Verastem Oncology
Annual Report 2017

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, 2017or☐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 reportingcompany)Smaller reporting company☐Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐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, 2017 was $79,779,254.The number of shares outstanding of the registrant’s common stock as of March 7, 2018 was 50,800,908. Table of ContentsTABLE OF CONTENTSPART IItem 1. Business 4Item 1A. Risk Factors 37Item 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 ofEquity Securities 63Item 6. Selected Financial Data 65Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 66Item 7A. Quantitative and Qualitative Disclosures About Market Risk 78Item 8. Consolidated Financial Statements and Supplementary Data 78Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 78Item 9A. Controls and Procedures 78Item 9B. Other Information 81PART III Item 10. Directors, Executive Officers and Corporate Governance 82Item 11. Executive Compensation 86Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 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 97EXHIBIT INDEX 98SIGNATURES 101 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 and defactinib, and our PI3K and FAK programs generally, the timeline for clinical development andregulatory approval of our product candidates, the expected timing for the reporting of data from on-going trials, thestructure of our planned or pending clinical trials, additional planned studies, our rights to develop or commercializeour product candidates and our ability to finance contemplated development and commercialization activities and fundoperations 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. Applicable risks and uncertaintiesinclude the risks that the full data from the Phase 3 DUO™ study will not be consistent with the previously presentedresults of the study; that the preclinical testing of our product candidates and preliminary or interim data from clinicaltrials may not be predictive of the results or success of ongoing or later clinical trials; that data may not be availablewhen expected, including for the Phase 3 DUO study; that even if data from clinical trials is positive, regulatoryauthorities may require additional studies for approval and the product may not prove to be safe and effective; that thedegree of market acceptance of product candidates, if approved, may be lower than expected; that the timing, scope andrate of reimbursement for our product candidates is uncertain; that there may be competitive developments affecting ourproduct candidates; that data may not be available when expected; that enrollment of clinical trials may take longerthan expected; that our product candidates will cause unexpected safety events or result in an unmanageable safetyprofile as compared to their level of efficacy; that duvelisib will be ineffective at treating patients with lymphoidmalignancies; that we will be unable to successfully initiate or complete the clinical development and eventualcommercialization of our product candidates; that the development and commercialization of our product candidateswill take longer or cost more than planned; that we may not have sufficient cash to fund our contemplated operations;that we or Infinity Pharmaceuticals, Inc. will fail to fully perform under the duvelisib license agreement; that we may beunable to make additional draws under our debt facility or obtain adequate financing in the future through productlicensing, co-promotional arrangements, public or private equity, debt financing or otherwise; that we will not pursue orsubmit regulatory filings for our product candidates, including for duvelisib in patients with CLL/SLL or iNHL;acceptance or approval of our New Drug Application for duvelisib will not occur on the expected timeframe or at all andthat our product candidates will not receive regulatory approval, become commercially successful products, or result innew treatment options being offered to patients. Other risks and uncertainties include those identified under the heading"Risk Factors" in this Annual Report on Form 10-K for the year ended December 31, 2017 and in any subsequent filingswith the Securities and Exchange Commission (SEC). As a result of these and other factors, we may not achieve the plans, intentions or expectations disclosed in ourforward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures orinvestments we may make. We do not assume any obligation to update any forward-looking statements, whether as aresult 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 developing and commercializing drugs to improve thesurvival and quality of life of cancer patients. Our most advanced product candidates, duvelisib and defactinib, utilize amulti-faceted approach to treat cancers originating either in the blood or major organ systems. We are currentlyevaluating these compounds in both preclinical and clinical studies as potential therapies for certain cancers, includingleukemia, lymphoma, lung cancer, ovarian cancer, mesothelioma, and pancreatic cancer. We believe that thesecompounds may be beneficial as therapeutics either as single agents or when used in combination with immuno-oncology agents or other current and emerging standard of care treatments in aggressive cancers that are poorly servedby currently available therapies.Duvelisib targets the Phosphoinositide 3-kinase (PI3K) signaling pathway. The PI3K signaling pathway playsa central role in cancer proliferation and survival. Duvelisib is an investigational oral therapy designed to attack bothmalignant B-cells and T-cells and disrupt the tumor microenvironment to help thwart their growth and proliferationthrough the dual inhibition of PI3K delta and gamma. Duvelisib is being developed for the treatment of patients withhematologic cancers including chronic lymphocytic leukemia and small lymphocytic lymphoma (CLL/SLL) andindolent non-Hodgkin lymphoma (iNHL), which includes follicular lymphoma (FL), and other subtypes of lymphoma,including peripheral T-cell lymphoma (PTCL). Duvelisib has U.S. Food and Drug Administration (FDA) Fast TrackDesignation for patients with CLL or PTCL who have received at least one prior therapy and for patients with FL whohave received at least two prior therapies. In addition, duvelisib has orphan drug designation for patients with CLL/SLLand FL in the United States and European Union. Duvelisib was evaluated in late- and mid-stage clinical trials, including DUO™, a randomized, Phase 3monotherapy study in patients with relapsed or refractory CLL/SLL, and DYNAMO™, a single-arm, Phase 2monotherapy study in patients with double-refractory iNHL, including FL, SLL, and marginal zone lymphoma(MZL). Both DUO and DYNAMO achieved their primary endpoints upon top-line analysis of efficacy data. Wesubmitted a New Drug Application (NDA) to the FDA requesting the full approval of duvelisib for the treatment ofpatients with relapsed or refractory CLL/SLL and accelerated approval for the treatment of patients with relapsed orrefractory FL in February 2018. Defactinib is a targeted inhibitor of the Focal Adhesion Kinase (FAK) signaling pathway. FAK is a non-receptor tyrosine kinase encoded by the PTK-2 gene that is involved in cellular adhesion and, in cancer, metastaticcapability. 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. Defactinib has orphan drug designation in ovarian cancer in theUnited States and the European Union, and in mesothelioma in the United States, the European Union, and Australia.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 with pembrolizumab in patients with non-small cell lung cancer (NSCLC), mesothelioma orpancreatic cancer.4 Table of ContentsTHE PROBLEMCancer is a group of diseases characterized by uncontrolled growth and spread of abnormalcells. The American Cancer Society estimates that in the United States in 2018, approximately1.7 million new cases of cancer will be diagnosed and approximately 610,000 people will die from thedisease. Current treatments for cancer include surgery, radiation therapy, chemotherapy, hormonaltherapy, immunotherapy, and targeted therapy. Despite years of intensive research and clinical use,current treatments often fail to cure cancer. Cancer remains one of the world’s most serious healthproblems and is the second most common cause of death in the United States after heart disease. Thefollowing table sets forth the U.S. annual incidence of certain cancers, based on 2017 estimates fromthe National Cancer Institute’s Surveillance, Epidemiology, and End Results Program (NCI; SEER). Cancer type U.S. annual incidence Lymphoma Non-Hodgkin lymphoma 72,240 Chronic lymphocytic leukemia/small lymphocytic leukemia 20,110 Follicular lymphoma 14,448 Solid tumor Lung and bronchus cancer 222,500 Pancreatic cancer 53,670 Ovarian cancer 22,440 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 development and commercialization of novel drugs that use a multi-facetedapproach to improving outcomes for patients with cancer.Key elements of our strategy to achieve this goal are:·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.·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,PTCL, NSCLC, ovarian cancer, pancreatic cancer and mesothelioma trials that we are currentlyconducting, we plan to pursue additional disease indications to expand the potential of our productcandidates.5 Table of Contents·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.·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-oncology,and the tumor microenvironment. We plan to continue to conduct research in the hematological andimmuno-oncology 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.OUR PRODUCT CANDIDATESWe are focused on the development and commercialization of small molecules for optimized efficacy andsafety primarily as orally available drug candidates. We have several product candidates currently in clinical trials,including duvelisib and defactinib. We are running clinical trials in cancers where there are limited treatment options,including CLL/SLL, iNHL, T-cell lymphoma, lung cancer, ovarian cancer, pancreatic cancer, mesothelioma, and otheradvanced cancers.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 (DOR) to cancer treatment. Chronic Lymphocytic Leukemia/Small Lymphocytic Leukemia, Non-Hodgkin LymphomaHematologic malignancies are cancers of the blood or bone marrow such as CLL/SLL and non-Hodgkinlymphoma (NHL). In general, NHLs are a disease that occurs in patients over the age of 65.The NCI estimates that there were 20,110 new cases of CLL/SLL in the U.S. in 2017 and thatthe five-year relative survival rate from 2007 to 2013 for patients with CLL/SLL was approximately83%. As CLL/SLL is generally a slow-growing disease, the advent of new oral anti-cancer therapiessince 2013 have been a significant advance as treatment options beyond chemotherapy or anti-B-lymphocyte antigen CD20 (CD20) immunotherapies, including ofatumumab. For example, theBruton’s Tyrosine Kinase (BTK) and B-cell lymphoma 2 (BCL-2) inhibitors have demonstrableactivity in the treatment of CLL/SLL. However, evidence coming from studies on real-world use ofthese agents is revealing that a significant number of patients either relapse following treatment,become refractory to current agents, or are unable to tolerate treatment due to unmanageable sideeffects resulting from treatment, representing a significant medical need. 6 Table of Contents The five‑year relative survival rate from 2007 to 2013 for patients with NHL was approximately 71%. Thetype and stage of the lymphoma can often provide useful information about a person’s prognosis, but for some types oflymphomas the stage is less informative on its own. In these cases, other factors can give doctors a better idea about aperson’s prognosis. These factors are included in the International Prognostic Index and other metrics which take intoaccount the patient’s age, stage of disease, presence of metastases, performance status and blood levels of lactatedehydrogenase.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 CLL/SLL. Follicular LymphomaFL comprises 20% of all NHL and as many as 70% of the indolent lymphomas reported in American andEuropean clinical trials. Common symptoms of FL include enlargement of the lymph nodes in the neck, underarms,abdomen, or groin, as well as fatigue, shortness of breath, night sweats, and weight loss. Often, patients with FL have noobvious symptoms of the disease at diagnosis. Most patients with FL are age 50 years and older and present withwidespread disease at diagnosis. Nodal involvement is most common and is often accompanied by splenic and bonemarrow disease. Rearrangement of the BCL-2 gene is present in more than 90% of patients with FL; overexpression ofthe BCL-2 protein is associated with the inability to eradicate the lymphoma by inhibiting apoptosis.Despite the advanced stage, the median survival ranges from 8 to 15 years, leading to the designation of beingindolent. Patients with advanced-stage FL are not cured with current therapeutic options. The rate of relapse is fairlyconsistent over time, even in patients who have achieved complete responses to treatment.There are various treatment options for FL based on the severity of associated symptoms and the rate of cancergrowth. If patients show no or very few symptoms, physicians may recommend not to treat the disease right away, anapproach referred to as "active surveillance" (also known as "watchful waiting"). Active treatment is started if the patientbegins to develop lymphoma-related symptoms or there are signs that the disease is progressing based on testing duringfollow-up visits.FL is generally responsive to radiation and chemotherapy. Radiation alone can provide a long-lastingremission in some patients with limited disease. In more advanced stages, physicians may use one or more chemotherapydrugs or the monoclonal antibody rituximab (Rituxan), alone or in combination with other agents.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. The potential of additional oral agents, particularly as a monotherapy that can beused in the general community physician’s armamentarium, may hold significant value in the treatment of patients withFL. Peripheral T-Cell LymphomaPTCL consists of a group of rare and usually aggressive (fast-growing) NHLs that develop from mature T-cells.Most T-cell lymphomas are PTCLs, which collectively account for about 10% to 15% of all NHL cases in the UnitedStates.PTCLs are sub-classified into various subtypes, each of which are typically considered to be separate diseasesbased on their distinct clinical differences. Most of these subtypes are very rare; the three most common subtypes ofPTCL, peripheral T-cell lymphoma not otherwise specified (PTCL-NOS), anaplastic large-cell lymphoma (ALCL), andangioimmunoblastic T-cell lymphoma (AITL), account for approximately 70% of all PTCLs in the United States.For most subtypes of PTCL, the frontline treatment regimen is typically a combination chemotherapy, such asCHOP (cyclophosphamide, doxorubicin, vincristine, prednisone), EPOCH (etoposide, vincristine, doxorubicin,7 Table of Contentscyclophosphamide, prednisone), or other multi-drug regimens. Because most patients with PTCL will relapse, someoncologists recommend giving high-dose chemotherapy followed by an autologous stem cell transplant (in whichpatients receive their own stem cells) to some patients who had a good response to their initial chemotherapy. Whilepromising, there is no firm clinical data to support that undergoing a transplant in this setting is better than notundergoing a transplant.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 PTCL.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 estimates that in2018 there will be approximately 22,200 new cases of ovarian cancer diagnosed and approximately 14,100 ovariancancer related deaths.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 thetreatment of ovarian cancer and many tumors become resistant to platinum‑based chemotherapy, which is the primarytreatment regimen. Further therapy with conventional chemotherapy is generally palliative, not curative, as the tumor isable to metastasize and spread to other sites in the body. Pancreatic CancerPancreatic cancer is the tenth most common cancer diagnosed in the United States and the disease representsthe third 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 were diagnosed with pancreatic cancer in 2017 and over 43,000 were estimated to havedied from the disease. Pancreatic cancer is one of the few cancers where survival has not improved significantly duringthe past 40 years. Pancreatic cancer has a very high mortality rate with approximately 92% of patients dying within fiveyears of their initial diagnosis based on the five-year relative survival rate from 2007 to 2013. The median age fordiagnosis is 70 with the disease affecting males slightly more than females.Treatment 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 tumor microenvironment. 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 2017 there were 222,500 new cases of lung cancer (bothNSCLC and SCLC) in the United States and more than 150,000 deaths. Lung cancer is the leading cause ofcancer‑related mortality in the United States. The five‑year relative survival rate from 2007 to 2013 for patients withlung cancer was approximately 18%.8 Table of ContentsPatients 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.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 PI3K refers to 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. Duvelisib 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 FDA or any other health authority for marketing authorization. The clinical investigation program for duvelisib is supported by data from a Phase 1, open-label, dose-escalation study designed to evaluate the safety, pharmacokinetics and clinical activity of duvelisib in patients withadvanced hematologic malignancies. The maximum tolerated dose of duvelisib was defined at 75 mg twice daily (BID)and the trial has been completed. A 25 mg BID dosing regimen was determined for further development based onefficacy, safety, pharmacokinetics and pharmacodynamics. Data from this study, presented in December 2014 at theAnnual Meeting of the American Society for Hematology (ASH 2014), showed that duvelisib is clinically active inCLL/SLL, iNHL, and T-cell lymphoma, as well as other hematologic malignancies. Chronic Lymphocytic Leukemia/Small Lymphocytic Leukemia, Non-Hodgkin LymphomaThe FDA and European Medicines Agency (EMA) have granted orphan drug designation to duvelisib for thepotential treatment of CLL/SLL, and the FDA has granted fast track designation to the investigation of duvelisib for thetreatment of patients with CLL/SLL who have received at least one prior therapy. Duvelisib was evaluated for thetreatment of CLL/SLL in the DUO™ study. The DUO study is a Phase 3, monotherapy, open-label, two- arm,randomized, superiority trial designed to evaluate the efficacy and safety of duvelisib at 25mg BID compared9 Table of Contentsto ofatumumab, a monoclonal antibody treatment, administered to patients who have been diagnosed with CLL/SLLwhose disease is relapsed or refractory. Patients in DUO that continue to derive benefit remain on treatment. DUOenrollment criteria included patients with CLL/SLL, whose disease had progressed during or relapsed after at least oneprevious CLL/SLL therapy. The primary endpoint of the study was Progression-Free Survival (PFS). 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%overall response rate (ORR) (17 of 30 evaluable patients), including one complete response, as per investigatorassessment. At the time of the presentation of the study at ASH 2014, the median PFS in the 31 patients who received the25 mg BID dose had not yet been reached with 66% of patients progression free at twelve months and 59% of patientsprogression free at 24 months. 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%).The results from the DUO study were presented at the 2017 Annual Meeting of the American Society forHematology conference (ASH 2017). The DUO study met its primary endpoint with oral duvelisib monotherapyachieving a statistically significant improvement in PFS compared to ofatumumab in patients with relapsed or refractoryCLL/SLL per a blinded Independent Review Committee (IRC) using modified international workshop on CLL (iwCLL)or revised International Working Group (IWG) Response Criteria (median PFS=13.3 months versus 9.9 months,respectively; HR=0.52, p<0.0001), representing a 48% reduction in the risk of progression or death.10 Table of ContentsMedian PFS per IRC*Flinn et al., ASH 2017Similar efficacy of duvelisib was observed regardless of whether patients had 17p deletion (del[17p]). Theprimary outcome of median PFS via IRC review in the del[17p] subpopulation significantly favored duvelisib overofatumumab (median PFS=12.7 months versus 9.0 months, respectively; HR=0.41, p=0.0011), representing a 59%reduction in the risk of progression or death. Per investigator assessment, duvelisib demonstrated a median PFS of 17.6months, compared to 9.7 months for ofatumumab (HR=0.40, p<0.0001). Duvelisib maintained a PFS advantage in allpatient subgroups analyzed as a subset of pre-specified sensitivity analyses.Median PFS per IRC for del[17p] Subpopulation*Flinn et al., ASH 201711 Table of ContentsMedian PFS per Investigator Assessment*Flinn et al., ASH 2017 Median PFS by Subgroup*Flinn et al., ASH 2017The secondary efficacy outcome of ORR via IRC assessment according to modified iwCLL/IWG criteria,significantly favored duvelisib over ofatumumab, 74% versus 45%, respectively (p<0.0001), and reduced lymph nodeburden by more than 50% in most patients compared to ofatumumab, 85% versus 16%, respectively. In the del[17p]subpopulation of patients, ORR was also significantly higher for duvelisib compared to ofatumumab, 70% versus 43%,respectively (p=0.0182).12 Table of Contents*Flinn et al., ASH 2017Patients who progressed in the DUO study were given the option to enroll in a crossover study to receive theopposite treatment. In the optional crossover study, 89 patients who were previously treated with ofatumumab in DUOand experienced confirmed disease progression were subsequently treated with duvelisib as a monotherapy. As in theparent DUO study, duvelisib demonstrated robust clinical activity in this crossover study with an ORR of 73%, a medianDOR of 12.7 months and a median PFS of 15 months by investigator assessments.In the DUO study, the overall survival in the intent to treat (ITT) population was similar for those randomizedto duvelisib and to ofatumumab during the study (HR=0.99, p=0.4807), as expected there was no detrimental effect onoverall survival. Though the FDA has noted that overall survival is the most reliable and therefore the preferredendpoint for approval of drugs for oncology indications in general, the FDA has publicly stated that it understands thechallenges of showing an overall survival improvement in CLL/SLL, given the long natural history of the disease andavailability of multiple therapies. Therefore, while they may request drug companies to collect overall survival data toensure there is no detrimental effect on overall survival and to observe any potential improvement, an improvement inoverall survival is not necessary for approval in CLL. Rather, improvements in PFS together with a favorable benefit-riskprofile may be acceptable to receive FDA approval.Following prolonged exposure, duvelisib, as a monotherapy, demonstrated a manageable safety profile, withresults from this study consistent with the well-characterized safety profile of duvelisib monotherapy in patients withadvanced hematologic malignancies in previous studies. For duvelisib-treated patients, the median time on treatmentwas 50.3 weeks (range, 0.9 - 160.0) compared to 23.1 weeks (range, 0.1 - 26.1) for ofatumumab. The most common Grade≥3 treatment-emergent hematologic adverse events (occurring in more than 10% of patients) were neutropenia (30%)and anemia (13%). The most common Grade ≥3 non-hematologic treatment-emergent adverse events (occurring in morethan 10% of patients) were diarrhea (15%), pneumonia (14%) and colitis (12%). The rate of severe opportunisticinfections was 6%, including two patients (1%) with Pneumocystis jirovecii pneumonia (PJP), neither of whom was onprophylaxis for PJP at the time of the event. Adverse events led to discontinuation of treatment in 35% of patients.Approximately 40% of patients treated with duvelisib remained on treatment for over 18 months, with a median totalfollow-up of nearly two years.13 Table of ContentsAdverse events of special interest infrequently led to discontinuation of duvelisib treatment (e.g., diarrhea(5%), colitis (5%), pneumonitis (2%), neutropenia (1%), pneumonia (1%), transaminase elevations (1%), and rash (1%).Duvelisib treatment-related adverse events leading to death (n=4) include general physical health deterioration (n=1),pneumonia staphylococcal (n=2) and sepsis (n=1)).*Flinn et al., ASH 2017 Indolent Non-Hodgkin Lymphoma The FDA and EMA have granted orphan drug designation to duvelisib for the potential treatment of FL, andthe 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. The DYNAMO study is a Phase 2, open-label, single-arm monotherapy studyevaluating the safety and efficacy of duvelisib dosed at 25 mg BID in 129 patients with iNHL. Patients in DYNAMOthat continue to derive a benefit remain on treatment. DYNAMO enrollment criteria included patients with FL, the mostcommon subtype of iNHL, MZL and SLL, whose disease is double-refractory to rituximab, an anti-CD20 monoclonalantibody, and to either chemotherapy or radioimmunotherapy and who must have progressed within six months ofreceiving their final dose of a previous therapy. The primary endpoint of the study was an ORR as assessed by IRC andaccording to the revised IWG Criteria, which includes a change in target nodal lesions in combination with othermeasurements to determine response to treatment. The results from the DYNAMO study were presented at the 2016 Annual Meeting of the American Society forHematology conference (ASH 2016). DYNAMO achieved the primary endpoint in a heavily pre-treated, double-refractory patient population with an ORR of 46% (p=0.0001) in the ITT population, as assessed by an IRC with amedian DOR of 10 months. The breakdown of ORR in the three subtypes of iNHL for the overall study population was41% in FL (n=83), 68% in SLL (n=28) and 33% in MZL (n=18). 83% of patients had a reduction of target nodal lesionsin lymph nodes. 14 Table of Contents*Adapted from Flinn et al., ASH 2016 *Flinn et al., ASH 2016 Duvelisib demonstrated a consistent and manageable safety profile with appropriate risk mitigation. Themajority of adverse events were Grade 1 or 2 in severity, reversible and/or clinically manageable. The most common(greater than 5%) Grade 3 adverse effects were an increase in diarrhea (14%), anemia (10%), and neutropenia (9%). Grade3 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%), and pneumonitis (2%). Seriousopportunistic infections were less than 5% with none being fatal. Four treatment-related adverse events had the outcomeof death (one septic shock; one viral infection; one drug reaction/eosinophilia/systemic symptoms; and one toxicepidermal necrolysis/sepsis syndrome). 15 Table of ContentsT-cell Lymphoma, Aggressive NHL and Other Lymphomas In the Phase 1 study, the ORR in patients with PTCL (n=16) was 50%, including three complete responses(CRs) and five partial responses (PRs). Responses were seen across the spectrum of PTCL subtypes, including CRs andPRs in patients with enteropathy-associated T-cell lymphoma (EATL), AITL, subcutaneous panniculitis-like T-celllymphoma (SPTCL), and anaplastic large-cell lymphoma (ALCL), among others. DOR in the PTCL population rangedfrom 1.8 to 17.3 months with median PFS of 8.3 months and median overall survival of 8.4 months. In cutaneous T-celllymphoma (CTCL) (n=19), the ORR was 32%, with six PRs. DOR ranged from 0.7 to 10.1 months and median PFS was4.5 months. Median overall survival was not reached; however, the estimated probability of survival was determined tobe of 90% at 6 months, 79% at 12 and 18 months, and 73% at 24 months. Duvelisib monotherapy demonstrated amanageable safety profile, with results from this study consistent with the well-characterized safety profile of duvelisibmonotherapy in patients with hematologic malignancies in other studies. These clinical results were supported bypreclinical findings showing that duvelisib exhibited cell-killing activity in vivo and promoted beneficial changeswithin the tumor microenvironment. During 2017, the FDA granted Fast Track designation for the treatment of patients with PTCL, who havereceived at least one prior therapy. During the first quarter of 2018, we initiated an open-label, multicenter, Phase 2clinical trial evaluating the efficacy and safety of duvelisib in patients with relapsed or refractory PTCL. We expect thestudy to be conducted in both the United States, the European Union, and Japan.FAK Inhibition ProgramOur product candidates that inhibit FAK utilize a multi-faceted approach to treat cancer by enhancing anti-tumor immunity and modulating the local tumor microenvironment. Our lead FAK inhibitor is known as defactinib. Theeffects of FAK inhibition on the tumor microenvironment make defactinib a good candidate for combination therapywith immuno-oncology agents and other anti-cancer compounds. FAK expression is greater in many tumor typescompared to normal tissue, particularly in cancers that have a high invasive and metastatic capability. The contactbetween cancer cells and connective tissue stimulates FAK signaling.In 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 1a) and increases cytotoxic T-cells (Figure 1b) in skin cancertumors leading to a reduction in tumor burden (Figure 1c). 