreasonable efforts to mitigate any such difference), then at Licensee’s sole cost:11.6.1INFI, within thirty (30) days after the date of such notice or waiver, shall promptly prepare, withLicensee’s reasonable cooperation, and the Parties shall negotiate, a termination and wind-down plan that will include,at a minimum, a plan for accomplishing the activities described in this Section 11.6. 11.6.2Licensee shall, at INFI’s request, promptly provide to INFI a fair and accurate detailed writtendescription of the status of the Development, Manufacture and Commercialization of the IPI-145 Compound and theIPI-145 Product in the Territory as of the effective date of the termination;11.6.3To the extent requested by INFI, Licensee shall, at its own expense, promptly transfer andassign to INFI all of Licensee’s, each of its Affiliates’ and each Sublicensee’s rights in any INDs, MarketingAuthorizations and Regulatory Documentation necessary or useful for the Research (including to perform medicinalchemistry), Development, Manufacture or Commercialization of the IPI-145 Compound or IPI-145 Product in theTerritory; except that Licensee may retain a single copy of such items for its records, and such RegulatoryDocumentation shall become the Confidential Information of INFI (with INFI considered the Disclosing Party andLicensee considered the Receiving Party), and Licensee may not rely on the exceptions enumerated in Sections 8.1.1,8.1.2 or 8.1.5 with respect to its obligations regarding the confidentiality and non-use of such Confidential Informationunder this Agreement;11.6.4To the extent requested by INFI, Licensee shall, at its own expense, promptly transfer andassign to INFI all of Licensee’s, each of its Affiliates’ and each Sublicensee’s rights to other technical and otherinformation or materials that are necessary or useful for the Research (including to perform medicinal chemistry),Development, Manufacture or Commercialization of the IPI-145 Compound or IPI-145 Product in the Territory and allpromotional materials, customer data, competitive intelligence data, market research and other materials, information ordata related to the marketing, promotion or sale of the IPI-145 Compound or IPI-145 Product in the Territory in itspossession or control as of the effective date of such termination; except that Licensee may retain a single copy of suchitems for its records, and such technical and other information or materials shall become the Confidential Information ofINFI- 55 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.(with INFI considered the Disclosing Party and Licensee considered the Receiving Party), and Licensee may not relyon the exceptions enumerated in Sections 8.1.1, 8.1.2 or 8.1.5 with respect to its obligations regarding theconfidentiality and non-use of such Confidential Information under this Agreement;11.6.5Within thirty (30) days after the effective date of expiration or termination of this Agreement, theReceiving Party shall, and shall cause its Affiliates to, (a) destroy all tangible items solely comprising, bearing orcontaining any Confidential Information of the Disclosing Party or any of its Affiliates that are in the Receiving Party’sor its Affiliates’ possession or control, and provide written certification of such destruction, or (b) ship such tangibleitems of the Disclosing Party’s (or any of its Affiliates’) Confidential Information to the Disclosing Party, as theDisclosing Party may direct, at the Receiving Party’s expense; provided, that in any event, (x) each Party may retainone copy of the Confidential Information of the other Party or any of its Affiliates to the extent necessary to perform itsobligations that survive expiration or termination of this Agreement; (y) the Receiving Party may retain one copy ofsuch Confidential Information of the Disclosing Party or any of its Affiliates for its legal archives; and (z) INFI mayretain Licensee’s (or any of its Affiliates’) Confidential Information to the extent necessary for INFI to exercise itsrights that survive expiration or termination of this Agreement. Any Confidential Information that is subject to theexceptions enumerated in Sections 8.1.1, 8.1.2, 8.1.3, 8.1.4 or 8.1.5 shall not be subject to the obligations imposed onthe Receiving Party pursuant to clause (a) or (b) of this Section 11.6.5;11.6.6At INFI’s request, Licensee shall, at its own expense, promptly transfer and assign to INFI all ofLicensee’s, each of its Affiliates’ and each Sublicensee’s rights, title and interests in and to the IPI-145 Product-specifictrademark(s) (for the avoidance of doubt, not including any Licensee housemarks) used for the IPI-145 Product in theTerritory, including the Product Mark, and all goodwill therein;11.6.7Promptly upon request by INFI, but in no event commencing later than [* * *] days after theeffective date of termination and in no event lasting longer than [* * *] days following the effective date of termination,Licensee shall provide such assistance as may be reasonably necessary or useful for INFI to commence or continueDeveloping, Manufacturing or Commercializing the IPI-145 Compound or IPI-145 Product in the Territory, to theextent Licensee, any of its Affiliates or any Sublicensee is then performing or having performed such activities,including transferring (by novation) or amending as appropriate and where permitted by applicable contractualrestriction, upon request of INFI, any agreements or arrangements with Third Party vendors to Develop, Manufacture,distribute, sell or otherwise Commercialize the IPI-145 Compound or IPI-145 Product in the Territory. To the extentthat any such contract is not assignable to INFI, Licensee shall reasonably cooperate with INFI to arrange to continueto provide such services for a reasonable time after termination;11.6.8If there are any clinical studies being conducted by or under the authority of Licensee or any ofits Affiliates or any Sublicensee at the time of notice of termination, Licensee shall, as INFI may request, (a) atLicensee’s expense, promptly transition to INFI or its designee- 56 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.some or all of such on-going clinical studies and the activities related to or supporting such clinical studies, (b) atINFI’s expense, continue to conduct such on-going clinical studies for a period requested by INFI up to a maximum of[* * *] months after the effective date of such termination, or (c) at Licensee’s expense, terminate such on-goingclinical studies in a manner consistent with applicable Law; provided, however, that in the event that INFI, Licensee,an institutional review board or independent safety board determines that an on-going clinical study being run byLicensee or any of its Affiliates or any Sublicensee would pose an unacceptable safety risk for subjects or patientsparticipating in such on-going clinical study, Licensee shall not be obligated to continue such clinical study andLicensee shall provide INFI with a full explanation of the safety issue concerns raised by such institutional reviewboard or independent safety board and, if requested by INFI, reasonable documentation thereof; and11.6.9At INFI’s request, Licensee shall provide INFI written notice of the quantity of the IPI-145Compound or IPI-145 Product that Licensee or any of its Affiliates has in inventory in the Territory and permit INFI, atINFI’s option, to take ownership and control of all or any part of such inventory.Notwithstanding any provision of this Agreement to the contrary, Licensee shall have no obligations under Sections11.6.1 through 11.6.9 unless and until INFI executes the waiver of damages described in Section 11.6 and deliverssuch executed waiver of damages to Licensee.11.7Effect of Termination by Licensee Pursuant to Section 11.2 or 11.5. Upon Licensee’s termination ofthis Agreement pursuant to Sections 11.2 or 11.5, all rights and licenses granted by INFI to Licensee hereunder shallterminate and Licensee shall not have any rights to use, or exercise any rights under, the Duvelisib IP and all rights andlicense granted by Licensee to INFI under Section 2.3 shall terminate (except as otherwise set forth in Section 6.1.2)and INFI shall not have any rights to use, or exercise any rights under, the Licensee IP. At INFI’s sole cost andrequest, the Parties shall perform the following actions and in such an event, INFI shall pay to Licensee a royalty of [** *] on Net Sales (applied to INFI in the same manner as applied to Licensee): 11.7.1To the extent requested by INFI, Licensee shall, at INFI’s own expense, promptly transfer andassign to INFI all of Licensee’s, each of its Affiliates’ and each Sublicensee’s rights in any INDs, MarketingAuthorizations and Regulatory Documentation necessary or useful for the Research (including to perform medicinalchemistry), Development, Manufacture or Commercialization of the IPI-145 Compound or IPI-145 Product in theTerritory; except that Licensee may retain a single copy of such items for its records, and such RegulatoryDocumentation shall become the Confidential Information of INFI (with INFI considered the Disclosing Party andLicensee considered the Receiving Party), and Licensee may not rely on the exceptions enumerated in Sections 8.1.1,8.1.2 or 8.1.5 with respect to its obligations regarding the confidentiality and non-use of such Confidential Informationunder this Agreement;11.7.2At INFI’s request, Licensee shall, at INFI’s expense, promptly transfer and assign to INFI all ofLicensee’s, each of its Affiliates’ and each Sublicensee’s rights, title and- 57 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.interests in and to the IPI-145 Product-specific trademark(s) (for the avoidance of doubt, not including any Licenseehousemarks) used for the IPI-145 Product in the Territory, including the Product Mark, and all goodwill therein;11.7.3If there are any clinical studies being conducted by or under the authority of Licensee or any ofits Affiliates or any Sublicensee at the time of notice of termination, Licensee shall, as INFI may request, (a) at INFI’sexpense (including the reimbursement of Licensee’s reasonable and documented Internal Personnel Expenses and Out-of-Pocket Expenses in connection therewith), promptly transition to INFI or its designee some or all of such on-goingclinical studies and the activities related to or supporting such clinical studies, (b) at INFI’s expense (including thereimbursement of Licensee’s reasonable and documented Internal Personnel Expenses and Out-of-Pocket Expenses inconnection therewith), and to the extent possible given the resources Licensee has available to it at the relevant time,continue to conduct such on-going clinical studies for a period requested by INFI up to a maximum of [* * *] monthsafter the effective date of such termination, or (c) at INFI’s expense (including the reimbursement of Licensee’sreasonable and documented Internal Personnel Expenses and Out-of-Pocket Expenses in connection therewith),terminate such on-going clinical studies in a manner consistent with applicable Law11.8Accrued Rights; Surviving Provisions of the Agreement.11.8.1Termination or expiration of this Agreement for any reason shall be without prejudice to anyrights that shall have accrued to the benefit of any Party or any Third Party Grantor prior to such termination orexpiration, including the payment obligations under this Agreement or any INFI Third Party Agreement (includingLicensee’s payment obligations for sales of the IPI-145 Product made during the Term and including Licensee’spayment obligations with respect to any milestone payment or Reimbursement Event achieved during the Term), andany and all damages or remedies arising from any breach hereunder. Such termination or expiration shall not relieveany Party from obligations which are expressly indicated to survive termination of this Agreement.11.8.2The provisions of Sections 2.1 (to the extent such license survives pursuant to Section 6.1.2),2.2 (to the extent the license in Section 2.1 survives pursuant to Section 6.1.2), 2.3 (except if such license is terminatedas a result of INFI’s breach), 2.4.6 (as applicable), 2.4.7, 2.4.8 (as applicable), 2.6.1, 2.7 (to the extent the relevantlicense survives in accordance with this Agreement), 3.1.2(c) (to the extent any portion of the ReimbursementPayments are made in Licensee Common Stock and such restrictions still apply at the time of termination of thisAgreement), 3.1.4(b), 6.1.2 (to the extent the grant of such licenses is triggered prior to the effective date oftermination), 6.1.4, 6.2 (to the extent related to a Calendar Quarter prior to the termination of this Agreement), 6.3, 6.4,6.5 (for [* * *]), 6.6 (to the extent there are remaining obligations at the time of termination of this Agreement), 6.7 (tothe extent there are remaining obligations at the time of termination of this Agreement), 7.1, 7.2, 7.9.3, 8 (for thesurvival term specified in Section 8.7), 9.5, 10.1 through 10.4 (solely with respect to indemnifiable events that occurprior to the effective date of termination), 10.5, 10.6 (for the survival periods specified- 58 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.therein), 11.6, 11.7, 11.8, 11.9, 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.9, 12.11, 12.12, 12.13, 12.14, 12.15, 12.16,12.17, 12.18 and 12.19, any applicable definitions in ARTICLE 1 and any other definitions or provisions necessary tointerpret such surviving provisions, shall survive the termination of this Agreement in its entirety or expiration of thisAgreement for any reason, in accordance with their respective terms and conditions, and for the duration stated, andwhere no duration is stated, shall survive indefinitely. 11.9Damages; Relief. Except to the extent INFI executes and delivers a waiver of damages describedin Section 11.6, termination of this Agreement shall not preclude either Party from claiming any other damages,compensation or relief that it may be entitled to upon such termination.ARTICLE 12MISCELLANEOUS12.1Disputes. In the event any dispute arises out of or in relation to or in connection with this Agreement,including failure to perform under or breach of this Agreement, or any issue relating to the interpretation or applicationof this Agreement or any INFI Third Party Agreement, the Parties shall use good faith efforts to resolve such disputewithin [* * *] days after a Party notifies the other Party of such dispute. If the Parties are unable to resolve suchdispute within such [* * *] day period, either Party may, by written notice to the other Party, refer such dispute to theSenior Executives for resolution, and the Senior Executives shall attempt in good faith to resolve such dispute within [** *] days after such notice.12.2Arbitration. If the Senior Executives are unable to resolve a given dispute referred to it pursuant toSection 12.1 within [* * *] days following such referral of such dispute, either Party may have such dispute settled bybinding arbitration in the manner described below:12.2.1Arbitration Request. If a Party intends to begin an arbitration to resolve a dispute arising underthis Agreement, such Party shall provide written notice (the “Arbitration Request”) to the other Party of such intentionand the issues for resolution.12.2.2Additional Issues. Within [* * *] days after the receipt of the Arbitration Request, the otherParty may, by written notice, add additional issues for resolution.12.2.3Arbitration Rules; Location. Except as expressly provided herein, the sole mechanism forresolution of any claim, dispute or controversy arising out of or in connection with or relating to this Agreement or thebreach or alleged breach thereof shall be arbitration by the American Arbitration Association (“AAA”), in accordancewith the Commercial Arbitration Rules and Supplementary Procedures for Large Complex Disputes of the AAA asthen in effect. The arbitration shall take place in Boston, Massachusetts.12.2.4English Language. All proceedings shall be held in English and a transcribed record preparedin English. Documents submitted in the arbitration (the originals of- 59 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.which are not in English) shall be submitted together with a reasonably complete and accurate English translation.12.2.5Selection of Arbitrators. Each Party shall choose one arbitrator within [* * *] days after receiptof notice of the intent to arbitrate and the said two arbitrators shall select by mutual agreement a third arbitrator within[* * *] days after they have been selected as arbitrators. If one or more arbitrators are not appointed within the timesherein provided or any extension of time that is mutually agreed on, the AAA shall make such appointment within [* **] days after such failure.12.2.6Experience. If the issues in dispute involve scientific or technical matters, any arbitrators chosenhereunder shall have educational training or experience sufficient to demonstrate a reasonable level of knowledge inthe pharmaceutical and biotechnology fields.12.2.7Time Schedule. Within [* * *] days after initiation of arbitration, the Parties shall reachagreement upon and thereafter follow procedures directed at ensuring that the arbitration will be concluded and thefinal award rendered within no more than [* * *] months from selection of the three arbitrators or as soon thereafter aspracticable. Failing such agreement, the AAA will design and the Parties will follow procedures directed at meetingsuch a time schedule.12.2.8Powers of Arbitrators. The arbitrators shall be limited in the scope of their authority to resolvingonly the specific matter which the Parties have referred to arbitration for resolution and shall not have authority torender any decision or award on any other issues. Without limiting the foregoing, the arbitrators:(a)shall not have any power or authority to add to, alter, amend or modifythe terms of this Agreement but shall specify rules sufficient to allow reasonable discovery by the Parties;(b)shall establish and enforce appropriate rules to ensure that theproceedings, including the decision, be kept confidential and that all Confidential Information of any Party disclosedduring such proceedings be kept confidential in accordance with this Agreement and be used for no purpose other thanthe arbitration unless otherwise permitted in accordance with ARTICLE 8; and(c)shall issue all preliminary awards and the final award in writing.12.2.9Injunctive Relief. Nothing in this Agreement shall be deemed as preventing either Party fromseeking injunctive relief (or any other provisional remedy such as temporary restraining order, preliminary injunction orother interim equitable relief) from the arbitrators or from any court having jurisdiction over the Parties (and prior to orduring any arbitration if necessary to protect the interests of such Party in avoiding irreparable harm or to preserve thestatus quo pending the arbitration proceeding) and the subject matter of the dispute, as necessary- 60 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.to protect such Party’s name, Confidential Information, Know-How or any other proprietary right or otherwise to avoidirreparable harm. Without limiting the generality of the foregoing, either Party may seek such injunctive relief (or anyother such provisional remedy) if it reasonably believes that the other Party has breached this Agreement.12.2.10Costs; Exclusion from Award. The award rendered by the arbitrators shall not includecosts of arbitration, attorneys’ fees or costs for expert and other witnesses, which shall be the responsibility of eachParty (i.e., each Party shall bear its own costs and expenses), except that the Parties shall share equally the fees of thearbitrators.12.2.11Judgment. Judgment on the award rendered by the arbitrators may be entered in anycourt having jurisdiction thereof.12.2.12Survivability. Any duty to arbitrate under this Agreement shall remain in effect andbe enforceable after termination of this Agreement.12.3Timing. Resolution of any disputes shall be subject to the relevant Third Party Grantor’s rights underthe applicable INFI Third Party Agreement and any time frames set forth in Sections 12.1 or 12.2 shall, to the extentnecessary to comply with such rights, be modified to accommodate the time-frames for dispute resolution under therelevant INFI Third Party Agreement.12.4Governing Law. This Agreement and any dispute arising from the performance or breach hereof shallbe governed by and construed and enforced in accordance with the Laws of the State of New York without givingeffect to conflicts of the laws provisions thereof. The provisions of the United Nations Convention on Contracts forthe International Sale of Goods shall not apply to this Agreement or any subject matter hereof.12.5Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned orotherwise transferred by any Party without the consent of the other Party; except that any Party may, without suchconsent, assign this Agreement, in whole or in part: (a) to any of its respective Affiliates, provided, that the assigningParty shall remain jointly and severally liable with such Affiliate in respect of all obligations so assigned; or (b) to anysuccessor in interest by way of merger, acquisition or sale of all or substantially all of its assets to which this Agreementrelates, provided, that such successor agrees in writing to be bound by the terms of this Agreement as if it were theassigning party. Any assignment or transfer of this Agreement not in accordance with this Section 12.5 shall be voidand unenforceable.12.6No Reach Through to Acquirer IP. 12.6.1Notwithstanding anything in this Agreement to the contrary, following the closing of a Changeof Control of INFI, Licensee shall not obtain rights or access to the Patent Rights or Know-How controlled by theINFI Acquirer (as defined below) or any of the Affiliates of INFI (other than INFI and its Affiliates which existimmediately prior to the closing of such- 61 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Change of Control (such Affiliates, the “INFI Pre-Existing Affiliates”)). For clarity but without limitation, Licensee’srights in all Patent Rights and Know-How Controlled by INFI or any of its INFI Pre-Existing Affiliates, which PatentRights and Know-How exist as of the date of the closing of such Change of Control and are then licensed hereunder toLicensee, and all Counterparts of such Patent Rights, shall remain licensed to Licensee after the date of the closing ofsuch Change of Control in accordance with and subject to the terms and conditions of this Agreement and shall not beaffected in any manner by virtue of such Change of Control. “INFI Acquirer” means the Third Party that acquires INFIor its direct or indirect controlling Affiliate, or that acquires all or substantially all of the assets of INFI or its direct orindirect controlling Affiliate.12.6.2Notwithstanding anything in this Agreement to the contrary, following the closing of a Changeof Control of Licensee, INFI shall not obtain rights or access to the Patent Rights or Know-How controlled by theLicensee Acquirer (as defined below) or any of the Affiliates of Licensee (other than Licensee and its Affiliates whichexist immediately prior to the closing of such Change of Control (such Affiliates, the “Licensee Pre-ExistingAffiliates”)). For clarity but without limitation, INFI’s rights in all Patent Rights and Know-How Controlled byLicensee or any of its Licensee Pre-Existing Affiliates, which Patent Rights and Know-How exist as of the date of theclosing of such Change of Control and are then licensed hereunder to INFI, and all Counterparts of such Patent Rights,shall remain licensed to INFI after the date of the closing of such Change of Control in accordance with and subject tothe terms and conditions of this Agreement and shall not be affected in any manner by virtue of such Change ofControl. “Licensee Acquirer” means the Third Party that acquires Licensee or its direct or indirect controlling Affiliate,or that acquires all or substantially all of the assets of Licensee or its direct or indirect controlling Affiliate.12.7Licensee Acquisition of Third Party Grantor. In the event that (a) Licensee or any of its Affiliatesacquires any Third Party Grantor or any of its Affiliates, by merger, purchase of assets or otherwise, and (b) a breachby Licensee, any of its Affiliates or any Sublicensee of this Agreement results in a breach by INFI of the applicableINFI Third Party Agreement, then: (x) such breach shall not be cited by Licensee or its Affiliates against INFI as abreach of such INFI Third Party Agreement and INFI shall have a reasonable period of time to cure such breach that isno less than the longer of (i) the time that Licensee had to perform such activity or to cure such breach or (ii) onehundred eighty (180) days; (y) if such breach relates to Licensee’s failure to make any payment due hereunder whichamount is owed to such Third Party Grantor under such INFI Third Party Agreement, INFI shall have no obligation tomake the corresponding payment to such Third Party Grantor; and (z) if such breach is incapable of cure usingcommercially reasonable efforts, it shall not be deemed a breach of either this Agreement or such INFI Third PartyAgreement, and neither Licensee nor its Affiliates shall be entitled to take any further action against INFI with respectto such breach.12.8Force