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.16 Table of ContentsFIGURE 1*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 2a) and proliferation (Figure 2b) of tumor-associated fibroblasts, together with a decrease in collagenand other extracellular matrix proteins (Figure 2c) 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 2d) to induce more durable survival of transgenic micebearing pancreatic tumors (Figure 3). 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. FIGURE 2*Adapted from: Jiang et al. Targeting focal adhesion kinase renders pancreatic cancers responsive to checkpoint immunotherapy. NatureMedicine. 2016.17 Table of Contents FIGURE 3Vehicle: 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. DefactinibDefactinib 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 in the United States and the EuropeanUnion and in mesothelioma in the United States, the European 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.18 Table of ContentsPhase 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, a PD-1 inhibitor, 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, Chief Strategy Officer, Steven Bloom, Chief Financial Officer, Julie Feder, Chief Medical Officer, Diep Le, M.D., Ph.D., ChiefCommercial Officer, Joseph Lobacki, and 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. Bloom joined Verastem in March 2014 and recently took on the role of Chief Strategy Officer, focusing onCorporate and Business Development, Medical Affairs, Patient Advocacy and Corporate Communications. Prior tojoining the company, Mr. Bloom was Senior Vice President at Ziopharm Oncology where for 6 years he led businessdevelopment and the commercial planning initiatives for a late stage oncology asset. Before joining Ziopharm, Mr.Bloom was Vice President for the health informatics company Pharmetrics and spent the first 19 years of his career at EliLilly and Company in leadership roles in marketing, sales and corporate affairs.Ms. Feder joined Verastem in July 2017 as our Chief Financial Officer. Ms. Feder served as the Chief FinancialOfficer for the Clinton Health Access Initiative, Inc. (CHAI) for the previous six years. Prior to joining CHAI, Ms. Federspent three years at Genzyme Corporation, first as Vice President of Internal Audit and also as Finance IntegrationLeader. In these roles, she managed the day-to-day operations of Genzyme’s global internal audit function, whileleading the Genzyme Global Finance integration into Sanofi’s organization following Sanofi’s acquisition of Genzyme.Dr. Le joined us in October 2017 as our Chief Medical Officer, is a trained medical oncologist, board certifiedin internal medicine and has 15 years of drug development experience across all phases in both solid and hematologicmalignancies as well as IND and NDA submissions. Dr. Le joins Verastem from MedImmune (a subsidiary ofAstraZeneca) where she served as Vice President, Immuno-Oncology Innovative Medicines and led the productdevelopment teams for multiple high-priority immuno-oncology assets. Prior to joining MedImmune, Dr. Le held rolesof increasing responsibility at Novartis and at GlaxoSmithKline where she led the MEK inhibitor, trametinib(Mekinist™), from the first-in-human studies to FDA approval.Mr. Lobacki joined Verastem in January 2018 as our Chief Commercial Officer. He most recently served as theChief Operating Officer of Finch Therapeutics Group and previously as the Chief Commercial Officer and ExecutiveCouncil Member of Medivation, where he was responsible for the strategy and execution of commercial operationsincluding Xtandi, a treatment for advanced prostate cancer. Previously, Mr. Lobacki was Senior Vice President andChief Commercial Officer of Micromet Inc., where he oversaw commercial activities including19 Table of Contentsmedical affairs and strategic marketing. Prior to joining Micromet, Mr. Lobacki was Senior Vice President and GeneralManager at Genzyme Corporation, where he managed the launch of Mozobil and Clolar/Evoltra in the US and EU.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.Our 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 ofcancer stem cells. Eric Lander, Ph.D., Founding Director of the Broad Institute, Professor of Biology at MIT andProfessor of Systems 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.20 Table of ContentsPI3K inhibition programWe are currently developing the PI3K inhibitor duvelisib.We 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.We 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.Patent 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 a21 Table of Contentsdrug for which FDA approval is the first permitted marketing of the active ingredient, the Hatch‑Waxman Act allows forextension of the term of one United States patent that includes at least one claim covering the composition of matter ofan FDA‑approved drug, an FDA‑approved method of treatment using the drug, and/or a method of manufacturing theFDA‑approved drug. The extended patent term cannot exceed the shorter of five years beyond the non‑extendedexpiration of the patent or 14 years from the date of the FDA approval of the drug. Some foreign jurisdictions, includingEurope and Japan, have analogous patent term extension provisions, which allow for extension of the term of a patentthat covers a drug approved by the applicable foreign regulatory agency. In the future, if and when our pharmaceuticalproducts receive FDA approval, we expect to apply for patent term extension on patents covering those products, theirmethods 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/SLL, and Infinity assumed financial responsibility for the shutdown of certainother clinical studies up to a maximum of $4.5 million. We are obligated to use diligent efforts to develop andcommercialize a product in an oncology indication containing duvelisib. During the term of the license agreement,Infinity has agreed not to research, develop, manufacture or commercialize duvelisib in any other indication in humansor 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, which was paid in cash by us to Infinity inOctober 2017, and (ii) $22.0 million upon the approval of an NDA in the United States or an application for marketingauthorization with a regulatory authority outside of the United States for a product in an oncology indicationcontaining duvelisib. For any portion of any of the foregoing payments that we elect to issue in shares of our commonstock in lieu of cash, the number of shares of common stock 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 stockdivided by (b) the average closing price of a share of common stock as quoted on Nasdaq for a twenty-day periodfollowing the public announcement of the applicable milestone event. The shares of common stock will be issued asunregistered securities, and we will have an obligation to promptly file a registration statement with the SEC to registersuch shares for resale. Any issuance of shares will be subject to the satisfaction of closing conditions, including that allmaterial authorizations, consents, approvals and the like 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 until22 Table of Contentsthe later to occur of the last-to-expire of specified patent rights and the expiration of non-patent regulatory exclusivitiesin a country. Each of the above royalty rates is reduced by 50% on a product-by-product and country-by-country basis ifthe applicable 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. 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.Many 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.23 Table of ContentsThe 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 patients with CLL,SLL, or FL, and which we believe is conducting a Phase 1b clinical trial of acalisib (GS-9820);·Bayer AG has received approval from the FDA of copanlisib for the treatment of patients with relapsed FL;·Novartis, which we believe is conducting a Phase 2 clinical trial of buparlisib;·AstraZeneca, which we believe is conducting Phase 2 clinical trials of ACP 319;·TG Therapeutics, Inc., which we believe is conducting multiple clinical trials of TGR-1202; and24 Table of Contents·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 patients withmantle cell lymphoma (MCL), CLL, MZL, SLL, or Waldenström’s macroglobulinemia, and is conductingmultiple late stage 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 patients with CLL, and is conducting multiple late stage clinical studies ofvenetoclax in additional hematologic malignancies;·Celgene Corporation, which has received FDA approval of lenalidomide, an immunomodulator, for thetreatment of patients with multiple myeloma, MCL, and myelodyplastic syndromes, and is conducting latestage clinical 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. These companies include divisions of large pharmaceutical companies including AstellasPharma Inc., Celgene, Inc., Sanofi‑Aventis U.S. LLC, GlaxoSmithKline plc, Boehringer Ingelheim GmbH, Pfizer Inc. andothers.MANUFACTURINGWe 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.25 Table of ContentsGOVERNMENT 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 an NDA;·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,26 Table of Contentsmay continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA,unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and placesthe trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before theclinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials tocommence.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.Progress 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 $2.4 million, and the sponsor of an approved NDA is also subject toannual program fees, based on the number of approved products. These fees are typically adjusted annually. User feestatutory authority expires every five years. The Prescription Drug User Fee Act, was re-authorized for an additional fiveyears in 2017 until 2022. Fee waivers are available in certain circumstances, including a waiver of27 Table of Contentsthe application fee for an orphan drug application.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 such resubmissions in two or six monthsdepending on the type of information included. Even with submission of this additional information, the FDAultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve theNDA.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 new28 Table of Contentsdrug candidate may request the FDA to designate the product for a specific indication as a fast track product concurrentwith or after the filing of the IND for the product candidate. The FDA must determine if the product candidate qualifiesfor fast 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.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.Orphan 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 is29 Table of Contentssafe and 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;·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 requires30 Table of Contentsas a condition of approval new clinical trials conducted by or for the sponsor. This three‑year exclusivity period oftenprotects changes to a previously approved drug product, such as a new dosage form, route of administration,combination or indication. Under the Best Pharmaceuticals for Children Act, federal law also provides that periods ofpatent and non‑patent marketing exclusivity listed in the Orange Book for a drug may be extended by six months if theNDA sponsor conducts pediatric studies identified by the FDA in a written request. For written requests issued by theFDA after September 27, 2007, the date of enactment of the FDAAA, the FDA must grant pediatric exclusivity no laterthan nine months prior to the date of expiration of patent or non‑patent exclusivity in order for the six‑month pediatricextension to apply to that exclusivity period.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.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,manufacturers must continue to expend time, money and effort in the areas of production and quality control tomaintain cGMP compliance.31 Table of ContentsOnce 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 lawsAlthough we currently have no products approved for commercial sale, we may be subject to various federaland state laws pertaining to healthcare “fraud and abuse,” including anti-kickback laws and false claims laws, foractivities related to future sales of any of our product candidates that may in the future receive regulatory and marketingapproval. Anti-kickback laws generally prohibit a pharmaceutical manufacturer from soliciting, offering, receiving, orpaying any remuneration to generate business, including the purchase, prescription or use of a particulardrug. Although the specific provisions of these laws vary, their scope is generally broad and there may not beregulations, guidance or court decisions that apply the laws to particular industry practices. There is therefore apossibility that our practices might be challenged under such anti-kickback laws. False claims laws prohibit anyonefrom knowingly and willingly presenting, or causing to be presented, any claims for payment for reimbursed drugs orservices to third party payors (including Medicare and Medicaid) that are false or fraudulent. Laws and regulations have been enacted by the federal government and various states to regulate the sales andmarketing practices of pharmaceutical manufacturers with marketed products. The laws and regulations generally limitfinancial interactions between manufacturers and healthcare providers and/or require disclosure to the government andpublic of such interactions. Many of these laws and regulations contain ambiguous requirements or requireadministrative guidance for implementation. Given the lack of clarity in laws and their implementation, any futureactivities (if we obtain approval and/or reimbursement from federal healthcare programs for our product candidates)could be subject to challenge.32 Table of ContentsIf our operations are found to be in violation of the fraud and abuse laws described above, or any other laws thatapply to us, we may be subject to penalties, including, without limitation, civil, criminal, and administrative penalties,damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federalhealthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment orrestructuring of our operations.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 healthcare costs, including price33 Table of Contentscontrols, restrictions on reimbursement and requirements for substitution of generic products for branded prescriptiondrugs. Adoption of such controls and measures, and tightening of restrictive policies in jurisdictions with existingcontrols and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing andcould 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 healthcare 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. In the United States, federal and state governments continue to propose and pass legislation designed to reformdelivery of, or payment for, healthcare, which include initiatives to reduce the cost of healthcare. For example, in March2010, the United States Congress enacted the Patient Protection and Affordable Care Act and the Health Care andEducation Reconciliation Act, or the Health Care Reform Act, which expanded healthcare coverage through Medicaidexpansion and the implementation of the individual mandate for health insurance coverage and which included changesto the coverage and reimbursement of drug products under government healthcare programs as well as the imposition ofannual fees on manufacturers of branded pharmaceuticals. Under the Trump administration, there have been ongoingefforts to modify or repeal all or certain provisions of the Health Care Reform Act. The Trump administration may alsotake executive action in the absence of legislative action. For example, in October 2017, the President announced thathis administration will withhold the cost-sharing subsidies paid to health insurance exchange plans serving low-incomeenrollees. Actions by the administration are widely expected to lead to fewer Americans having more comprehensivehealth insurance compliant with the Health Care Reform Act, even in the absence of a legislative repeal. Tax reformlegislation was also enacted at the end of 2017 that includes provisions that will affect healthcare insurance coverageand payment, such as the elimination of the tax penalty for individuals who do not maintain sufficient health insurancecoverage beginning in 2019 (the so-called “individual mandate”). In a November 2017 report, the CongressionalBudget Office estimates that the elimination will increase the number of uninsured by 4 million in 2019 and 13 millionin 2027. 34 stTable of ContentsThere have also been efforts by government officials or legislators to implement measures to regulate prices orpayment for pharmaceutical products, including legislation on drug importation. Recently, there has been considerablepublic and government scrutiny of pharmaceutical pricing and proposals to address the perceived high cost ofpharmaceuticals. There have also been recent state legislative efforts to address drug costs, which generally havefocused on increasing transparency around drug costs or limiting drug prices. Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our product candidates ifapproved for sale. We cannot predict the ultimate content, timing or effect of any changes to the Health Care Reform Actor other federal and state reform efforts. There is no assurance that federal or state healthcare reform will not adverselyaffect our future business and financial results. EMPLOYEESAs of February 28, 2018, we had 69 full‑time equivalent employees, including a total of 12 employees withM.D. or Ph.D. degrees. Of these full‑time employees, 31 employees are engaged in research and development activities.None of our employees is represented by a labor union or covered by a collective bargaining agreement. We considerour relationship with our employees to be good.BUSINESS—EXECUTIVE OFFICERS OF THE REGISTRANTThe following table sets forth the name, age and position of each of our executive officers as of February 28,2018.Name Age Position Robert Forrester 54 President, Chief Executive Officer Steven Bloom 57 Chief Strategy Officer Julie B. Feder 47 Chief Financial Officer Diep Le, M.D., Ph.D. 50 Chief Medical Officer Joseph Lobacki 59 Chief Commercial Officer Daniel Paterson 57 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.Steven Bloom has served as our Chief Strategy Officer since December 2017, our Senior Vice President ofCorporate Development from January 2017 to November 2017 and as our Vice President of Commercial Planning andExternal Affairs from January 2015 until January 2017. Prior to joining us in March 2014, Mr. Bloom served as SeniorVice President at Ziopharm Oncology from March 2008 to March 2014. Before joining Ziopharm, Mr. Bloom was VicePresident for the health informatics company Pharmetrics and spent the first 19 years of his career at Eli Lilly andCompany in leadership roles in marketing, sales and corporate affairs.Julie B. Feder has served as our Chief Financial Officer since July 2017. Prior to joining us, Ms. Feder servedas the Chief Financial Officer for the Clinton Health Access Initiative (CHAI) from September 2011 to July 2017. Priorto joining CHAI, Ms. Feder spent three years at Genzyme Corporation, first as Vice President of Internal Audit and alsoas Finance Integration Leader. In these roles, she managed the day-to-day operations of Genzyme’s global internal auditfunction, while leading the Genzyme Global Finance integration into Sanofi’s organization following Sanofi’sacquisition of Genzyme.35 Table of ContentsDiep Le, M.D., Ph.D. has served as our Chief Medical Officer since October 2017. Prior to joining us, Dr. Leserved as the Vice President, Immuno-Oncology Innovative Medicines at MedImmune (a subsidiary of AstraZeneca)from October 2015 to June 2017 and led the product development teams for multiple high-priority immuno-oncologyassets. Prior to that, Dr. Le served as the Executive Director and Global Clinical Program Lead at Novartis Oncologyfrom October 2013 to October 2015, and various roles of increasing responsibility at GlaxoSmithKline from June 2009to October 2013, where she led the MEK inhibitor, trametinib (Mekinist™), from the first-in-human studies to FDAapproval.Joseph Lobacki has served as our Chief Commercial Officer since January 2018. Prior to joining us, Mr.Lobacki served as the Chief Operating Officer of Finch Therapeutics Group from November 2016 to December 2017, theChief Commercial Officer and Executive Council Member of Medivation, Inc. from December 2014 to October 2016,and as the General Manager of Oncology at Idera Pharmaceuticals from April 2014 to December 2014. Prior to that Mr.Lobacki served as a commercial and business operations consultant for biotechnology companies from June 2012 toApril 2014 and as the Senior Vice President and Chief Commercial Officer of Micromet Inc., where he oversawcommercial activities including medical affairs and strategic marketing.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 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.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.36 Table of Contents ITEM 1A. Risk Factors. RISKS RELATED TO THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCT CANDIDATESPreclinical 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 our New Drug Application (NDA) for duvelisib is notaccepted by the U.S. Food and Drug Administration (FDA), we are unable to obtain marketing approval for orsuccessfully commercialize duvelisib, or any of our other product candidates, or if we experience significant delays indoing 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, for which we are conducting clinical trials in multiple indications andsubmitted an NDA to the FDA requesting approval in February 2018. Our ability to generate product revenues willdepend heavily on the successful development and potential commercialization of our product candidates. The successof 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 FDA and other regulatory authorities for our product candidates,including pricing approvals where required, as well as securing acceptance and approval of the NDA wesubmitted for duvelisib;·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;·securing and maintaining coverage and adequate reimbursement for our products from third party payors;·effectively competing with other therapies; and·a continued acceptable safety and efficacy profile of the products following approval.Many 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.Even if duvelisib, or any of our other product candidates, receives marketing approval, it may fail to achieve thedegree of market acceptance by physicians, patients, healthcare payors and others in the medical communitynecessary for commercial success.If duvelisib, or any of our other product candidates, receives marketing approval, it may nonetheless fail to gainsufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. If duvelisib does not achieve an adequate level of acceptance, or if we are unable to increase market acceptance of duvelisib as compared to existing or competitive products, we may not generate significant product revenues and wemay not become profitable. In addition, clinical studies of duvelisib showed side effects that may need to be managed tobe profitable. The degree of market acceptance of duvelisib, if approved for commercial sale, will depend on a number offactors, including: ·efficacy and potential advantages compared to alternative treatments;·convenience and ease of administration compared to alternative treatments;37 Table of Contents·the ability to offer duvelisib for sale at competitive prices;·the willingness of the target patient population to try new therapies and of physicians to prescribe duvelisib;·the line of therapy duvelisib is designated under physician treatment guidelines;·changes in the standard of care for the targeted indications for duvelisib;·limitations or warnings, including distribution or use restrictions, contained in the approved labeling for duvelisib;·the strength of marketing and distribution support;·sufficient third-party coverage and reimbursement;·the ability of the medical community to appropriately recognize and manage side effects;·safety concerns with similar products marketed by others; and·the prevalence and severity of any side effects as a result of treatment with duvelisib.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. There also may be significant variability in the safety results obtained through the long-termfollow-up of patients from ongoing studies. We do not know whether any clinical trial we may conduct or follow-updata we collect will demonstrate consistent or adequate efficacy and/or safety sufficient to obtain regulatory approval tomarket our product candidates.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. The FDA or other regulatory authorities may require additionaltesting to substantiate our claims from our Phase 3 DUO, Phase 2 DYNAMO and other studies, which could delay orprevent marketing approval for duvelisib.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,38 Table of Contentsor regulators 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;·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 of aRisk Evaluation and Mitigation Strategy (REMS), or safety warnings, including boxed warnings;·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 an NDA. Our productdevelopment costs will also increase if we experience delays in clinical testing or marketing approvals. We do not knowwhether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.Significant clinical trial delays also could shorten any periods during which we may have the exclusive right tocommercialize our product candidates or allow our competitors to bring products to market before we do and impair ourability to successfully commercialize our product candidates and may harm our business and results of 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;39 Table of Contents·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;·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. Patients in our clinical trials have experienced serious adverse events, deemed by us and the clinicalinvestigator to be related to our product candidates. Serious adverse events generally refer to adverse events, that resultin death, are life threatening, require hospitalization or prolonging of hospitalization, or cause a significant andpermanent disruption of normal life functions, congenital anomalies or birth defects, or require intervention to preventsuch outcomes.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.40 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 tumormicroenvironment is unproven, and we do not know whether we will be able to develop any products of commercialvalue.We are developing and commercializing product candidates to treat cancer by using targeted agents to killcancer cells or disrupt the tumor microenvironment and thereby thwart their growth and proliferation of cancer cells.Research on the use of small molecules to inhibit PI3K and FAK signaling pathways and disrupt the tumormicroenvironment is an emerging field and, consequently, there is uncertainty about whether duvelisib and defactinibare effective in improving outcomes for patients with cancer. With respect to our FAK inhibition program, there is somedebate in the scientific community regarding cancer stem cells (CSCs), the existence of these cells, the definingcharacteristics of these cells, as well as whether targeting such cells is an effective approach to treating cancer. Somebelieve that targeting CSCs as part of our multi-faceted approach should be sufficient for a positive clinical outcome,while others believe that, at times or always, the use of FAK inhibitors that reduce CSCs should be coupled withconventional chemotherapies 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 any approved or investigationalproduct being combined with our product candidate in these clinical trials. Furthermore, the potential marketopportunity for our product candidates is difficult to estimate precisely. For instance, if one of41 Table of Contentsour product 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 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 exclusive in-license from Infinity Pharmaceuticals, Inc.(Infinity) to research, develop, commercialize, and manufacture products in oncology indications containing duvelisib.The success of this strategy depends partly upon our ability to identify, select, discover and acquire promisingpharmaceutical product candidates and products. The process of proposing, negotiating and implementing a license oracquisition of a product candidate or approved product is lengthy and complex. Other companies, including some withsubstantially greater financial, marketing and sales resources, may compete with us for the license or acquisition ofproduct candidates and approved products. In addition, companies that perceive us to be a competitor may be unwillingto assign or license rights to us. We have limited resources to identify and execute the acquisition or in-licensing ofthird-party products, businesses and technologies and integrate them into our current infrastructure. Moreover, we maydevote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail torealize the anticipated benefits of such efforts. We also may be unable to license or acquire the relevant compound orproduct candidate on terms that would allow us to make an appropriate return on our investment. Any product candidatethat we acquire may require additional development efforts prior to commercial sale, including manufacturing, pre-clinical testing, extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. Allproduct candidates are prone to risks of failure typical of pharmaceutical product development.In 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 our42 Table of Contentsproducts 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.We have limited experience in marketing and commercializing product candidates. If, in the future, we are unable toestablish sales and marketing capabilities or enter into agreements with third parties to sell and market our productcandidates, we may not be successful in commercializing our product candidates if and when 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, we will face significant increased costs as weundertake commercialization activities for any of our product candidates, including duvelisib, and recruiting andtraining a sales force is expensive and time consuming and could delay any product launch. If the commercial launch ofa product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occurfor any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may becostly, and our investment would be 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 andbuilding out a commercialization operation generally.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 to43 Table of Contentsus. We likely will have little control over such third parties, and any of them may fail to devote the necessary resourcesand attention to sell and market our products effectively. If we do not establish sales and marketing capabilitiessuccessfully, either on our own or in collaboration with third parties, we will not be successful in commercializing ourproduct candidates.We face substantial competition, which may result in others developing or commercializing products before or moresuccessfully 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 or third-party coverage and reimbursement policies, which would harm our business.The regulations that govern marketing approvals, pricing and reimbursement for new drug products varywidely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. Inmany countries, the pricing review period begins after marketing or product licensing approval is granted. In someforeign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even afterinitial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, butthen be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods,and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricinglimitations may hinder our ability to recoup our investment in one or more product candidates, even if our productcandidates obtain marketing approval.Our ability to commercialize any products successfully also will depend in part on the extent to whichcoverage and adequate reimbursement for these products and related treatments will be available from governmenthealth administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they44 Table of Contentswill cover and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is costcontainment. Government authorities and third-party payors have attempted to control costs by limiting coverage andthe amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drugcompanies provide them with predetermined discounts from list prices and are challenging the prices charged formedical products. We cannot be sure that coverage and reimbursement will be available for any product that wecommercialize and, if reimbursement is available, the level of reimbursement. Coverage and reimbursement may impactthe demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining coverage andreimbursement for our products may be particularly difficult because of the higher prices often associated with drugsadministered under the supervision of a physician. If coverage and reimbursement are not available or reimbursement isavailable only to limited levels, we may not be able to successfully commercialize any product candidate for which weobtain marketing approval.There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, andcoverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatoryauthorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug will be paidfor in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution.Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not bemade permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it isused, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existingpayments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required bygovernment healthcare programs or private payors and by any future relaxation of laws that presently restrict imports ofdrugs from countries where they may be sold at lower prices than in the United States. Third-party payors often relyupon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability topromptly obtain coverage and profitable payment rates from both government-funded and private payors for anyapproved products that we develop could have a material adverse effect on our operating results, our ability to raisecapital needed to commercialize 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.If 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 and45 Table of Contentswastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biologicalmaterials. Our operations also produce hazardous waste products. We generally contract with third parties for thedisposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. Inthe event of contamination or injury resulting from our use of hazardous materials, we could be held liable for anyresulting damages, and any liability could exceed our resources. We also could incur significant costs associated withcivil or criminal 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 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 and transaction costs, and we may encounter general economicand business conditions that adversely affect us relating to our license agreement with Infinity. If one or more of theseassumptions are incorrect, it could have an adverse effect on our business and operating results, and the benefits fromour license agreement with Infinity for the duvelisib program may not be realized or be of the magnitude expected.RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITALWe require additional financing to execute our operating plan and continue to operate as a going concern.Our audited consolidated financial statements for the year ended December 31, 2017 have beenprepared assuming we will continue to operate as a going concern, but we believe that our cash, cash equivalents andinvestments at December 31, 2017 of $86.7 million combined with our continuing operating losses raise substantialdoubt about our ability to continue as such. Because we continue to experience net operating losses, our ability tocontinue as a going concern is subject to our ability to obtain necessary capital from outside sources, includingobtaining additional capital from the sale of our securities or assets, obtaining loans from financial institutions orentering into partnership arrangements. Our continued net operating losses increase the difficulty in obtaining suchcapital, and there can be no assurances that we will be able to obtain such capital on favorable terms or at all. If we areunable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate ourclinical development programs or commercialization efforts, and/or ultimately cease operations.We 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, 2017, we had anaccumulated deficit of $303.1 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, sales of our46 Table of Contentscommon stock pursuant to our at-the-market equity offering programs, and our loan and security agreement withHercules Capital Inc. (Hercules). The proceeds of our term loan facility with Hercules, which we entered into in March2017 and amended in January and March 2018, will be used for our ongoing research and development programs andfor general corporate purposes. As of December 31, 2017, there was $35.0 million available to borrow under theamended term loan facility with Hercules, subject to certain conditions of funding. We have devoted substantially all ofour efforts to research and development. We expect to continue to incur significant expenses and increasing operatinglosses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. Weanticipate that our expenses will increase substantially if and as we:·prepare for the anticipated commercialization of duvelisib;·continue our ongoing clinical trials with our product candidates, including with our most advanced productcandidates duvelisib and 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 to supportour product development and planned future commercialization efforts; and·establish a sales, marketing and distribution infrastructure to commercialize any products for which we obtainmarketing approval.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 marketingapproval. 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, including forduvelisib.We expect our expenses to increase in connection with our ongoing activities, particularly as we continue theclinical development of our product candidates and as we seek marketing approval for duvelisib. If we receive suchapproval, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturingand distribution of duvelisib. Accordingly, we will need to obtain substantial additional funding in connection with ourcontinuing operations, including for our clinical development programs and any commercialization efforts forduvelisib.We expect our existing cash, cash equivalents and investments will enable us to fund our current operatingplan and capital expenditure requirements into the second half of 2018. Our future capital requirements will depend onmany factors, including:·the scope, progress and results of our ongoing and potential future clinical trials;·the extent to which we acquire or in‑license other product candidates and technologies;·the costs, timing and outcome of regulatory review of our product candidates (including our efforts to seekapproval and fund the preparation and filing of regulatory submissions);·the costs and timing of commercialization activities for the product candidates for which we expect to receivemarketing approval;·revenue, if any, received from commercial sales of our product candidates, should any of our product candidatesreceive marketing approval;47 Table of Contents·the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectualproperty rights and defending intellectual property related claims; 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 tocomplete, and we may never generate the necessary data or results required to obtain marketingapproval of any of our product candidates, including duvelisib. Though we submitted an NDA forduvelisib in February 2018, the NDA may not be accepted or approved by the FDA, and even ifapproved, duvelisib may not achieve commercial success. Our commercial revenues, if any, will bederived from sales of products, such as duvelisib, that may not be commercially available for severalyears, if at all. Accordingly, even if we receive regulatory approval of one of our product candidates, such as duvelisib, it will take several years to achieve peak sales, and we will need to continue to relyon additional financing to further our clinical development objectives. Adequate additional financingmay 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 the terms of our licenseagreement with Infinity, we may elect to make certain milestone payments in shares of common stock in lieu of cash,according to a formula set forth in the license agreement. Debt financing, if available, may involve agreements thatinclude covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, makingcapital expenditures or declaring dividends. For example, see our risk factors under the heading “Risks Related to OurIndebtedness.”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, we entered into a Loan and Security Agreement with Hercules, which was subsequentlyamended in January and March 2018. Under the Loan and Security Agreement, as amended (the Amended LoanAgreement), Hercules will provide access to term loans with an aggregate principal amount of up to $50.0million. Under the Amended Loan Agreement, we borrowed an initial tranche of $2.5 million in March 2017, we drewan additional $7.5 million in October 2017, and in December 2017 we drew an additional $5.0 million. All obligations under the Amended Loan Agreement are secured by substantially all of our existing propertyand assets, excluding our intellectual property. This indebtedness may create additional financing risk for us,particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing ouroutstanding debt obligations at maturity. This indebtedness could also have important negative consequences,including:·we will need to repay our indebtedness by making payments of interest and principal, which will reduce theamount of money available to finance our operations, our research and development efforts and other generalcorporate activities; and·our failure to comply with the restrictive covenants in the Amended Loan Agreement could result in an48 Table of Contentsevent of default that, if not cured or waived, would accelerate our obligation to repay this indebtedness, andHercules could seek to enforce their security interest in the assets securing such indebtedness.To the extent additional debt is added to our current debt levels, the risks described above could increase.We may not have cash available in an amount sufficient to enable us to make interest or principal payments on ourindebtedness when due.Failure to satisfy our current and future debt obligations under the Amended Loan Agreement, or breaching anycovenants under the Amended 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 Amended Loan Agreement as a result of an event of default, we 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, we may be required to delay, limit, reduce or terminate our productcandidate development or commercialization efforts or grant to others rights to develop and market product candidatesthat we would otherwise prefer to develop and market internally. 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 our property other than our intellectual property. Our business, financial condition and results ofoperations could be materially adversely affected as a result of any of these events. We are subject to certain restrictivecovenants which, if breached, could have a material adverse effect on our business and prospects.The Amended Loan Agreement imposes operating and other restrictions on us. Such restrictions will affect, andin many respects limit or prohibit, our ability and the ability of any future subsidiary to, among other things: ·dispose of certain assets;·change our 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 other49 Table of Contentsregulatory authorities may require us to perform additional clinical trials before approving our marketing applications.We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determinethat any of our clinical trials comply with GCP requirements. We also are required to register ongoing clinical trials andpost the results of completed clinical trials on government‑sponsored databases, such as ClinicalTrials.gov, withincertain timeframes. Failure to do so can 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.We 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 of50 Table of Contentsour proprietary 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.Third-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 andPfizer, and expect to enter into additional license agreements in the future. Our existing license agreements impose, andwe expect that future license agreements will impose, various diligence, milestone payment, royalty, insurance and otherobligations on us. For example, under our license agreements with Infinity and Pfizer, we are required to use diligent orcommercially reasonable efforts to develop and commercialize licensed products under the agreement and to satisfyother specified obligations. If we fail to comply with our obligations under these licenses, our licensors may have theright to terminate these license agreements, in which event we might not be able to market any product that is coveredby these agreements, or to convert the exclusive licenses to non-exclusive licenses, which could materially adverselyaffect the value of the product candidate being developed under these license agreements. Termination of these licenseagreements or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstatedlicenses with less favorable terms, which may not be possible. If Pfizer were to terminate its license agreement with us forany reason, we would lose our rights to defactinib. If Infinity were to terminate its license agreement with us for anyreason, 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. Therefore, we cannot be certain that these patents and applications will be prosecuted and enforced in amanner consistent with the best interests of our business. If such licensors fail to maintain such patents, or lose rights tothose patents, the rights we have 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.Assuming 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 pre53 Table of Contentsissuance submission 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.Third 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 pharmaceutical54 Table of Contentscompanies, 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 able to obtain adequateremedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret isdifficult, expensive and time consuming, and the outcome is unpredictable. In addition, some courts inside and outsidethe United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfullyobtained or independently developed by a competitor, we would have no right to prevent them from using thattechnology or information to compete with us. If any of our trade secrets were to be disclosed to or independentlydeveloped by a competitor, our competitive position would be harmed.55 Table of ContentsRISKS 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 for duvelisib, or any ofour product candidates, we will not be able to commercialize duvelisib, or any such other candidates, and our abilityto generate revenue will be materially impaired.Though we submitted an NDA for duvelisib in February 2018, the NDA may not be accepted or approved bythe FDA. Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. Duvelisib and the activitiesassociated with its development and commercialization, including its design, testing, manufacture, safety, efficacy,recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, as with our other productcandidates, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States andby comparable authorities in other countries. Failure to obtain marketing approval for duvelisib will prevent us fromcommercializing duvelisib. We have not received approval to market any of our product candidates from regulatoryauthorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary togain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process.Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information tothe FDA for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing FDA approvalalso requires the submission of information about the product manufacturing process to, and inspection ofmanufacturing facilities by, the FDA. Duvelisib may not be effective, may be only moderately effective or may prove tohave undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtainingmarketing 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 subject tomore limited indications than those we propose or subject to restrictions or post approval commitments that render theapproved product not commercially viable.If we experience delays in obtaining approval or if we fail to obtain approval of duvelisib, its commercialprospects may be harmed and our ability to generate revenues will be materially impaired.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 and the European Union for the use of duvelisib inCLL/SLL and FL, in the United States and European Union for the use of defactinib in ovarian cancer, and the UnitedStates, the European Union, and Australia for the use of defactinib in mesothelioma. If duvelisib or defactinib obtainsmarketing authorization, it will receive orphan drug exclusivity. Orphan drug exclusivity grants seven years ofmarketing exclusivity under the Federal Food, Drug and Cosmetic Act (FDCA), up to ten years of marketing exclusivityin Europe, and five years of marketing exclusivity in Australia. A competitor may receive orphan drug marketingauthorization prior to us for the same indication for which we are developing duvelisib or defactinib. Other companieshave received orphan drug designations for compounds other than duvelisib or defactinib for the same indications forwhich we may have received orphan drug designation in corresponding territories. While orphan drug exclusivity for duvelisib or defactinib would provide market exclusivity against the same active ingredient for the same indication, wewould not be able to exclude other companies from manufacturing and/or selling drugs using the same active ingredientfor the same indication beyond that timeframe on the basis of orphan drug exclusivity. Furthermore, the marketingexclusivity in Europe can be reduced from ten years to six years if the initial designation criteria have significantlychanged since the market authorization of the orphan medicinal product. We cannot guarantee that another companyalso with orphan drug designation will not receive marketing authorization for the same active ingredient and sameindication before we do. If that were to56 Table of Contentshappen, our applications for that indication may not be approved until the competing company’s period of exclusivityhas expired. Even if we are the first to obtain marketing authorization for an orphan drug indication, there arecircumstances under which the FDA may approve a competing product for the same indication during the seven-yearperiod of marketing exclusivity, such as if the later product is the same compound as our product but is shown to beclinically superior to our product, or if the later product is a different drug than our product candidate. Further, the seven-year marketing exclusivity would not prevent competitors from obtaining approval of the same compound forother indications 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, for example, if we obtain marketing approval for duvelisib, the approval may be subject tolimitations on the indicated uses for which the product may be marketed or to the conditions of approval, or containrequirements for costly post marketing testing and surveillance to monitor the safety or efficacy of the product,including the imposition of a REMS. The FDA closely regulates the post approval marketing and promotion of drugs toensure drugs are marketed only for the approved indications and in accordance with the provisions of the approvedlabeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off label use and if we donot market our products for their approved indications, we may be subject 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;·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;57 Table of Contents·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. A person or entity does not need to have actual knowledge of the anti-kickback statute or specificintent to violate it in order to have committed a violation;·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. In addition, the government may assert that a claim including items and services resulting from aviolation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the FCA;·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 acondition of reimbursement under governmental healthcare programs;·the so-called federal “sunshine law” or Open Payments requires manufacturers of drugs, devices, biologics andmedical supplies to report to the Department of Health and Human Services information related to paymentsand other transfers of value to physicians and teaching hospitals, as well as physician ownership andinvestment 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-58 Table of Contentsgovernmental third-party payors, including private insurers, and some state laws regulate interactions betweenpharmaceutical companies and healthcare providers and require pharmaceutical companies to comply with thepharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidancepromulgated by the federal government in addition to requiring drug manufacturers to report informationrelated to payments to physicians and other healthcare providers or marketing expenditures and pricinginformation. State laws also govern the privacy and security of health information in some circumstances, manyof which differ from each other in significant ways and often are not preempted by HIPAA, thus complicatingcompliance efforts.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, including arrangements we may have with physicians and other healthcare providers, may notcomply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcarelaws and regulations. If our operations are found to be in violation of any of these laws or any other governmentalregulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages,fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment orrestructuring of our operations. If any of the physicians or other providers or entities with whom we expect to dobusiness are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrativesanctions, 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, and we expect there will continue to be, anumber of legislative and regulatory changes and proposed changes regarding the healthcare system that could, amongother things, prevent or delay marketing approval of our product candidates, restrict or regulate post approval activitiesand affect our ability to profitably sell any product candidates 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 beenaggressively pursuing healthcare reform. For example, in March 2010, President Obama signed into law the Health CareReform Act, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcarespending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and healthinsurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Thelaw, for example, increased drug rebates under state Medicaid programs for brand name prescription drugs andextending those rebates to Medicaid managed care and assessed a fee on manufacturers and importers of brand nameprescription drugs reimbursed under certain government programs, including Medicare and Medicaid.59 Table of ContentsSince its enactment, there have been ongoing judicial, legislative and administrative efforts to modify, repealor prevent implementation of various provisions of the Health Care Reform Act. See “GOVERNMENT REGULATION –New Legislation and Regulations.” We cannot predict the ultimate content, timing or effect of any federal orstate healthcare reform legislation or the impact of potential legislation on us.In addition, other legislative changes have been proposed and adopted in the U.S. since the Health Care ReformAct was enacted. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscalyear, which went into effect in April 2013 and, due to the Bipartisan Budget Act of 2015, will remain in effect through2025 unless additional action is taken by Congress. Recent tax reform legislation eliminates the tax penalty forindividuals who do not maintain sufficient health insurance coverage beginning in 2019 (the so-called “individualmandate”).Individual states in the United States have also become increasingly active in passing legislation andimplementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursementconstraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures,and, in some cases, measures designed to encourage importation from other countries and bulk purchasing. In addition,regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine whatpharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.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, Daniel Paterson, ourChief Operating Officer, and Joseph Lobacki, our Chief Commercial Officer, as well as the other principal members ofour management and scientific teams. Although we have formal employment agreements with Robert Forrester, DanielPaterson, and Joseph Lobacki, these agreements do not prevent them from terminating their employment with us at anytime. We do not maintain “key person” insurance for any of our executives or other employees. The loss of the servicesof any of these persons could impede the achievement of our research, 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 breaches or 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 key businessprocesses and clinical development programs. For example, the loss of clinical trial data from ongoing or plannedclinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data orapplications, or inappropriate disclosure of confidential or proprietary information, we could be exposed to liability,which could have a material adverse effect on our operating results and financial condition and possibly delay thefurther development and commercialization of our product candidates.