Majeure. No Party shall be held liable or responsible to the other Party nor be deemed to be indefault under, or in breach of any provision of, this Agreement for failure or delay in fulfilling or performing anyobligation (other than a payment obligation) of this- 62 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Agreement when such failure or delay is due to force majeure, and without the fault or negligence of the Party sofailing or delaying. For purposes of this Agreement, force majeure is defined as causes beyond the reasonable controlof the failing or delaying Party, which may include strike, fire, flood, earthquake, accident, war, act of terrorism, act ofGod or of the government of any country or of any local government or by other cause unavoidable or beyond thereasonable control of such Party. In such event the affected Party shall immediately notify the other Party of suchinability and of the period for which such inability is expected to continue. The Party giving such notice shallthereupon be excused from such of its obligations under this Agreement as it is thereby disabled from performing for solong as it is so disabled for up to a maximum of ninety (90) days, after which time INFI and Licensee shall promptlymeet to discuss in good faith how to best proceed in a manner that maintains and abides by the Agreement. The failingor delaying Party shall use commercially reasonable efforts to minimize the duration of any force majeure and toresume performance of its obligations. Notwithstanding the foregoing, Licensee may not rely on this Section 12.8, orany comparable provision at law or in equity, (a) to excuse, or extend any cure period without respect to, any breach orfailure to perform by Licensee that may cause INFI to be in breach of any INFI Third Party Agreement, except to theextent permitted by the applicable INFI Third Party Agreement or (b) to extend any period for performance of anyobligation of Licensee (whether to be performed directly or through any of its Affiliates or any Sublicensee) that, ifbreached, may cause INFI to be in breach of any INFI Third Party Agreement, except to the extent permitted by theapplicable INFI Third Party Agreement.12.9Notices. All notices, consents, waivers, and other communications under this Agreement must be inwriting and will be deemed to have been duly given when (a) delivered by hand (with written confirmation ofreceipt) or (b) when received by the addressee, if sent by an internationally recognized overnight delivery service(receipt requested), in each case to the appropriate addresses set forth below (or to such other addresses as a Party maydesignate by notice):If to INFI, addressed to:Infinity Pharmaceuticals, Inc.784 Memorial DriveCambridge, Massachusetts 02139Attention: General Counselwith a copies to:Infinity Pharmaceuticals, Inc.784 Memorial DriveCambridge, Massachusetts 02139Attention: Chief Executive Officerand- 63 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Wilmer Cutler Pickering Hale and Dorr LLP60 State StreetBoston, MA 02109Attention: Belinda M. Juran, Esq.If to Licensee, addressed to:Verastem, Inc.117 Kendrick Street, Suite 500Needham, Massachusetts 02494Attention: Chief Operating Officerwith a copy to:Verastem, Inc.117 Kendrick Street, Suite 500Needham, Massachusetts 02494Attention: Senior Corporate Counsel and Ropes & Gray LLPPrudential Tower, 800 Boylston StreetBoston, MA 02199-3600Attention: Marko Zatylny 12.10Export Clause. Each Party acknowledges that the Laws of the United States restrict the export andre-export of commodities and technical data of United States origin. Each Party agrees that it will not export or re-export restricted commodities or the technical data of the other Party in any form without the appropriate United Statesand non-U.S. United States government licenses.12.11Waiver. Neither Party may waive or release any of its rights or interests in this Agreement except inwriting. The failure of either Party to assert a right hereunder or to insist upon compliance with any term of thisAgreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term orcondition. No waiver by either Party of any condition or term in any one or more instances shall be construed as acontinuing waiver of such condition or term or of another condition or term.12.12Severability. If any provision hereof should be held invalid, illegal or unenforceable in anyjurisdiction, (a) such provision shall be deemed stricken from this Agreement, (b) the Parties shall negotiate in goodfaith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the Parties and (c)all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in- 64 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.order to carry out the intentions of the Parties as nearly as may be possible. Such invalidity, illegality orunenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.12.13Entire Agreement. This Agreement, together with the Exhibits hereto, sets forth all the covenants,promises, agreements, warranties, representations, conditions and understandings between the Parties as to the subjectmatter of this Agreement and supersedes and terminates all prior agreements and understanding between the Partieswith respect to the subject matter hereof. In particular, and without limitation, this Agreement supersedes and replacesthe Superseded Agreement which is hereby terminated in its entirety effective as of the Effective Date, the ExistingConfidentiality Agreement and any and all term sheets relating to the transactions contemplated by this Agreement andexchanged between the Parties or any of their Affiliates prior to the Effective Date. There are no covenants, promises,agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties as tothe subject matter of this Agreement other than as set forth herein and therein. No subsequent alteration, amendment,change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by therespective authorized officers of the Parties.12.14Independent Contractors. Nothing herein shall be construed to create any relationship of employerand employee, agent and principal, partnership or joint venture between the Parties. Each Party is an independentcontractor. Neither Party shall assume, either directly or indirectly, any liability of or for the other Party. Neither Partyshall have the authority to bind or obligate the other Party and neither Party shall represent that it has such authority.12.15Headings; Construction; Interpretation.12.15.1Headings used herein are for convenience only and shall not in any way affect theconstruction of or be taken into consideration in interpreting this Agreement.12.15.2The terms of this Agreement represent the results of negotiations between the Partiesand their representatives, each of which has been represented by counsel of its own choosing, and neither of which hasacted under duress or compulsion, whether legal, economic or otherwise. Accordingly, the terms of this Agreementshall be interpreted and construed in accordance with their usual and customary meanings, and each of the Partieshereby waives the application in connection with the interpretation and construction of this Agreement of any rule ofLaw to the effect that ambiguous or conflicting terms or provisions contained in this Agreement shall be interpreted orconstrued against the Party whose attorney prepared the executed draft or any earlier draft of this Agreement.12.15.3Any reference in this Agreement to an Article, Section, subsection, paragraph, clause,Schedule or Exhibit shall be deemed to be a reference to any Article, Section, subsection, paragraph, clause, Scheduleor Exhibit, of or to, as the case may be, this Agreement.- 65 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.12.15.4Except where the context otherwise requires, (a) any definition of or reference to anyagreement, instrument or other document refers to such agreement, instrument other document as from time to timeamended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements ormodifications set forth herein or therein), (b) any reference to any Law refers to such Law as from time to time enacted,repealed or amended, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, refer to thisAgreement in its entirety and not to any particular provision hereof, (d) the words “include,” “includes,” and“including” shall be deemed to be followed by the phrase “but not limited to,” “without limitation” or words of similarimport, (e) the word “or” is used in the inclusive sense (and/or), (f) words denoting the singular shall include the pluraland vice versa and words denoting any gender shall include all genders, (g) a capitalized term not defined herein butreflecting a different part of speech than a capitalized term which is defined herein shall be interpreted in a correlativemanner, (h) the word “will” will be construed to have the same meaning and effect as the word “shall”, (i) anyreference herein to any Person will be construed to include such Person’s successors and/or permitted assignees, (j) theword “notice” means notice in writing (whether or not specifically stated) and no inference or conclusions of any sortshall be drawn from the fact that in some instances in this Agreement, the word “notice” is actually preceded orfollowed by “in writing” or the equivalent while in other instances they are not, and (k) provisions that require a Partyor the Parties to “agree”, “consent”, “approve” or the like, or to inform the other Party, will require that suchagreement, consent, approval or the like, or such notice informing the other Party, be specific and in a writing signedby an authorized officer of such Party(ies), and no inferences or conclusions of any sort shall be drawn from the factthat in some instances in this Agreement, the words “agree”, “consent”, “approve” or the like, or the requirement toinform the other Party, are actually preceded or followed by “in writing” or the equivalent while in other instances theyare not.12.16Further Actions. Each Party shall execute, acknowledge and deliver such further instruments as maybe necessary or appropriate in order to carry out the expressly stated purposes and the clear intent of this Agreement.12.17Parties in Interest. All of the terms and provisions of this Agreement shall be binding upon, and shallinure to the benefit of and be enforceable by the Parties and their respective and permitted assigns.12.18Performance by Affiliates. To the extent that this Agreement imposes obligations on Affiliates of aParty, such Party agrees to cause its Affiliates to perform such obligations and a breach by such Affiliate shall beconsidered a breach by such Party.12.19Counterparts. This Agreement may be signed in counterparts, each and every one of which shall bedeemed an original, notwithstanding variations in format or file designation which may result from the electronictransmission, storage and printing of copies from separate computers or printers. Facsimile signatures and signaturestransmitted via PDF shall be treated as original signatures. - 66 - THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties have caused this Agreementto be executed by their duly authorized representatives to be effective as of the Effective Date.INFINITY PHARMACEUTICALS, INC.By: /s/ Adelene Q. PerkinsName: Adelene Q. PerkinsTitle: CEO and ChairVERASTEM, INC.By: /s/ Robert ForresterName: Robert ForresterTitle: CEO [Signature Page to Amended and Restated License Agreement] THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit AINFI PROSECUTION PATENT RIGHTS[* * *] Exhibit A-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit BINK PROSECUTION PATENT RIGHTS[* * *] Exhibit B-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit CIPI-145 OR DUVELISIB Exhibit C-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit DIPI-443 Exhibit D-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit EPRODUCT MARKS Mark(Class)CountryStatusFiling No.FilingDateReg. No.Reg.Date [* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *][* * *][* * *] [* * *][* * *][* * *][* * *][* * *][* * *][* * *] Exhibit E-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.EXHIBIT FTRANSITION PLAN[* * *] Exhibit F-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit F-1INFI PRODUCT RELATED CONTRACTS[* * *] Exhibit F-1-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit F-2SPECIFICATION FOR DUVELISIB DRUG SUBSTANCE AND RSMS[* * *] Exhibit F-2-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENTREQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.EXHIBIT F-3Inventory[* * *] Exhibit F-3-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENTREQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELYWITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit GDEVELOPMENT PLAN[* * *] Exhibit G-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit HDUO CLINICAL TRIAL PROTOCOL[* * *] Exhibit H-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit ITARGET INHIBITOR CRITERIA[* * *] Exhibit I-1 THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIALTREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEENFILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.Exhibit I-1 [* * *] DESCRIPTION[* * *] Exhibit I-1-1Exhibit 10.26LOAN AND SECURITY AGREEMENTThis LOAN AND SECURITY AGREEMENT is made and dated as of March 21, 2017, and is entered intoby and among (a) VERASTEM, INC., a Delaware corporation (“Verastem”), and each of its Qualified Subsidiaries(hereinafter collectively referred to as the “Borrower”), (b) the several banks and other financial institutions or entitiesfrom time to time parties to this Agreement (collectively, referred to as “Lender”), and (c) HERCULES CAPITAL,INC., a Maryland corporation, in its capacity as administrative agent and collateral agent for itself and the Lender (insuch capacity, the “Agent”). RECITALSA.Borrower has requested Lender to make available to Borrower a loan or loans in an aggregateprincipal amount of up to Twenty-Five Million Dollars ($25,000,000.00) (the “Term Loan”); andB.Lender is willing to make the Term Loan on the terms and conditions set forth in this Agreement.AGREEMENTNOW, THEREFORE, Borrower, Agent and Lender agree as follows:SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION1.1Unless otherwise defined herein, the following capitalized terms shall have the followingmeanings:“1934 Act” means the Securities Exchange Act of 1934, as amended.“Account Control Agreement(s)” means any agreement entered into by and among the Agent,Borrower and a third-party Bank or other institution (including a Securities Intermediary) in which Borrower maintainsa Deposit Account or an account holding Investment Property (in each case subject to the provisions of Section 7.12)and which grants Agent a perfected first priority security interest in the subject account or accounts.“ACH Authorization” means the ACH Debit Authorization Agreement in substantially the form ofExhibit H, which account numbers shall be redacted for security purposes if and when filed publicly by the Borrower.“ACH Failure” means (i) the failure of the Automated Clearing House (ACH) system to effect atransfer of funds requested by Lender to be used to satisfy all or part of Borrower’s obligations to pay principal andinterest due hereunder or (ii) a failure by Lender to initiate debit entries for the periodic payments of such principal orinterest.“Advance(s)” means a Term Loan Advance.“Advance Date” means the funding date of any Advance.1 “Advance Request” means a request for an Advance submitted by Borrower to Agent in substantiallythe form of Exhibit A, which account numbers shall be redacted for security purposes if and when filed publicly by theBorrower.“Affiliate” means (a) any Person that directly or indirectly controls, is controlled by, or is undercommon control with the Person in question, (b) any Person directly or indirectly owning, controlling or holding withpower to vote ten percent (10%) or more of the outstanding voting securities of another Person or (c) any Person tenpercent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held byanother Person with power to vote such securities. As used in the definition of “Affiliate,” the term “control” meansthe possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of aPerson, whether through ownership of voting securities, by contract or otherwise.“Agent” has the meaning given to it in the preamble to this Agreement.“Agreement” means this Loan and Security Agreement, as amended from time to time.“Amortization Date” means November 1, 2018; provided however, if the Interest Only ExtensionConditions are satisfied on or prior to November 1, 2018, then “Amortization Date” shall mean May 1, 2019.“Assignee” has the meaning given to it in Section 11.13.“Board” means Borrower’s board of directors or any duly qualified subcommittee thereof, asapplicable.“Borrower Products” means all products, software, service offerings, technical data or technologycurrently being designed, manufactured or sold by Borrower or which Borrower intends to sell, license, or distribute inthe future including any products or service offerings under development, collectively, together with all products,software, service offerings, technical data or technology that have been sold, licensed or distributed by Borrower sinceits incorporation.“Business Day” means any day other than Saturday, Sunday and any other day on which bankinginstitutions in the State of California are closed for business.“Cash” means all cash, cash equivalents and liquid funds.“Change in Control” means any “person” or “group” (as such terms are used in Sections 13(d) and14(d) of the 1934 Act, but excluding any employee benefit plan of such person or its subsidiaries, and any person orentity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the 1934 Act) of more than fifty percent (50%) of theequity interests of Verastem entitled to vote for members of its Board on a fully diluted basis (and taking into accountall such securities that such person or group has the right to acquire pursuant to any option right). “Claims” has the meaning given to it in Section 11.10.2 “Closing Date” means the date of this Agreement.“Code” means the Internal Revenue Code of 1986, as amended from time to time.“Collateral” means the property described in Section 3.“Common Stock” means the common stock, $0.001 par value per share of Verastem.“Confidential Information” has the meaning given to it in Section 11.12.“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent orotherwise, of that Person with respect to (i) any Indebtedness, lease, dividend, letter of credit or other obligation ofanother, including any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold withrecourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligationswith respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of thatPerson; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate capagreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person againstfluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term“Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course ofbusiness. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinedamount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated ordeterminable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in goodfaith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations underthe guarantee or other support arrangement.“Copyright License” means any written agreement granting any right to use any Copyright orCopyright registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafteracquires any interest.“Copyrights” means all copyrights, whether registered or unregistered, held pursuant to the laws of theUnited States of America, any State thereof, or of any other country.“Deposit Accounts” means any “deposit accounts,” as such term is defined in the UCC, and includesany checking account, savings account, or certificate of deposit.“Designated Foreign Subsidiary” means any Foreign Subsidiary, individually, and in the aggregate withother Foreign Subsidiaries, which owns personal property and assets, in each case determined as of the most recentfiscal year end, in an amount less than ten percent (10.0%) of all of the personal property and assets of Verastem.“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary or Excluded Subsidiary.“Due Diligence Fee” means Twenty-Thousand Dollars ($20,000.00), which fee is due to Lender on orprior to the Closing Date, and shall be deemed fully earned on such date regardless of the early termination of thisAgreement.“Eligible Foreign Subsidiary” means any Foreign Subsidiary (which is not a Designated ForeignSubsidiary) whose execution of a Joinder Agreement would not result in a material adverse tax consequence toBorrower and whom Agent elects to join as a Borrower.3 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and theregulations promulgated thereunder.“Event of Default” has the meaning given to it in Section 9.“Excluded Account” means (i) any Account (including, for the avoidance of doubt, any cash, cashequivalents, or other property contained therein) to the extent, and for so long as, such Account is pledged and usedexclusively to secure performance of obligations arising under clauses (vi) and (xiv) of the defined term “PermittedLiens”, and whether such pledge is by escrow or otherwise, (ii) accounts used solely to fund payroll or employeebenefits, (iii) withholding tax, benefits, trust, escrow, or fiduciary accounts, and (iv) other Accounts that have anaggregate balance not to exceed One Hundred Thousand Dollars ($100,000.00) for all such Accounts at any time and(v) deposit, securities, commodity or similar accounts in jurisdictions outside the United States of America that have anaggregate balance not to exceed One Hundred Thousand Dollars ($100,000.00) for all such accounts at any time. “Excluded Subsidiary” means Verastem Securities Company, a Massachusetts securities corporation,which is a Subsidiary of Borrower that has applied or is in the process of applying to be classified as a “securitycorporation” under Massachusetts General Laws Ch. 63, Section 38B(a), as amended, supplemented and/or modified.“Excluded Taxes” shall mean (i) taxes imposed on or with respect to Lender’s overall net or grossincome or gross receipts, or franchise taxes imposed in lieu of the foregoing, by any jurisdiction in which Lender isresident, has a branch or otherwise has any other former or present connection (other than any connection solelyattributable to this Agreement), (ii) branch profits taxes, (iii) any withholding taxes imposed on Lender with respect tothe payments it is entitled to receive hereunder pursuant to laws in effect on the date it becomes a party to thisAgreement (which in the case of any permitted assignee of Lender, shall mean the date as of which Lender’s rights andobligations under this Agreement are assigned to such Person), (iv) Taxes attributable to Lender’s failure to complywith Sections 7.10(b) and 7.10(c), (v) any U.S. federal withholding taxes imposed on Lender under FATCA, and (vi)any U.S. federal backup withholding tax.“Facility Charge” means Seventy-Five Thousand Dollars ($75,000.00).“FATCA” means Section 1471 through 1474 of the Code, as of the date of this Agreement (or anyamended or successor version that is substantively comparable and not materially more onerous to comply with), anycurrent or future regulations or official interpretations thereof and any agreements entered into pursuant to Section1471(b)(1) of the Code, and any applicable intergovernmental agreement with respect thereto and applicable officialimplementing guidance thereunder.“Financial Statements” has the meaning given to it in Section 7.1.“Foreign Subsidiary” means any Subsidiary that is not a “United States person” within the meaning ofSection 7701(a)(3) of the Code.4 “Foreign Subsidiary HoldCo” means any (a) Domestic Subsidiary substantially all the assets of whichconsist, directly or indirectly, of equity interests (or equity interests and indebtedness) of one or more ForeignSubsidiaries that are treated as a controlled foreign corporation within the meaning of Section 957 of the Code, or (b)Subsidiary that is disregarded for U.S. federal income tax purposes and substantially all the assets of which consist,directly or indirectly, of equity interests (or equity interests and indebtedness) of one or more Foreign Subsidiaries thatare treated as a controlled foreign corporation within the meaning of Section 957 of the Code.“GAAP” means generally accepted accounting principles in the United States of America, as in effectfrom time to time, consistently applied, except that for purposes of the classification of operating leases (other than withrespect to Section 7.1), GAAP shall be determined on the basis of such principles in effect on the Closing Date. Forpurposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the Closing Date andconsistent with those used in the preparation of the most recent audited or unaudited financial statements filed with theSecurities and Exchange Commission in a Form 10-K or Form 10-Q (with such changes as are permitted to be made toGAAP pursuant to Section 7.1). “Indebtedness” means indebtedness of any kind, including (a) all indebtedness for borrowed money orthe deferred purchase price of property or services (excluding trade credit entered into in the ordinary course ofbusiness due within ninety (90) days), including reimbursement and other obligations with respect to surety bonds andletters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital leaseobligations, and (d) all Contingent Obligations; provided that Indebtedness shall not include (i) prepaid or deferredrevenue arising in the ordinary course of business and (ii) endorsements of checks or drafts arising in the ordinarycourse of business.