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 February 28, 2018. We cannotpredict whether the price of our common stock will rise or fall. The market price for our common stock may beinfluenced by many 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 The NasdaqGlobal Market. To maintain listing, we are required, among other things, to maintain a minimum closing bid price of$1.00 per share. If the closing bid price of our common stock is below $1.00 per share for 30 consecutive business days,we will receive a deficiency notice from Nasdaq advising us that we have a certain period of time, typically 180 days, toregain compliance by maintaining a minimum closing bid price of at least $1.00 for at least ten consecutive businessdays, 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 The NasdaqGlobal Market could also have other negative results, including the potential loss of confidence by our current orprospective third-party providers and collaboration partners, the loss of institutional investor interest, and fewerlicensing and partnering opportunities.62 Table of ContentsBecause 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 current orfuture debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our commonstock will be the sole source of gain for our stockholders for the foreseeable future. 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. 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.” The followingtable sets forth, for the periods indicated, the high and low sales prices for our common stock as reported on The NasdaqGlobal Market.Year ended December 31, 2017 High Low First quarter $2.25 $1.11 Second quarter $2.54 $1.61 Third quarter $5.71 $2.11 Fourth quarter $4.92 $2.95 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 HOLDERSAs of February 28, 2018, there were 16 holders of record of our common stock and the closing price of ourcommon stock on The Nasdaq Global Market as of that date was $3.06. 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.63 Table of ContentsPERFORMANCE 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 of 1933, as amended, 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 to theNasdaq Biotechnology Index from December 31, 2012 through December 31, 2017. The comparison assumes $100 wasinvested after the market closed on December 31, 2012 in our common stock and in each of the foregoing indices, and itassumes reinvestment of dividends, if any.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Verastem, Inc., the Nasdaq Composite Index, and the Nasdaq Biotechnology Index *$100 invested on 12/31/12 in stock or index, including reinvestment of dividends. Fiscal year ending December 31,2017.Cumulative Total Return Comparison December 31, 2012 2013 2014 2015 2016 2017 Verastem, Inc. 100.00 129.69 103.98 21.16 12.74 34.93 Nasdaq Composite 100.00 141.63 162.09 173.33 187.19 242.29 Nasdaq Biotechnology 100.00 174.05 230.33 244.29 194.95 228.29 PURCHASE OF EQUITY SECURITIESWe did not purchase any of our equity securities during the period covered by this Annual Report onForm 10‑K.64 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: 2017 2016 2015 2014 2013 (in thousands, except share and per share amounts) Operating expenses: Research and development $46,423 $19,779 $40,565 $35,448 $25,930 General and administrative 21,381 17,223 17,634 18,159 15,472 Total operating expenses 67,804 37,002 58,199 53,607 41,402 Loss from operations (67,804) (37,002) (58,199) (53,607) (41,402) Interest income 561 562 334 242 200 Interest expense (559) — — — — Net loss applicable to common stockholders $(67,802) $(36,440) $(57,865) $(53,365) $(41,202) Net loss per share applicable to common stockholders—basic and diluted $(1.76) $(0.99) $(1.61) $(2.07) $(1.82) Weighted‑average number of common shares used innet loss per share applicable to common stockholders—basic and diluted 38,422 36,988 35,932 25,804 22,680 As of December 31, Balance sheet data: 2017 2016 2015 2014 2013 (in thousands) Cash, cash equivalents and investments $86,672 $80,897 $110,258 $92,675 $123,656 Working capital 70,659 70,304 100,734 86,112 94,151 Total assets 89,791 83,629 113,094 98,649 125,261 Accumulated deficit (303,142) (235,323) (198,883) (141,018) (87,653) Total stockholders’ equity 57,684 72,297 102,469 88,766 117,446 65 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 developing and commercializing drugs to improve with thesurvival and quality of life of cancer patients. Our most advanced product candidates, duvelisib and defactinib, utilize amulti-faceted approach to treat cancers originating either in the blood or major organ systems. We are currentlyevaluating these compounds in both preclinical and clinical studies as potential therapies for certain cancers, includingleukemia, lymphoma, lung cancer, ovarian cancer, mesothelioma, and pancreatic cancer. We believe that thesecompounds may be beneficial as therapeutics either as single agents or when used in combination with immuno-oncology agents or other current and emerging standard of care treatments in aggressive cancers that are poorly servedby currently available therapies.Duvelisib targets the Phosphoinositide 3-kinase (PI3K) signaling pathway. The PI3K signaling pathway playsa central role in cancer proliferation and survival. Duvelisib is an investigational oral therapy designed to attack bothmalignant B- and T-cells and disrupt the tumor microenvironment to help thwart their growth and proliferation throughthe dual inhibition of PI3K delta and gamma. Duvelisib is being developed for the treatment of patients withhematologic cancers including chronic lymphocytic leukemia and small lymphocytic lymphoma (CLL/SLL) andindolent non-Hodgkin lymphoma (iNHL), which includes follicular lymphoma (FL), and other subtypes of lymphoma,including peripheral T-cell lymphoma (PTCL). Duvelisib has U.S. Food and Drug Administration (FDA) Fast TrackDesignation for patients with CLL or PTCL who have received at least one prior therapy and for patients with FL whohave received at least two prior therapies. In addition, duvelisib has orphan drug designation for patients with CLL/SLLand FL in the United States and European Union. Duvelisib was evaluated in late- and mid-stage clinical trials, including DUO™, a randomized, Phase 3monotherapy study in patients with relapsed or refractory CLL/SLL, and DYNAMO™, a single-arm, Phase 2monotherapy study in patients with double-refractory iNHL, including FL, SLL, and marginal zone lymphoma(MZL). Both DUO and DYNAMO achieved their primary endpoints upon top-line analysis of efficacy data. Wesubmitted a New Drug Application (NDA) to the FDA requesting the full approval of duvelisib for the treatment ofpatients with relapsed or refractory CLL/SLL and accelerated approval for the treatment of patients with relapsed orrefractory FL in February 2018. Defactinib is a targeted inhibitor of the Focal Adhesion Kinase (FAK) signaling pathway. FAK is a non-receptor tyrosine kinase encoded by the PTK-2 gene that is involved in cellular adhesion and, in cancer, metastaticcapability. 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. Defactinib has orphan drug designation in ovarian cancer in theUnited States and the European Union, and in mesothelioma in the United States, the European Union, and Australia.66 Table of ContentsDefactinib 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 with pembrolizumab in patients with non-small cell lung cancer (NSCLC), mesothelioma orpancreatic cancer. Our operations to date have been organizing and staffing our company, business planning, raising capital,identifying and acquiring potential product candidates and undertaking preclinical studies and clinical trials for ourproduct candidates. To date, we have not generated any revenues. We have financed our operations to date throughprivate placements of preferred stock, public offerings of our common stock, sales of common stock under our at-the-market equity offering programs, and our loan and security agreement executed with Hercules Capital, Inc. (Hercules) inMarch 2017, as amended. As of December 31, 2017, we had an accumulated deficit of $303.1 million. Our net loss was $67.8 million,$36.4 million and $57.9 million for the years ended December 31, 2017, 2016 and 2015, 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 seek marketing approval for our lead product candidate,duvelisib, and continue the research and development and clinical trials of all of our product candidates. In addition, ifwe obtain marketing approval for any of our product candidates, we expect to incur significant commercializationexpenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtainsubstantial additional funding in connection with our continuing operations. Adequate additional financing may not beavailable to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, wewould be forced to delay, reduce or eliminate our research and development programs or any future commercializationefforts. We will need to generate significant revenues 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 thedevelopment 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.67 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 and defactinib, for the years ended December31, 2017, 2016 and 2015. We use our employee and infrastructure resources across multiple research and developmentprojects. Our project costing methodology does not allocate personnel and other indirect costs to specific clinicalprograms. These unallocated research and development expenses are summarized in the table below and include $5.8million, $3.9 million and $7.3 million of personnel costs for the years ended December 31, 2017, 2016 and 2015,respectively. Year ended December 31, 2017 2016 2015 (in thousands) (in thousands) (in thousands) Duvelisib $30,409 $3,326 $ — Defactinib 2,894 3,934 20,713 Unallocated and other research and development expense 11,739 11,445 17,442 Unallocated stock-based compensation expense 1,381 1,074 2,410 Total research and development expense $46,423 $19,779 $40,565 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 FDA or other regulatory authority were to require us to conduct clinical trials beyond those which wecurrently anticipate will be required for the completion of clinical development of a product candidate or if weexperience significant delays in enrollment in any clinical trials, we could be required to expend significant additionalfinancial resources and time on the completion of clinical development.General 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 and68 Table of Contentsadministrative expenses include allocated facility costs and professional fees for legal, patent, investor and publicrelations, consulting, insurance premiums, audit, tax and other public company costs.Interest income and interest expenseInterest income reflects interest earned on our cash, cash equivalents and available-for-sale securities.Interest expense reflects interest expense due under our term loan facility executed with Hercules and non-cashinterest related to the amortization of debt discount and issuance 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.69 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, including ourown and a representative group of four public biotechnology and life sciences companies with similar characteristics tous, including similar stage of product development and therapeutic focus. We have not paid and do not anticipatepaying cash dividends on our shares of common stock; therefore, the expected dividend yield is assumed to be zero. Historically, we have recognized stock-based compensation net of estimated forfeitures over the vesting period of therespective grant. Effective January 1, 2017, we adopted Accounting Standard Updated (ASU) 2016-09, Compensation –Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplified theaccounting for stock-based compensation arrangements, including the accounting for forfeitures. Upon adoption, weelected to begin accounting for forfeitures as they occur, rather than estimating a forfeiture rate, and recorded animmaterial cumulative-effect adjustment to opening accumulated deficit. 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, 2017, there was approximately $6.8 million of unrecognized stock‑based compensationrelated to stock options, which are expected to be recognized over a weighted‑average period of 2.9 years. There is nounrecognized stock‑based compensation related to RSUs or restricted common stock. See Notes 2 and 7 to ourconsolidated financial statements located in this Annual Report on Form 10‑K for further discussion of share‑basedcompensation.70 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, 2017 to the Year Ended December 31, 2016Research and development expense. Research and development expense for the year ended December 31, 2017(2017 Period) was $46.4 million compared to $19.8 million for the year ended December 31, 2016 (2016 Period). The$26.6 million increase from the 2016 Period to the 2017 Period was primarily related to an increase of $13.4 million inexternal CRO expense for outsourced biology, chemistry, development and clinical services, which includes our clinicaltrial costs, the achievement of a $6.0 million milestone pursuant to our license agreement with Infinity, an increase of$5.1 million in consulting fees, an increase in personnel related costs of $1.9 million, and a net increase ofapproximately $243,000 in stock-based compensation and other expenses.General and administrative expense. General and administrative expense for the 2017 Period was$21.4 million compared to $17.2 million for the 2016 Period. The increase of $4.2 million from the 2016 Period to the2017 Period primarily resulted from increases in consulting and professional fees of $4.4 million, including $2.5 millionrelated to commercial launch preparation, an increase in personnel costs of $1.0 million and an increase in facilities andother expenses of approximately $200,000. These increases were partially offset by a decrease in stock-basedcompensation expense of $1.5 million.Interest income. Interest income remained flat from the 2016 Period to the 2017 Period primarily as a result ofhigher interest rates on investments in the 2017 Period, offset by a lower investment cost basis.Interest expense. Interest expense for the 2017 Period was approximately $559,000 and related to our loan andsecurity agreement executed with Hercules in March 2017, as amended. We did not incur any interest expense in the2016 Period.Comparison of the Year Ended December 31, 2016 to the Year Ended December 31, 2015Research and development expense. Research and development expense for the 2016 Period was $19.8 millioncompared to $40.6 million for the year ended December 31, 2015 (2015 Period). The $20.8 million decrease from the2015 Period to the 2016 Period was primarily related to a decrease of $15.6 million in external CRO expense foroutsourced biology, chemistry, development and clinical services, which includes our clinical trial costs, a $3.4 milliondecrease in personnel related costs, primarily due to the reduction in workforce in October 2015, a decrease of $1.3million in stock-based compensation expense and a decrease of $1.5 million in lab supplies, travel and other researchand development expense. These decreases were partially offset by an increase of approximately $947,000 in consultingand 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.71 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, public offerings of our common stock, sales of common stock under our at-the marketequity offering programs, and our loan and security agreement executed with Hercules in March 2017, as amended.As of December 31, 2017, we had $86.7 million in cash, cash equivalents and investments. We primarily investour cash, cash equivalents and investments in a U.S. Government money market fund and corporate bonds andcommercial 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, 2017 2016 2015 Net cash (used in) provided by: Operating activities $(57,310) $(29,484) $(45,559) Investing activities 43,953 36,968 (27,057) Financing activities 63,184 (5) 63,585 Increase in cash and cash equivalents $49,827 $7,479 $(9,031) Operating activities. The use of cash in operating activities for all periods resulted primarily from our netlosses adjusted for non-cash charges and changes in the components of working capital. The $27.8 million increase incash used in operating activities for the 2017 Period compared to the 2016 Period was primarily due to an increase inresearch and development expenses related to our license agreement with Infinity, including our ongoing clinical trialsand the achievement of a $6.0 million milestone in the 2017 Period. The $16.1 million decrease in cash used inoperating activities for the 2016 Period compared to the 2015 Period was primarily due to a decrease in research anddevelopment expenses related to our ongoing clinical trials, including the closeout of our COMMAND trial, anddevelopment of our lead product candidates.Investing activities. The cash provided by investing activities for the 2017 Period reflects net maturities ofinvestments of $44.0 million. 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.Financing activities. The cash provided by financing activities for the 2017 Period primarily represents $24.7million in net proceeds received from an underwritten offering of 8,422,877 shares of our common stock at a price of$2.97 per share with BTIG, LLC, $23.1 million in net proceeds received under our at-the-market equity program, $14.8million in net proceeds received from a loan and security agreement executed with Hercules, and approximately$442,000 received from the exercise of stock options, offset by approximately $138,000 of deferred financing costs. Thecash used in financing activities for the 2016 Period primarily represents approximately $5,000 used to satisfy the taxwithholding obligations on certain RSUs that were net settled by employees. The cash provided by financing activitiesfor the 2015 Period primarily represents net proceeds of $63.9 million from the sale of shares of our common stock in ourJanuary 2015 follow-on offering and our at-the-market equity offering program, offset in part by approximately$417,000 of cash used to satisfy the tax withholding obligations on certain RSUs that were net settled by employees.On March 21, 2017 (Closing Date), we entered into a term loan facility of up to $25.0 million with Hercules, aMaryland corporation, the proceeds of which will be used for its ongoing research and development programs and forgeneral corporate purposes. The term loan facility is governed by a loan and security agreement, dated March 21, 2017(the Original Loan Agreement), which originally provided for up to four separate advances, of which the first tranche of$2.5 million was drawn on the Closing Date. The second and third tranches of $2.572 Table of Contentsmillion and $5.0 million, were both drawn on October 12, 2017 after announcing favorable data from our Phase IIIclinical study evaluating the safety and efficacy of duvelisib in patients with relapsed/refractory CLL/SLL. A total of$6.0 million of the proceeds received from the second and third tranches were used to make a milestone paymentpursuant to our license agreement with Infinity. The fourth tranche consisted of $15.0 million that could be drawn, atour option and at the sole discretion of Hercules, on or prior to June 30, 2018. On December 20, 2017, we drew anadvance under the fourth tranche of $5.0 million. On January 4, 2018, we entered into the First Amendment to the Original Loan Agreement (the FirstAmendment) and on March 6, 2018, we entered into the Second Amendment to the Original Loan Agreement (theSecond Amendment, and the Original Loan Agreement as amended by the First Amendment and the SecondAmendment, the Amended Loan Agreement). The First Amendment increased the total borrowing limit under theOriginal Loan Agreement from up to $25.0 million to up to $50.0 million (the Term Loan). As $15.0 million in termloans had already been drawn prior to entering into the First Amendment, there is $35.0 million of borrowing capacityremaining under the Amended Loan Agreement. The remaining $35.0 million of borrowing capacity may be drawn inminimum increments of $5.0 million in multiple tranches comprised of (i) term loans (each a Term E Loan Advance) inan aggregate principal amount of up to $10.0 million and (ii) subject to Hercules’ sole discretion, term loans (each aTerm F Loan Advance) in an aggregate principal amount of up to $25.0 million. The Amended Loan Agreement permitsus to draw Term E Loan Advances subject to (i) the FDA accepting on or prior to September 30, 2018 our NDA forduvelisib and (ii) delivery of our financial and business projections to Hercules in form and substance reasonablyacceptable to Hercules. In addition, the Amended Loan Agreement allows us to draw Term F Loan Advances subject tothe prior drawing of all other tranches and Hercules’ sole discretion. 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 provided for interest-only payments until November1, 2018, which was extended to May 1, 2019 pursuant to the Amended Loan Agreement upon our receipt of a minimumof $20.0 million cash proceeds from a sale of equity securities in December 2017. Thereafter, amortization payments willbe payable monthly in twenty installments of principal and interest (subject to recalculation upon a change in primerates). Any advance may be prepaid in whole or in part upon seven business days’ prior written notice to Hercules,subject to a prepayment charge of 3.0%, if such advance is prepaid in any of the first twelve (12) months following theClosing Date, 2.0%, if such advance is prepaid after twelve (12) months following the Closing Date but on or prior totwenty-four (24) months following the Closing Date, and 1.0% thereafter. In addition, a final payment equal to 4.5% ofthe greater of (a) $5.0 million and (b) the total principal amount of the Term Loan extended by Hercules which is due onthe Loan Maturity Date, or such earlier date specified in the Amended Loan Agreement. Amounts outstanding during anevent of default shall be payable on demand and shall accrue interest at an additional rate of 5.0% per annum of the pastdue amount outstanding. The Term Loan is secured by a lien on substantially all of the assets of Verastem, Inc., 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 Amended Loan Agreement include, without limitation, and subject tocustomary grace periods, (1) any failure by us to make any payments of principal or interest under the Amended LoanAgreement, promissory notes or other loan documents, (2) any breach or default in the performance of any covenantunder the Amended Loan Agreement, (3) any making of false or misleading representations or warranties in any materialrespect, (4) our insolvency or bankruptcy, (5) certain attachments or judgments on the assets of Verastem, Inc., or (6) theoccurrence of any material default under certain agreements or obligations of ours 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 Amended Loan Agreement. The Amended 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 were able tooffer and sell up to $35.0 million of our common stock at then-current market prices from time to time73 Table of Contentsthrough Cantor Fitzgerald & Co. (Cantor), as sales agent (the 2013 ATM Program). In November 2014, we commencedsales under the 2013 ATM Program. During the year ended December 31, 2015, we sold 1,189,479 shares of commonstock under the 2013 ATM Program with net proceeds (after deducting commissions and other offering expenses) of$12.9 million. No proceeds were received and no additional sales of our common stock were made under the 2013 ATMProgram during the years ended December 31, 2017 and 2016. On March 30, 2017, we terminated the 2013 ATM Program and established a new at-the-market equity offeringprogram pursuant to which were able to offer and sell up to $35.0 million of our common stock at then-current marketprices from time to time through Cantor, as sales agent (the 2017 ATM Program). On August 28, 2017, we amended oursales agreement with Cantor to increase the maximum aggregate offering price of shares of common stock that can besold under the 2017 ATM Program to $75.0 million. Through December 31, 2017, we sold 5,036,879 shares under the2017 ATM Program for net proceeds of approximately $23.1 million (after deducting commissions and other offeringexpenses).As of March 13, 2018, we sold an additional 97,078 shares of common stock under the at-the-market equityoffering program with net proceeds of approximately $342,000 (after deducting commissions and other offeringexpenses).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.Funding 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: · prepare for the anticipated commercialization of duvelisib; · continue our ongoing clinical trials, including with our most advanced product candidates duvelisiband defactinib; · add operational, financial and management information systems and personnel, including personnelto support our product development and planned future commercialization efforts; and · establish a sales, marketing and distribution infrastructure to commercialize any products for whichwe may obtain marketing approval.Without additional funding, we do not believe that we have sufficient funds to meet our obligations within thenext twelve months from the date of issuance of these consolidated financial statements. These factors raise substantialdoubt about our ability to continue as a going concern. Because of the numerous risks and uncertainties associatedwith the development and commercialization of our product candidates, and the extent to which we may enter intocollaborations with third parties for development and commercialization of our product candidates, we are unable toestimate the amounts of increased capital outlays and operating expenses associated with completing the developmentof our current product candidates. Our future capital requirements will depend on many factors, including: · 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 of our product candidates (including our efforts toseek approval and fund the preparation and filing of regulatory submissions); 74 Table of Contents · the costs and timing of commercialization activities for our product candidates, for which we receivemarketing approval; · revenue, if any, received from commercial sales of our product candidates, should any of our productcandidates receive marketing 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, theownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidationor other preferences that adversely affect the rights of our existing stockholders. Debt financing, if available, mayinvolve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurringadditional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations,strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to ourtechnologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not befavorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may berequired to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rightsto 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, 2017:(in thousands) Total 2018 2019 -2020 2021 -2022 Thereafter Operating lease obligations $957 $542 $415 $ — $— Amended Loan Agreement 15,000 — 15,000 — — 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 may requireus to pay upfront license fees, ongoing annual license maintenance fees, milestone payments, minimum royaltypayments, as well as reimbursement of certain patent costs incurred by the licensors, as applicable. We have notincluded these payments in the table above because: there were no upfront license fees payable in future periods;no annual license maintenance fees; we cannot estimate if milestone and/or royalty payments will occur in futureperiods; and patent cost reimbursement costs are perpetual and the agreements are cancelable by us at any timeupon 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/SLL, and Infinity assumed financial responsibility for the shutdown of certainother clinical studies up to a maximum of $4.5 million. We are obligated to use diligent efforts to develop andcommercialize a product in an oncology indication containing duvelisib. During the term of the license agreement,Infinity has agreed not to research, develop, manufacture or commercialize duvelisib in any other indication in humansor 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, which milestone was paid in75 Table of Contentscash by us to Infinity in October 2017, and (ii) $22.0 million upon the approval of an NDA in the United States or anapplication for marketing authorization with a regulatory authority outside of the United States for a product in anoncology indication containing duvelisib. For any portion of any of the foregoing payments that we elect to issue inshares of our common stock in lieu of cash, the number of shares of common stock to be issued will be determined bymultiplying (1) 1.025 by (2) the number of shares of common stock equal to (a) the amount of the payment to be paid inshares of common stock divided by (b) the average closing price of a share of common stock as quoted on Nasdaq for atwenty day period following the public announcement of the applicable milestone event. The shares of common stockwill be issued as unregistered securities, and we will have an obligation to promptly file a registration statement with theSEC to register such shares for resale. Any issuance of shares will be subject to the satisfaction of closing conditions,including that all material authorizations, consents, approvals and the like necessary for such issuance shall have beenobtained. 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. 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, for all therapeutic, diagnostic and prophylactic uses in humans. Wehave the right to grant sublicenses under the foregoing licensed rights, subject to certain restrictions. We are solelyresponsible, at our own expense, for the clinical development of the FAK Products, which is to be conducted inaccordance 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 Products in each country begin onthe date of first commercial sale of the FAK Products in that country, and end on the later of 10 years after the date offirst commercial sale of the FAK Products in that country or the date of expiration or abandonment of the last claimcontained in any issued patent or patent application licensed by Pfizer to us that covers the Product in that country. 