“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents; Licenses; tradesecrets and inventions; mask works; Borrower’s applications therefor and reissues, extensions, or renewals thereof; andBorrower’s goodwill associated with any of the foregoing, together with Borrower’s rights to sue for past, present andfuture infringement of Intellectual Property and the goodwill associated therewith.“Interest Only Extension Conditions” means satisfaction of each of the following events: (a) no defaultor Event of Default shall have occurred; and (b) confirmation by Agent and Lender that Borrower has received, afterthe Closing Date but on or prior to November 1, 2018, unrestricted and unencumbered net cash proceeds in aminimum amount of at least Twenty Million Dollars ($20,000,000) in connection with either (i) the issuance and saleby Borrower of its equity securities or Subordinated Indebtedness with investors reasonably acceptable to Agent,and/or (ii) ongoing commercial partnerships reasonably acceptable to Agent with Persons reasonably acceptable toAgent.5 “Inventory” means “inventory” as defined in Article 9 of the UCC.“Investment” means any beneficial ownership (including stock, partnership or limited liability companyinterests) of or in any Person, or any loan, advance or capital contribution to any Person or the acquisition of all, orsubstantially all, of the assets of another Person. The amount of any Investment at any time shall be the originalprincipal amount thereof less all dividends, distributions, interest payments, returns of principal or equity or otheramount received on the sale or disposition of such Investment on or before such time and shall, if made by the transferor exchange of assets other than cash, be deemed to have been made in an amount equal to the fair market value ofsuch assets at the time of such Investment“Joinder Agreements” means for each Qualified Subsidiary, a completed and executed JoinderAgreement in substantially the form attached hereto as Exhibit G.“Lender” has the meaning given to it in the preamble to this Agreement.“License” means any Copyright License, Patent License, Trademark License or other license of rightsor interests.“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, securityinterest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law orotherwise, against any property, any conditional sale or other title retention agreement, and any lease in the nature of asecurity interest; provided that in no event shall an operating lease entered into in the ordinary course of business or anyprecautionary UCC filings made pursuant thereto by an applicable lessor or lessee, be deemed to be a Lien.“Liquidity Requirement” shall have the meaning assigned to such term in Section 7.15. “Loan” means the Advances made under this Agreement.“Loan Documents” means this Agreement, the Notes (if any), the ACH Authorization, the AccountControl Agreements, the Joinder Agreements, all UCC Financing Statements, any subordination agreement, and anyother documents executed in connection with the Secured Obligations or the transactions contemplated hereby, as thesame may from time to time be amended, modified, supplemented or restated.“Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties,assets or financial condition of Borrower and its Subsidiaries taken as a whole; or (ii) the ability of Borrower toperform or pay the Secured Obligations in accordance with the terms of the Loan Documents, or the ability of Agent orLender to enforce any of its rights or remedies with respect to the Secured Obligations; or (iii) the Collateral or Agent’sLiens on the Collateral or the priority of such Liens.“Maximum Rate” shall have the meaning assigned to such term in Section 2.3.“Milestone Event” shall mean that (a) no Event of Default shall have occurred, and (b) Agent shall haveconfirmed, in Agent’s reasonable discretion, on or prior to September6 20, 2017, that Borrower has achieved the pre-specified primary endpoint in a Phase III clinical study evaluating thesafety and efficacy of Duvelisib in the treatment of patients with relapsed/refractory chronic lymphocytic leukemia orsmall lymphocytic lymphoma.“Note(s)” means a promissory note or promissory notes to evidence Lender’s Loans substantially in theform of Exhibit B.“Patent License” means any written agreement granting any right with respect to any invention onwhich a Patent is in existence or a Patent application is pending, in which agreement Borrower now holds or hereafteracquires any interest.“Patents” means all letters patent of, or rights corresponding thereto, in the United States of America orin any other country, all registrations and recordings thereof, and all applications for letters patent of, or rightscorresponding thereto, in the United States of America or any other country.“Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of Lender or Agent arisingunder this Agreement or any other Loan Document; (ii) Indebtedness existing on the Closing Date which is disclosedin Schedule 1A; (iii) Indebtedness of up to Two Hundred Thousand Dollars ($200,000) outstanding at any timesecured by a Lien described in clause (vii) of the defined term “Permitted Liens,” provided such Indebtedness does notexceed the cost of the Equipment financed with such Indebtedness; (iv) Indebtedness to trade creditors incurred in theordinary course of business, and Indebtedness incurred in the ordinary course of business with corporate credit cards(including travel and entertainment expenses and similar expenses incurred in the ordinary course of business); (v)Indebtedness that also constitutes a Permitted Investment; (vi) Subordinated Indebtedness; (vii) reimbursementobligations in connection with letters of credit and cash management services (including credit cards, debit cards andsimilar instruments) that are secured by Cash and issued on behalf of the Borrower or a Subsidiary thereof in anamount not to exceed Three Hundred Thousand Dollars ($300,000) at any time outstanding, (viii) other unsecuredIndebtedness in an amount not to exceed Two Hundred Thousand Dollars ($200,000) at any time outstanding, (ix)intercompany Indebtedness as long as either (A) each of the Subsidiary obligor and the Subsidiary obligee under suchIndebtedness is a Qualified Subsidiary that has executed a Joinder Agreement or (B) neither the Subsidiary obligor northe Subsidiary obligee under such Indebtedness is a Borrower, and (x) extensions, refinancings, renewals,modifications, amendments, restatements, or amendments and restatements of any items of Permitted Indebtedness,provided that the principal amount is not increased or the terms modified do not impose materially more burdensometerms upon Borrower or its Subsidiary, as the case may be.“Permitted Investment” means: (i) Investments existing on the Closing Date which are disclosed inSchedule 1B; (ii) (a) marketable direct obligations issued or unconditionally guaranteed by the United States ofAmerica or any agency or any State thereof maturing within one year from the date of acquisition thereof, (b)commercial paper maturing no more than one year from the date of creation thereof and currently having a rating of atleast A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (c) certificates of depositissued by any bank with assets of at least Five Hundred Million Dollars ($500,000,000) maturing no more than oneyear from the date of investment therein, (d) money market accounts, and (e) such other7 Investments as are described in the Board-approved investment guidelines delivered to Agent prior to the Closing Dateor with such changes as reasonably acceptable to Agent made after the Closing Date; (iii) Investments consisting ofthe endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course ofbusiness; (iv) Investments accepted in connection with Permitted Transfers; (v) Investments (including debtobligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement ofdelinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’sbusiness; (vi) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, tocustomers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subparagraph (vi)shall not apply to Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans not involving thenet transfer on a substantially contemporaneous basis of cash proceeds to employees, officers or directors relating to thepurchase of capital stock of Borrower pursuant to employee stock purchase plans or other similar agreements approvedby the Board; (viii) Investments consisting of travel advances in the ordinary course of business; (ix) Investments innewly-formed Domestic Subsidiaries, provided that each such Domestic Subsidiary enters into a Joinder Agreementpromptly after its formation by Borrower or any Subsidiary and execute such other documents as shall be reasonablyrequested by Agent; (x) intercompany Investments as long as either (A) each of the Subsidiary investor and theSubsidiary investee under such Investments is a Qualified Subsidiary that has executed a Joinder Agreement or (B)neither the Subsidiary investor nor the Subsidiary investee under such Investment is a Borrower or an ExcludedSubsidiary; (xi) Investments in Foreign Subsidiaries approved in advance in writing by Agent; (xii) joint ventures orstrategic alliances in the ordinary course of Borrower’s business consisting of the nonexclusive licensing of technology,the development of technology or the providing of technical support, provided that any cash Investments by Borroweror any Subsidiary do not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal year;(xiii) Investments in the Excluded Subsidiary, so long as an Event of Default does not exist at the time of suchInvestment and would not exist after giving effect to such Investment and provided that Borrower is, at all times, incompliance with the Liquidity Requirement; and (xiv) additional Investments that do not exceed Two Hundred FiftyThousand Dollars ($250,000) in the aggregate.“Permitted Liens” means any and all of the following: (i) Liens in favor of Agent or Lender; (ii) Liensexisting on the Closing Date which are disclosed in Schedule 1C; (iii) Liens for taxes, fees, assessments or othergovernmental charges or levies, either (A) not delinquent or (B) being contested in good faith by appropriateproceedings and Borrower maintains adequate reserves therefor in accordance with GAAP (to the extent requiredthereby); (iv) Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlordsand other like Persons arising in the ordinary course of Borrower’s business and imposed without action of suchparties; provided, that the payment thereof is not yet required; (v) Liens arising from judgments, decrees or attachmentsin circumstances which do not constitute an Event of Default hereunder; (vi) deposits to secure the performance ofobligations (including by way of deposits to secure letters of credit issued to secure the same) under commercial supplyand/or manufacturing agreements in an amount not to exceed Five Hundred Thousand Dollars ($500,000) and thefollowing deposits, to the extent made in the ordinary course of business: deposits under worker’s compensation,unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders orcontracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bondsfor the performance of bids, tenders or contracts (other than for8 the repayment of borrowed money) or to secure statutory obligations (other than Liens arising under ERISA orenvironmental Liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds; (vii) Lienson Equipment or software or other intellectual property constituting purchase money Liens and Liens in connectionwith capital leases securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness”; (viii) Liens incurred inconnection with Subordinated Indebtedness; (ix) leasehold interests in leases, subleases, licenses or sublicenses grantedin the ordinary course of business and not interfering in any material respect with the business of the licensor; (x) Liensin favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that arepromptly paid on or before the date they become due; (xi) Liens on insurance proceeds securing the payment offinanced insurance premiums that are promptly paid on or before the date they become due (provided that such Liensextend only to such insurance proceeds and not to any other property or assets); (xii) statutory and common law rightsof set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutionsand brokerage firms; (xiii) easements, zoning restrictions, rights-of-way and similar encumbrances on real propertyimposed by law or arising in the ordinary course of business so long as they do not materially impair the value ormarketability of the related property; (xiv) (A) Liens on Cash securing obligations permitted under clause (vii) of thedefinition of Permitted Indebtedness and (B) security deposits in connection with real property leases, the combinationof (A) and (B) in an aggregate amount not to exceed Seven Hundred Thousand Dollars ($700,000) at any time; (xv)sales, transfers, licenses, sublicenses, leases, subleases or other dispositions of assets not prohibited by Section 7.8 and,in connection therewith, customary rights and restrictions contained in agreements relating to such transactions pendingthe completion thereof or during the term thereof, and any option or other agreement to sell, transfer, license,sublicense, lease, sublease or dispose of an asset not prohibited by Section 7.8 and (xvi) Liens incurred in connectionwith the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clauses (i)through (xvi) above; provided, that any extension, renewal or replacement Lien shall be limited to the propertyencumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced,modified, amended, restated or amended and restated (as may have been reduced by any payment thereon) does notincrease.“Permitted Transfers” means (i) sales, transfers or other dispositions of Inventory in the ordinary courseof business, (ii) licenses, sublicenses and similar arrangements for the use of Intellectual Property and related assets inthe ordinary course of business and other licenses and sublicenses that could not result in a legal transfer of title of thelicensed property, (iii) transfers expressly permitted under Section 7.5, 7.6 or 7.7, (iv) dispositions of worn-out,obsolete or surplus Equipment at fair market value in the ordinary course of business, (v) transfers by and among theBorrower and any of its Subsidiaries, provided that such Subsidiary has entered into a Joinder Agreement and suchother documents as shall reasonably be required by Agent, (vi) transfers by and among Subsidiaries, provided that noSubsidiary involved in such transfer is a Borrower or an Excluded Subsidiary, (vii) the use or transfer of cash or cashequivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents and in theordinary course of business, (viii) transfers consisting of Permitted Liens, and (ix) other Transfers of assets having a fairmarket value of not more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal year.9 “Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporatedorganization, association, corporation, limited liability company, institution, other entity or government.“Prepayment Charge” shall have the meaning assigned to such term in Section 2.4. “Prime Rate” is the “prime rate” as reported in The Wall Street Journal or any successor publicationthereto.“Proposed Future Royalty Backed Indebtedness Transactions” is defined in Section 11.19 hereof.“Qualified Subsidiary” means any direct or indirect Domestic Subsidiary (other than the ExcludedSubsidiary) or Eligible Foreign Subsidiary.“Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents, Chattel Paper,Supporting Obligations, letters of credit, proceeds of any letter of credit, and Letter of Credit Rights, and (ii) allcustomer lists, software, and business records related thereto.“Register” shall have the meaning assigned to such term in Section 11.7(b).“Required Lenders” means at any time, the holders of more than 50% of the aggregate unpaid principalamount of the Term Loan Advances then outstanding.“Secured Obligations” means Borrower’s obligations under this Agreement and any Loan Document,including any obligation to pay any amount now owing or later arising.“SPE” means any Subsidiary formed for the sole purpose of effectuating a Proposed Future RoyaltyBacked Indebtedness Transactions. “Subordinated Indebtedness” means Indebtedness subordinated to the Secured Obligations in amountsand on terms and conditions satisfactory to Agent in its sole but reasonable discretion.“Subsidiary” means an entity, whether corporate, partnership, limited liability company, joint venture orotherwise, in which Borrower owns or controls 50% or more of the outstanding voting securities, including each entitylisted on Schedule 1 hereto.“Tax” and “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings(including backup withholding), assessments, fees or other charges imposed by any governmental authority, includingany interest, additions to tax or penalties applicable thereto.“Term Loan” shall have the meaning assigned to such term in the preamble to this Agreement.“Term A Loan Advance” shall have the meaning assigned to such term in Section 2.1(a).10 “Term B Draw Period” means the period of time commencing upon the Closing Date, and continuingthrough the earliest to occur of (a) December 20, 2017, (b) the date that is ninety (90) days after the occurrence of theMilestone Event, or (c) an Event of Default.“Term B Loan Advance” shall have the meaning assigned to such term in Section 2.1(a).“Term C Draw Period” means the period of time commencing upon the occurrence of each of (a) theMilestone Event and (b) Lender making both the Term A Loan Advance and the Term B Loan Advance, andcontinuing through the earliest to occur of (a) December 20, 2017, (b) the date that is ninety (90) days after theoccurrence of the Milestone Event, or (c) an Event of Default.“Term C Loan Advance” shall have the meaning assigned to such term in Section 2.1(a).“Term D Draw Period” means the period of time commencing upon the occurrence of the Lendermaking each of the Term A Loan Advance, the Term B Loan Advance and the Term C Loan Advance, andcontinuing through the earlier to occur of (a) June 30, 2018 or (b) an Event of Default.“Term D Loan Advance” shall have the meaning assigned to such term in Section 2.1(a).“Term Commitment” means as to any Lender, the obligation of such Lender, if any, to make a TermLoan Advance to the Borrower in a principal amount not to exceed the amount set forth under the heading “TermCommitment” opposite such Lender’s name on Schedule 1.1. “Term Loan Advance” and “Term Loan Advances” shall have the meaning assigned to such terms inSection 2.1(a).“Term Loan Interest Rate” means for any day a floating per annum rate of interest equal to the greaterof either (a) 10.5% and (b) the lesser of (i) 12.75% and (ii) the sum of (x) 10.5% plus (y) (A) the Prime Rate minus (B)4.5%.“Term Loan Maturity Date” means December 1, 2020.“Trademark License” means any written agreement granting any right to use any Trademark orTrademark registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafteracquires any interest.“Trademarks” means all trademarks (registered, common law or otherwise) and any applications inconnection therewith, including registrations, recordings and applications in the United States Patent and TrademarkOffice or in any similar office or agency of the United States of America, any State thereof or any other country or anypolitical subdivision thereof.“UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State ofCalifornia; provided, that in the event that, by reason of mandatory provisions11 of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s Lien on anyCollateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdictionother than the State of California, then the term “UCC” shall mean the Uniform Commercial Code as in effect, fromtime to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment,perfection, priority or remedies and for purposes of definitions related to such provisions. Unless otherwise specified, all references in this Agreement or any Annex or Schedule hereto to a “Section,”“subsection,” “Exhibit,” “Annex,” or “Schedule” shall refer to the corresponding Section, subsection, Exhibit, Annex,or Schedule in or to this Agreement. Unless otherwise specifically provided herein, any accounting term used in thisAgreement or the other Loan Documents shall have the meaning customarily given such term in accordance withGAAP, and all financial computations hereunder shall be computed in accordance with GAAP, consistentlyapplied. Unless otherwise defined herein or in the other Loan Documents, terms that are used herein or in the otherLoan Documents and defined in the UCC shall have the meanings given to them in the UCC.SECTION 2. THE LOAN2.1Term Loan.(a)Term Loan Advances. Subject to the terms and conditions of this Agreement, Lender willseverally (and not jointly) make in an amount not to exceed its respective Term Commitment, and Borroweragrees to draw, one (1) advance in a principal amount of Two Million Five Hundred Thousand Dollars($2,500,000) on the Closing Date (the “Term A Loan Advance”). Subject to the terms and conditions of thisAgreement, during the Term B Draw Period, upon Borrower’s written request in accordance with thisAgreement, Lender will severally (and not jointly) make in an amount not to exceed its respective TermCommitment, one (1) advance in a principal amount of Two Million Five Hundred Thousand Dollars($2,500,000) (the “Term B Loan Advance”). Subject to the terms and conditions of this Agreement, during theTerm C Draw Period, upon Borrower’s written request in accordance with this Agreement and Borrower’spayment to Lender of a fully-earned non-refundable commitment fee equal to Twenty-Five Thousand Dollars($25,000), Lender will severally (and not jointly) make in an amount not to exceed its respective TermCommitment, one (1) advance in a principal amount of Five Million Dollars ($5,000,000) (the “Term C LoanAdvance”). Subject to the terms and conditions of this Agreement, during the Term D Draw Period, uponBorrower’s written request in accordance with this Agreement and Borrower’s payment to Lender of a fully-earned non-refundable commitment fee equal to one percent (1%) of the principal amount of each suchadvance, Lender may in its sole discretion elect to make or not make, in an amount not to exceed its respectiveTerm Commitment, an advance or advances, each in a principal amount of greater than or equal to Five MillionDollars ($5,000,000) (each a “Term D Loan Advance”) but in an aggregate principal amount for all Term D Loan Advances not to exceed Fifteen Million Dollars. The Term A Loan Advance, the Term B LoanAdvance, the Term C Loan Advance, and each Term D Loan Advance are hereinafter referred to individuallyas a “Term Loan Advance” and collectively as the “Term Loan Advances”. The aggregate outstandingprincipal amount of Term Loan Advances shall not exceed the12 Term Loan. Proceeds of any Term Loan Advance shall be deposited into an account that is subject to a firstpriority perfected security interest in favor of Agent perfected by an Account Control Agreement.(b) Advance Request. To obtain a Term Loan Advance, Borrower shall complete, sign anddeliver to Agent an Advance Request (at least three (3) Business Days before the Advance Date other than (i)the Term A Loan Advance, which shall be at least one (1) Business Day, and (ii) any Term D Loan Advance,which shall be at least thirty (30) days). Lender shall fund the Term Loan Advance in the manner requested bythe Advance Request provided that each of the conditions precedent to such Term Loan Advance is satisfied asof the requested Advance Date.(c)Interest. The principal balance of each Term Loan Advance shall bear interest thereon fromsuch Advance Date at the Term Loan Interest Rate based on a year consisting of 360 days, with interestcomputed daily based on the actual number of days elapsed. The Term Loan Interest Rate will float andchange on the day the Prime Rate changes from time to time.(d)Payment. Borrower will pay interest on each Term Loan Advance on the first (1) Business Day of each month, beginning the month after the Advance Date. Borrower shall repay theaggregate Term Loan principal balance that is outstanding on the day immediately preceding the AmortizationDate, in equal monthly installments of principal and interest (mortgage style), based upon an amortizationschedule of thirty (30) months, beginning on the Amortization Date and continuing on the first Business Day ofeach month thereafter until the Secured Obligations (other than inchoate indemnity obligations) are repaid. Notwithstanding the foregoing, the entire Term Loan principal balance and all accrued but unpaid interesthereunder and all other Secured Obligations with respect to Term Loan Advances, shall be due and payable onTerm Loan Maturity Date. Borrower shall make all payments under this Agreement without setoff,recoupment or deduction and regardless of any counterclaim or defense. Lender will initiate debit entries to theBorrower’s account as authorized on the ACH Authorization (i) on each payment date of all periodicobligations payable to Lender under each Term Loan Advance and (ii) reasonable and invoiced out-of-pocketlegal fees and costs incurred by Agent or Lender in connection with Section 11.11 of this Agreement. Oncerepaid, a Term Loan Advance or any portion thereof may not be reborrowed.2.2Maximum Interest. Notwithstanding any provision in this Agreement or any other LoanDocument, it is the parties’ intent not to contract for, charge or receive interest at a rate that is greater than themaximum rate permissible by law that a court of competent jurisdiction shall deem applicable hereto (whichunder the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest oncommercial loans) (the “Maximum Rate”). If a court of competent jurisdiction shall finally determine thatBorrower has actually paid to Lender an amount of interest in excess of the amount that would have beenpayable if all of the Secured Obligations had at all times borne interest at the Maximum Rate, then such excessinterest actually paid by Borrower shall be applied as follows: first, to the payment of the Secured Obligationsconsisting of the outstanding principal; second, after all principal is repaid, to the payment of Lender’s accruedinterest,13 stcosts, expenses, professional fees and any other Secured Obligations; and third, after all Secured Obligations arerepaid, the excess (if any) shall be refunded to Borrower. 2.3Default Interest. In the event any payment is not paid on the scheduled payment date (or withinthree (3) Business Days of the scheduled payment date, provided that such late payment is due to an ACHFailure), an amount equal to five percent (5%) of the past due amount shall be payable on demand, provided thatno such amount shall be payable if such nonpayment is due to Lender’s failure to initiate debt entries pursuant tothe ACH Authorization. In addition, upon the occurrence and during the continuation of an Event of Defaulthereunder, all Secured Obligations, including principal, interest, compounded interest, and professional fees, shallbear interest at a rate per annum equal to the rate set forth in Section 2.1(c) plus five percent (5%) per annum. Inthe event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shallbear interest on interest, compounded at the rate set forth in Section 2.1(c) or this Section 2.3, as applicable.2.4Prepayment. At its option upon at least seven (7) Business Days prior notice to Agent (or suchshorter notice period as agreed by Agent), Borrower may prepay all or any portion of the outstanding Term LoanAdvances by paying the entire principal balance (or any portion thereof) with respect to the principal balancebeing prepaid, all accrued and unpaid interest thereon, together with a prepayment charge equal to the followingpercentage of the Term Loan Advance amount being prepaid: if such Term Loan Advance amounts are prepaidin any of the first twelve (12) months following the Closing Date, three percent (3%); on or after twelve (12)months but prior to twenty-four (24) months, two percent (2%), and thereafter, one percent (1%) (each, a“Prepayment Charge”). Borrower agrees that the Prepayment Charge is a reasonable calculation of Lender’s lostprofits in view of the difficulties and impracticality of determining actual damages resulting from an earlyrepayment of the Term Loan Advances. Borrower shall prepay the outstanding amount of all principal andaccrued interest through the prepayment date and the Prepayment Charge upon the occurrence of a Change inControl. Notwithstanding the foregoing, Agent and Lender agree to waive the Prepayment Charge if Agent andLender (in its sole and absolute discretion) agree in writing to refinance the Term Loan Advances prior to theMaturity Date. Notwithstanding anything to the contrary contained in this Agreement, Borrower may rescindany notice of prepayment if such prepayment would have resulted from a refinancing of all or a portion of theTerm Loan Advances, which refinancing shall not be consummated or shall otherwise be delayed.2.5End of Term Charge. On the earliest to occur of (i) the Term Loan Maturity Date, (ii) the datethat Borrower prepays the outstanding Secured Obligations (other than any inchoate indemnity obligations andany other obligations which, by their terms, are to survive the termination of this Agreement) in full, or (iii) thedate that the Secured Obligations become due and payable, Borrower shall pay Lender a charge of four and onehalf of one percent (4.5%) of the greater of (a) Five Million Dollars ($5,000,000) and (b) the total principalamount of all Term Loan Advances made hereunder. Notwithstanding the required payment date of suchcharge, it shall be deemed earned by Lender as of the Closing Date.2.6Notes. If so requested by Lender by written notice to Borrower, then Borrower shall execute anddeliver to Lender (and/or, if applicable and if so specified in such14 notice, to any Person who is an assignee of Lender pursuant to Section 11.13) (promptly after the Borrower’sreceipt of such notice) a Note or Notes to evidence Lender’s Loans.2.7Pro Rata Treatment. Each payment (including prepayment) on account of any fee and anyreduction of the Term Loan Advances shall be made pro rata according to the Term Commitments of the relevantLender.SECTION 3. SECURITY INTEREST3.1As security for the prompt and complete payment when due (whether on the payment dates orotherwise) of all the Secured Obligations, Borrower grants to Agent a security interest in all of Borrower’s right,title, and interest in and to the following personal property whether now owned or hereafter acquired(collectively, the “Collateral”): (a) Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles (other thanIntellectual Property); (e) Inventory; (f) Investment Property; (g) Deposit Accounts; (h) Cash; (i) Goods; and allother tangible and intangible personal property of Borrower (other than Intellectual Property) whether now orhereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and anyof Borrower’s property in the possession or under the control of Agent; and, to the extent not otherwise included,all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profitsand products of each of the foregoing; provided, however, that the Collateral shall include all Accounts andGeneral Intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all orany part, or rights in, the Intellectual Property (the “Rights to Payment”). Notwithstanding the foregoing,Borrower is not granting to Agent, and Agent is not receiving from Borrower, any grant of security interest in (a)any Excluded Account, (b) any of the outstanding capital stock or other equity interests of any owned (x) ForeignSubsidiary (other than an Eligible Foreign Subsidiary) or (y) Foreign Subsidiary HoldCo of Borrower in excessof sixty-five percent (65%) of the equity interests (as determined for U.S. federal income tax purposes) of suchSubsidiary, (c) any of the outstanding capital stock or other equity interests of a Subsidiary owned by a ForeignSubsidiary HoldCo, (d) equipment financed by capital leases or purchase money financing, products, proceedsand insurance proceeds of the foregoing, but only to the extent and for so long as the agreements under which theequipment is financed prohibit granting a security interest therein to Lender, or (e) any particular asset if thepledge thereof or the security interest therein is prohibited or restricted by applicable law, rule or regulation(including any requirement to obtain the consent of any governmental authority, regulatory authority or thirdparty), provided that the foregoing exclusion of this clause (e) shall in no way be construed (1) to apply to theextent that any described prohibition or restriction is unenforceable under Section 9-406, 9-407, 9-408, or 9-409of the UCC or other applicable law or (2) to apply to the extent that any consent or waiver has been obtained, oris hereafter obtained, that would permit the Agent’s security interest or Lien notwithstanding the prohibition orrestriction on the pledge of such asset. 3.2For the avoidance of doubt, without the written agreement of Borrower, the Excluded Subsidiaryis not granting to Agent, and Agent is not receiving from the Excluded Subsidiary, any grant of a security interestin the Excluded Subsidiary’s property or assets, whether now owned or hereafter acquired. Notwithstanding theprevious15 sentence, nothing herein will limit the Agent’s (i) ability to require Borrower to completely liquidate the ExcludedSubsidiary and transfer all proceeds of such liquidation to an account in the name of Borrower that is subject toan Account Control Agreement pursuant to the terms of Section 7.15 hereof, or (ii) rights and remedies under theLoan Documents upon the occurrence and during the continuance of an Event of Default3.3If this Agreement is terminated in accordance with its terms, Agent’s Lien in the Collateral shallcontinue until the Secured Obligations (other than inchoate indemnity obligations) are satisfied in full, and at suchtime Agent shall, at Borrower’s sole cost and expense, authorize Borrower to terminate its security interest in theCollateral and all rights therein shall automatically revert to Borrower. Agent shall execute such documents andtake such other steps as are reasonably necessary for Borrower to accomplish the foregoing, all at Borrower’ssole cost and expense.SECTION 4. CONDITIONS PRECEDENT TO LOANThe obligations of Lender to make the Term Loan Advances hereunder, in each case, are subject to thesatisfaction by Borrower of the following conditions:4.1Initial Advance. On or prior to the Closing Date, Borrower shall have delivered to Agent thefollowing:(a)executed copies of the Loan Documents, Account Control Agreements, a legal opinion ofBorrower’s counsel, and all other documents and instruments reasonably required by Agent to effectuate thetransactions contemplated hereby or to create and perfect the Liens of Agent with respect to all Collateral, in allcases in form and substance reasonably acceptable to Agent;(b)certified copy of resolutions of the Board evidencing approval of the Loan and othertransactions evidenced by the Loan Documents;(c)certified copies of the Certificate of Incorporation and the Bylaws, as amended through theClosing Date, of Borrower;(d)a certificate of good standing for Borrower from its state of incorporation and similar certificatesfrom all other jurisdictions in which it does business and where the failure to be qualified would have a MaterialAdverse Effect;(e)payment of the Due Diligence Fee, the Facility Charge and reimbursement of Agent’s andLender’s current expenses reimbursable pursuant to this Agreement, which amounts may be deducted from theinitial Advance;(f)an executed copy of a legal opinion of Borrower’s counsel dated as of the Closing Date; and(g)such other documents as Agent may reasonably request.4.2All Advances. On each Advance Date:16 (a)Agent shall have received (i) an Advance Request for the relevant Advance as required bySection 2.1(b), duly executed by Borrower’s Chief Executive Officer or Chief Financial Officer, and (ii) anyother documents Agent may reasonably request.(b)the representations and warranties set forth in this Agreement shall be true and correct in allmaterial respects on and as of the Advance Date with the same effect as though made on and as of such date,except to the extent such representations and warranties expressly relate to an earlier date, in which case suchrepresentations and warranties shall be true and correct in all material respects as of such earlier date;(c)Borrower shall be in compliance with all the terms and provisions set forth herein and in eachother Loan Document on its part to be observed or performed, and at the time of and immediately after suchAdvance no Event of Default shall have occurred and be continuing; and(d)each Advance Request shall be deemed to constitute a representation and warranty byBorrower on the relevant Advance Date as to the matters specified in paragraphs (b) and (c) of this Section 4.2and as to the matters set forth in the Advance Request.4.3No Default. As of the Closing Date and each Advance Date, (i) no fact or condition exists thatwould (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default and (ii)no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and iscontinuing.SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWERBorrower represents and warrants that:5.1Corporate Status. Borrower is a corporation duly organized, legally existing and in goodstanding under the laws of the State of Delaware, and is duly qualified as a foreign corporation in all jurisdictionsin which the nature of its business or location of its properties require such qualifications and where the failure tobe qualified could reasonably be expected to have a Material Adverse Effect. Borrower’s present name, formernames (if any), locations, place of formation, tax identification number, organizational identification number andother information are correctly set forth in Exhibit C, as may be updated by Borrower in a written notice(including any Compliance Certificate) provided to Agent after the Closing Date. 5.2Collateral. Borrower owns the Collateral and the Intellectual Property, free of all Liens, exceptfor Permitted Liens. Borrower has the power and authority to grant to Agent a Lien in the Collateral as securityfor the Secured Obligations. 5.3Consents. Borrower’s execution, delivery and performance of this Agreement and all other LoanDocuments (i) have been duly authorized by all necessary corporate action of Borrower, (ii) will not result in thecreation or imposition of any Lien upon the Collateral, other than Permitted Liens and the Liens created by thisAgreement and17 the other Loan Documents, (iii) do not violate any provisions of Borrower’s Certificate or Articles ofIncorporation (as applicable), bylaws, or any, law, regulation, order, injunction, judgment, decree or writ towhich Borrower is subject and (iv) except as described on Schedule 5.3, do not violate any contract or agreementor require the consent or approval of any other Person which has not already been obtained, except for consentsand approvals the failure of which to obtain could not reasonably be expected to have a material adverse effect onBorrower’s business. The individual or individuals executing the Loan Documents are duly authorized to do so.5.4Material Adverse Effect. No event that has had or could reasonably be expected to have aMaterial Adverse Effect has occurred and is continuing. 5.5Actions Before Governmental Authorities. There are no actions, suits or proceedings at law or inequity or by or before any governmental authority now pending or, to the knowledge of Borrower, threatenedagainst or affecting Borrower or its property, that is reasonably expected to result in a Material Adverse Effect. 5.6Laws. Borrower is not in violation of any law, rule or regulation, or in default with respect toany judgment, writ, injunction or decree of any governmental authority, where such violation or default isreasonably expected to result in a Material Adverse Effect. Borrower is not in default in any manner under anyprovision of any agreement or instrument evidencing material Indebtedness in excess of One Hundred FiftyThousand Dollars ($150,000), or any other material agreement to which it is a party or by which it is bound,which default could reasonably be expected to have a material adverse effect on Borrower’s business. Borrower, its Subsidiaries and, to the knowledge of the Borrower and its Subsidiaries, any agent or other partyacting on behalf of Borrower or its Subsidiaries are in compliance with all applicable anti-money laundering,economic sanctions and anti-bribery laws and regulations, and none of the funds to be provided under thisAgreement will be used, directly or indirectly, for any activities in violation of such laws and regulations.5.7Information Correct and Current. No information, report, Advance Request, financial statement,exhibit or schedule furnished, by or on behalf of Borrower to Agent in connection with any Loan Document orincluded therein or delivered pursuant thereto contained, or, when taken as a whole, contains or will contain anymaterial misstatement of fact or, when taken together with all other such information or documents, omitted,omits or will omit to state any material fact necessary to make the statements therein, in the light of thecircumstances under which they were, are or will be made, not materially misleading at the time such statementwas made or deemed made. Additionally, any and all financial or business projections provided by Borrower toAgent, whether prior to or after the Closing Date, shall be (i) provided in good faith and based on the mostcurrent data and information available to Borrower, and (ii) the most current of such projections provided to theBoard (it being understood that such projections are subject to significant uncertainties and contingencies, manyof which are beyond the control of Borrower, that no assurance is given that any particular projections will berealized, that actual results may differ). 5.8Tax Matters. Except as described on Schedule 5.8 and except those being contested in goodfaith with adequate reserves under GAAP, (a) Borrower has filed all 18 material federal, state and local tax returns that it is required to file, (b) Borrower has duly paid or fully reservedfor all taxes or installments thereof (including any interest or penalties) as and when due, which have become duepursuant to such returns, and (c) Borrower has paid or fully reserved for any tax assessment received byBorrower for the three (3) years preceding the Closing Date, if any (including any taxes being contested in goodfaith and by appropriate proceedings) in each case, other than with respect to taxes that do not exceed FiftyThousand Dollars ($50,000) in the aggregate.5.9Intellectual Property Claims. Borrower is the sole owner of, or otherwise has the right to use, theIntellectual Property material to Borrower’s business. Except as described on Schedule 5.9, (i) each of theCopyrights, Trademarks and Patents is valid and enforceable, (ii) no part of the Intellectual Property has beenjudged invalid or unenforceable, in whole or in part, and (iii) to the best of Borrower’s knowledge, no claim hasbeen made to Borrower that any part of the Intellectual Property violates the rights of any third party which couldreasonably be expected to have a material adverse effect on Borrower’s business. Exhibit D is a true, correct andcomplete list of each of Borrower’s Patents, registered Trademarks, registered Copyrights, and materialagreements under which Borrower licenses Intellectual Property from third parties (other than shrink-wrapsoftware licenses), together with application or registration numbers, as applicable, owned by Borrower or anySubsidiary, in each case as of the Closing Date. Borrower is not in breach of, nor has Borrower failed to performany obligations under, any of the foregoing contracts, licenses or agreements and, to Borrower’s knowledge, nothird party to any such contract, license or agreement is in breach thereof or has failed to perform any obligationsthereunder, in each case, to the extent such breach could be reasonably expected to have a material adverse effecton Borrower’s business. 5.10Intellectual Property. To Borrower’s knowledge, except as described on Schedule 5.10,Borrower has all material rights with respect to Intellectual Property necessary in the operation or conduct ofBorrower’s business as currently conducted by Borrower. Without limiting the generality of the foregoing, andin the case of Licenses, except for restrictions that are unenforceable under Division 9 of the UCC, Borrower hasthe right, to the extent required to operate Borrower’s business, to freely transfer, license or assign IntellectualProperty necessary or material in the operation or conduct of Borrower’s business as currently conducted byBorrower, without condition, restriction or payment of any kind (other than license payments in the ordinarycourse of business) to any third party, and Borrower owns or has the right to use, pursuant to valid licenses, allsoftware development tools, library functions, compilers and all other third-party software and other items that arematerial to Borrower’s business and used in the design, development, promotion, sale, license, manufacture,import, export, use or distribution of Borrower Products that are material to Borrower’s business exceptcustomary covenants in inbound license agreements, equipment and real property leases where Borrower is thelicensee or lessee. 5.11Borrower Products. Except as described on Schedule 5.11, no Intellectual Property owned byBorrower or Borrower Product has been or is subject to any actual or, to the knowledge of Borrower, threatenedin writing litigation, proceeding (including any proceeding in the United States Patent and Trademark Office orany corresponding foreign19 office or agency) or outstanding decree, order, judgment, settlement agreement or stipulation that restricts in anymanner Borrower’s use, transfer or licensing thereof or that may affect the validity, use or enforceability thereof,in each case, which could reasonably be expected to have a material adverse effect on Borrower’s business. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision entered into inconnection with any litigation or proceeding that obligates Borrower to grant licenses or ownership interest in anyfuture Intellectual Property related to the operation or conduct of the business of Borrower or BorrowerProducts. Except as set forth on the Compliance Certificate, Borrower has not received any written notice orclaim, or, to the knowledge of Borrower, oral notice or claim, challenging or questioning Borrower’s ownershipin any Intellectual Property material to Borrower’s business (or written notice of any claim challenging orquestioning the ownership in any licensed Intellectual Property material to Borrower’s business of the ownerthereof) or suggesting that any third party has any claim of legal or beneficial ownership with respect thereto nor,to Borrower’s knowledge, in each case, is there a reasonable basis for any such claim. Neither Borrower’s use ofits Intellectual Property material to Borrower’s business nor the production and sale of Borrower Productsmaterial to Borrower’s business infringes the Intellectual Property or other rights of others. 5.12Financial Accounts. Exhibit E, as may be updated by the Borrower in a written notice providedto Agent after the Closing Date, is a true, correct and complete list of (a) all banks and other financial institutionsat which Borrower or any Subsidiary maintains Deposit Accounts and (b) all institutions at which Borrower orany Subsidiary maintains an account holding Investment Property, and such exhibit correctly identifies the name,address and telephone number of each bank or other institution, the name in which the account is held, adescription of the purpose of the account, and the complete account number therefor.5.13Employee Loans. Except as permitted by Section 7.7(a), Borrower has no outstanding loans toany employee, officer or director of the Borrower nor has Borrower guaranteed the payment of any loan made toan employee, officer or director of the Borrower by a third party.5.14Capitalization and Subsidiaries. Borrower does not own any stock, partnership interest or othersecurities of any Person, except for Permitted Investments. Attached as Schedule 5.14, as may be updated byBorrower in a written notice provided after the Closing Date, is a true, correct and complete list of eachSubsidiary.SECTION 6. INSURANCE; INDEMNIFICATION6.1Coverage. Borrower shall cause to be carried and maintained commercial general liabilityinsurance, on an occurrence form, against risks customarily insured against in Borrower’s line of business. Suchrisks shall include the risks of bodily injury, including death, property damage, personal injury, advertising injury,and contractual liability per the terms of the indemnification agreement found in Section 6.3. Borrower mustmaintain a minimum of Two Million Dollars ($2,000,000) of commercial general liability insurance for eachoccurrence; any combination of primary and umbrella liability policies may be utilized in order to maintain thislimit. Borrower has and agrees to maintain a minimum of Two20 Million Dollars ($2,000,000) of directors’ and officers’ insurance for each occurrence and Five Million Dollars($5,000,000) in the aggregate. So long as there are any Secured Obligations outstanding (other than inchoateindemnity obligations), Borrower shall also cause to be carried and maintained insurance upon the Collateral,insuring against all risks of physical loss or damage howsoever caused, in an amount not less than the fullreplacement cost of the Collateral, provided that such insurance may be subject to standard exceptions anddeductibles. 