76 Table of ContentsOFF‑BALANCE SHEET ARRANGEMENTSWe did not have any off-balance sheet arrangements during the periods presented, and we do not currentlyhave, any off‑balance sheet arrangements, as defined under Securities and Exchange Commission rules.TAX LOSS CARRYFORWARDSAs of December 31, 2017, we had federal and state net operating loss carryforwards of $237.0 million and$235.9 million, respectively, which are available to reduce future taxable income. We also had federal and state taxcredits of $14.1 million and $1.7 million, respectively, which may be used to offset future tax liabilities. The netoperating loss and tax credit carryforwards will expire at various dates through 2037. 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, 2017, we recorded a 100% valuation allowance against our net operatingloss and tax credit carryforwards of $85.8 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) 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and JointVentures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016and November 17, 2016 EITF Meetings. ASU 2017-03 clarifies the SEC staff’s expectations about the extent ofdisclosures that a registrant is expected to provide regarding the impact that the adoption of ASUs 2014-09 (Revenuefrom Contracts with Customers), 2016-02 (Leases) and 2016-13 (Measurement of Credit Losses on FinancialInstruments) will have on its financial statements. It also conforms SEC guidance on accounting for tax benefitsresulting from investments in affordable housing projects to the guidance in ASU 2014-01, Investments -Equity Methodand Joint Ventures (Topic 323). The guidance under this ASU was effective upon issuance and did not have a materialimpact on our 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 was effective for annual and interim periods beginning after December 15, 2016. We adopted this standardeffective January 1, 2017. The adoption of this ASU did not have an effect on our consolidated financial statements ordisclosures. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies the accounting for share-basedcompensation arrangements, including the accounting for forfeitures, income tax consequences, classification of awardsas either equity or liabilities and classification on the statement of cash flows. The standard was effective for annual andinterim periods beginning after December 15, 2016, with early adoption permitted. We adopted ASU 2016-09 effectiveJanuary 1, 2017. Upon adoption, we elected to begin accounting for forfeitures as they occur, rather than estimating aforfeiture rate, and recorded an immaterial cumulative-effect adjustment to opening accumulated deficit. Also uponadoption, we recognized all previously unrecognized tax benefits, which would have resulted in the recognition of animmaterial cumulative-effect adjustment to opening accumulated deficit; however, these unrecognized tax benefits wererecorded as a deferred tax asset, which was fully offset by a77 Table of Contentsvaluation allowance. Therefore, the recognition of these benefits had no net cumulative-effect on opening accumulateddeficit upon adoption. 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 $86.7 million and $80.9 million as of December 31, 2017 and 2016, respectively, consisting of cash, U.S.Government money market funds, overnight repurchase agreements collateralized by government agency securities orU.S. Treasury securities, corporate bonds and commercial paper of publicly traded companies. Our primary exposure tomarket risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularlybecause most of our investments are interest bearing. Our available for sale securities are subject to interest rate risk andwill fall in value if market interest rates increase. Due to the short‑term duration most of our investment portfolio and thelow risk profile of our investments, an immediate 100 basis point change in interest rates would not have a materialeffect on the fair market value of our portfolio.We 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, 2017, an immaterial amount of our total liabilities was denominated in currenciesother than the functional currency.As of December 31, 2017, we have borrowed $15.0 million under the Amended Loan Agreement. The AmendedLoan Agreement bears interest per annum 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%. Changes in interest rates can cause interest charges tofluctuate under the Amended Loan Agreement. A 10% increase in current interest rates would have resulted in animmaterial increase in the amount of cash interest expense for the year ended December 31, 2017. 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‑26 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 ProceduresLimitations on Effectiveness of Controls and ProceduresIn designing and evaluating our disclosure controls and procedures and internal control over financialreporting, management recognizes that any controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosurecontrols and procedures and internal control over financial reporting must reflect the fact that there are resourceconstraints and that management is required to apply judgment in evaluating the benefits of possible controls andprocedures relative to their costs. Evaluation of Disclosure Controls and ProceduresOur Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosurecontrols and procedures, as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act, as of the end of theperiod covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officerconcluded that our disclosure controls and procedures as of the end of the period covered by this report were effective.78 Table of ContentsManagement’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 Chief Financial Officer, andeffected by our board of directors, management and other personnel, to provide reasonable assurance regarding thereliability of our financial reporting and the preparation of our financial statements for external purposes in accordancewith U.S. generally accepted accounting principles (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 Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financialreporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 Framework). Based on this evaluation, our managementconcluded that our internal control over financial reporting was effective as of December 31, 2017.The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited byErnst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.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, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’sinternal control over financial reporting.79 Table of ContentsReport of Independent Registered Public Accounting FirmTo the Stockholders and the Board of Directors of Verastem, Inc.Opinion on Internal Control over Financial ReportingWe have audited Verastem, Inc.’s internal control over financial reporting as of December 31, 2017, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission 2013 framework (the COSO criteria). In our opinion, Verastem, Inc. (the Company) maintained,in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSOcriteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates) (PCAOB), the 2017 consolidated financial statements of the Company and our report dated March 13, 2018expressed an unqualified opinion thereon that included an explanatory paragraph regarding the Company’s ability tocontinue as a going concern.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financialreporting and for its assessment of the effectiveness of internal control over financial reporting includedin the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting basedon our audit. We are a public accounting firm registered with the PCAOB and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that amaterial weakness exists, testing and evaluating the design and operating effectiveness of internal control based on theassessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe thatour audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control over financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect onthe financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate./s/ Ernst & Young LLPBoston, MassachusettsMarch 13, 201880 Table of Contents Item 9B. Other InformationNone.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 ofFebruary 28, 2018.Name Age PositionRobert Forrester 54 President, Chief Executive Officer and DirectorMichael Kauffman, M.D., Ph.D. 54 Lead DirectorTimothy Barberich 70 DirectorAlison Lawton 56 DirectorS. Louise Phanstiel 59 DirectorEric Rowinsky, M.D. 61 DirectorBrian Stuglik, R.Ph. 58 DirectorBruce Wendel 64 DirectorSteven Bloom 57 Chief Strategy OfficerJulie B. Feder 47 Chief Financial OfficerDiep Le, M.D., Ph.D. 50 Chief Medical OfficerJoseph Lobacki 59 Chief Commercial OfficerDaniel Paterson 57 Chief Operating Officer Robert Forrester, age 54, 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 54, 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, on the board of directors orInfinity Pharmaceuticals, Inc., and on the82 Table of Contentsboard of directors of Kezar Life Sciences Inc. Dr. Kauffman received an M.D. and Ph.D. in molecular biology andbiochemistry from Johns Hopkins University and holds a B.A. in biochemistry from Amherst College. Dr. Kauffmantrained in Internal Medicine at Beth Israel Deaconess and Massachusetts General Hospitals. He is board certified ininternal medicine. The Board of Directors believes that Dr. Kauffman’s qualifications to sit on the Board include thecombination of his significant business, clinical development and leadership experience at public life sciencescompanies and his medical and scientific background.Timothy Barberich, age 70, 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 board ofdirectors of publicly traded GI Dynamics, and on the board of directors of the privately held company, FrequencyTherapeutics, Inc. He has also served on the boards of directors of Neurovance Inc. until it was acquired by OtsukaPharmaceutical Co., Ltd. in 2017, Inotek Pharmaceuticals, Inc., HeartWare, International, Inc., Tokai Pharmaceuticals,BioSphere Medical, Inc. and GeminX Pharmaceuticals. Mr. Barberich has also served on the board of trustees of BostonMedical Center and the board of the Pharmaceutical Research and Manufacturers’ Association (PhRMA). Prior tofounding Sepracor, Mr. Barberich spent 10 years as a senior executive at Bedford, Massachusetts-based MilliporeCorporation. Mr. Barberich is a graduate of Kings College and holds a Bachelor’s of Science degree in Chemistry. TheBoard of Directors believes that Mr. Barberich’s qualifications to sit on the Board include his significant experience inthe development and commercialization of pharmaceutical products, his leadership experience at other pharmaceuticalcompanies and his service on other boards of directors.Alison Lawton, age 56, is a Class II director who has served as a member of our Board of Directors sinceNovember 2012. Ms. Lawton has been the President and Chief Operating Officer at Kaleidon Biosciences, Inc. sinceDecember 2017. Prior to this, Ms. Lawton served as the Chief Operating Officer at Aura Biosciences January 2015 toDecember 2017, and was Chief Operating Officer of OvaScience, Inc., a publicly traded life sciences company, fromJanuary 2013 until December 2013. From 1991 to 2012, Ms. Lawton worked at various positions of increasingresponsibility at Genzyme Corporation (Genzyme) and subsequently at Sanofi-Aventis, following its 2011 acquisitionof Genzyme, each a global biopharmaceutical company. Ms. Lawton served as head of Genzyme Biosurgery, where shewas responsible for Genzyme’s global orthopedics, surgical and cell therapy and regenerative medicine businesses. Priorto that, Ms. Lawton oversaw Global Market Access at Genzyme, which included Global Regulatory Affairs, GlobalHealth Outcomes and Strategic Pricing, Global Public Policy, and Global Product Safety & Risk Management. Beforejoining Genzyme, Ms. Lawton worked for seven years in the United Kingdom at Parke-Davis, a pharmaceuticalcompany. Ms. Lawton serves on the board of directors of ProQR Therapeutics a publicly traded biopharmaceuticalcompanies. She also served on the boards of directors of CoLucid Pharmaceuticals, Inc., until its acquisition by Eli Lillyin 2017, and Cubist Pharmaceuticals for three years until its acquisition by Merck & Co., Inc. in 2015. Ms. Lawton alsoserves on the Scientific Advisory Board of the private biotechnology company X4 Pharmaceuticals. She is a formerPresident and Chair of the Board of Regulatory Affairs Professional Society and former FDA Advisory Committeemember for Cell and Gene Therapy Committee. The Board of Directors believes that Ms. Lawton’s qualifications to siton 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 59, 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 Directors83 Table of Contentsbelieves that Ms. Phanstiel’s qualifications to sit on the Board include her significant financial, investment, andmanagement expertise, and her experience managing and serving as a director of publicly traded companies.Eric Rowinsky, age 61, is a Class I director who has served as a member of our Board of Directors since May2017. Dr. Rowinsky has been the Executive Director and President of RGenix, Inc., since June 2016. He also has servedas the Chief Scientific Officer of Clearpath Development Co. since June 2016. Prior to this, Dr. Rowinsky served as theHead of Research and Development, Chief Medical Officer and Executive Vice President of Stemline Therapeutics, Inc.from February 2011 to January 2016. In 2010, Dr. Rowinsky co-founded Primrose Therapeutics and became its ChiefExecutive Officer until it was acquired in 2011. From 2005 to 2010, he served as the Chief Medical Officer andExecutive Vice President of Clinical Development and Regulatory Affairs of ImClone Systems Incorporated, a lifesciences company focused on monoclonal antibodies, which was acquired by Eli Lilly. Previous to that, Dr. Rowinskyheld several positions at the Cancer Therapy and Research Center's Institute of Drug Development, including Director ofthe Institute and SBC Endowed Chair for Early Drug Development. Prior to that, he served as Clinical Professor ofMedicine in the Division of Medical Oncology at the University of Texas Health Science Center at San Antonio and asAssociate Professor of Oncology at the Johns Hopkins University School of Medicine. Dr. Rowinsky has served on theboards of directors of Biogen Idec, Inc., Navidea, and Fortress Biosciences, Inc., all public life sciences companies since2010, and formerly served on the board of directors of BIND Therapeutics, a life-science company acquired byPfizer. Dr. Rowinsky received a B.A. degree in Liberal Arts from New York University and earned his M.D. fromVanderbilt University. The Board of Directors believes that Dr. Rowinsky’s qualifications to sit on the Board includehis extensive research and drug development experience, oncology expertise, corporate strategy, and broad scientificand medical knowledge. Brian Stuglik R.Ph., age 58, is a Class II director who has served as a member of our Board of Directors sinceSeptember 2017. Mr. Stuglik founded Proventus Health Solutions in January 2016 and has over three decades ofexperience in U.S. and international pharmaceutical development, product strategy, and commercialization. Prior tofounding Proventus Health Solutions, Mr. Stuglik served as the Vice President and Chief Marketing Officer for theOncology division of Eli Lilly and Company from 2009 to December 2015. Mr. Stuglik received a Bachelor of Sciencein Pharmacy from Purdue University and holds memberships in the American Society of Clinical Oncology, theAmerican Association of Cancer Research, and the International Association for the Study of Lung Cancer. The Boardof Directors believes that Mr. Stuglik’s qualifications to sit on the Board include his extensive experience inpharmaceutical development, product strategy and commercialization.Bruce Wendel, age 64, 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 publicly 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.Steven Bloom, age 57, has served as our Chief Strategy Officer since December 2017, our Senior Vice Presidentof Corporate Development from January 2017 to November 2017 and as our Vice President of Commercial Planning andExternal Affairs from January 2015 until January 2017. Prior to joining us in March 2014, Mr. Bloom served as SeniorVice President at Ziopharm Oncology from March 2008 to March 2014. Before joining Ziopharm, Mr. Bloom was VicePresident for the health informatics company Pharmetrics and spent the first 19 years of his career at Eli Lilly andCompany in leadership roles in marketing, sales and corporate affairs.Julie B. Feder, age 47, has served as our Chief Financial Officer since July 2017. Prior to joining us, Ms. Federserved as the Chief Financial Officer for the Clinton Health Access Initiative (CHAI) from September 2011 to July 2017. Prior to joining CHAI, Ms. Feder spent three years at Genzyme Corporation, first as Vice President of84 Table of ContentsInternal Audit and also as Finance Integration Leader. In these roles, she managed the day-to-day operations ofGenzyme’s global internal audit function, while leading the Genzyme Global Finance integration into Sanofi’sorganization following Sanofi’s acquisition of Genzyme.Diep Le, M.D., Ph.D., age 50, has served as our Chief Medical Officer since October 2017. Prior to joining us,Dr. Le served as the Vice President, Immuno-Oncology Innovative Medicines at MedImmune (a subsidiary ofAstraZeneca) from October 2015 to June 2017 and led the product development teams for multiple high-priorityimmuno-oncology assets. Prior to that, Dr. Le served as the Executive Director and Global Clinical Program Lead atNovartis Oncology from October 2013 to October 2015, and various roles of increasing responsibility atGlaxoSmithKline from June 2009 to October 2013, where she led the MEK inhibitor, trametinib (Mekinist™), from thefirst-in-human studies to FDA approval.Joseph Lobacki, age 59, has served as our Chief Commercial Officer since January 2018. Prior to joining us,Mr. Lobacki served as the Chief Operating Officer of Finch Therapeutics Group from November 2016 to December 2017,the Chief Commercial Officer and Executive Council Member of Medivation, Inc. from December 2014 to October2016, and as the General Manager of Oncology at Idera Pharmaceuticals from April 2014 to December 2014. Prior tothat Mr. Lobacki served as a commercial and business operations consultant for biotechnology companies from June2012 to April 2014 and as the Senior Vice President and Chief Commercial Officer of Micromet Inc., where he oversawcommercial activities including medical affairs and strategic marketing.Daniel Paterson, age 57, 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, 2017, 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 standards concerningany amendments to, or waivers from, any provision of the code.Board 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.85 Table of ContentsAudit 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 Timothy Barberich, Eric Rowinskyand Bruce Wendel. Compensation committee The members of our compensation committee are Alison Lawton, Michael Kauffman, and Brian Stuglik. ITEM 11. EXECUTIVE COMPENSATIONNAMED EXECUTIVE OFFICER COMPENSATION,COMPENSATION DISCUSSION AND ANALYSIS Our named executive officers for the fiscal year ended December 31, 2017 were:·Robert Forrester, our President and Chief Executive Officer;·Julie B. Feder, our Chief Financial Officer; and·Diep Le, M.D., Ph.D., our Chief Medical Officer.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. Option Non-Equity All Other Awards Incentive Compensation Name and Principal Position Year Salary ($) Bonus ($) ($)(1) Plans ($)(2) ($)(3) Total ($)Robert Forrester 2017 535,000 — 294,804 321,000 15,014 1,165,818Chief Executive Officer 2016 525,000 — 245,844 321,000 12,690 1,104,534Julie B. Feder (4) 2017 150,385 — 878,024 60,000 6,708 1,095,117Chief Financial Officer Diep Le, M.D. Ph.D. (5) 2017 76,923 95,000(6)1,125,863 40,000 3,365 1,341,151Chief Medical Officer (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). For information regarding assumptions underlying the value of stock awards, see Note7 to our financial statements and the discussion under Part II, Item 7 “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Critical Accounting Policies—Stock-Based Compensation,” ofthis Annual Report on Form 10-K for the year ended December 31, 2017.(2)The amounts shown for non-equity incentive plan compensation represent amounts earned for the fiscal yearsended December 31, 2017 and 2016. Amounts earned for 2017 were paid in 2018, and amounts earned in 2016were paid in 2017.86 Table of Contents(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.(4)Ms. Feder has served as our Chief Financial Officer since July 10, 2017.(5)Dr. Le has served as our Chief Medical Officer since October 9, 2017.(6)The amount reflects a one-time sign-on bonus of $95,000 paid to Dr. Le.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, 2018,Mr. Forrester’s annual base salary is $555,000. 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 vesting of the portionof any equity awards granted prior to the date of his amended and restated employment agreement that, by their terms,vest only based on the passage of time and that would have vested during the 12-month period following thetermination of his employment, (3) to pay Mr. Forrester any bonus which has been awarded, but not yet paid on the dateof termination and (4) if Mr. Forrester exercises his right to continue participation in our health and dental plans underthe federal law known as COBRA, to pay Mr. Forrester a monthly cash amount equal to the full premium cost of thatparticipation for 12 months following such termination of employment (or, if earlier, until the time when Mr. Forresterbecomes eligible to enroll in the health or dental plan 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 that, by their terms, vest only based on thepassage of time, (3) to pay Mr. Forrester any bonus which has been awarded, but not yet paid on the date of terminationand (4) if Mr. Forrester exercises his right to continue participation in our health and dental plans under the federal lawknown as COBRA, to pay Mr. Forrester a monthly cash amount equal to the full premium cost of that participationfor 24 months following such termination of employment (or, if earlier, until the time when provided that such benefitsshall end when Mr. Forrester becomes eligible to enroll in the health or dental plan 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 payments87 Table of Contentsrelated to equity awards granted prior to the execution of his employment agreement and the denominator of which isthe portion of such payments related to all equity awards granted to him. However, if it would result in a greater amountpayable to Mr. Forrester, Mr. Forrester would instead be entitled to either the full amount of the total payments payablein connection with a change in control or a reduced amount of the total payments payable in connection with a changein control, whichever results in the greater economic benefit for Mr. Forrester.Julie B. FederPursuant to her employment agreement, Ms. Feder was entitled to an initial base salary of $340,000, subject toincrease from time to time by the Board of Directors. As of January 1, 2018, Ms. Feder’s annual base salary is $355,000.Ms. Feder is also eligible to receive a bonus of 35% of her current annual base salary. Subject to Ms. Feder’s executionof an effective release of claims, Ms. Feder would be entitled to the severance payments described below if we terminateher employment without cause, as defined in her employment agreement, or if Ms. Feder terminates her employment forgood reason, as defined in her employment agreement.If Ms. Feder’s employment is terminated by us without cause or by Ms. Feder for good reason, absent a changein control, as defined in her employment agreement, we would be obligated (1) to pay Ms. Feder her base salary for aperiod of nine months following such termination of employment, (2) to pay Ms. Feder any bonus which has beenawarded, but not yet paid on the date of termination and (3) if Ms. Feder exercises her right to continue participation inour health and dental plans under the federal law known as COBRA, to pay Ms. Feder a monthly cash amount equal tothe full premium cost of that participation for nine months following such termination of employment (or, if earlier, untilthe time when Ms. Feder becomes eligible to enroll in the health or dental plan of a new employer).If Ms. Feder’s employment is terminated by us without cause or by Ms. Feder 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 Ms. Federa lump sum amount equal to 12 months of her then-current annual base salary, (2) to accelerate the vesting of alloutstanding equity awards that, by their terms, vest only based on the passage of time, (3) if Ms. Feder exercises her rightto continue participation in our health and dental plans under the federal law known as COBRA, to pay Ms. Feder amonthly cash amount equal to the full premium cost of that participation for 12 months following such termination ofemployment (or, if earlier, until the time when Ms. Feder becomes eligible to enroll in the health or dental plan of a newemployer) and (4) to pay any bonus which has been awarded, but not yet paid on the date of termination. Diep Le, M.D., Ph.D.Pursuant to her employment agreement, Dr. Le was entitled to an initial base salary of $400,000, subject toincrease from time to time by the Board of Directors, and a one-time sign-on bonus of $95,000 that will be earned on thesecond anniversary of her hire date, but was paid during 2017. If Dr. Le resigns before the second anniversary of her hiredate, she must repay the sign-on bonus in full. Dr. Le is also entitled to payment or reimbursement of moving expensesup to $50,000 associated with relocating to the Boston area, and for reasonable and customary commuting expensesprior to such relocation. As of January 1, 2018, Dr. Le’s annual base salary is $400,000. Dr. Le is also eligible to receivea bonus of 40% of her current annual base salary. Subject to Dr. Le’s execution of an effective release of claims, Dr. Lewould be entitled to the severance payments described below if we terminate her employment without cause, as definedin her employment agreement, or if Dr. Le terminates her employment for good reason, as defined in her employmentagreement.If Dr. Le’s employment is terminated by us without cause or by Dr. Le for good reason, absent a change incontrol, as defined in her employment agreement, we would be obligated (1) to pay Dr. Le her base salary for a period ofnine months following such termination of employment, or if the termination occurs prior to Dr. Le’s relocation toMassachusetts, her then-current annual base salary for a period of one month for each full month that has elapsedbetween the effective date of her employment agreement and the termination date, up to a maximum of nine months, (2)payment of bonus which has been awarded, but not yet paid on the date of termination and (3) if Dr. Le exercises herright to continue participation in our health and dental plans under the federal law known as COBRA, to pay Dr. Le amonthly cash amount equal to the full premium cost of that participation fora period commensurate with the period overwhich Dr. Le is entitled to receive salary payments following such termination88 Table of Contents(or, if earlier, until the time when Dr. Le becomes eligible to enroll in the health or dental plan of a new employer).If Dr. Le’s employment is terminated by us without cause or by Dr. Le for good reason, in each case within 90days prior to, or within 18 months following, a change in control, we would be obligated (1) to pay Dr. Le a lump sumamount equal to 12 months of her then-current annual base salary, (2) to accelerate the vesting of all outstanding equityawards that, by their terms, vest only based on the passage of time, (3) if Dr. Le exercises her right to continueparticipation in our health and dental plans under the federal law known as COBRA, to pay Dr. Le a monthly cashamount equal to the full premium cost of that participation for 12 months following such termination of employment(or, if earlier, until the time when Dr. Le becomes eligible to enroll in the health or dental plan of a new employer) and(4) to pay any bonus which has been awarded, but not yet paid on the date of termination. 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 Internal Revenue Code. Employee contributions may be made on apre-tax basis or after-tax (Roth) basis. The 401(k) plan provides for employer matching contributions equal to (1) 100%of employee deferral contributions up to a deferral rate of 3% of eligible compensation plus (2) 50% of employeedeferral contributions up to a deferral rate of an additional 2% of eligible compensation.Outstanding 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, 2017. Option Awards Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Option Options Options Exercise ExpirationName Exercisable (#) Unexercisable (#) Price ($) DateRobert Forrester 250,000 —(1) 9.85 1/15/2023 50,000 —(2) 14.18 9/17/2023 250,000 —(3) 13.59 1/7/2024 250,000 —(4) 13.59 1/7/2024 185,963 84,525(5) 9.19 1/8/2025 268,000 —(6) 2.13 11/8/2025 132,000 —(7) 1.86 1/1/2026 100,000 —(8) 1.37 6/14/2026 — 360,000(9) 1.20 1/9/2027Julie B. Feder — 370,000(10) 3.45 7/10/2027Diep Le, M.D. — 300,000(11) 4.63 10/9/2027 — 70,000(12) 4.63 10/9/2027(1)This option was granted on January 15, 2013. The option vested 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 vested 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 vested as to 25% of the shares underlying the option on89 Table of ContentsJuly 1, 2014 and, thereafter, as to 6.25% of the shares underlying the option on the last day of each calendar quarterafter such date, through June 30, 2017.