6.2Certificates. Borrower shall deliver to Agent certificates of insurance for its global masterinsurance policies, which shall evidence Borrower’s compliance with its insurance obligations in Section 6.1 andthe obligations contained in this Section 6.2. Borrower’s insurance certificate shall state Agent (shown as“Hercules Capital, Inc., as Agent”) is an additional insured for its global master commercial general liabilityinsurance policies, a loss payee for all global master risk property damage insurance policies, subject to theinsurer’s approval, and a loss payee for its global master property insurance policies and additional insured forliability insurance for any future global master insurance that Borrower may acquire from such insurer. Attachedto the certificates of insurance will be additional insured endorsements for global master liability and lender’s losspayable endorsements for all global master risk property damage insurance. All such certificates of insurance willprovide for a minimum of thirty (30) days advance written notice to Agent of cancellation (other than cancellationfor non-payment of premiums, for which ten (10) days’ advance written notice shall be sufficient) or any otherchange adverse to Agent’s interests. Any failure of Agent to scrutinize such insurance certificates for complianceis not a waiver of any of Agent’s rights, all of which are reserved. Borrower shall provide Agent with a copy ofeach global master insurance policy, and upon entering or amending any such global master insurance policyrequired hereunder, Borrower shall provide Agent with a copy of such global master insurance policies and shallpromptly deliver to Agent updated insurance certificates with respect to such global master insurance policies.6.3Indemnity. Borrower agrees to indemnify and hold Agent, Lender and their officers, directors,employees, agents, in-house attorneys, representatives and shareholders (each, an “Indemnified Person”)harmless from and against any and all claims, costs, expenses, damages and liabilities (including such claims,costs, expenses, damages and liabilities based on liability in tort, including strict liability in tort), includingreasonable and invoiced out-of-pocket costs (including attorneys’ fees) and disbursements and other costs ofinvestigation or defense within ten (10) days of receipt of such invoice (which ten (10) day period shall not applyto costs, expenses, damages and liabilities, out-of-pocket costs (including attorneys’ fees) and disbursements andother costs of investigation or defense (including those incurred upon any appeal) due on the Term Loan MaturityDate or in connection with a payoff in full of the Secured Obligations) (collectively, “Liabilities”), that may beinstituted or asserted against or incurred by such Indemnified Person as the result of credit having been extended,suspended or terminated under this Agreement and the other Loan Documents or the administration of suchcredit, or in connection with or arising out of the transactions contemplated hereunder and thereunder, or anyactions or failures to act in connection therewith, or arising out of the disposition or utilization of the Collateral,excluding in all cases Liabilities to the extent resulting solely from any Indemnified Person’s gross negligence orwillful misconduct. Borrower agrees to pay, and21 to save Agent and Lender harmless from, any and all liabilities with respect to, or resulting from any delay inpaying, any and all excise, sales or other similar taxes (excluding taxes imposed on or measured by the netincome of Agent or Lender) that may be payable or determined to be payable with respect to any of the Collateralor this Agreement. In no event shall any Indemnified Person be liable on any theory of liability for any special,indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings). ThisSection 6.3 shall survive the repayment of indebtedness under, and otherwise shall survive the expiration or othertermination of, the Loan Agreement. This Section 6.3 shall not apply with respect to Taxes other than anyTaxes that represent losses, claims, damages, etc. arising from any non-Tax claim.SECTION 7. COVENANTS OF BORROWERBorrower agrees as follows:7.1Financial Reports. Borrower shall furnish to Agent the financial statements and reports listedhereinafter (the “Financial Statements”):(a)as soon as practicable (and in any event within 30 days) after the end of each calendar month(commencing with the month ending March 31, 2017), unaudited interim and year-to-date financial statementsas of the end of such month (prepared on a consolidated and consolidating basis, if applicable), includingbalance sheet and related statements of income and cash flows accompanied by a report detailing any materialcontingencies (including the commencement of any material litigation by or against Borrower) or any otheroccurrence that would reasonably be expected to have a Material Adverse Effect, all certified by Borrower’sChief Executive Officer or Chief Financial Officer to the effect that they have been prepared in a mannerconsistent with past practice by management, except (i) for the absence of footnotes, (ii) that they are subject tonormal year end adjustments, and (iii) they do not contain certain non-cash items that are customarily includedin quarterly and annual financial statements; (b)as soon as practicable (and in any event within forty-five (45) days) after the end of the last dayof each of the first three fiscal quarters of each fiscal year, unaudited interim and year-to-date financialstatements as of the end of such calendar quarter (prepared on a consolidated and consolidating basis, ifapplicable), including balance sheet and related statements of income and cash flows accompanied by a reportdetailing any material contingencies (including the commencement of any material litigation by or againstBorrower) or any other occurrence that would reasonably be expected to have a Material Adverse Effect,certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have beenprepared in accordance with GAAP, except (i) for the absence of footnotes, and (ii) that they are subject tonormal year end adjustments;(c)(i) as soon as practicable (and in any event within ninety (90) days) after the end of each fiscalyear, unqualified (other than a going concern qualification solely with respect to the maturity of any outstandingTerm Loan Advances) audited financial statements as of the end of such year (prepared on a consolidated andconsolidating basis,22 if applicable), including balance sheet and related statements of income and cash flows, and setting forth incomparative form the corresponding figures for the preceding fiscal year, certified by a firm of independentcertified public accountants selected by Borrower and reasonably acceptable to Agent, (it being understoodthat any nationally recognized big four accounting firm is reasonably acceptable to Agent) and (ii) as soon aspractical (and in any event within ten (10) days after delivery of the financial statements in the foregoing clause(i), any management report from such accountants;(d) as soon as practicable (and in any event within 30 days) after the end of each month, aCompliance Certificate in the form of Exhibit F;(e)at Agent’s written request, a report showing agings of accounts receivable and accountspayable;(f)promptly after the sending or filing thereof, as the case may be, copies of any proxy statements,financial statements or reports that Borrower has made available to holders of Verastem’s Common Stock andcopies of any regular, periodic and special reports or registration statements that Borrower files with theSecurities and Exchange Commission or any governmental authority that may be substituted therefor, or anynational securities exchange;(g)financial and business projections promptly following their approval by the Board, and in anyevent, within sixty (60) days subsequent to the end of Borrower’s fiscal year, as well as budgets, operatingplans and other financial information reasonably requested by Agent (provided that Borrower and itsSubsidiaries shall not be obligated to disclose pursuant to this Section 7.1(g) any privileged attorney-clientcommunication, or information that Borrower is not permitted by statute, regulation, or court order to disclose). Borrower shall not make any material change in its (a) accounting policies or reporting practices except for anychange required by GAAP through the mandate of new procedures, unless Borrower used commerciallyreasonable efforts to notify Agent within thirty (30) days in advance of such change, or (b) fiscal years or fiscalquarters, unless Borrower shall have notified Agent in writing within thirty (30) days in advance of suchchange. The fiscal year of Borrower shall end on December 31.The executed Compliance Certificate may be sent via email to Agent at legal@herculestech.com. All FinancialStatements required to be delivered pursuant to clauses (a), (b) and (c) shall be sent via e-mail tofinancialstatements@herculestech.com with a copy to legal@herculestech.com provided, that if e-mail is notavailable or sending such Financial Statements via e-mail is not possible, they shall be sent to Agent at:legal@herculestech.com, attention Chief Credit Officer.Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extentany such documents are included in materials otherwise filed with the SEC) may be delivered electronicallyand if so delivered, shall be deemed to have been delivered on the date on which Borrower emails a link theretoto Agent; provided that23 Borrower shall directly provide Agent all Financial Statements required to be delivered pursuant to Section 7.1(b)and (c) hereunder.7.2Management Rights. Borrower shall permit any representative that Agent or Lender authorizes,including its attorneys and accountants, to inspect the Collateral and examine and make copies and abstracts ofthe books of account and records of Borrower at reasonable times and upon reasonable notice during normalbusiness hours; provided, however, that so long as no Event of Default has occurred and is continuing, suchexaminations shall be limited to no more often than once per fiscal year. In addition, any such representativeshall have the right to meet with management and officers of Borrower to discuss such books of account andrecords at reasonable times and upon reasonable notice during normal business hours. In addition, Agent orLender shall be entitled at reasonable times and intervals acceptable to Borrower to consult with and advise themanagement and officers of Borrower concerning significant business issues affecting Borrower; provided thatmanagement and officers of Borrower shall not be bound to accept any such advisement. Such consultationsshall not unreasonably interfere with Borrower’s business operations. The parties intend that the rights grantedAgent and Lender shall constitute “management rights” within the meaning of 29 C.F.R. Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or participation by Agent or Lender with respect to any businessissues shall not be deemed to give Agent or Lender, nor be deemed an exercise by Agent or Lender of, controlover Borrower’s management or policies. 7.3Further Assurances. Borrower shall from time to time execute, deliver and file, alone or withAgent, any financing statements, security agreements, collateral assignments, notices, control agreements, orother documents to perfect or give the highest priority to Agent’s Lien on the Collateral (subject only to PermittedLiens that have superior priority to Agent’s Lien under this Agreement). Borrower shall from time to timeprocure any instruments or documents as may be reasonably requested by Agent, and take all further action thatmay be necessary, or that Agent may reasonably request, to perfect and protect the Liens granted hereby andthereby. In addition, and for such purposes only, Borrower hereby authorizes Agent to execute and deliver onbehalf of Borrower and to file such financing statements (including an indication that the financing statementcovers “all assets or all personal property” of Borrower in accordance with Section 9-504 of the UCC), collateralassignments, notices, control agreements, security agreements and other documents without the signature ofBorrower either in Agent’s name or in the name of Agent as agent and attorney-in-fact for Borrower. Borrowershall protect and defend Borrower’s title to the Collateral and Agent’s Lien thereon against all Persons claimingany interest adverse to Borrower or Agent other than Permitted Liens. 7.4Indebtedness. Borrower shall not create, incur, assume, guarantee or be or remain liable withrespect to any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness, or prepay anyIndebtedness (other than in connection with refinancings thereof; provided that the principal amount of suchIndebtedness is not increased) or take any actions which impose on Borrower an obligation to prepay anyIndebtedness, except for (a) the conversion of Indebtedness into equity securities and the payment of cash in lieuof fractional shares in connection with such conversion, (b) purchase money Indebtedness pursuant to its thenapplicable payment schedule, (c) prepayment by24 any Subsidiary of (i) inter-company Indebtedness owed by such Subsidiary to any Borrower, or (ii) if suchSubsidiary is not a Borrower, intercompany Indebtedness owed by such Subsidiary to another Subsidiary that isnot a Borrower or (d) as otherwise permitted hereunder or approved in writing by Agent.7.5Collateral. Borrower shall at all times keep the Collateral, the Intellectual Property and all otherproperty and assets used in Borrower’s business or in which Borrower now or hereafter holds any interest freeand clear from any legal process or Liens whatsoever (except for Permitted Liens), and shall give Agent promptwritten notice of any legal process affecting the Collateral, the Intellectual Property, such other property andassets, or any Liens thereon, provided however, that the Collateral and such other property and assets may besubject to Permitted Liens except that there shall be no Liens whatsoever on Intellectual Property. Borrower shallnot agree with any Person other than Agent or Lender not to encumber its property other than (i) as is otherwisepermitted in the definitions of “Permitted Transfers” and “Permitted Liens” and (ii) restrictions by reason ofcustomary provisions restricting assignment, subletting or other transfers contained in leases, licenses and similaragreements entered into in the ordinary course of business (provided that such restrictions are limited to theproperty or assets secured by such Liens or the property or assets subject to such leases, licenses or similaragreements as the case may be). Borrower shall not enter into or suffer to exist or become effective anyagreement that prohibits or limits the ability of any Borrower to create, incur, assume or suffer to exist any Lienupon any of its Intellectual Property, whether now owned or hereafter acquired, to secure its obligations underthe Loan Documents to which it is a party other than (a) this Agreement and the other Loan Documents, (b) anyagreements governing any purchase money Liens or capital lease obligations otherwise permitted hereby (inwhich case, any prohibition or limitation shall only be effective against the assets financed thereby) and (c)customary restrictions on the assignment of leases, licenses and other agreements. Borrower shall cause itsSubsidiaries to protect and defend such Subsidiary’s title to its assets from and against all Persons claiming anyinterest adverse to such Subsidiary, and Borrower shall cause its Subsidiaries at all times to keep suchSubsidiary’s property and assets free and clear from any legal process or Liens whatsoever (except for PermittedLiens, provided however, that there shall be no Liens whatsoever on Intellectual Property), and shall give Agentprompt written notice of any legal process affecting such Subsidiary’s assets. 7.6Investments. Borrower shall not directly or indirectly acquire or own, or make any Investment inor to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments.7.7Distributions. Borrower shall not, and shall not allow any Subsidiary to, (a) repurchase orredeem any class of stock or other equity interest other than pursuant to employee, director or consultantrepurchase plans or other similar agreements, provided, however, in each case the repurchase or redemption pricedoes not exceed the original consideration paid for such stock or equity interest and such repurchases orredemptions are in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in anyfiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to therepurchases, or (b) declare or pay any cash dividend or make a cash distribution on any class of stock or otherequity interest, except that a Subsidiary may pay25 dividends or make distributions to Borrower, or (c) lend money to any employees, officers or directors orguarantee the payment of any such loans granted by a third party in excess of One Hundred Fifty ThousandDollars ($150,000) in the aggregate or (d) waive, release or forgive any Indebtedness owed by any employees,officers or directors in excess of One Hundred Fifty Thousand Dollars ($150,000) in the aggregate.7.8Transfers. Except for Permitted Transfers, Borrower shall not, and shall not allow anySubsidiary to, voluntarily or involuntarily transfer, sell, lease, license, lend or in any other manner convey anyequitable, beneficial or legal interest in any material portion of its assets.7.9Mergers or Acquisitions. Borrower shall not merge or consolidate, or permit any of itsSubsidiaries to merge or consolidate, with or into any other business organization (other than mergers orconsolidations of (a) a Subsidiary which is not a Borrower into another Subsidiary or into Borrower or (b) a Borrower into another Borrower), or acquire, or permit any of its Subsidiaries to acquire, all or substantially allof the capital stock or property of another Person without the prior written consent of Agent.7.10Taxes. (a)Borrower and its Subsidiaries shall pay when due all material taxes, fees or other charges of anynature whatsoever (together with any related interest or penalties) now or hereafter imposed or assessed againstBorrower, Agent, Lender or the Collateral or upon Borrower’s ownership, possession, use, operation ordisposition thereof or upon Borrower’s rents, receipts or earnings arising therefrom (other than ExcludedTaxes). (b)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respectto payments made under any Loan Document shall deliver to Borrower and Agent, at the time or timesreasonably requested by Borrower or Agent, such properly completed and executed documentation reasonablyrequested by Borrower or Agent as will permit such payments to be made without withholding or at a reducedrate of withholding. In addition, Lender, if reasonably requested by Borrower or Agent, shall deliver suchother documentation prescribed by applicable law or reasonably requested by Borrower or Agent as will enableBorrower and Agent to determine whether or not Lender is subject to backup withholding or informationreporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, thecompletion, execution and submission of such documentation (other than Internal Revenue Service Form W-9or the relevant Internal Revenue Service Form W-8) shall not be required if in Lender’s reasonable judgmentsuch completion, execution or submission would subject Lender to any material unreimbursed cost or expenseor would materially prejudice the legal or commercial position of Lender. (c)Without limiting the generality of the foregoing, if a payment made to a Lender would besubject to U.S. federal withholding Tax imposed by FATCA if Lender were to fail to comply with theapplicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of theCode, as applicable), Lender shall deliver to Borrower and Agent at the time or times prescribed by law and atsuch time or26 times reasonably requested by Borrower or Agent such documentation prescribed by applicable law (includingas prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requestedby Borrower or Agent as may be necessary for Borrower and Agent to comply with its obligations underFATCA and to determine that Lender has complied with Lender’s obligations under FATCA or to determinethe amount to deduct and withhold from such payment. Solely for purposes of this clause (c), “FATCA” shallinclude any amendments made to FATCA after the date hereof. (d)Borrower shall file on or before the due date therefor all personal property tax returns in respectof the Collateral. Notwithstanding the foregoing, Borrower may contest, in good faith and by appropriateproceedings, taxes for which Borrower maintains adequate reserves therefor in accordance with GAAP.7.11Corporate Changes. Neither Borrower nor any Subsidiary shall change its corporate name, legalform or jurisdiction of formation without twenty (20) days’ prior written notice to Agent. Neither Borrower norany Subsidiary shall suffer a Change in Control. Neither Borrower nor any Subsidiary shall relocate its chiefexecutive office or its principal place of business unless: (i) it has provided prior written notice to Agent; and (ii)such relocation shall be within the continental United States of America. Neither Borrower nor any QualifiedSubsidiary shall relocate any item of Collateral (other than (w) Permitted Transfers, (x) movements of Inventoryand/or clinical pharmaceutical compounds and/or drugs to, from and between storage depots and clinical sites inthe ordinary course of business, (y) relocations of Equipment having an aggregate value of up to Two HundredThousand Dollars ($200,000) in any fiscal year, and (z) relocations of Collateral from a location described onExhibit C to another location described on Exhibit C) unless (i) it has provided prompt written notice to Agent,(ii) such relocation is within the continental United States of America and, (iii) if such relocation is to a third partybailee, and such relocated (x) Collateral (other than clinical pharmaceutical compounds and/or drug) has anaggregate value in excess of Five Hundred Thousand Dollars ($500,000), or (y) clinical pharmaceuticalcompounds and/or drugs has an aggregate value in excess of One Million Dollars ($1,000,000), it has used itscommercially reasonable efforts to deliver a bailee agreement in form and substance reasonably acceptable toAgent. 7.12Deposit Accounts. Neither Borrower nor any Qualified Subsidiary shall maintain any DepositAccounts, or accounts holding Investment Property, except with respect to which Agent has an Account ControlAgreement; provided that no Account Control Agreement shall be required for any (i) accounts securingBorrower’s reimbursement obligations under letters of credit permitted under subsections (vi) and (xiv) ofPermitted Liens and (ii) Excluded Accounts.7.13Subsidiaries. Borrower shall notify Agent of each Subsidiary formed subsequent to the ClosingDate and, within twenty (20) days of formation, shall cause any such Qualified Subsidiary to execute and deliverto Agent a Joinder Agreement.27 7.14Notification of Event of Default. Borrower shall notify Agent immediately of the occurrence ofany Event of Default.7.15Liquidity Requirement. Borrower shall at all times maintain in accounts of Borrower that aresubject to an Account Control Agreement, unrestricted and unencumbered (other than as a result of thisAgreement) Cash in an aggregate amount greater than or equal to the lesser of (a) one hundred twenty-fivepercent (125%) of the aggregate outstanding Advances and (b) one hundred percent (100%) of all Cash ofBorrower maintained in any accounts (other than Cash held in Excluded Accounts) (the “LiquidityRequirement”). In addition to and without limiting the foregoing, if at any time Borrower’s unrestricted andunencumbered Cash maintained in accounts of Borrower that are subject to an Account Control Agreement isless than one hundred twenty-five percent (125%) of the aggregate outstanding Advances, Borrower shallimmediately completely liquidate the Excluded Subsidiary and transfer all proceeds of such liquidation to anaccount in the name of Borrower that is subject to an Account Control Agreement.7.16Post-Closing Deliverables. Borrower shall deliver to Agent within thirty (30) Business Daysafter the Closing Date, endorsements to Borrower’s global master property and liability policies, whichendorsements shall name Agent as lender loss payee or additional insured, as applicable and provide that Agentshall receive prior notice of cancellation of such property and liability policies.SECTION 8. [RESERVED]SECTION 9. EVENTS OF DEFAULTThe occurrence of any one or more of the following events shall be an Event of Default:9.1Payments. Borrower fails to pay any amount due under this Agreement or any of the other LoanDocuments on the due date; provided, however, that an Event of Default shall not occur on account of a failureto pay due solely to an administrative or operational error of Agent or Lender or Borrower’s bank if Borrowerhad the funds to make the payment when due and makes the payment within three (3) Business Days followingBorrower’s knowledge of such failure to pay; or9.2Covenants. Borrower breaches or defaults in the performance of any covenant or SecuredObligation under this Agreement, or any of the other Loan Documents or any other agreement among Borrower,Agent and Lender, and (a) with respect to a default under any covenant under this Agreement (other than underSections 6 (other than delivery of certificates of insurance pursuant to Section 6.2), 7.4, 7.5, 7.6, 7.7, 7.8, 7.9,7.14, 7.15, and 7.16 any other Loan Document or any other agreement among Borrower, Agent andLender, such default continues for more than fifteen (15) days after the earlier of the date on which (i) Agent orLender has given notice of such default to Borrower and (ii) Borrower has actual knowledge of such default or(b) with respect to a default under any of Sections 6 (other than delivery of certificates of insurance pursuant toSection 6.2), 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.14 7.15, and 7.16 (provided, however for (i) Section 6.2 Borrowerfails28 to cure such default within fifteen (15) Business Days, and (ii) Section 7.15, Borrower fails to cure such defaultwithin one (1) Business Day), the occurrence of such default; or9.3Material Adverse Effect. A circumstance has occurred that would reasonably be expected tohave a Material Adverse Effect; or9.4Representations. Any representation or warranty made by Borrower in any Loan Documentshall have been false or misleading in any material respect when made or when deemed made; or9.5Insolvency. Borrower (A) (i) shall make an assignment for the benefit of creditors; or (ii) shall beunable to pay its debts as they become due, or be unable to pay or perform under the Loan Documents, or shallbecome insolvent; or (iii) shall file a voluntary petition in bankruptcy; or (iv) shall file any petition, answer, ordocument seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolutionor similar relief under any present or future statute, law or regulation pertinent to such circumstances; or (v) shallseek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower or of all orany substantial part (i.e., 33-1/3% or more) of the assets or property of Borrower; or (vi) shall cease operations ofits business as its business has normally been conducted, or terminate substantially all of its employees; or(vii) Borrower or the Board or majority shareholders shall take any action initiating any of the foregoing actionsdescribed in clauses (i) through (vi); or (B) either (i) forty-five (45) days shall have expired after thecommencement of an involuntary action against Borrower seeking reorganization, arrangement, composition,readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation,without such action being dismissed or all orders or proceedings thereunder affecting the operations or thebusiness of Borrower being stayed; or (ii) a stay of any such order or proceedings shall thereafter be set aside andthe action setting it aside shall not be timely appealed; or (iii) Borrower shall file any answer admitting or notcontesting the material allegations of a petition filed against Borrower in any such proceedings; or (iv) the court inwhich such proceedings are pending shall enter a decree or order granting the relief sought in any suchproceedings; or (v) forty-five (45) days shall have expired after the appointment, without the consent oracquiescence of Borrower, of any trustee, receiver or liquidator of Borrower or of all or any substantial part of theproperties of Borrower without such appointment being vacated; or9.6Attachments; Judgments. Any portion of Borrower’s assets is attached or seized, or a levy isfiled against any such assets, or a judgment or judgments is/are entered for the payment of money (not covered byindependent third party insurance as to which liability has not been rejected by such insurance carrier),individually or in the aggregate, of at least Two Hundred Thousand Dollars ($200,000), or Borrower is enjoinedor in any way prevented by court order from conducting any part of its business, and such attachment, seizure,levy, judgment or enjoinment is not, within fifteen (15) days after the occurrence thereof, discharged or stayed(whether through the posting of a bond or otherwise); or 9.7Other Obligations. The occurrence of any default under any agreement or obligation ofBorrower involving any Indebtedness in excess of Two Hundred Thousand29 Dollars ($200,000), after giving effect to any applicable grace period thereunder, which has resulted in a right bya third party to accelerate the maturity of such Indebtedness.SECTION 10. REMEDIES10.1General. Upon and during the continuance of any one or more Events of Default, (i) Agentmay, and at the direction of the Required Lenders shall, accelerate and demand payment of all or any part of theSecured Obligations together with a Prepayment Charge and declare them to be immediately due and payable(provided, that upon the occurrence of an Event of Default of the type described in Section 9.5, all of the SecuredObligations shall automatically be accelerated and made due and payable, in each case without any further noticeor act), (ii) Agent may, at its option, sign and file in Borrower’s name any and all collateral assignments, notices,control agreements, security agreements and other documents it deems necessary or appropriate to perfect orprotect the repayment of the Secured Obligations, and in furtherance thereof, Borrower hereby grants Agent anirrevocable power of attorney coupled with an interest, and (iii) Agent may notify any of Borrower’s accountdebtors to make payment directly to Agent, compromise the amount of any such account on Borrower’s behalfand endorse Agent’s name without recourse on any such payment for deposit directly to Agent’s account. Agentmay, and at the direction of the Required Lenders shall, exercise all rights and remedies with respect to theCollateral under the Loan Documents or otherwise available to it under the UCC and other applicable law,including the right to release, hold, sell, lease, liquidate, collect, realize upon, or otherwise dispose of all or anypart of the Collateral and the right to occupy, utilize, process and commingle the Collateral. All Agent’s rightsand remedies shall be cumulative and not exclusive.10.2Collection; Foreclosure. Upon the occurrence and during the continuance of any Event ofDefault, Agent may, and at the direction of the Required Lenders shall, at any time or from time to time, apply,collect, liquidate, sell in one or more sales, lease or otherwise dispose of, any or all of the Collateral, in its thencondition or following any commercially reasonable preparation or processing, in such order as Agent mayelect. Any such sale may be made either at public or private sale at its place of business or elsewhere. Borroweragrees that any such public or private sale may occur upon ten (10) calendar days’ prior written notice toBorrower. Agent may require Borrower to assemble the Collateral and make it available to Agent at a placedesignated by Agent that is reasonably convenient to Agent and Borrower. The proceeds of any sale, dispositionor other realization upon all or any part of the Collateral shall be applied by Agent in the following order ofpriorities:First, to Agent and Lender in an amount sufficient to pay in full Agent’s and Lender’s reasonable costsand professionals’ and advisors’ fees and expenses as described in Section 11.11;Second, to Lender in an amount equal to the then unpaid amount of the Secured Obligations (includingprincipal, interest, and default rate interest pursuant to Section 2.3), in such order and priority as Agentmay choose in its sole discretion; and30 Finally, after the full and final payment in Cash of all of the Secured Obligations (other than inchoateobligations), to any creditor holding a junior Lien on the Collateral, or to Borrower or its representativesor as a court of competent jurisdiction may direct.Agent shall be deemed to have acted reasonably in the custody, preservation and disposition of any of the Collateral ifit complies with the obligations of a secured party under the UCC.10.3No Waiver. Agent shall be under no obligation to marshal any of the Collateral for the benefit ofBorrower or any other Person, and Borrower expressly waives all rights, if any, to require Agent to marshal anyCollateral. 10.4Cumulative Remedies. The rights, powers and remedies of Agent hereunder shall be in additionto all rights, powers and remedies given by statute or rule of law and are cumulative. The exercise of any one ormore of the rights, powers and remedies provided herein shall not be construed as a waiver of or election ofremedies with respect to any other rights, powers and remedies of Agent.SECTION 11. MISCELLANEOUS11.1Severability. Whenever possible, each provision of this Agreement shall be interpreted in suchmanner as to be effective and valid under applicable law, but if any provision of this Agreement shall beprohibited by or invalid under such law, such provision shall be ineffective only to the extent and duration ofsuch prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions ofthis Agreement.11.2Notice. Except as otherwise provided herein, any notice, demand, request, consent, approval,declaration, service of process or other communication (including the delivery of Financial Statements) that isrequired, contemplated, or permitted under the Loan Documents or with respect to the subject matter hereof shallbe in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of:(i) the day of transmission by electronic mail or hand delivery or delivery by an overnight express service orovernight mail delivery service; or (ii) the third calendar day after deposit in the United States of America mails,with proper first class postage prepaid, in each case addressed to the party to be notified as follows:(a)If to Agent:HERCULES CAPITAL, INC.Legal DepartmentAttention: Chief Legal Officer400 Hamilton Avenue, Suite 310Palo Alto, CA 94301email: legal@herculestech.comTelephone: 650-289-3060(b)If to Lender:31 HERCULES CAPITAL, INC.Legal DepartmentAttention: Chief Legal Officer400 Hamilton Avenue, Suite 310Palo Alto, CA 94301email: legal@herculestech.comTelephone: 650-289-3060(c)If to Borrower:VERASTEM, INC.Attention: Joseph Chiapponi117 Kendrick Street, Suite 500Needham, MA 02494email: jchiapponi@verastem.comTelephone: (781) 292-4213or to such other address as each party may designate for itself by like notice.11.3Entire Agreement; Amendments. (a)This Agreement and the other Loan Documents constitute the entire agreement andunderstanding of the parties hereto in respect of the subject matter hereof and thereof, and supersede andreplace in their entirety any prior proposals, term sheets, non-disclosure or confidentiality agreements, letters,negotiations or other documents or agreements, whether written or oral, with respect to the subject matterhereof or thereof (including Agent’s revised proposal letter dated December 2, 2016). (b)Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may beamended, supplemented or modified except in accordance with the provisions of this Section 11.3(b). TheRequired Lenders and Borrower party to the relevant Loan Document may, or, with the written consent of theRequired Lenders, the Agent and the Borrower party to the relevant Loan Document may, from time to time,(i) enter into written amendments, supplements or modifications hereto and to the other Loan Documents forthe purpose of adding any provisions to this Agreement or the other Loan Documents or changing in anymanner the rights of the Lenders or of the Borrower hereunder or thereunder or (ii) waive, on such terms andconditions as the Required Lenders or the Agent, as the case may be, may specify in such instrument, any ofthe requirements of this Agreement or the other Loan Documents or any default or Event of Default and itsconsequences; provided, however, that no such waiver and no such amendment, supplement or modificationshall (A) forgive the principal amount or extend the final scheduled date of maturity of any Loan, extend thescheduled date of any amortization payment in respect of any Term Loan Advance, reduce the stated rate ofany interest or fee payable hereunder) or extend the scheduled date of any payment thereof, in each casewithout the written consent of each Lender directly affected thereby; (B) eliminate or reduce the voting rights ofany Lender under this Section 11.3(b) without the written consent of such Lender; (C) reduce any percentagespecified in the definition of32 Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligationsunder this Agreement and the other Loan Documents, release all or substantially all of the Collateral or releasea Borrower from its obligations under the Loan Documents, in each case without the written consent of allLenders; or (D) amend, modify or waive any provision of Section 11.17 without the written consent of theAgent. Any such waiver and any such amendment, supplement or modification shall apply equally to eachLender and shall be binding upon Borrower, the Lender, the Agent and all future holders of the Loans.11.4No Strict Construction. The parties hereto have participated jointly in the negotiation anddrafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, thisAgreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proofshall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.11.5No Waiver. The powers conferred upon Agent and Lender by this Agreement are solely toprotect its rights hereunder and under the other Loan Documents and its interest in the Collateral and shall notimpose any duty upon Agent or Lender to exercise any such powers. No omission or delay by Agent or Lenderat any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenantsor provisions hereof by Borrower at any time designated, shall be a waiver of any such right or remedy to whichAgent or Lender is entitled, nor shall it in any way affect the right of Agent or Lender to enforce such provisionsthereafter.11.6Survival. All agreements, representations and warranties contained in this Agreement and theother Loan Documents or in any document delivered pursuant hereto or thereto shall be for the benefit of Agentand Lender and shall survive the execution and delivery of this Agreement. Sections 6.3 and 8.1 shall survive thetermination of this Agreement.11.7Successors and Assigns. (a)The provisions of this Agreement and the other Loan Documents shall inure to the benefit ofand be binding on Borrower and its permitted assigns (if any). Borrower shall not assign its obligations underthis Agreement or any of the other Loan Documents without Agent’s express prior written consent, and anysuch attempted assignment shall be void and of no effect. Agent and Lender may assign, transfer, or endorseits rights hereunder and under the other Loan Documents without prior notice to Borrower, and all of suchrights shall inure to the benefit of Agent’s and Lender’s successors and assigns; provided that as long as noEvent of Default has occurred and is continuing, neither Agent nor any Lender may assign, transfer or endorseits rights hereunder or under the Loan Documents to any party that is a direct competitor of Borrower (asreasonably determined by Agent), it being acknowledged that in all cases, any transfer to an Affiliate of anyLender or Agent shall be allowed.(b)The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain a copy ofeach assignment and assumption delivered to it and a register for33 the recordation of the names and addresses of the Lender, and the commitments of, and principal amounts (andstated interest) of the Term Loans owing to, each Lender pursuant to the terms hereof from time to time (the“Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Agentand the Lender shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as aLender hereunder for all purposes of the Loan Documents. The Register shall be available for inspection bythe Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.11.8Governing Law. This Agreement and the other Loan Documents have been negotiated anddelivered to Agent and Lender in the State of California, and shall have been accepted by Agent and Lender inthe State of California. Payment to Agent and Lender by Borrower of the Secured Obligations is due in the Stateof California. This Agreement and the other Loan Documents shall be governed by, and construed and enforcedin accordance with, the laws of the State of California, excluding conflict of laws principles that would cause theapplication of laws of any other jurisdiction.11.9Consent to Jurisdiction and Venue. All judicial proceedings (to the extent that the referencerequirement of Section 11.10 is not applicable) arising in or under or related to this Agreement or any of the otherLoan Documents may be brought in any state or federal court located in the State of California. By executionand delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to nonexclusivepersonal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction orvenue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack of jurisdictionor venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby inconnection with this Agreement or the other Loan Documents. Service of process on any party hereto in anyaction arising out of or relating to this Agreement shall be effective if given in accordance with the requirementsfor notice set forth in Section 11.2, and shall be deemed effective and received as set forth inSection 11.2. Nothing herein shall affect the right to serve process in any other manner permitted by law or shalllimit the right of either party to bring proceedings in the courts of any other jurisdiction.11.10Mutual Waiver of Jury Trial / Judicial Reference. (a)Because disputes arising in connection with complex financial transactions are most quickly andeconomically resolved by an experienced and expert Person and the parties wish applicable state and federallaws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applyingsuch applicable laws. EACH OF BORROWER, AGENT AND LENDER SPECIFICALLY WAIVESANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY,“CLAIMS”) ASSERTED BY BORROWER AGAINST AGENT, LENDER OR THEIR RESPECTIVEASSIGNEE OR BY AGENT, LENDER OR THEIR RESPECTIVE ASSIGNEE AGAINSTBORROWER. This waiver extends to all such Claims, including Claims that involve Persons other thanAgent, Borrower and Lender; Claims that arise out of or are in any way connected to the relationship among 34 Borrower, Agent and Lender; and any Claims for damages, breach of contract, tort, specific performance, orany equitable or legal relief of any kind, arising out of this Agreement, any other Loan Document. (b)If the waiver of jury trial set forth in Section 11.10(a) is ineffective or unenforceable, the partiesagree that all Claims shall be resolved by reference to a private judge sitting without a jury, pursuant to Code ofCivil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a refereeselected by the Presiding Judge of the Santa Clara County, California. Such proceeding shall be conducted inSanta Clara County, California, with California rules of evidence and discovery applicable to suchproceeding. (c)In the event Claims are to be resolved by judicial reference, either party may seek from a courtidentified in Section 11.9, any prejudgment order, writ or other relief and have such prejudgment order, writ orother relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subjectto resolution by judicial reference.11.11Professional Fees. Borrower promises to pay Agent’s and Lender’s reasonable and documentedout-of-pocket fees and expenses necessary to finalize the loan documentation, including but not limited toreasonable attorneys fees, UCC searches, filing costs, and other miscellaneous expenses. In addition, Borrowerpromises to pay any and all reasonable attorneys’ and other professionals’ fees and expenses incurred by Agentand Lender after the Closing Date in connection with or related to: (a) the Loan; (b) the administration,collection, or enforcement of the Loan; (c) the amendment or modification of the Loan Documents; (d) anywaiver, consent, release, or termination under the Loan Documents; (e) the protection, preservation, audit, fieldexam, sale, lease, liquidation, or disposition of Collateral or the exercise of remedies with respect to theCollateral; (f) any legal, litigation, administrative, arbitration, or out of court proceeding in connection with orrelated to Borrower or the Collateral, and any appeal or review thereof; and (g) any bankruptcy, restructuring,reorganization, assignment for the benefit of creditors, workout, foreclosure, or other action related to Borrower,the Collateral, the Loan Documents, including representing Agent or Lender in any adversary proceeding orcontested matter commenced or continued by or on behalf of Borrower’s estate, and any appeal or reviewthereof.11.12Confidentiality. Agent and Lender acknowledge that certain items of Collateral and informationprovided to Agent and Lender by Borrower or any Subsidiary are confidential and proprietary information ofBorrower or such Subsidiary, if and to the extent such information either (x) is marked as confidential byBorrower or any Subsidiary at the time of disclosure, or (y) should reasonably be understood to be confidential(the “Confidential Information”). Accordingly, Agent and Lender agree that any Confidential Information it mayobtain shall not be disclosed to any other Person or entity in any manner whatsoever, in whole or in part, withoutthe prior written consent of Borrower, except that Agent and Lender may disclose any such information: (a) toits own directors, officers, employees, accountants, counsel and other professional advisors and to its Affiliates ifAgent or Lender in their sole but reasonable discretion determines that any such party should have35 access to such information in connection with such party’s responsibilities in connection with the Loan or thisAgreement and, provided that such recipient of such Confidential Information either (i) agrees to be bound by theconfidentiality provisions of this paragraph or (ii) is otherwise subject to confidentiality restrictions thatreasonably protect against the disclosure of Confidential Information; (b) if such information is generallyavailable to the public; (c) if required or appropriate in any report, statement or testimony submitted to anygovernmental authority having or claiming to have jurisdiction over Agent or Lender; (d) if required orappropriate in response to any summons or subpoena or in connection with any litigation, to the extent permittedor deemed advisable by Agent’s or Lender’s counsel; (e) to comply with any legal requirement or law applicableto Agent or Lender; (f) to the extent reasonably necessary in connection with the exercise of any right or remedyunder any Loan Document, including Agent’s sale, lease, or other disposition of Collateral after an Event ofDefault; (g) to any participant or assignee of Agent or Lender or any prospective participant or assignee;provided, that such participant or assignee or prospective participant or assignee agrees in writing to be bound bythis Section prior to disclosure; or (h) otherwise with the prior consent of Borrower; provided, that any disclosuremade in violation of this Agreement shall not affect the obligations of Borrower or any of its Affiliates or anyguarantor under this Agreement or the other Loan Documents. 11.13 Assignment of Rights. Borrower acknowledges and understands that Agent or Lender may,subject to Section 11.7, sell and assign all or part of its interest hereunder and under the Loan Documents to anyPerson or entity (an “Assignee”). After such assignment the term “Agent” or “Lender” as used in the LoanDocuments shall mean and include such Assignee, and such Assignee shall be vested with all rights, powers andremedies of Agent and Lender hereunder with respect to the interest so assigned; but with respect to any suchinterest not so transferred, Agent and Lender shall retain all rights, powers and remedies hereby given. No suchassignment by Agent or Lender shall relieve Borrower of any of its obligations hereunder. Lender agrees that inthe event of any transfer by it of the Note(s)(if any), it will endorse thereon a notation as to the portion of theprincipal of the Note(s), which shall have been paid at the time of such transfer and as to the date to whichinterest shall have been last paid thereon.11.14Revival of Secured Obligations. This Agreement and the Loan Documents shall remain in fullforce and effect and continue to be effective if any petition is filed by or against Borrower for liquidation orreorganization, if Borrower becomes insolvent or makes an assignment for the benefit of creditors, if a receiver ortrustee is appointed for all or any significant part of Borrower’s assets, or if any payment or transfer of Collateralis recovered from Agent or Lender. The Loan Documents and the Secured Obligations and Collateral securityshall continue to be effective, or shall be revived or reinstated, as the case may be, if at any time payment andperformance of the Secured Obligations or any transfer of Collateral to Agent, or any part thereof is rescinded,avoided or avoidable, reduced in amount, or must otherwise be restored or returned by, or is recovered from,Agent, Lender or by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulentconveyance,” or otherwise, all as though such payment, performance, or transfer of Collateral had not beenmade. In the event that any payment, or any part thereof, is rescinded, reduced, avoided, avoidable, restored,returned, or recovered, the Loan Documents and the Secured Obligations shall be deemed, without any furtheraction or documentation, to have been36 revived and reinstated except to the extent of the full, final, and indefeasible payment to Agent or Lender in Cash.11.15Counterparts. This Agreement and any amendments, waivers, consents or supplements heretomay be executed in any number of counterparts, and by different parties hereto in separate counterparts, each ofwhich when so delivered shall be deemed an original, but all of which counterparts shall constitute but one andthe same instrument.11.16No Third Party Beneficiaries. No provisions of the Loan Documents are intended, nor will beinterpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any Personother than Agent, Lender and Borrower unless specifically provided otherwise herein, and, except as otherwiseso provided, all provisions of the Loan Documents will be personal and solely among Agent, the Lender and theBorrower.11.17Agency. (a)Lender hereby irrevocably appoints Hercules Capital, Inc. to act on its behalf as the Agenthereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf andto exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actionsand powers as are reasonably incidental thereto.