(4)This option was granted on January 7, 2014. The option vested 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 on the last dayof each 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.(6)This option was granted on November 9, 2015. The option vested 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 vested 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 vested as to 50% of the shares underlying the option uponsatisfaction of a certain performance milestone by June 2017, and as to the remaining 50% of the shares underlyingthe option upon satisfaction of a certain performance milestone in September 2017.(9)This option was granted on January 9, 2017. 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.(10)This option was granted on July 10, 2017. 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.(11)This option was granted on October 9, 2017. 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.(12)This option was granted on October 9, 2017. The option vests as to 100% of the shares underlying the option uponsatisfaction of a certain performance milestone.90 Table of ContentsDIRECTOR COMPENSATIONDirector CompensationThe following table summarizes the compensation paid to or earned by our directors during the year endedDecember 31, 2017: Fees Earned Option or Paid in Awards Name Cash ($) ($)(1)(2) Total ($)Timothy Barberich 53,000 35,742 88,742Paul Friedman, M.D. (3) 16,125 — 16,125Michael Kauffman, M.D., Ph.D. 79,000 35,742 114,742Alison Lawton 55,000 35,742 90,742S. Louise Phanstiel 60,000 35,742 95,742Eric Rowinsky, M.D. 33,125 71,483 104,608Brian Stuglik, R.Ph. 14,831 168,776 183,607Bruce Wendel 49,320 35,742 85,062(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. For information regarding assumptions underlying the valueof stock awards, see Note 7 to our financial statements and the discussion under Part II, Item 7 “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Stock-Based Compensation,” of this Annual Report on Form 10-K for the year ended December 31, 2017.(2)The number of stock options awarded to any non-employee director who received a grant during 2017 was 25,000,with the exception of Dr. Rowinsky and Mr. Stuglik who each received 50,000 stock options as a result of their newappointments to our Board of Directors(3)Dr. Friedman resigned from our Board of Directors effective April 27, 2017.The following table sets forth, as of December 31, 2017, the aggregate number of exercisable and unexercisablestock option awards held by our directors: Option Awards Name Exercisable (#) Unexercisable (#) Total (#)Timothy Barberich 110,099 12,498 122,597Michael Kauffman, M.D., Ph.D. 124,478 12,498 136,976Alison Lawton 124,478 12,498 136,976S. Louise Phanstiel 126,841 12,498 139,339Eric Rowinsky, M.D. 25,002 24,998 50,000Brian Stuglik, R.Ph. 12,501 37,499 50,000Bruce Wendel 62,502 12,498 75,000 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; and91 Table of Contents·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 2017, 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.” 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, 2017. 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) 7,609,728 $5.40 654,630(3)Equity compensation plans not approved by securityholders(2) 1,110,250 $3.75 2,506,000 (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, 2017, 1,324,000 shares had been granted, 138,750 shares had been exercised and 75,000shares had been cancelled under this program. In December 2017, the Board of Directors authorized and reserved2,500,000 additional shares of common stock that may be issued pursuant to stock options granted or to be grantedto new employees in accordance with Nasdaq Listing Rule 5635(c)(4), as an inducement material to suchemployees entering into employment with the Company.(3)Does not include 1,285,714 shares added to the 2012 Incentive Plan under the evergreen provision on January 1,2018.92 Table of ContentsSECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT The following table sets forth certain information as of February 28, 2018 (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 February 28, 2018 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 February 28, 2018, there were 50,800,908shares of common stock outstanding. Number of shares Percentage of shares Name and address of beneficial owner beneficially owned beneficially owned 5% stockholders: BVF, Inc. (1) 2,737,000 5.39%1 Sansome Street, 30th Floor San Francisco, CA 94104 Directors and Executive Officers Robert Forrester (2) 1,851,007 3.53%Julie B. Feder — — Diep Le, M.D. — — Timothy Barberich (3) 248,431 * Michael Kauffman, M.D., Ph.D. (4) 132,810 * Alison Lawton (5) 135,310 * S. Louise Phanstiel (6) 161,673 * Eric Rowinsky, M.D. (7) 41,668 * Brian Stuglik, R. Ph. (8) 29,169 * Bruce Wendel (9) 70,834 * All executive officers and directors as a group (Thirteen persons) (10) 3,822,398 7.06%*Represents beneficial ownership of less than one percent of our outstanding common stock.(1)Information is based on a Schedule 13G filed with the SEC on January 26, 2018 by Biotechnology Value Fund,L.P. (BVF), Biotechnology Fund II, L.P (BVF2), Biotechnology Value Trading Fund OS LP (Trading Fund OS),BVF Partners OS Ltd. (Partners OS), BVF Partners LP (Partners), BVF Inc. and Mark N. Lampert (Mr. Lampert),reporting as of January 16, 2018. According to the Schedule 13G, (i) BVF beneficially owns 1,293,127 shares ofcommon stock, (ii) BVF2 beneficially owns 863,522 shares of common stock, and (iii) Trading Fund OSbeneficially owns 221,646 shares of common stock. Partner OS, as general partner of Trading Fund OF, may bedeemed to beneficially own the 221,646 shares owned by Trading Fund OS. Partners, as the general partner of BVF,BVF2, the investment manager of Trading Fund OS, and the sole member of Partner OS, may be deemed tobeneficially own the 2,737,000 shares of common stock owned by aggregate by BVF, BVF2, Trading Fund OS, andcertain Partners management account, including 358,705 shares of common stock owned. BVF Inc., as the generalpartner of Partners, and Mr. Lampert as a director and officer of BVF Inc. may be deemed to beneficially own the2,737,000 shares of common stock owned by Partners. The address for these entities is listed in the Schedule 13Gas 1 Sansome Street, 30 Floor, San Francisco, CA 94104.(2)Consists of 9,000 shares of common stock held by the Claudia Forrester 2001 Trust, 9,000 shares of common stockheld by the Iona Forrester 2001 Trust and 200,734 shares of common stock held by Mr. Forrester and 1,632,273shares of common stock issuable upon the exercise of stock options within 60 days of February 28,93 thTable of Contents2018.(3)Consists of 130,000 shares of common stock held by Mr. Barberich and 118,431 shares of common stock issuableupon the exercise of stock options within 60 days of February 28, 2018.(4)Consists of 132,810 shares of common stock issuable upon the exercise of stock options within 60 days of February28, 2018.(5)Consists of 2,500 shares of common stock held by Ms. Lawton and 132,810 shares of common stock issuable uponthe exercise of stock options within 60 days of February 28, 2018.(6)Consists of 26,500 shares of common stock held by The Phanstiel Trust and 135,173 shares of common stockissuable upon the exercise of stock options within 60 days of February 28, 2018.(7)Consists of 41,668 shares of common stock issuable upon the exercise of stock options within 60 days of February28, 2018.(8)Consists of 29,169 shares of common stock issuable upon the exercise of stock options within 60 days of February28, 2018.(9)Consists of 70,834 shares of common stock issuable upon the exercise of stock options within 60 days of February28, 2018.(10)Includes shares of common stock issuable upon exercise of stock options within 60 days of February 28, 2018. 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;94 Table of Contents·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;·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, 2017 and 2016 for each of the following categories of services are as follows:Fee Category 2017 ($) 2016 ($)Audit Fees 1,086,000 417,500Audit-Related Fees — —Tax Fees — —All Other Fees — —Total Fees 1,086,000 417,500 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 ContentsEXHIBIT INDEXExhibitnumber Description of exhibit3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to theAnnual Report on Form 10‑K 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) 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*# Amended and Restated 2012 Incentive Plan 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 Incentive Stock Option Agreement under Amended and Restated 2012 Incentive Plan 10.5# Form of Nonstatutory 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) 10.6*# Form of Nonstatutory Stock Option Agreement under Amended and Restated 2012 Incentive Plan 10.7# 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) 10.8# Amendment to Form of Restricted Stock Unit Agreement under 2012 Incentive Plan (incorporated byreference to Exhibit 10.25 to the Annual Report on Form 10‑K filed by the Registrant on March 26,2013) 10.9*# Form of Restricted Stock Unit Agreement under Amended and Restated 2012 Incentive Plan 10.10# Form of Inducement Award Nonstatutory Stock Option Agreement (incorporated by reference toExhibit 4.4 to the Registration Statement on Form S-8 filed by the Registrant with the Securities andExchange Commission on December 19, 2014) 10.11*# Form of Inducement Award Nonstatutory Stock Option Agreement 10.12# Amended and Restated Employment Agreement between the Registrant and Robert Forrester, datedJanuary 13, 2012 (incorporated by reference to Exhibit 10.5 to Amendment No. 3 to the RegistrationStatement on Form S‑1 (File No. 333‑177677) filed by the Registrant on January 13, 2012) 98 Table of Contents10.13# Amended and Restated Employment Agreement between the Registrant and Jonathan Pachter, datedJanuary 13, 2012 (incorporated by reference to Exhibit 10.6 to Amendment No. 3 to the RegistrationStatement on Form S‑1 (File No. 333‑177677) filed by the Registrant on January 13, 2012) 10.13# Form of Indemnification Agreement between the Registrant and each director (incorporated byreference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on August 8,2017) 10.14 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‑Kfiled by the Registrant on April 18, 2014) 10.15# Employment Agreement, dated March 1, 2012, between the Registrant and Daniel Paterson(incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10‑K filed by the Registranton March 26, 2013) 10.16† License Agreement, dated July 11, 2012, by and between the Registrant and Pfizer Inc. (incorporatedby reference to Exhibit 10.2 to the Quarterly Report on Form 10‑Q filed by the Registrant onAugust 13, 2012) 10.17# Letter Agreement, dated June 6, 2013, by and between the Registrant and Robert Forrester(incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10‑Q filed by theRegistrant on August 13, 2013) 10.18† Letter Agreement, dated December 7, 2012, by and between the Registrant and Pfizer Inc.(incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10‑K filed by the Registranton March 6, 2014) 10.19# Amended and Restated Employment Agreement, dated November 22, 2013, by and between theRegistrant and Robert Forrester (incorporated by reference to Exhibit 10.32 to the Annual Report onForm 10‑K filed by the Registrant on March 6, 2014) 10.20# Employment Agreement between the Registrant and Gregory Berk, dated April 15, 2016 (incorporatedby reference to Exhibit 10.2 to the Quarterly Report on Form 10‑Q filed by the Registrant on May 9,2016) 10.21# Employment Agreement between the Registrant and Julie B. Feder, dated July 10, 2017 (incorporatedby reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on July 11,2017) 10.22# Employment Agreement between the Registrant and NgocDiep T. Le, dated October 9, 2017(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10‑Q filed by theRegistrant on November 7, 2017) 10.23# Separation Agreement between the Registrant and Gregory Berk, effective January 19, 2017(incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K filed by the Registranton March 23, 2017) 10.24# Consulting Agreement between the Registrant and Gregory Berk, effective January 20, 2017(incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K filed by the Registranton March 23, 2017) 99 Table of Contents10.25‡ Amended and Restated License Agreement, dated November 1, 2016, by and between the Registrantand Infinity Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.25 to the Annual Report onForm 10-K filed by the Registrant on March 23, 2017) 10.26 Loan and Security Agreement, dated March 21, 2017, by and between the Registrant, the Lender (asdefined therein) and Hercules Capital, Inc. (incorporated by reference to Exhibit 10.26 to the AnnualReport on Form 10-K filed by the Registrant on March 23, 2017) 10.27 First Amendment to Loan and Security Agreement, dated January 4, 2018, by and between theRegistrant, the Lender (as defined therein) and Hercules Capital, Inc. (incorporated by reference toExhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on January 4, 2018) 10.28* Second Amendment to Loan and Security Agreement, dated March 6, 2018, by and between theRegistrant, the Lender (as defined therein) and Hercules Capital, Inc. 10.29*# Employment Agreement between the Registrant and Joseph Lobacki, dated January 3, 2018 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 Chief Financial Officer 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 Chief Financial Officer 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 13, 2018 (furnished herewith) 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.100 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 13 day ofMarch 2018. 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 13, 2018 /s/ Julie B. Feder Julie B. Feder Chief Financial Officer (Principal financial and accounting officer) March 13, 2018 /s/ Timothy Barberich Timothy Barberich Director March 13, 2018/s/ Michael Kauffman, M.D.,Ph.D. Michael Kauffman, M.D., Ph.D. Director March 13, 2018 /s/ Alison Lawton Alison Lawton Director March 13, 2018 /s/ S. Louise Phanstiel S. Louise Phanstiel Director March 13, 2018 /s/ Eric Rowinsky, M.D. Eric Rowinsky, M.D. Director March 13, 2018 /s/ Brian Stuglik, R.Ph, Brian Stuglik, R.Ph. Director March 13, 2018 /s/ Bruce Wendel Bruce Wendel Director March 13, 2018 101 th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 FirmTo the Stockholders and the Board of Directors of Verastem, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Verastem, Inc. (the Company) as of December 31,2017 and 2016, 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, 2017, and the related notes (collectively referred to asthe “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in allmaterial respects, the financial position of the Company at December 31, 2017 and 2016, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S.generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteriaestablished in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 framework), and our report dated March 13, 2018 expressed an unqualified opinionthereon.The Company's Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as agoing concern. As discussed in Note 1 to the financial statements, the Company has an accumulated deficit, recurringlosses, and expects continuing future losses, and has stated that substantial doubt exists about the Company’s ability tocontinue as a going concern. Management's evaluation of the events and conditions and management’s plans regardingthese matters are also described in Note 1. The consolidated financial statements do not include any adjustments thatmight result from the outcome of this uncertainty. Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express anopinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with thePCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of materialmisstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to thoserisks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in thefinancial statements. Our audits also included evaluating the accounting principles used and significant estimates madeby management, as well as evaluating the overall presentation of the financial statements. We believe that our auditsprovide a reasonable basis for our opinion./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2011. Boston, MassachusettsMarch 13, 2018F-2 Table of ContentsVerastem, Inc.CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts) December 31, 2017 2016 Assets Current assets: Cash and cash equivalents $82,176 $32,349 Short-term investments 4,496 48,548 Prepaid expenses and other current assets 1,115 398 Total current assets 87,787 81,295 Property and equipment, net 861 1,417 Restricted cash 162 162 Other assets 981 755 Total assets $89,791 $83,629 Liabilities and stockholders’ equity Current liabilities: Accounts payable $9,186 $4,095 Accrued expenses 7,942 6,896 Total current liabilities 17,128 10,991 Non-current liabilities: Long-term debt 14,828 — Other non-current liabilities 151 341 Total liabilities 32,107 11,332 Stockholders’ equity: Preferred stock, $0.0001 par value; 5,000 shares authorized, no shares issuedand outstanding at December 31, 2017 and 2016, respectively — — Common stock, $0.0001 par value; 100,000 shares authorized, 50,801 and 36,992 sharesissued and outstanding at December 31, 2017 and 2016, respectively 5 4 Additional paid-in capital 360,823 307,587 Accumulated other comprehensive (loss) income (2) 29 Accumulated deficit (303,142) (235,323) Total stockholders’ equity 57,684 72,297 Total liabilities and stockholders’ equity $89,791 $83,629 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, 2017 2016 2015 Operating expenses: Research and development $46,423 $19,779 $40,565 General and administrative 21,381 17,223 17,634 Total operating expenses 67,804 37,002 58,199 Loss from operations (67,804) (37,002) (58,199) Interest income 561 562 334 Interest expense (559) — — Net loss $(67,802) $(36,440) $(57,865) Net loss per share—basic and diluted $(1.76) $(0.99) $(1.61) Weighted-average number of common shares used in net loss per share—basic anddiluted 38,422 36,988 35,932 Net loss $(67,802) $(36,440) $(57,865) Unrealized (loss) gain on available-for-sale securities (31) (14) 32 Comprehensive loss $(67,833) $(36,454) $(57,833) 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, 2014 27,259,372 $ 3 $229,770 $11 $(141,018) $88,766 Net loss — — — — (57,865) (57,865) Unrealized gain on available-for-salemarketable securities — — — 32 — 32 Issuance of common stock resultingfrom follow-on offering 8,337,500 1 50,941 — — 50,942 Issuance of common stock resultingfrom at-the-market transactions, net ofissuance costs of $53 1,189,479 — 10,911 — — 10,911 Vesting of restricted stock 7,995 — 2 — — 2 Issuance of common stock resultingfrom exercise of stock options 33,658 — 13 — — 13 Issuance of common stock resultingfrom vesting of restricted stock unitsand 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-salemarketable securities — — — (14) — (14) Issuance of common stock resultingfrom exercise of stock options 1,605 — — — — — Issuance of common stock resultingfrom vesting of restricted stock unitsand 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 Net loss — — — — (67,802) (67,802) Unrealized loss on available-for-salemarketable securities — — — (31) — (31) Issuance of common stock resultingfrom follow-on offering, net ofissuance costs of $324 8,422,877 1 24,691 — — 24,692 Issuance of common stock resultingfrom at-the-market transactions, net ofissuance costs of $112 5,036,879 — 23,053 — — 23,053 Issuance of common stock resultingfrom exercise of stock options 348,734 — 442 — — 442 Stock-based compensation expense — — 5,050 — (17) 5,033 Balance at December 31, 2017 50,800,908 $ 5 $360,823 $(2) $(303,142) $57,684 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, 2017 2016 2015 Operating activities Net loss $(67,802) $(36,440) $(57,865) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 556 670 754 Stock-based compensation expense 5,033 6,287 10,085 Amortization of deferred financing costs, debt discounts and premiums anddiscounts on available-for-sale marketable securities 223 (140) 264 Loss on disposal of fixed assets — — 46 Changes in operating assets and liabilities: Prepaid expenses, other current assets and other assets (943) (568) 276 Accounts payable 5,046 153 863 Accrued expenses and other liabilities 577 623 418 Liability classified stock-based compensation awards — (69) (400) Net cash used in operating activities (57,310) (29,484) (45,559) Investing activities Purchases of property and equipment — (39) (211) Purchases of investments (7,957) (82,101) (199,851) Maturities of investments 51,910 119,067 173,005 Decrease in restricted cash — 41 — Net cash provided by (used in) investing activities 43,953 36,968 (27,057) Financing activities Proceeds from long-term debt, net 14,811 — — Deferred debt financing costs (138) — — Proceeds from the exercise of stock options 442 — 13 Proceeds from the issuance of common stock, net 48,069 — 63,989 Cash used to settle restricted stock liability — (5) (417) Net cash provided by (used in) financing activities 63,184 (5) 63,585 Increase (decrease) in cash and cash equivalents 49,827 7,479 (9,031) Cash and cash equivalents at beginning of period 32,349 24,870 33,901 Cash and cash equivalents at end of period $82,176 $32,349 $24,870 Supplemental disclosures Cash paid for interest $295 $ — $ — Supplemental disclosure non-cash financing activities Common stock issuance costs included in accounts payable and accruedexpenses $324 $ — $ — See accompanying notes to the consolidated financial statements. F-6 Table of Contents1. Nature of businessVerastem, Inc. (the Company) is a biopharmaceutical company focused on developing and commercializingdrugs to improve outcomes for patients with cancer. The Company’s operations to date have been limited to organizingand staffing the Company, business planning, raising capital, acquiring and developing its technology, identifyingpotential product 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, 2017, the Company had cash, cash equivalents and investments of $86.7 million andaccumulated deficit of $303.1 million. The Company has historical losses from operations and anticipates that it willcontinue to incur losses for the foreseeable future as it continues the research and development and clinical trials of, andseeks marketing approval for, its lead product candidates. Without additional funding, the Company believes that itwill not have sufficient funds to meet its obligations within the next twelve months from the date of issuance of theseconsolidated financial statements. These factors raise substantial doubt about the Company’s ability to continue as agoing concern. The Company plans to continue to fund its operations through proceeds from sales of its common stock underits at-the-market equity offering program, public or private equity offerings, its loan and security agreement withHercules Capital, Inc. (Hercules), or other strategic transactions. However, adequate additional financing may not beavailable to the Company on acceptable terms, or at all. If the Company is unable to raise capital when needed or onattractive terms, it may be forced to delay, reduce or eliminate its research and development programs or any futurecommercialization efforts. 2. Significant accounting policiesBasis of presentationThe accompanying financial statements of the Company have been prepared in accordance with U.S. generallyaccepted accounting principles (GAAP) under the assumption that the Company will continue as a going concern for thenext twelve months. Accordingly, they do not include any adjustments that might result from the uncertainty related tothe Company’s ability to continue as a going concern.The 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 GAAP requires management to makeestimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On anongoing basis, management evaluates its estimates, including estimates related to accruals and stock‑basedcompensation expense. The Company bases its estimates on historical experience and other market‑specific or otherrelevant assumptions that it believes to be reasonable. Actual results could differ from such estimates. F-7 Table of ContentsSegment 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. 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. Items Measured at Fair Value on a Recurring BasisThe following table presents information about the Company’s financial instruments that are measured at fairvalue on a recurring basis (in thousands): December 31, 2017 Description Total Level 1 Level 2 Level 3 Financial assets Cash equivalents $80,894 $75,478 $5,416 $ — Short-term investments 4,496 — 4,496 — Total financial assets $85,390 $75,478 $9,912 $ — 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 $ — 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. TheF-8 Table of Contentspricing 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, 2017 and 2016.Fair Value of Financial Instruments The fair value of the Company’s long-term debt is determined using current applicable rates for similarinstruments as of the balance sheet dates and an assessment of the credit rating of the Company. The carrying value ofthe Company’s debt at December 31, 2017 approximates fair value because the Company’s interest rate yield is nearcurrent market rates for comparable debt instruments. The fair value of the Company’s long-term debt was determinedusing Level 3 inputs. 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. Realized gains and losses are determined using the specificidentification method and are included in interest income in the consolidated statements of operations andcomprehensive loss. There were no realized gains or losses on investments for the years ended December 31, 2017, 2016 or 2015. There were no investments that had been in an unrealized loss position for more than 12 months as of December 31,2017 or December 31, 2016. There were 5 debt securities in an unrealized loss position for less than 12 months atDecember 31, 2017 and there were 14 debt securities that had been in an unrealized loss position for less than 12 monthsat December 31, 2016. The aggregate unrealized loss on these securities as of December 31, 2017 and December 31,2016 was approximately $2,000 and $24,000, respectively, and the fair value was $9.9 million and $23.6 million,respectively. The Company considered the decline in the market value for these securities to be primarily attributable tocurrent economic conditions. As it was not more likely than not that the Company would be required to sell thesesecurities before the recovery of their amortized cost basis, which may be at maturity, the Company did not considerthese investments to be other-than-temporarily impaired as of December 31, 2017.F-9 Table of ContentsCash, cash equivalents and investments consist of the following (in thousands): December 31, 2017 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts $76,760 $ — $ — $76,760 Corporate bonds and commercial paper $5,418 $ — $(2) $5,416 Total cash and cash equivalents $82,178 $ — $(2) $82,176 Investments: Corporate bonds and commercial paper (due within 1 year) $4,496 $ — $ — $4,496 Total investments $4,496 $ — $ — $4,496 Total cash, cash equivalents, and investments $86,674 $ — $(2) $ 86,672 December 31, 2016 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents: Cash and money market accounts $22,349 $ — $ — $22,349 Overnight 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 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, 2017, 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. 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 byF-10 Table of Contentscomparison 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, 2017. Other assetsOther assets primarily consists of prepayments made to contract research organizations (CROs). As ofDecember 31, 2017 and 2016, other assets was primarily comprised of approximately $755,000 of prepaid CROexpenses that the Company assumed and paid to Infinity Pharmaceuticals, Inc. (Infinity) pursuant to the licenseagreement between the Company and Infinity. 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.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 on a straight-line basis over the requisiteservice period, which typically is the vesting period. Compensation expense is measured using the fair value of theaward at the grant date, net of estimated forfeitures, and is adjusted to reflect actual forfeitures as they occur. Awardssubject to performance based vesting requirements are expensed utilizing an accelerated attribution model ifachievement of the performance criteria is 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, including the Company and arepresentative 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. Historically, the Company hasrecognized stock-based compensation net of estimated forfeitures over the vesting period of the respective grant. Effective January 1, 2017, the Company adopted Accounting Standard Updated (ASU) 2016-09, Compensation – StockCompensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplified theaccounting for share-based compensation arrangements, including the accountingF-11 Table of Contentsfor forfeitures. Upon adoption, the Company elected to begin accounting for forfeitures as they occur, rather thanestimating a forfeiture rate, and recorded an immaterial cumulative-effect adjustment to opening accumulated deficit.