(b)Lender agrees to indemnify the Agent in its capacity as such (to the extent not reimbursed byBorrower and without limiting the obligation of Borrower to do so), according to its respective TermCommitment percentages (based upon the total outstanding Term Commitments) in effect on the date on whichindemnification is sought under this Section 11.17, from and against any and all liabilities, obligations, losses,damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever thatmay at any time be imposed on, incurred by or asserted against the Agent in any way relating to or arising outof, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to hereinor therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent underor in connection with any of the foregoing; The agreements in this Section shall survive the payment of theLoans and all other amounts payable hereunder.(c)Agent in Its Individual Capacity. The Person serving as the Agent hereunder shall have thesame rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though itwere not the Agent and the term “Lender” shall, unless otherwise expressly indicated or unless the contextotherwise requires, include each such Person serving as Agent hereunder in its individual capacity.(d)Exculpatory Provisions. The Agent shall have no duties or obligations except those expresslyset forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agentshall not:(i)be subject to any fiduciary or other implied duties, regardless of whether any default or anyEvent of Default has occurred and is continuing;37 (ii)have any duty to take any discretionary action or exercise any discretionary powers, exceptdiscretionary rights and powers expressly contemplated hereby or by the other LoanDocuments that the Agent is required to exercise as directed in writing by the Lender,provided that the Agent shall not be required to take any action that, in its opinion or theopinion of its counsel, may expose the Agent to liability or that is contrary to any LoanDocument or applicable law; and(iii)except as expressly set forth herein and in the other Loan Documents, have any dutyto disclose, and the Agent shall not be liable for the failure to disclose, any informationrelating to the Borrower or any of its Affiliates that is communicated to or obtained by anyPerson serving as the Agent or any of its Affiliates in any capacity.(e)The Agent shall not be liable for any action taken or not taken by it (i) with the consent or at therequest of the Lender or as the Agent shall believe in good faith shall be necessary, under the circumstances or(ii) in the absence of its own gross negligence or willful misconduct.(f)The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) anystatement, warranty or representation made in or in connection with this Agreement or any other LoanDocument, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or inconnection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements orother terms or conditions set forth herein or therein or the occurrence of any default or Event of Default, (iv) thevalidity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any otheragreement, instrument or document or (v) the satisfaction of any condition set forth in Section 4 or elsewhereherein, other than to confirm receipt of items expressly required to be delivered to the Agent. (g)Reliance by Agent. Agent may rely, and shall be fully protected in acting, or refraining to act,upon, any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond orother paper or document that it has no reason to believe to be other than genuine and to have been signed orpresented by the proper party or parties or, in the case of cables, telecopies and telexes, to have been sent by theproper party or parties. In the absence of its gross negligence or willful misconduct, Agent may conclusivelyrely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificatesor opinions furnished to Agent and conforming to the requirements of the Loan Agreement or any of the otherLoan Documents. Agent may consult with counsel, and any opinion or legal advice of such counsel shall befull and complete authorization and protection in respect of any action taken, not taken or suffered by Agenthereunder or under any Loan Documents in accordance therewith. Agent shall have the right at any time toseek instructions concerning the administration of the Collateral from any court of competent jurisdiction. Agent shall not be under any obligation to exercise any of the rights or powers granted to Agent by thisAgreement, the Loan Agreement and the other Loan Documents at the request or direction of Lenders unlessAgent shall have been provided by Lender with adequate security and indemnity38 against the costs, expenses and liabilities that may be incurred by it in compliance with such request ordirection.11.18Publicity. None of the parties hereto nor any of its respective member businesses and Affiliatesshall, without the other parties’ prior written consent (which shall not be unreasonably withheld or delayed),publicize or use (a) the other party's name (including a brief description of the relationship among the partieshereto), logo or hyperlink to such other parties’ web site, separately or together, in written and oral presentations,advertising, promotional and marketing materials, client lists, public relations materials or on its web site(together, the " Publicity Materials"); (b) the names of officers of such other parties in the Publicity Materials; and(c) such other parties’ name, trademarks, servicemarks in any news or press release concerning such party;provided however, notwithstanding anything to the contrary herein, no such consent shall be required (i) to theextent necessary to comply with the requests of any regulators, legal requirements or laws applicable to suchparty, pursuant to any listing agreement with any national securities exchange (so long as such party providesprior notice to the other party hereto to the extent reasonably practicable) and (ii) to comply with Section 11.12. 11.19Further Transactions. Borrower has notified Agent that after the Closing Date, Borrower mayseek to enter into certain transactions pursuant to which Borrower would incur Indebtedness from time to timethat is secured solely by stock pledge agreements (by Borrower or a SPE), royalties (or rights therein or relatedthereof), rights to payment under royalties, licenses and the proceeds thereof solely with respect to clinical assets(the “Proposed Future Royalty Backed Indebtedness Transactions”). Borrower acknowledges that theconsummation of any Proposed Further Royalty Back Indebtedness Transaction requires the prior writtenconsent of Agent and Agent agrees to timely review any relevant term sheets and/or documentation relating toProposed Future Royalty Backed Indebtedness Transactions.(SIGNATURES TO FOLLOW)39 IN WITNESS WHEREOF, Borrower, Agent and Lender have duly executed and delivered this Loan andSecurity Agreement as of the day and year first above written. BORROWER: VERASTEM, INC. Signature:/s/ Robert Forrester Print Name:Robert Forrester Title:Chief Executive Officer Accepted in Palo Alto, California: AGENT: HERCULES CAPITAL, INC. Signature:/s/ Jennifer Choe Print Name:Jennifer Choe Title:Assistant General Counsel LENDER: HERCULES CAPITAL, INC. Signature:/s/ Jennifer Choe Print Name:Jennifer Choe Title:Assistant General Counsel 40 Table of Exhibits and Schedules Exhibit A:Advance Request Attachment to Advance RequestExhibit B:Term NoteExhibit C:Name, Locations, and Other Information for BorrowerExhibit D:Borrower’s Patents, Trademarks, Copyrights and LicensesExhibit E:Borrower’s Deposit Accounts and Investment AccountsExhibit F:Compliance CertificateExhibit G:Joinder AgreementExhibit H:ACH Debit Authorization AgreementSchedule 1SubsidiariesSchedule 1.1CommitmentsSchedule 1AExisting Permitted IndebtednessSchedule 1BExisting Permitted InvestmentsSchedule 1CExisting Permitted LiensSchedule 5.3Consents, Etc.Schedule 5.8Tax MattersSchedule 5.9Intellectual Property ClaimsSchedule 5.10Intellectual PropertySchedule 5.11Borrower ProductsSchedule 5.14Capitalization 41 EXHIBIT AADVANCE REQUESTTo:Agent:Date: __________, 20[__] Hercules Capital, Inc. (the “Agent”) 400 Hamilton Avenue, Suite 310 Palo Alto, CA 94301 email: legal@herculestech.com Attn: VERASTEM, INC. (“Borrower”) hereby requests from Hercules Capital, Inc. (“Lender”) an Advance in the amountof _____________________ Dollars ($________________) on ______________, _____ (the “Advance Date”)pursuant to the Loan and Security Agreement among Borrower, Agent and Lender (the “Agreement”). Capitalizedwords and other terms used but not otherwise defined herein are used with the same meanings as defined in theAgreement.Please:(a)Issue a check payable to Borrower________or(b)Wire Funds to Borrower’s account________ [IF FILED PUBLICLY, ACCOUNT INFOREDACTED FOR SECURITY PURPOSES]Bank: _____________________________Address: _____________________________ _____________________________ABA Number: _____________________________Account Number: _____________________________Account Name: _____________________________Contact Person: _____________________________Phone Number To Verify Wire Info: _____________________________Email address: _____________________________ Borrower represents that the conditions precedent to the Advance set forth in the Agreement are satisfied,waived, or shall be satisfied upon the making of such Advance, including but not limited to: (i) that no event that hashad or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing; (ii) that therepresentations and warranties set forth in the Agreement are and shall be true and correct in all material respects onand as of the Advance Date with the same effect as though made on and as of such date, except to the extent suchrepresentations and warranties expressly relate to an earlier date in which case they shall be true and correct in allmaterial respects as of such date; (iii) that Borrower is in compliance with all the terms and provisions set forth in eachLoan Document on its part to be observed or performed; and (iv) that as of the Advance Date, no fact or conditionexists that42 would (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default under the LoanDocuments. Borrower understands and acknowledges that Agent has the right to review the financial informationsupporting this representation and, based upon such review in its sole but reasonable discretion, Lender may decline tofund the requested Advance.Borrower hereby represents that Borrower’s corporate status and locations have not changed since the date ofthe Agreement or, if the Attachment to this Advance Request is completed, are as set forth in the Attachment to thisAdvance Request.Borrower agrees to notify Agent promptly before the funding of the Loan if any of the matters which havebeen represented above shall not be true and correct on the Borrowing Date and if Agent has received no such noticebefore the Advance Date then the statements set forth above shall be deemed to have been made and shall be deemedto be true and correct as of the Advance Date.Executed as of [ ], 20[ ].BORROWER: VERASTEM, INC.SIGNATURE:________________________TITLE:_____________________________PRINT NAME:______________________43 ATTACHMENT TO ADVANCE REQUESTDated: _______________________Borrower hereby represents and warrants to Agent that Borrower’s current name and organizational status is asfollows:Name:Verastem, Inc.Type of organization:CorporationState of organization:DelawareOrganization file number:4853179Borrower hereby represents and warrants to Agent that the street addresses, cities, states and postal codes of its currentlocations are as follows:117 Kendrick Street, Suite 500, Needham, MA 02494 44 EXHIBIT BTHE FOLLOWING INFORMATION IS SUPPLIED SOLELY FOR U.S. FEDERAL INCOME TAXPURPOSES. THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT (‘‘OID’’) WITHIN THEMEANING OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE‘‘CODE’’), AND THIS LEGEND IS REQUIRED BY SECTION 1275(C) OF THE CODE.HOLDERS MAY OBTAIN INFORMATION REGARDING THE AMOUNT OF OID, THE ISSUE PRICE,THE ISSUE DATE, AND THE YIELD TO MATURITY RELATING TO THE NOTES BY CONTACTING[NAME OR TITLE] [ADDRESS] [TELEPHONE NUMBER]SECURED TERM PROMISSORY NOTE$25,000,000Advance Date: ___ __, 20[ ] Maturity Date: _____ ___, 20[ ]FOR VALUE RECEIVED, VERASTEM, INC., a Delaware corporation, for itself and each of its QualifiedSubsidiaries (the “Borrower”) hereby promises to pay to Hercules Capital, Inc., a Maryland corporation (or itsregistered assigns) (the “Lender”) at 400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301 or such other place ofpayment as the registered holder of this Secured Term Promissory Note (this “Promissory Note”) may specify fromtime to time in writing, in lawful money of the United States of America, the principal amount of Twenty-Five MillionDollars ($25,000,000) or such other principal amount as Lender has advanced to Borrower, together with interest at arate as set forth in Section 2.1(c) of the Loan Agreement based upon a year consisting of 360 days, with interestcomputed daily based on the actual number of days in each month. This Promissory Note is the Note referred to in, and is executed and delivered in connection with, that certainLoan and Security Agreement dated [ ], 2017, by and among Borrower, Hercules Capital, Inc., a Marylandcorporation (the “Agent”) and the several banks and other financial institutions or entities from time to time partythereto as lender (as the same may from time to time be amended, modified or supplemented in accordance with itsterms, the “Loan Agreement”), and is entitled to the benefit and security of the Loan Agreement and the other LoanDocuments (as defined in the Loan Agreement), to which reference is made for a statement of all of the terms andconditions thereof. All payments shall be made in accordance with the Loan Agreement. All terms defined in theLoan Agreement shall have the same definitions when used herein, unless otherwise defined herein. An Event ofDefault under the Loan Agreement shall constitute a default under this Promissory Note. Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest underthe UCC or any applicable law. Borrower agrees to make all payments under this Promissory Note without setoff,recoupment or deduction and regardless of any counterclaim or defense. This Promissory Note has been negotiatedand delivered to Lender and is payable in the State of California. This Promissory Note shall be governed by andconstrued and enforced in accordance with, the laws of the State of California, excluding any conflicts of law rules orprinciples that would cause the application of the laws of any other jurisdiction.BORROWER FOR ITSELF ANDON BEHALF OF ITS QUALIFIED SUBSIDIARIES:VERASTEM, INC. SIGNATURE: TITLE: PRINT NAME: 45 EXHIBIT CNAME, LOCATIONS, AND OTHER INFORMATION FOR BORROWER1. Borrower represents and warrants to Agent that Borrower’s current name and organizational status as of theClosing Date is as follows:Name:Verastem, Inc.Type of organization:CorporationState of organization:DelawareOrganization file number:48531792. Borrower represents and warrants to Agent that for five (5) years prior to the Closing Date, Borrower did notdo business under any other name or organization or form except the following:Name:None.Used during dates of:None.Type of Organization:None.State of organization:None.Organization file number: None.Borrower’s fiscal year ends on December 31Borrower’s federal employer tax identification number is: 27-3269467 3. Borrower represents and warrants to Agent that its chief executive office is located at 117 Kendrick Street, Suite500, Needham, MA 02494.46 EXHIBIT DBORROWER’S PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES47 EXHIBIT EBORROWER’S DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS48 EXHIBIT FCOMPLIANCE CERTIFICATEHercules Capital, Inc. (as “Agent”)400 Hamilton Avenue, Suite 310Palo Alto, CA 94301Reference is made to that certain Loan and Security Agreement dated [ ], 2017 and the LoanDocuments (as defined therein) entered into in connection with such Loan and Security Agreement all as may beamended from time to time (hereinafter referred to collectively as the “Loan Agreement”) by and among VERASTEM,INC. (the “Company”) as Borrower, the several banks and other financial institutions or entities from time to timeparty thereto (collectively, the “Lender”) and Hercules Capital, Inc., as agent for the Lender (the “Agent”). Allcapitalized terms not defined herein shall have the same meaning as defined in the Loan Agreement.The undersigned is an Officer of the Company, knowledgeable of all Company financial matters, and isauthorized to provide certification of information regarding the Company; hereby certifies, in such capacity, that inaccordance with the terms and conditions of the Loan Agreement, the Company is in compliance for the period ending___________ of all covenants, conditions and terms and hereby reaffirms that all representations and warrantiescontained therein are true and correct in all material respects on and as of the date of this Compliance Certificate withthe same effect as though made on and as of such date, except to the extent such representations and warrantiesexpressly relate to an earlier date, after giving effect in all cases to any standard(s) of materiality contained in the LoanAgreement as to such representations and warranties. Attached are the required documents supporting the abovecertification. The undersigned further certifies that these are prepared consistent with past management practice (exceptfor the absence of footnotes with respect to unaudited financial statement and subject to normal year end adjustments)and are consistent from one period to the next except as explained below.REPORTING REQUIREMENTREQUIREDCHECK IFATTACHEDInterim Financial StatementsMonthly within 30 days(commencing 3/31/17) Interim Financial StatementsQuarterly within 45 days Audited Financial StatementsFYE within 90 days Liquidity Covenant: Borrower shall at all times maintain in accounts of Borrower that are subject to an AccountControl Agreement, unrestricted and unencumbered cash (other than as a result of the Loan Agreement) in anaggregate amount greater than or equal to the lesser of (a) one hundred twenty-five percent (125%) of the aggregateoutstanding Advances and (b) one hundred percent (100%) of all cash of Borrower maintained in any accounts (otherthan Excluded Accounts). 125% of Advances: $___________________49 Cash of Borrower maintained in Account Control Agreements: $_________________All cash of Borrower: $______________________Cash of Borrower in Excluded Accounts: $______________Complies: YesNoThe undersigned hereby also confirms the below disclosed accounts represent all depository accounts and securitiesaccounts presently open in the name of each Borrower or Borrower Subsidiary/Affiliate, as applicable. Depository AC #FinancialInstitutionAccount Type(Depository /Securities)Last MonthEndingAccountBalancePurpose ofAccountBORROWERName/Address: 1 2 3 4 5 6 7 BORROWER SUSIDIARY/ AFFILIATE COMPANYName/Address 1 2 3 4 5 6 7 50  Very Truly Yours, VERASTEM, INC. By: Name: Its: 51 EXHIBIT GFORM OF JOINDER AGREEMENTThis Joinder Agreement (the “Joinder Agreement”) is made and dated as of [ ], 20[ ], and is entered intoby and between__________________., a ___________ corporation (“Subsidiary”), and HERCULES CAPITAL,INC., a Maryland corporation (as “Agent”). RECITALSA. Subsidiary’s Affiliate, VERASTEM, INC., a Delaware corporation (“Company”) has entered into thatcertain Loan and Security Agreement dated [ ], 2017, with the several banks and other financial institutions orentities from time to time party thereto as lender (collectively, the “Lender”) and the Agent, as such agreement may beamended (the “Loan Agreement”), together with the other agreements executed and delivered in connection therewith;B. Subsidiary acknowledges and agrees that it will benefit both directly and indirectly from Company’sexecution of the Loan Agreement and the other agreements executed and delivered in connection therewith;AGREEMENTNOW THEREFORE, Subsidiary and Agent agree as follows:1.The recitals set forth above are incorporated into and made part of this Joinder Agreement. Capitalized terms notdefined herein shall have the meaning provided in the Loan Agreement.2. By signing this Joinder Agreement, Subsidiary shall be bound by the terms and conditions of the Loan Agreementthe same as if it were the Borrower (as defined in the Loan Agreement) under the Loan Agreement, mutatismutandis, provided however, that (a) with respect to (i) Section 5.1 of the Loan Agreement, Subsidiary representsthat it is an entity duly organized, legally existing and in good standing under the laws of [ ], (b) neither Agentnor Lender shall have any duties, responsibilities or obligations to Subsidiary arising under or related to the LoanAgreement or the other Loan Documents, (c) that if Subsidiary is covered by Company’s insurance, Subsidiary shallnot be required to maintain separate insurance or comply with the provisions of Sections 6.1 and 6.2 of the LoanAgreement, and (d) that as long as Company satisfies the requirements of Section 7.1 of the Loan Agreement,Subsidiary shall not have to provide Agent separate Financial Statements. To the extent that Agent or Lender hasany duties, responsibilities or obligations arising under or related to the Loan Agreement or the other LoanDocuments, those duties, responsibilities or obligations shall flow only to Company and not to Subsidiary or anyother Person or entity. By way of example (and not an exclusive list): (i) Agent’s providing notice to Company inaccordance with the Loan Agreement or as otherwise agreed among Company, Agent and Lender shall be deemedprovided to Subsidiary; (ii) a Lender’s providing an Advance to Company shall be deemed an Advance toSubsidiary; and (iii) Subsidiary shall have no right to request an Advance or make any other demand on Lender.3.Subsidiary agrees not to certificate its equity securities without Agent’s prior written consent, which consent may beconditioned on the delivery of such equity securities to Agent in order to perfect Agent’s security interest in suchequity securities.4.Subsidiary acknowledges that it benefits, both directly and indirectly, from the Loan Agreement, and herebywaives, for itself and on behalf on any and all successors in interest (including without limitation any assignee forthe benefit of creditors, receiver, bankruptcy trustee or itself as debtor-in-possession under any bankruptcyproceeding) to the fullest extent provided by law, any and all claims, rights or52 defenses to the enforcement of this Joinder Agreement on the basis that (a) it failed to receive adequateconsideration for the execution and delivery of this Joinder Agreement or (b) its obligations under this JoinderAgreement are avoidable as a fraudulent conveyance.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 53 [SIGNATURE PAGE TO JOINDER AGREEMENT]SUBSIDIARY:_________________________________.By:Name:Title:Address:Telephone: ___________email: ____________AGENT:HERCULES CAPITAL, INC.By:____________________________________Name:__________________________________Title: ___________________________________Address:400 Hamilton Ave., Suite 310Palo Alto, CA 94301email: legal@herculestech.comTelephone: 650-289-3060 54 EXHIBIT HACH DEBIT AUTHORIZATION AGREEMENTHercules Capital, Inc.400 Hamilton Avenue, Suite 310Palo Alto, CA 94301Re: Loan and Security Agreement dated _______________ (the “Agreement”) by and among Verastem, Inc. (the “Borrower”), each of its Qualified Subsidiaries (as defined therein) the Lender (as defined therein) fromtime to time party thereto and Hercules Capital, Inc., as administrative agent and collateral agent for itself andthe Lender (the “Agent”)In connection with the above referenced Agreement, the Borrower hereby authorizes the Company to initiate debitentries for (i) the periodic payments due under the Agreement and (ii) out-of-pocket legal fees and costs incurred byAgent or Lender pursuant to Section 11.11 of the Agreement to the Borrower’s account indicated below. TheBorrower authorizes the depository institution named below to debit to such account. [IF FILED PUBLICLY, ACCOUNT INFO REDACTED FOR SECURITY PURPOSES] This authority will remain in full force and effect so long as any amounts are due under the Agreement.VERASTEM, INC.(Borrower)(Please Print)By: _________________________________________Date: ________________________________________ 55 DEPOSITORY NAMEBRANCHCITYSTATE AND ZIP CODETRANSIT/ABA NUMBERACCOUNT NUMBERSCHEDULE 1.1COMMITMENTSLENDERTRANCHETERM LOANCOMMITMENTHercules Capital, Inc.Term A Loan$2,500,000Hercules Capital, Inc.Term B Loan$2,500,000Hercules Capital, Inc.Term C Loan$5,000,000Hercules Capital, Inc.Term D Loan$15,000,000TOTAL COMMITMENTS $25,000,000 56Exhibit 21.1List of Registrant’s SubsidiariesVerastem Securities Company, incorporated in Massachusetts, a wholly owned subsidiary. Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S‑8 No. 333‑180475) pertaining to the 2010 Equity Incentive Plan and the2012 Incentive Plan of Verastem, Inc.,(2)Registration Statement (Form S‑8 No. 333‑190578) pertaining to the 2012 Incentive Plan ofVerastem, Inc.,(3)Registration Statement (Form S‑8 No. 333‑201075) pertaining to the 2014 Inducement Award Program ofVerastem, Inc., and(4)Registration Statement (Form S‑8 No. 333‑201076) pertaining to the 2012 Incentive Plan ofVerastem, Inc.(5)Registration Statement (Form S‑8 No. 333‑211235) pertaining to the 2012 Incentive Plan ofVerastem, Inc.of our report dated March 23, 2017 with respect to the consolidated financial statements of Verastem, Inc. included in thisAnnual Report (Form 10‑K) of Verastem, Inc. for the year ended December 31, 2016./s/ Ernst & Young LLPBoston, MassachusettsMarch 23, 2017 Exhibit 31.1CERTIFICATIONSI, Robert Forrester certify that:1.I have reviewed this Annual Report on Form 10‑K of Verastem, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report,fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls andprocedures to be designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of anannual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internalcontrol over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board ofdirectors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting.Chief Executive Officer /s/ Robert ForresterRobert ForresterChief Executive Officer Date: March 23, 2017Exhibit 31.2CERTIFICATIONSI, Joseph Chiapponi, certify that:1.I have reviewed this Annual Report on Form 10‑K of Verastem, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report,fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls andprocedures to be designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control overfinancial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented inthis report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of anannual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internalcontrol over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation ofinternal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board ofdirectors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal controlover financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant’s internal control over financial reporting. /s/ JoSEPH CHIAPPONI Joseph Chiapponi Vice President, FinanceDate: March 23, 2017Exhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report on Form 10‑K of Verastem, Inc. (the “Company”) for the period endedDecember 31, 2016 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), theundersigned, Robert Forrester, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that to my knowledge:(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934 as amended; and(2)the information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company. /s/ Robert Forrester Robert Forrester Chief Executive OfficerDate: March 23, 2017A signed original of this written statement required by Section 906 has been provided to the Company and will beretained by the Company and furnished to the SEC or its staff upon request.Exhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report on Form 10‑K of Verastem, Inc. (the “Company”) for the period endedDecember 31, 2016 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), theundersigned, Joseph Chiapponi, Vice President, Finance of the Company, hereby certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that to my knowledge:(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934 as amended; and(2)the information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company. /s/ Joseph Chiapponi Joseph Chiapponi Vice President, FinanceDate: March 23, 2017A signed original of this written statement required by Section 906 has been provided to the Company and will beretained by the Company and furnished to the SEC or its staff upon request.  Exhibit 99.1 Verastem Reports Year-End 2016 Financial Results BOSTON, MA – March 23, 2017 – Verastem, Inc. (NASDAQ: VSTM), focused on discovering and developing drugs to treatcancer, today reported financial results for the year ended December 31, 2016, and also provided an overview of certaincorporate developments. “2016 was a year of significant achievement for Verastem with the in-licensing of duvelisib, a late-stage, clinical productcandidate with broad poten(cid:46)al across B-cell and T-cell lymphoid malignancies, and the advancement of defac(cid:46)nib into clinicaldevelopment in combina(cid:46)on with immuno-oncology agents,” said Robert Forrester, President and Chief Execu(cid:46)ve Officerof Verastem. “As we enter 2017, we are laser-focused on several important milestones, beginning with repor(cid:46)ng top-lineduvelisib data from the Phase 3 DUO™ study in chronic lymphocy(cid:46)c leukemia (CLL) expected mid-year 2017. There remains anunmet medical need for pa(cid:46)ents with relapsed CLL. We believe duvelisib has poten(cid:46)al as a convenient, oral monotherapy withan expected and manageable safety profile for pa(cid:46)ents with relapsed CLL. For defac(cid:46)nib, we look forward to advancing ourongoing combination trials into important expansion cohorts across several high unmet need indications.” Mr. Forrester con(cid:46)nued, “On the financial front, we ended 2016 with $80.9 million in cash, cash equivalents and investments,which we believe is sufficient to support our research and development programs and opera(cid:46)ons into 2018. In March 2017,we entered into a loan facility with Hercules Capital, Inc. for up to $25.0 million, subject to certain condi(cid:46)ons including posi(cid:46)veDUO data, which would provide us with additional financial flexibility to advance duvelisib.” Fourth Quarter 2016 and Recent Highlights: Duvelisib ·In-licensed Late-stage, Complementary Oncology Product Candidate Duvelisib – Verastem and Infinity Pharmaceu(cid:46)cals,Inc. (Infinity) announced the signing of an agreement under which Verastem licensed exclusive worldwide rights to developand commercialize duvelisib, an inves(cid:46)ga(cid:46)onal product candidate currently in development for hematologic malignancies.Duvelisib is well aligned with Verastem's strategic focus of developing novel an(cid:46)-cancer therapeu(cid:46)cs that modulate thetumor microenvironment. The transac(cid:46)on provides a new oncology product candidate with demonstrated ac(cid:46)vity inlymphoid malignancies. ·Ongoing Phase 3 DUO Study in Relapsed or Refractory CLL – The safety and efficacy of duvelisib is currently beingevaluated in the randomized Phase 3 DUO study in pa(cid:46)ents with relapsed or refractory CLL. In the DUO study,approximately 300 pa(cid:46)ents were randomized 1:1 to receive duvelisib (25mg BID) or ofatumumab (8 weekly infusions,star(cid:46)ng with an ini(cid:46)al intravenous dose of 300mg on day 1 followed by 7 weekly doses of 2,000mg, then 2,000mg monthlyfor 4 cycles). The primary endpoint of this study is progression free survival (PFS). Key secondary endpoints includeoverall response rate (ORR), overall survival, dura(cid:46)on of response (DOR) and safety. Verastem expects to report top-linedata from the DUO study in mid-year 2017.  ·Posi(cid:34)ve Phase 2 DYNAMO™ Data Reported at ASH 2016 – Posi(cid:46)ve Phase 2 clinical data from the DYNAMO studydemonstra(cid:46)ng the clinical ac(cid:46)vity of duvelisib in pa(cid:46)ents with relapsed refractory indolent non-Hodgkin lymphoma (iNHL)were presented at the 58th American Society of Hematology (ASH) Annual Mee(cid:46)ng in December 2016. In an oralpresenta(cid:46)on, (cid:46)tled “A phase 2 study demonstra(cid:46)ng the clinical ac(cid:46)vity of duvelisib in pa(cid:46)ents with relapsed refractoryindolent non-Hodgkin lymphoma,” (Publica(cid:46)on ID: 1218) Ian Flinn, M.D., Ph.D. (Director, Hematologic MalignanciesProgram, Sarah Cannon Research Ins(cid:46)tute), described results from 129 pa(cid:46)ents with double refractory iNHL (median 3prior an(cid:46)-cancer regimens, range 1-18). The study met its primary endpoint, achieving an ORR of 46% as determined by anindependent review commi(cid:76)ee (IRC) (p=0.0001; 95% CI 0.37-0.55). Among disease subgroups, the ORR was 41% infollicular lymphoma (n=83), 68% in small lymphocy(cid:46)c lymphoma (n=28), and 33% in marginal zone lymphoma (n=18). Themedian DOR among all pa(cid:46)ents was 9.9 months. Notably, 83% of pa(cid:46)ents had reduc(cid:46)ons in the size of their target lymphnodes per the IRC. Duvelisib was generally well tolerated, with an expected and manageable safety profile with appropriaterisk mi(cid:46)ga(cid:46)on. The DYNAMO study showed that duvelisib monotherapy has a favorable benefit-risk profile in refractoryiNHL patients and may represent an important treatment option in this population. Defactinib (VS-6063) ·Dosed the First Pa(cid:34)ent in Combina(cid:34)on Trial of Defac(cid:34)nib and Avelumab in Pa(cid:34)ents with Ovarian Cancer – Asannounced in January 2017, the first pa(cid:46)ent was dosed in a new clinical trial evalua(cid:46)ng avelumab, an inves(cid:46)ga(cid:46)onal fullyhuman an(cid:46)-PD-L1 IgG1 monoclonal an(cid:46)body, in combina(cid:46)on with Verastem’s defac(cid:46)nib, an inves(cid:46)ga(cid:46)onal focal adhesionkinase (FAK) inhibitor, in pa(cid:46)ents with advanced ovarian cancer. This mul(cid:46)center, open-label, dose-escala(cid:46)on and dose-expansion Phase 1/2 clinical trial is designed to assess the safety, pharmacokine(cid:46)cs, pharmacodynamics, and ini(cid:46)alobserva(cid:46)ons of clinical ac(cid:46)vity of the avelumab/defac(cid:46)nib combina(cid:46)on in pa(cid:46)ents with recurrent or refractory stage III-IVovarian cancer. The study is being conducted in collabora(cid:46)on with the alliance between Merck KGaA, Darmstadt,Germany, which in the U.S. and Canada operates as EMD Serono, and Pfizer, and is expected to enroll approximately 100patients at up to 15 sites across the U.S. Corporate and Financial ·Hagop Youssoufian, MSc, M.D., Named Head of Hematology and Oncology Development – In January 2017, Dr.Youssoufian assumed this leadership role at Verastem to oversee the clinical and regulatory development of Verastem’spipeline, including duvelisib, and provide overall strategic and tac(cid:46)cal leadership to our hematology-oncology clinicalprograms. Dr. Youssoufian brings over 25 years of product development and commercializa(cid:46)on experience to Verastem,having served in senior leadership roles at several oncology-focused companies, including BIND Therapeu(cid:46)cs, ProgenicsPharmaceu(cid:46)cals, Ziopharm Oncology, Imclone Systems, Sanofi Aven(cid:46)s and Bristol-Myers Squibb where he was involved inthe development of Sprycel®, Taxotere® and Erbitux®. ·Addi(cid:34)onal Key Personnel Appointments – Recently, Michael Ferraresso joined Verastem as Vice President, CommercialOpera(cid:46)ons, and Verastem also appointed several highly experienced individuals to the Clinical and Scien(cid:46)fic AdvisoryBoard including:oLori Kunkel, M.D., Former Chief Medical Officer, PharmacyclicsoEdmund J. Pezalla, M.D., MPH, Former VP, Pharmaceutical Policy and Strategy at AetnaoGreg Berk, M.D., Former Chief Medical Officer, VerastemoCheryl Cohen, Former Chief Commercial Officer, MedivationoBrian Stuglik, PharmD., Former VP and Chief Marketing Officer, Oncology Global Marketing, Eli Lilly  ·Secured $25 Million Loan Facility – In March 2017, Verastem entered into a Loan and Security Agreement with HerculesCapital, Inc. for up to $25.0 million in financing. Verastem received the first $2.5 million of financing under the Loan andSecurity Agreement when the transac(cid:46)on closed. The proceeds will be used for Verastem’s ongoing research anddevelopment programs and for general corporate purposes. Addi(cid:46)onal tranches of up to $22.5 million in aggregate will beavailable subject to certain condi(cid:46)ons, including posi(cid:46)ve data from the Phase 3 DUO clinical trial evalua(cid:46)ng duvelisib inpatients with relapsed or refractory CLL. Full Year 2016 Financial Results Net loss for the year ended December 31, 2016 (2016 Period) was $36.4 million, or $0.99 per share, as compared to a net lossof $57.9 million, or $1.61 per share, for the year ended December 31, 2015 (2015 Period). Net loss includes non-cash stock-based compensation expense of $6.2 million and $9.7 million for the 2016 Period and 2015 Period, respectively. Research and development expense for the 2016 Period was $19.8 million compared to $40.6 million for the 2015 Period. The$20.8 million decrease from the 2015 Period to the 2016 Period was primarily related to a decrease of $15.6 million in externalcontract research organiza(cid:46)on expense for outsourced biology, chemistry, development and clinical services, which includesour clinical trial costs, a $3.4 million decrease in personnel related costs, primarily due to the reduc(cid:46)on in workforce inOctober 2015, a decrease of $1.3 million in stock-based compensa(cid:46)on expense and a decrease of $1.5 million in lab supplies,travel and other research and development expense. These decreases were par(cid:46)ally offset by an increase of approximately$947,000 in consulting and professional fees. General and administra(cid:46)ve expense for the 2016 Period was $17.2 million compared to $17.6 million for the 2015 Period. Theapproximate $411,000 decrease from the 2015 Period to the 2016 Period primarily resulted from a decrease of $2.1 million instock-based compensation expense. This decrease was partially offset by increases of $1.1 million in consulting and professionalfees, approximately $280,000 in personnel costs, and a net increase of approximately $306,000 of other general andadministrative costs. As of December 31, 2016, Verastem had cash, cash equivalents and investments of $80.9 million compared to $110.3 million asof December 31, 2015. Verastem used $29.5 million for operating activities during the 2016 Period. The number of outstanding common shares as of December 31, 2016, was 36,992,418. Financial Guidance Based on our current opera(cid:46)ng plans, we expect to have sufficient cash, cash equivalents and investments to fund our researchand development programs and operations into 2018.  Conference Call Information The Verastem management team will host a conference call today, Thursday, March 23, 2017, at 4:30 PM (ET). The call can beaccessed by dialing 1-877-341-5660 or 1-315-625-3226 five minutes prior to the start of the call and providing the passcode89196444. The live, listen-only webcast of the conference call can be accessed by visi(cid:46)ng the investors sec(cid:46)on of the Company’s website atwww.verastem.com. A replay of the webcast will be archived on the Company’s website for 90 days following the call. About the Tumor Microenvironment The tumor microenvironment encompasses various cellular popula(cid:46)ons and extracellular matrices within the tumor or cancerniche that support cancer cell survival. This includes immunosuppressive cell popula(cid:46)ons such as regulatory T-cells, myeloid-derived suppressor cells, M2 tumor-associated macrophages, as well as tumor-associated fibroblasts and extracellular matrixproteins which can hamper the entry and therapeu(cid:46)c benefit of cytotoxic immune cells and an(cid:46)-cancer drugs. In addi(cid:46)on totarge(cid:46)ng the prolifera(cid:46)ve and survival signaling of cancer cells, Verastem’s product candidates, including duvelisib anddefac(cid:46)nib, also target the tumor microenvironment as a mechanism of ac(cid:46)on to poten(cid:46)ally improve a pa(cid:46)ent’s response totherapy. About Duvelisib Duvelisib is an inves(cid:46)ga(cid:46)onal, dual inhibitor of phosphoinosi(cid:46)de 3-kinase (PI3K)-delta and PI3K-gamma, two enzymes that areknown to help support the growth and survival of malignant B-cells and T-cells. PI3K signaling may lead to the prolifera(cid:46)on ofmalignant B-cells and is thought to play a role in the forma(cid:46)on and maintenance of the suppor(cid:46)ve tumor microenvironment.Duvelisib is currently being evaluated in late- and mid-stage clinical trials, including DUO™, a randomized, Phase 3 monotherapystudy in pa(cid:46)ents with relapsed or refractory CLL, and DYNAMO™, a single-arm, Phase 2 monotherapy study in pa(cid:46)ents withrefractory iNHL that achieved its primary endpoint of ORR upon top-line analysis of efficacy data. Duvelisib is also beingevaluated for the treatment of hematologic malignancies through inves(cid:46)gator-sponsored studies, including T-cell lymphoma.Information about duvelisib clinical trials can be found on www.clinicaltrials.gov. About Defactinib Defac(cid:46)nib is an inves(cid:46)ga(cid:46)onal inhibitor of FAK, a non-receptor tyrosine kinase encoded by the PTK-2 gene that mediatesoncogenic signaling in response to cellular adhesion and growth factors. Based on the mul(cid:46)-faceted roles of FAK, defac(cid:46)nib isused to treat cancer through modula(cid:46)on of the tumor microenvironment, enhancement of an(cid:46)-tumor immunity, and reduc(cid:46)onof cancer stem cells.Defac(cid:46)nib is currently being evaluated in three separate clinical collabora(cid:46)ons in combina(cid:46)on withimmunotherapeu(cid:46)c agents for the treatment of several different cancer types including pancrea(cid:46)c cancer, ovarian cancer, non-small cell lung cancer, and mesothelioma. These studies are combina(cid:46)on clinical trials with pembrolizumab and avelumab fromMerck & Co. and Pfizer/Merck KGaA, respec(cid:46)vely. Informa(cid:46)on about these and addi(cid:46)onal clinical trials evalua(cid:46)ng thesafety and efficacy of defactinib can be found on www.clinicaltrials.gov. 1,2,345678,9 10,11,12 About Verastem, Inc. Verastem, Inc. (NASDAQ:VSTM) is a biopharmaceu(cid:46)cal company focused on discovering and developing drugs to improveoutcomes for pa(cid:46)ents with cancer. Verastem is currently developing duvelisib, a dual inhibitor of PI3K-delta and PI3K-gamma,which has successfully met its primary endpoint in a Phase 2 study in iNHL and is currently being evaluated in a Phase 3 clinicaltrial in pa(cid:46)ents with CLL. In addi(cid:46)on, Verastem is developing the FAK inhibitor defac(cid:46)nib, which is currently being evaluated inthree separate clinical collabora(cid:46)ons in combina(cid:46)on with immunotherapeu(cid:46)c agents for the treatment of several differentcancer types, including pancrea(cid:46)c cancer, ovarian cancer and non-small cell lung cancer, and mesothelioma. Verastem’sproduct candidates seek to treat cancer by modula(cid:46)ng the local tumor microenvironment, enhancing an(cid:46)-tumor immunity andreducing cancer stem cells. For more information, please visit www.verastem.com. Verastem forward-looking statements notice: This press release includes forward-looking statements about Verastem's strategy, future plans and prospects, includingstatements regarding the development and ac(cid:46)vity of Verastem's inves(cid:46)ga(cid:46)onal product candidates, including duvelisib anddefac(cid:46)nib (VS-6063), and Verastem's PI3K and FAK programs generally, the structure of our planned and pending clinical trialsand the (cid:46)meline and indica(cid:46)ons for clinical development, including repor(cid:46)ng top-line data, and regulatory submissions, ourrights to develop or commercialize our product candidates and our ability to finance contemplated development ac(cid:46)vi(cid:46)es andfund opera(cid:46)ons for a specified period. The words "an(cid:46)cipate," "believe," "es(cid:46)mate," "expect," "intend," "may," "plan,""predict," "project," "target," "poten(cid:46)al," "will," "would," "could," "should," "con(cid:46)nue," and similar expressions are intended toiden(cid:46)fy forward-looking statements, although not all forward-looking statements contain these iden(cid:46)fying words. Eachforward-looking statement is subject to risks and uncertain(cid:46)es that could cause actual results to differ materially from thoseexpressed or implied in such statement. Applicable risks and uncertain(cid:46)es include the risks that the preclinical tes(cid:46)ng ofVerastem's product candidates and preliminary or interim data from clinical trials may not be predic(cid:46)ve of the results orsuccess of ongoing or later clinical trials; that data may not be available when expected, including for the Phase 3 DUO™ study;that enrollment of clinical trials may take longer than expected; that our product candidates will cause unexpected safety eventsor result in an unmanageable safety profile as compared to their level of efficacy; that duvelisib will be ineffec(cid:46)ve at trea(cid:46)ngpa(cid:46)ents with lymphoid malignancies; that Verastem will be unable to successfully ini(cid:46)ate or complete the clinical developmentof its product candidates; that the development of Verastem's product candidates will take longer or cost more than planned;that Verastem may not have sufficient cash to fund its contemplated opera(cid:46)ons; that Verastem or Infinity will fail to fullyperform under the duvelisib license agreement; that the transi(cid:46)on of the duvelisib program from Infinity will not be completed;that Verastem may be unable to make addi(cid:46)onal draws under its debt facility or obtain adequate financing in the future throughproduct licensing, co-promo(cid:46)onal arrangements, public or private equity, debt financing or otherwise; that Verastem will notpursue or submit regulatory filings for its product candidates, including for duvelisib in pa(cid:46)ents with CLL or iNHL; and thatVerastem's product candidates will not receive regulatory approval, become commercially successful products, or result in newtreatment op(cid:46)ons being offered to pa(cid:46)ents. Other risks and uncertain(cid:46)es include those iden(cid:46)fied under the heading "RiskFactors" in Verastem's Annual Report on Form 10-K for the year ended December 31, 2016 and in any subsequent filings withthe U.S. Securi(cid:46)es and Exchange Commission. The forward-looking statements contained in this press release reflect Verastem'sviews as of the date of this release, and Verastem does not undertake and specifically disclaims any obliga(cid:46)on to update anyforward-looking statements. Verastem, Inc.Brian Sullivan, 781-292-4214bsullivan@verastem.com ReferencesWinkler D.G., Faia K.L., DiNi(cid:76)o J.P. et al. PI3K-delta and PI3K-gamma inhibi(cid:46)on by IPI-145 abrogates immune responses andsuppresses activity in autoimmune and inflammatory disease models. Chem Biol 2013; 20:1-11.Reif K et al.Cu(cid:90)ng Edge: Differen(cid:46)al Roles for Phosphoinosi(cid:46)de 3 kinases, p110-gamma and p110-delta, in lymphocytechemotaxis and homing. J Immunol 2004:173:2236-2240.Schmid M et al. Receptor Tyrosine Kinases and TLR/IL1Rs Unexpectedly ac(cid:46)vate myeloid cell PI3K, a single convergent pointpromoting tumor inflammation and progression. Cancer Cell 2011;19:715-727. www.clinicaltrials.gov, NCT02004522 www.clinicaltrials.gov, NCT01882803 www.clinicaltrials.gov, NCT02783625, NCT02783625, NCT02158091Schaller MD and Parsons JT. Focal adhesion kinase: an integrin-linked protein tyrosine kinase. Trends Cell Biol. 1993 3: 258-62.Jiang H et al. Targe(cid:46)ng focal adhesion kinase renders pancrea(cid:46)c cancers responsive to checkpoint immunotherapy. Nat Med2016: Aug 22(8) 851-60.Sulzmaier FJ et al. FAK in cancer: mechanistic findings and clinical applications. Nature Rev Cancer. 2014 14: 598-610. www.clinicaltrials.gov, NCT02546531www.clinicaltrials.gov, NCT02943317 www.clinicaltrials.gov, NCT02758587 1 2 3 4567891011 12 Verastem, Inc.Unaudited Selected Consolidated Balance Sheets(in thousands) December 31, December 31, 2016 2015 Cash, cash equivalents and investments $80,897 $110,258 Prepaid expenses and other current assets 398 585 Property and equipment, net 1,417 2,048 Other assets 917 203 Total assets $83,629 $113,094 Accounts payable and accrued expenses $10,991 $10,040 Other liabilities 341 585 Stockholders’ equity 72,297 102,469 Total liabilities and stockholders’ equity $83,629 $113,094  Verastem, Inc.Unaudited Condensed Consolidated Statements of Operations(in thousands, except per share amounts) Year ended December 31, 2016 2015 Operating expenses: Research and development $19,779 $40,565 General and administrative 17,223 17,634 Total operating expenses 37,002 58,199 Loss from operations (37,002) (58,199) Interest income 562 334 Net loss $(36,440) $(57,865) Net loss per share—basic and diluted $(0.99) $(1.61) Weighted-average number of common shares used in net loss per share-basic and diluted 36,988 35,932 

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