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.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, 2017 2016 2015 Outstanding stock options 8,719,978 5,848,470 5,390,130 Outstanding warrants — 142,857 142,857 Unvested restricted stock units — — 53,751 Total potentially dilutive securities 8,719,978 5,991,327 5,586,738 Recently Issued Accounting Standards Updates In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 providesguidance about which changes to the terms or conditions of a share-based award require an entity to apply modificationaccounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vestingconditions and classification of the awards are the same immediately before and after a modification. ASU 2017-09 iseffective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. TheCompany has not elected to early adopt this standard and does not expect the adoption to have a material impact on itsconsolidated financial statements and related disclosures.F-12 Table of Contents In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): RestrictedCash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash,cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Amounts generallydescribed as restricted cash and restricted cash equivalents should be included with cash and cash equivalents whenreconciling 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 periods beginning after December 15, 2017, with early adoption permitted. TheCompany has not elected to early adopt this standard and does not expect the adoption to have a material impact on itsconsolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification ofCertain Cash Receipts and Cash Payments. ASU 2016-15 adds or clarifies guidance on the classification of certain cashreceipts and payments in the statement of cash flows. The standard is effective for annual and interim periods beginningafter December 15, 2017, with early adoption permitted. The Company has not elected to early adopt this standard anddoes not expect the adoption to have a material impact on its consolidated financial statements and related disclosures.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the guidance underFASB Accounting Standards Codification (ASC) Topic 840, Leases, resulting in the creation of FASB ASC Topic 842,Leases. ASU 2016-02 requires lessees to recognize in the statement of financial position a liability to make leasepayments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance andoperating leases. The guidance also eliminates the current real estate-specific provisions for all entities. ASU 2016-02 iseffective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoptionpermitted. The Company has not elected to early adopt this standard and is currently evaluating the impact the adoptionof the standard will have on its consolidated financial statements and related disclosures.Recently Adopted Accounting Standards Updates In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) andInvestments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to StaffAnnouncements at the September 22, 2016 and November 17, 2016 EITF Meetings. ASU 2017-03 clarifies the SECstaff’s expectations about the extent of disclosures that a registrant is expected to provide regarding the impact that theadoption of ASUs 2014-09 (Revenue from Contracts with Customers), 2016-02 (Leases) and 2016-13 (Measurement ofCredit Losses on Financial Instruments) will have on its financial statements. It also conforms SEC guidance onaccounting for tax benefits resulting from investments in affordable housing projects to the guidance in ASU 2014-01,Investments -Equity Method and Joint Ventures (Topic 323). The guidance under this ASU was effective upon issuanceand did not have a material impact on the Company’s 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. The Company adopted thisstandard effective January 1, 2017. The adoption of this ASU did not have an effect on the Company’s financialstatements or disclosures. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies the accounting for share-basedcompensation arrangements, including the accounting for forfeitures, income tax consequences, classification of awardsas either equity or liabilities and classification on the statement of cash flows. The standard was effective for annual andinterim periods beginning after December 15, 2016, with early adoption permitted. The Company adopted ASU 2016-09 effective January 1, 2017. Upon adoption, the Company elected to begin accounting for forfeitures as they occur,rather than estimating a forfeiture rate, and recorded an immaterial cumulative-effect adjustment to openingaccumulated deficit. Also upon adoption, the Company recognized all previouslyF-13 Table of Contentsunrecognized tax benefits, which would have resulted in the recognition of an immaterial cumulative-effect adjustmentto opening accumulated deficit; however, these unrecognized tax benefits were recorded as a deferred tax asset, whichwas fully offset by a valuation allowance. Therefore, the recognition of these benefits had no net cumulative-effect onopening accumulated deficit upon adoption. 3. Property and equipment, netProperty and equipment and related accumulated depreciation are as follows (in thousands): December 31, December 31, 2017 2016 Leasehold improvements $2,104 $2,104 Laboratory equipment 908 908 Furniture and fixtures 325 325 Computer equipment 279 279 3,616 3,616 Less: accumulated depreciation (2,755) (2,199) Total property, plant and equipment, net $861 $1,417 Approximate total depreciation and amortization expenses amounted to $556,000, $670,000, and $754,000 forthe years ended December 31, 2017, 2016, and 2015, respectively.4. Accrued expensesAccrued expenses consist of the following (in thousands): December 31,2017 December31,2016 Contract research organization costs $3,774 $3,258 Compensation and related benefits 2,622 2,505 Professional fees 617 403 Consulting fees 579 527 Deferred rent 190 175 Other 160 28 Total accrued expenses $7,942 $6,896 5. Long-term debt On March 21, 2017 (Closing Date), Verastem, Inc. (the Borrower) entered into a term loan facility of up to $25.0million with Hercules, a Maryland corporation, the proceeds of which will be used for its ongoing research anddevelopment programs and for general corporate purposes. The term loan facility is governed by a loan and securityagreement, dated March 21, 2017 (the Original Loan Agreement), which originally provided for up to four separateadvances, of which the first tranche of $2.5 million was drawn on the Closing Date. The second and third tranches of$2.5 million and $5.0 million, respectively were drawn on October 12, 2017 after announcing favorable data from theCompany’s Phase III clinical study evaluating the safety and efficacy of duvelisib in patients with relapsed/refractorychronic lymphocytic leukemia or small lymphocytic lymphoma. A total of $6.0 million of the proceeds received fromthe second and third tranches were used to make a milestone payment pursuant to the Company’s license agreementwith Infinity. The fourth tranche of $15.0 million could be drawn, at the Borrower’s option and at the sole discretion ofHercules, on or prior to June 30, 2018. On December 20, 2017, the Borrower drew an additional advance on the fourthtranche of $5.0 million. On January 4, 2018, the Borrower entered into the First Amendment to the Original Loan Agreement (the FirstAmendment) and on March 6, 2018, the Borrower entered into the Second Amendment to the Original Loan Agreement(the Second Amendment, and the Original Loan Agreement as amended by the First Amendment and the SecondAmendment, the Amended Loan Agreement). The First Amendment increased the borrowing limit under the OriginalLoan Agreement from up to $25.0 million to up to $50.0 million (the Term Loan). As $15.0 million inF-14 Table of Contentsterm loans had already been drawn prior to entering into the First Amendment, there is $35.0 million of borrowingcapacity remaining under the Amended Loan Agreement. The remaining $35.0 million of borrowing capacity may bedrawn in minimum increments of $5.0 million in multiple tranches comprised of (i) term loans (each a Term E LoanAdvance) in an aggregate principal amount of up to $10.0 million and (ii) subject to Hercules’ sole discretion, termloans (each a Term F Loan Advance) in an aggregate principal amount of up to $25.0 million. The Amended LoanAgreement permits the Borrower to draw Term E Loan Advances subject to (i) the U.S. Food and Drug Administrationaccepting on or prior to September 30, 2018 our New Drug Application for duvelisib and (ii) delivery of the Company’sfinancial and business projections to Hercules in form and substance reasonably acceptable to Hercules. In addition, theAmended Loan Agreement allows the Borrower to draw Term F Loan Advances subject to the prior drawing of all othertranches and Hercules’ sole discretion. 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 provided for interest-only payments until November1, 2018, which was extended to May 1, 2019 pursuant to the Amended Loan Agreement upon the Borrower’s receipt of aminimum of $20.0 million cash proceeds from a sale of equity securities in December 2017. Thereafter, amortizationpayments will be payable monthly in twenty installments of principal and interest (subject to recalculation upon achange in prime rates). Any advance may be prepaid in whole or in part upon seven business days’ prior written noticeto Hercules, subject to a prepayment charge of 3.0%, if such advance is prepaid in any of the first twelve (12) monthsfollowing the Closing Date, 2.0%, if such advance is prepaid after twelve (12) months following the Closing Date but onor prior to twenty-four (24) months following the Closing Date, and 1.0% thereafter. In addition, a final payment equalto 4.5% of the greater of (a) $5.0 million and (b) the total principal amount of the Term Loan extended by Herculeswhich is due on the Loan Maturity Date, or such earlier date specified in the Amended 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 Amended Loan Agreement include, without limitation, and subject tocustomary grace periods, (1) the Borrower’s failure to make any payments of principal or interest under the AmendedLoan Agreement, promissory notes or other loan documents, (2) the Borrower’s breach or default in the performance ofany covenant under the Amended Loan Agreement, (3) the Borrower making a false or misleading representation orwarranty in any material respect, (4) the Borrower’s insolvency or bankruptcy, (5) certain attachments or judgments onthe Borrower’s assets, or (6) the occurrence of any material default under certain agreements or obligations of theBorrower involving indebtedness, or (7) the occurrence 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 Amended LoanAgreement.The Company assessed all terms and features of the Original Loan Agreement in order to identify any potentialembedded features that would require bifurcation or any beneficial conversion features. As part of this analysis, theCompany assessed the economic characteristics and risks of the Original Loan Agreement, including put and callfeatures. The Company determined that all features of the Original Loan Agreement were clearly and closely associatedwith a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial tothe Company's financial statements. The Company reassesses the features on a quarterly basis to determine if theyrequire separate accounting. The future principal payments under the Amended Loan Agreement are as follows as of December 31, 2017 (inthousands):2018 $ —2019 3,6092020 11,391F-15 Table of ContentsTotal principal payments $15,000 6. Common stockAs of December 31, 2017 and 2016, 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, December 31, 2017 2016 Shares reserved under equity compensation plans 8,264 7,189 Shares reserved for inducement grants 3,616 1,255 Shares reserved for outstanding warrants — 143 Total shares reserved 11,880 8,587 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 programsIn 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 throughCantor Fitzgerald & Co. (Cantor), as sales agent (the 2013 ATM Program). In November 2014, the Company commencedsales under the 2013 ATM Program. During the year ended December 31, 2015, the Company sold 1,189,479 shares ofcommon stock under the 2013 ATM Program with net proceeds (after deducting commissions and other offeringexpenses) of $12.9 million. No proceeds were received and no additional sales of the Company’s common stock weremade under the 2013 ATM Program and no proceeds were received during the years ended December 31, 2017 and2016.On March 30, 2017, the Company terminated the 2013 ATM Program and established a new at-the-marketequity offering program pursuant to which it was able to offer and sell up to $35.0 million of its common stock at then-current market prices from time to time through Cantor, as sales agent (the 2017 ATM Program). On August 28, 2017,the Company amended its sales agreement with Cantor to increase the maximum aggregate offering price of shares ofcommon stock that can be sold under the 2017 ATM Program to $75.0 million. Through December 31, 2017, theCompany sold 5,036,879 shares under the 2017 ATM Program for net proceeds of approximately $23.1 million (afterdeducting commissions and other offering expenses).As of March 13, 2018, the Company sold an additional 97,078 shares of common stock under the at-the-marketequity offering program with net proceeds of approximately $342,000 (after deducting commissions and other offeringexpenses).Equity offeringOn December 14, 2017, the Company entered into an Underwriting Agreement with BTIG, LLC relating to theunderwritten offering of 8,422,877 shares of its common stock at a price of $2.97 per share, for aggregate proceeds, netof underwriting discounts and offering costs, of approximately $24.7 million.F-16 Table of Contents7. 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, 2017 2016 2015 Research and development $1,381 $1,073 $2,411 General and administrative 3,652 5,145 7,273 Total stock-based compensation expense $5,033 $6,218 $9,684 All of the $5.0 million of stock-based compensation expense recorded during the year ended December 31,2017 was recorded to additional paid-in capital. Of the $6.2 million of stock-based compensation expense recordedduring 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 in liability classified awards. Of the $9.7 million of stock-based compensationexpense recorded during the year ended December 31, 2015, $10.1 million was recorded to additional paid-in capitaland approximately $400,000 was recorded as a decrease in liability classified awards.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, 2017 and 2016, thenumber of shares available for issuance under the 2012 Plan increased by 1,285,714 under this provision. Subsequently,on January 1, 2018, the number of shares available for issuance under the 2012 Plan increased by 1,285,714 under thisprovision. 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, 2017, under the 2012 Plan, the Companyhas granted stock options for 10,684,203 shares of common stock, of which 3,005,939 have been forfeited and 137,127have been exercised, and restricted stock units for 909,918 shares of common stock, of which 150,101 have beenforfeited. The exercise price of each option has been equal to the closing price of a share of our common stock on thegrant date. Inducement Award ProgramIn December 2014, the Company established an inducement award program (in accordance with Nasdaq ListingRule 5635(c)(4)) under which it may grant non-statutory stock options to purchase up to an aggregate of 750,000 sharesof common stock to new or prospective employees as inducement to enter into employment with theF-17 Table of ContentsCompany. In December 2016, the Board of Directors authorized and reserved 580,000 additional shares of commonstock under this program. In December 2017, the Board of Directors authorized and reserved 2,500,000 additional sharesof common stock under this program. The program is governed by the terms of the 2012 Plan but does not fall under the2012 Plan. As of December 31, 2017, the Company had granted options for 1,324,000 shares of common stock under theprogram, of which 75,000 have been forfeited and 138,750 have been exercised. As of December 31, 2017, 2,506,000remain available for future issuance. Stock Options A summary of the Company’s stock option activity and related information for the year ended December 31,2017 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, 2016 5,848,470 $6.35 8.0 $62 Granted 3,553,430 $2.60 Exercised (348,734) $1.27 Forfeited/cancelled (333,188) $2.04 Outstanding at December 31, 2017 8,719,978 $5.19 7.9 $6,150 Vested at December 31, 2017 4,795,186 $7.04 6.9 $2,562 Vested and expected to vest at December 31, 2017(1) 8,649,978 $5.20 7.9 $6,150 (1)This represents the number of vested options as of December 31, 2017, plus the number of unvested optionsexpected to vest as of December 31, 2017.The fair value of each stock option was estimated using a Black‑Scholes option‑pricing model with thefollowing assumptions: Year ended December 31, 2017 2016 2015Risk-free interest rate 2.02% 1.48% 1.75%Volatility 78% 75% 73%Dividend yield — — — Expected term (years) 5.8 5.9 6.0 The Company recorded stock‑based compensation expense associated with employee stock options of $4.5million, $6.1 million, and $7.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. Theweighted‑average grant date fair value of options granted in the years ended December 31, 2017, 2016 and 2015 was$1.83, $0.99, and $3.80 per share, respectively. The fair value of options that vested during the years ended December31, 2017, 2016 and 2015 was $4.8 million, $6.9 million, and $9.5 million, respectively. The aggregate intrinsic value ofoptions exercised (i.e., the difference between the market price at exercise and the price paid by employees to exercisethe option) during the years ended December 31, 2017 and 2016 was $1.1 million and $0, respectively. F-18 Table of ContentsIn 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 Company determinedthat 50% of performance conditions had been achieved during the year ended December 31, 2016. As a result, 250,000shares vested in October 2016 and the Company recognized stock-based compensation expense related to these awardsof approximately $222,000 for the year ended December 31, 2016. In September 2017, the Company determined thatthe remaining performance conditions had been achieved and as a result the remaining 250,000 shares vested and theCompany recognized stock-based compensation expense of approximately $379,000 during the year ended December31, 2017. The increase in stock-based compensation expense recognized for the awards which vested during the yearended December 31, 2017, as compared to the awards which vested during the year ended December 31, 2016, is a resultof the revaluation of an award held by a non-employee to fair value on the vesting date. At December 31, 2017, there was $6.8 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 2.9 years. Restricted Stock UnitsNo restricted stock units were granted during the years ended December 31, 2017, 2016 and 2015. The total fairvalue of restricted stock units vested during the years ended December 31, 2017, 2016 and 2015 was approximately $0,$65,000 and $1.6 million, respectively. As of December 31, 2016, all RSUs granted under the 2012 plan had vested.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 instrumentsuntil vested. As a result of this modification, the Company recorded a liability for the fair value of the awards as of eachreporting date with the change in fair value recorded through the consolidated statements of operations andcomprehensive loss. The Company recorded stock‑based compensation expense equal to the greater of the original grantdate fair value of the awards or the settlement date fair value. All RSUs were fully vested as of February 1, 2016. Duringthe year ended December 31, 2017, 2016 and 2015, the Company deposited approximately $0, $5,000, and $417,000,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, 2017 and 2016.8. Income TaxesAs of December 31, 2017, the Company had federal and state net operating loss carryforwards of approximately$237.0 million and $235.9 million, respectively, which are available to reduce future taxable income. The Companyalso had federal and state tax credits of $14.1 million and $1.7 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 2037. 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.F-19 Table of ContentsA reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operationsfollows: December 31, 2017 2016 Income tax benefit using U.S. federal statutory rate 34.00% 34.00%State tax benefit, net of federal benefit 5.00% 3.43%Research and development tax credits 7.04% 4.42%Permanent items (1.24)% (3.88)%Effect of U.S. Tax Cuts and Jobs Act (45.19)% —%Change in the valuation allowance 0.19% (36.71)%Other 0.20% (1.26)% —% —%The principal components of the Company’s deferred tax assets are as follows (in thousands): December 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $64,677 $72,285 Capitalized research and development 2,780 1,836 Research and development credits 15,406 8,298 Stock-based compensation 2,560 3,083 Other 379 429 Gross deferred tax assets 85,802 85,931 Valuation allowance (85,802) (85,931) Net deferred tax asset $ — $ — The Company has recorded a valuation allowance against its deferred tax assets at December 31, 2017 and2016 because the Company’s management believes that it is more likely than not that these assets will not be fullyrealized. The decrease in the valuation allowance of approximately $129,000 in the year ended December 31, 2017primarily relates to the reduction in the federal rate for corporations under the Tax Cuts and Jobs Act of 2017.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, 2017, 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.On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was enacted. This law substantially amended theInternal Revenue Code and among other things, effective January 1, 2018, permanently reduced the U.S. corporateincome tax rate from 35% to 21% and repealed the performance exception permitting certain executive officercompensation greater than $1.0 million to be deducted. On December 22, 2017, the SEC staff issued Staff AccountingBulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows therecording of provisional amounts during a measurement period not to extend beyond one year of the enactment date. Inaccordance with SAB 118, the Company has determined that its deferred tax asset value andF-20 Table of Contentsassociated valuation allowance reduction of $30.6 million is a provisional amount and a reasonable estimate atDecember 31, 2017. The final impact may differ from this provisional amount due to, among other things, changes ininterpretations and assumptions the Company has made thus far and the issuance of additional regulatory or otherguidance. The Company expects to determine the final impact within the measurement period.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, 2017 and 2016.The minimum aggregate future lease commitments as of December 31, 2017 are as follows (in thousands):2018 $542 2019 415 2020 — 2021 — 2022 — Thereafter — Total $957 The Company recorded rent expense of approximately $352,000, $352,000 and $352,000 for the years endedDecember 31, 2017, 2016 and 2015, respectively.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 toF-21 Table of ContentsInfinity 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, which milestone waspaid in cash by the Company to Infinity in October 2017 and recorded as research and development expense in theconsolidated statement of operations, and (ii) $22.0 million upon the approval of a New Drug Application in the UnitedStates or an application for marketing authorization with a regulatory authority outside of the United States for aproduct in an oncology indication containing duvelisib. For any portion of any of the foregoing payments that it electsto issue in shares of our common stock in lieu of cash, the number of shares of common stock to be issued will bedetermined by multiplying (1) 1.025 by (2) the number of shares of common stock equal to (a) the amount of thepayment to be paid in shares of common stock divided by (b) the average closing price of a share of common stock asquoted on Nasdaq for a twenty day period following the public announcement of the applicable milestone event. Theshares of common stock will be issued as unregistered securities, and the Company will have an obligation to promptlyfile a registration statement with the SEC to register such shares for resale. Any issuance of shares will be subject to thesatisfaction of closing conditions, including that all material authorizations, consents, approvals and the like necessaryfor 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. 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. The Company evaluated the license agreement with Infinity under ASC Topic 805, Business Combinations,and ASU 2017-01 and concluded that as substantially all of the fair value of the gross assets acquired is concentrated ina single identifiable asset or group of similar assets, the transaction did not meet the requirements to be accounted for asa business 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 regulatoryF-22 Table of Contentsand commercial sales milestones. Pfizer is also eligible to receive high single to mid-double digit royalties on future netsales of the FAK Products. The Company’s royalty obligations with respect to each FAK Product in each country beginon the date of first commercial sale of the FAK Product in that country, and end on the later of 10 years after the date offirst commercial sale of the FAK Product in that country or the date of expiration or abandonment of the last claimcontained in any issued patent or patent application licensed by Pfizer to the Company that covers the FAK Product inthat country. The Company accounted for the license agreement as the licensing of in process research and developmentwith no alternative future use.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 $273,000,$162,000, and $295,000 for the years ended December 31, 2017, 2016, and 2015, respectively.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, 2017 2017 2017 2017 Operating expenses: Research and development $8,385 $9,042 $17,743 $11,253 General and administrative 4,763 4,425 5,394 6,799 Total operating expenses 13,148 13,467 23,137 18,052 Loss from operations (13,148) (13,467) (23,137) (18,052) Interest income 155 140 121 145 Interest expense (12) (109) (110) (328) Net loss $(13,005) $(13,436) $(23,126) $(18,235) Net loss per share —basic and diluted $(0.35) $(0.36) $(0.61) $(0.43) Weighted-average number of common shares usedin net loss per share —basic and diluted 36,992 36,992 37,630(a) 42,027(a)(b) F-23 Table of Contents 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 shares usedin net loss per share —basic and diluted 36,975 36,992 36,992 36,992 (a)In the third and fourth quarters of 2017, the Company sold 2,853,753 and 2,183,126 shares of its common stockunder the Company’s at-the-market equity offering program, which resulted in net proceeds of $14.1 million and$9.0 million, respectively.(b)In December 2017, the Company closed an underwritten offering in which it sold 8,422,877 shares of its commonstock at a price of $2.97 per share, for aggregate proceeds, net of underwriting discounts and offering costs of $24.7million. 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 thosedisclosed above. F-24 VERASTEM, INC. Amended and Restated2012 Incentive Plan 1. Purpose The purpose of this 2012 Incentive Plan (the “Plan”) of Verastem, Inc., a Delaware corporation (the “Company”), is toadvance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate personswho are expected to make important contributions to the Company and by providing such persons with equity ownershipopportunities and performance-based incentives that are intended to better align the interests of such persons with those of theCompany’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’spresent or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, asamended, and any regulations thereunder (the “Code”) and any other business venture (including, without limitation, jointventure or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors ofthe Company (the “Board”). 2. Eligibility All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company (as suchterms consultants and advisors are defined and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended(the “Securities Act”), or any successor form) are eligible to be granted Awards under the Plan. Each person who is granted anAward under the Plan is deemed a “Participant.” “Award” means Options (as defined in Section 5), SARs (as defined in Section6), Restricted Stock (as defined in Section 7), Restricted Stock Units (as defined in Section 7) and Other Stock-Based Awards (asdefined in Section 8) and Cash-Based Awards (as defined in Section 8). 3. Administration and Delegation (a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority togrant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shalldeem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under thePlan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in themanner and to the extent it shall deem expedient and it shall be the sole and final judge of such expediency. All decisions by theBoard shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest inthe Plan or in any Award. 1  (b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of itspowers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the“Board” shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board’spowers or authority under the Plan have been delegated to such Committee or officers. (c) Delegation to Officers. To the extent permitted by applicable law, the Board may delegate to one or more officers ofthe Company the power to grant Options and other Awards that constitute rights under Delaware law (subject to any limitationsunder the Plan) to employees or officers of the Company and to exercise such other powers under the Plan as the Board maydetermine, provided that the Board shall fix the terms of such Awards to be granted by such officers (including the exercise priceof such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of sharessubject to such Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant suchAwards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, asamended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act). TheBoard may not delegate authority under this Section 3(c) to grant Restricted Stock, unless Delaware law then permits suchdelegation. 4. Stock Available for Awards (a) Number of Shares; Share Counting. (1) Authorized Number of Shares. Subject to adjustment under Section 9, Awards may be made under the Plan(any or all of which Awards may be in the form of Incentive Stock Options, as defined in Section 5(b)) for up to such number ofshares of common stock, $0.0001 par value per share, of the Company (the “Common Stock”) as is equal to the sum of: (A) 3,428,571 shares of Common Stock; plus (B) such additional number of shares of Common Stock (up to 571,242 shares) as is equal to the sum of(x) the number of shares of Common Stock reserved for issuance under the Company’s 2010 Equity Incentive Plan (the “ExistingPlan”) that remain available for grant under the Existing Plan immediately prior to the closing of the Company’s initial publicoffering and (y) the number of shares of Common Stock subject to awards granted under the Existing Plan which awards expire,terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance pricepursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options to any limitations of theCode); plus (C) an annual increase to be added on the first day of each of the fiscal year beginning with the fiscalyear ending December 31, 2013, and on each anniversary thereof until the expiration of the Plan equal to the lesser of (i)1,285,714 shares of Common Stock, (ii) 4% of the outstanding shares on such date or (iii) an amount determined by the Board.2  Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (2) Share Counting. For purposes of counting the number of shares available for the grant of Awards under thePlan: (A) all shares of Common Stock covered by SARs shall be counted against the number of sharesavailable for the grant of Awards under the Plan; provided, however, that (i) SARs that may be settled only in cash shall not be socounted and (ii) if the Company grants an SAR in tandem with an Option for the same number of shares of Common Stock andprovides that only one such Award may be exercised (a “Tandem SAR”), only the shares covered by the Option, and not theshares covered by the Tandem SAR, shall be so counted, and the expiration of one in connection with the other’s exercise will notrestore shares to the Plan; (B) if any Award (i) expires or is terminated, surrendered or canceled without having been fullyexercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award beingrepurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or (ii) results in anyCommon Stock not being issued (including as a result of an SAR that was settleable either in cash or in stock actually beingsettled in cash), the unused Common Stock covered by such Award shall again be available for the grant of Awards; provided,however, that (1) in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code, (2) inthe case of the exercise of an SAR, the number of shares counted against the shares available under the Plan shall be the fullnumber of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number ofshares actually used to settle such SAR upon exercise and (3) the shares covered by a tandem SAR shall not again becomeavailable for grant upon the expiration or termination of such tandem SAR; and (C) shares of Common Stock delivered (either by actual delivery, attestation, or net exercise) to theCompany by a Participant to (i) purchase shares of Common Stock upon the exercise of an Award or (ii) satisfy tax withholdingobligations (including shares retained from the Award creating the tax obligation) shall not be added back to the number ofshares available for the future grant of Awards. (b) Section 162(m) Per-Participant Limit. Subject to adjustment under Section 9, the maximum number of shares ofCommon Stock with respect to which Awards may be granted to any Participant under the Plan shall be 1,142,857 per calendaryear. For purposes of the foregoing limit, the combination of an Option in tandem with an SAR shall be treated as a single Award.The per Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of theCode or any successor provision thereto, and the regulations thereunder (“Section 162(m)”). (c) Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition bythe Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board 3  deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awardsshall not count against the overall share limit set forth in Section 4(a)(1) or any sublimit contained in the Plan, except as may berequired by reason of Section 422 and related provisions of the Code. 5. Stock Options (a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number ofshares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitationsapplicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as itconsiders necessary or advisable. (b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Section422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of Verastem, Inc., any of Verastem, Inc.’spresent or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities theemployees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construedconsistently with the requirements of Section 422 of the Code. An Option that is not intended to be an Incentive Stock Optionshall be designated a “Nonstatutory Stock Option.” The Company shall have no liability to a Participant, or any other party, if anOption (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or if the Companyconverts an Incentive Stock Option to a Nonstatutory Stock Option. (c) Exercise Price. The Board shall establish the exercise price of each Option and specify the exercise price in theapplicable Option agreement. The exercise price shall be not less than 100% of the fair market value per share of Common Stockas determined by (or in a manner approved by) the Board (“Fair Market Value”) on the date the Option is granted; provided thatif the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall benot less than 100% of the Fair Market Value on such future date. (d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as theBoard may specify in the applicable option agreement; provided, however, that no Option will be granted with a term in excess of10 years. (e) Exercise of Options. Options may be exercised by delivery to the Company of a notice of exercise in a form (whichmay be electronic) approved by the Company, together with payment in full (in the manner specified in Section 5(f)) of theexercise price for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will bedelivered by the Company as soon as practicable following exercise. (f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall bepaid for as follows: (1) in cash or by check, payable to the order of the Company; 4  (2) except as may otherwise be provided in the applicable Option agreement or approved by the Board, in itssole discretion, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly tothe Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to theCompany of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Companycash or a check sufficient to pay the exercise price and any required tax withholding; (3) to the extent provided for in the applicable Option agreement or approved by the Board, in its solediscretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued attheir Fair Market Value, provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, ifacquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be establishedby the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or othersimilar requirements; (4) to the extent provided for in the applicable Nonstatutory Stock Option agreement or approved by the Boardin its sole discretion, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive(i) the number of shares underlying the portion of the Option being exercised, less (ii) such number of shares as is equal to (A) theaggregate exercise price for the portion of the Option being exercised divided by (B) the Fair Market Value on the date ofexercise; (5) to the extent permitted by applicable law and provided for in the applicable Option agreement or approvedby the Board, in its sole discretion, by payment of such other lawful consideration as the Board may determine; or (6) by any combination of the above permitted forms of payment. (g) Limitation on Repricing. Unless such action is approved by the Company’s stockholders, the Company may not(except as provided for under Section 9): (1) amend any outstanding Option granted under the Plan to provide an exercise priceper share that is lower than the then-current exercise price per share of such outstanding Option, (2) cancel any outstandingoption (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awardsgranted pursuant to Section 4(c)) covering the same or a different number of shares of Common Stock and having an exerciseprice per share lower than the then-current exercise price per share of the cancelled option, (3) cancel in exchange for a cashpayment any outstanding Option with an exercise price per share above the then-current Fair Market Value, other than pursuantto Section 9, or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of theNASDAQ Stock Market. 6. Stock Appreciation Rights (a) General. The Board may grant Awards consisting of stock appreciation rights (“SARs”) entitling the holder, uponexercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be determined by the Board)determined by reference to appreciation, from and after the date of grant, in the Fair Market Value of a share of Common 5  Stock over the measurement price established pursuant to Section 6(b). The date as of which such appreciation is determined shallbe the exercise date. (b) Measurement Price. The Board shall establish the measurement price of each SAR and specify it in the applicableSAR agreement. The measurement price shall not be less than 100% of the Fair Market Value on the date the SAR is granted;provided that if the Board approves the grant of an SAR effective as of a future date, the measurement price shall be not less than100% of the Fair Market Value on such future date. (c) Duration of SARs. Each SAR shall be exercisable at such times and subject to such terms and conditions as the Boardmay specify in the applicable SAR agreement; provided, however, that no SAR will be granted with a term in excess of 10 years. (d) Exercise of SARs. SARs may be exercised by delivery to the Company of a notice of exercise in a form (which may beelectronic) approved by the Company, together with any other documents required by the Board. (e) Limitation on Repricing. Unless such action is approved by the Company’s stockholders, the Company may not(except as provided for under Section 9): (1) amend any outstanding SAR granted under the Plan to provide a measurement priceper share that is lower than the then-current measurement price per share of such outstanding SAR, (2) cancel any outstandingSAR (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awardsgranted pursuant to Section 4(c)) covering the same or a different number of shares of Common Stock and having an exercise ormeasurement price per share lower than the then-current measurement price per share of the cancelled SAR, (3) cancel inexchange for a cash payment any outstanding SAR with a measurement price per share above the then-current Fair Market Value,other than pursuant to Section 9, or (4) take any other action under the Plan that constitutes a “repricing” within the meaning ofthe rules of the NASDAQ Stock Market. 7. Restricted Stock; Restricted Stock Units (a) General. The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted Stock”),subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (orto require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in theapplicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for suchAward. The Board may also grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at thetime such Award vests (“Restricted Stock Units”) (Restricted Stock and Restricted Stock Units are each referred to herein as a“Restricted Stock Award”). (b) Terms and Conditions for All Restricted Stock Awards. The Board shall determine the terms and conditions of aRestricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any. 6  (c) Additional Provisions Relating to Restricted Stock. (1) Dividends. Unless otherwise provided in the applicable Award agreement, any dividends (whether paid incash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock (“Accrued Dividends”) shallbe paid to the Participant only if and when such shares become free from the restrictions on transferability and forfeitability thatapply to such shares. Each payment of Accrued Dividends will be made no later than the end of the calendar year in which thedividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the lapsing of therestrictions on transferability and the forfeitability provisions applicable to the underlying shares of Restricted Stock. (2) Stock Certificates. The Company may require that any stock certificates issued in respect of shares ofRestricted Stock, as well as dividends or distributions paid on such Restricted Stock, shall be deposited in escrow by theParticipant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of theapplicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictionsto the Participant or if the Participant has died, to his or her Designated Beneficiary. “Designated Beneficiary” means (i) thebeneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of theParticipant in the event of the Participant’s death or (ii) in the absence of an effective designation by a Participant, theParticipant’s estate. (d) Additional Provisions Relating to Restricted Stock Units. (1) Settlement. Upon the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to eachRestricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or (if soprovided in the applicable Award agreement) an amount of cash equal to the Fair Market Value of one share of Common Stock.The Board may, in its discretion, provide that settlement of Restricted Stock Units shall be deferred, on a mandatory basis or atthe election of the Participant in a manner that complies with Section 409A of the Code. (2) Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units. (3) Dividend Equivalents. The Award agreement for Restricted Stock Units may provide Participants with theright to receive an amount equal to any dividends or other distributions declared and paid on an equal number of outstandingshares of Common Stock (“Dividend Equivalents”). Dividend Equivalents may be paid currently or credited to an account for theParticipant, may be settled in cash and/or shares of Common Stock and may be subject to the same restrictions on transfer andforfeitability as the Restricted Stock Units with respect to which paid, in each case to the extent provided in the Award agreement. 8. Other Stock-Based and Cash-Based Awards (a) General. Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by referenceto, or are otherwise based on, shares of Common Stock or 7  other property, may be granted hereunder to Participants (“Other Stock-Based-Awards”). Such Other Stock-Based Awards shallalso be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu ofcompensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock orcash, as the Board shall determine. The Company may also grant Performance Awards or other Awards denominated in cash ratherthan shares of Common Stock (“Cash-Based Awards”). (b) Terms and Conditions. Subject to the provisions of the Plan, the Board shall determine the terms and conditions ofeach Other Stock-Based Award or Cash-Based Award, including any purchase price applicable thereto. 9. Adjustments for Changes in Common Stock and Certain Other Events (a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization,combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend ordistribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities availableunder the Plan, (ii) the share counting rules and sublimit set forth in Sections 4(a) and 4(b), (iii) the number and class of securitiesand exercise price per share of each outstanding Option, (iv) the share and per-share provisions and the measurement price of eachoutstanding SAR, (v) the number of shares subject to and the repurchase price per share subject to each outstanding RestrictedStock Award and (vi) the share and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock-Based Award, shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the mannerdetermined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of theCommon Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Optionare adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then anoptionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled toreceive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Optionexercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for suchstock dividend. (b) Reorganization Events. (1) Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with orinto another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right toreceive cash, securities or other property or is cancelled, (b) any transfer or disposition of all of the Common Stock of theCompany for cash, securities or other property pursuant to a share exchange or other transaction or (c) any liquidation ordissolution of the Company. (2) Consequences of a Reorganization Event on Awards Other than Restricted Stock. (A) In connection with a Reorganization Event, the Board may take any one or more of the followingactions as to all or any (or any portion of) outstanding Awards 8  other than Restricted Stock on such terms as the Board determines (except to the extent specifically provided otherwise in anapplicable Award agreement or another agreement between the Company and the Participant): (i) provide that such Awards shallbe assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliatethereof), (ii) upon written notice to a Participant, provide that all of the Participant’s unexercised Awards will terminateimmediately prior to the consummation of such Reorganization Event unless exercised by the Participant (to the extent thenexercisable) within a specified period following the date of such notice, (iii) provide that outstanding Awards shall becomeexercisable, realizable, or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon suchReorganization Event, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock willreceive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “AcquisitionPrice”), make or provide for a cash payment to Participants with respect to each Award held by a Participant equal to (A) thenumber of shares of Common Stock subject to the vested portion of the Award (after giving effect to any acceleration of vestingthat occurs upon or immediately prior to such Reorganization Event) multiplied by (B) the excess, if any, of (I) the AcquisitionPrice over (II) the exercise, measurement or purchase price of such Award and any applicable tax withholdings, in exchange forthe termination of such Award, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shallconvert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereofand any applicable tax withholdings) and (vi) any combination of the foregoing. In taking any of the actions permitted under thisSection 9(b)(2), the Board shall not be obligated by the Plan to treat all Awards, all Awards held by a Participant, or all Awards ofthe same type, identically. (B) Notwithstanding the terms of Section 9(b)(2)(A), in the case of outstanding Restricted Stock Unitsthat are subject to Section 409A of the Code: (i) if the applicable Restricted Stock Unit agreement provides that the RestrictedStock Units shall be settled upon a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i), and the Reorganization Event constitutes such a “change in control event”, then no assumption or substitution shall bepermitted pursuant to Section 9(b)(2)(A)(i) and the Restricted Stock Units shall instead be settled in accordance with the terms ofthe applicable Restricted Stock Unit agreement; and (ii) the Board may only undertake the actions set forth in clauses (iii), (iv) or(v) of Section 9(b)(2)(A) if the Reorganization Event constitutes a “change in control event” as defined under TreasuryRegulation Section 1.409A-3(i)(5)(i) and such action is permitted or required by Section 409A of the Code; if the ReorganizationEvent is not a “change in control event” as so defined or such action is not permitted or required by Section 409A of the Code,and the acquiring or succeeding corporation does not assume or substitute the Restricted Stock Units pursuant to clause (i) ofSection 9 (b)(2)(A), then the unvested Restricted Stock Units shall terminate immediately prior to the consummation of theReorganization Event without any payment in exchange therefor. (C) For purposes of Section 9(b)(2)(A)(i), an Award (other than Restricted Stock) shall be consideredassumed if, following consummation of the Reorganization Event, such Award confers the right to purchase or receive pursuant tothe terms of such Award, for each share of Common Stock subject to the Award immediately prior to the consummation of theReorganization Event, the consideration (whether cash, securities or other property) received 9  as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior tothe consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of considerationchosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the considerationreceived as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or anaffiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration tobe received upon the exercise or settlement of the Award to consist solely of such number of shares of common stock of theacquiring or succeeding corporation (or an affiliate thereof) that the Board determined to be equivalent in value (as of the date ofsuch determination or another date specified by the Board) to the per share consideration received by holders of outstandingshares of Common Stock as a result of the Reorganization Event. (3) Consequences of a Reorganization Event on Restricted Stock. Upon the occurrence of a ReorganizationEvent other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company with respect tooutstanding Restricted Stock shall inure to the benefit of the Company’s successor and shall, unless the Board determinesotherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuantto such Reorganization Event in the same manner and to the same extent as they applied to such Restricted Stock; provided, however, that the Board may provide for termination or deemed satisfaction of such repurchase or other rights under theinstrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, either initially or byamendment. Upon the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except tothe extent specifically provided to the contrary in the instrument evidencing any Restricted Stock or any other agreementbetween a Participant and the Company, all restrictions and conditions on all Restricted Stock then outstanding shallautomatically be deemed terminated or satisfied. 10. General Provisions Applicable to Awards (a) Transferability of Awards. Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by theperson to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distributionor, other than in the case of an Incentive Stock Option or Awards subject to Section 409A of the Code, pursuant to a qualifieddomestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant; provided, however,except with respect to Awards subject to Section 409A of the Code, that the Board may permit or provide in an Award for thegratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or otherentity established for the benefit of the Participant and/or an immediate family member thereof if the Company would be eligibleto use a Form S-8 under the Securities Act for the registration of the sale of the Common Stock subject to such Award to suchproposed transferee; provided further, that the Company shall not be required to recognize any such permitted transfer until suchtime as such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form andsubstance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of theAward. References to a Participant, to the extent relevant in the context, shall include references 10  to authorized transferees. For the avoidance of doubt, nothing contained in this Section 10(a) shall be deemed to restrict a transferto the Company. (b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shalldetermine. Each Award may contain terms and conditions in addition to those set forth in the Plan. (c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or inrelation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly. (d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, termination or othercessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and theextent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian orDesignated Beneficiary, may exercise rights under the Award. (e) Withholding. The Participant must satisfy all applicable federal, state, and local or other income and employment taxwithholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stockunder an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary orwages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the fullamount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations.Payment of withholding obligations is due before the Company will issue any shares on exercise, vesting or release fromforfeiture of an Award or at the same time as payment of the exercise or purchase price, unless the Company determines otherwise.If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in wholeor in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from theAward creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by theBoard, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the maximumwithholding amount consistent with the award being subject to equity accounting treatment under the applicable accountingrules. Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting orother similar requirements. (f) Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including but not limitedto, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and convertingan Incentive Stock Option to a Nonstatutory Stock Option. The Participant’s consent to such action shall be required unless (i)the Board determines that the action, taking into account any related action, does not materially and adversely affect theParticipant’s rights under the Plan or (ii) the change is permitted under Section 9. (g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stockpursuant to the Plan or to remove restrictions from shares 11  previously issued or delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction ofthe Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and deliveryof such shares have been satisfied, including any applicable securities laws and regulations and any applicable stock exchange orstock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations oragreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations. (h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in whole orin part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part, as the case may be. (i) Performance Awards. (1) Grants. Restricted Stock Awards and Other Stock-Based Awards under the Plan may be made subject to theachievement of performance goals pursuant to this Section 10(i) (“Performance Awards”). Subject to Section 10(i)(4), noPerformance Awards shall vest prior to the first anniversary of the date of grant. Performance Awards can also provide for cashpayments of up to $5,000,000 per calendar year per individual. (2) Committee. Grants of Performance Awards to any Covered Employee (as defined below) intended to qualifyas “performance-based compensation” under Section 162(m) (“Performance-Based Compensation”) shall be made only by aCommittee (or a subcommittee of a Committee) comprised solely of two or more directors eligible to serve on a committeemaking Awards qualifying as “performance-based compensation” under Section 162(m). In the case of such Awards granted toCovered Employees, references to the Board or to a Committee shall be treated as referring to such Committee (or subcommittee).“Covered Employee” shall mean any person who is, or whom the Committee, in its discretion, determines may be, a “coveredemployee” under Section 162(m)(3) of the Code. (3) Performance Measures. For any Award that is intended to qualify as Performance-Based Compensation, theCommittee shall specify that the degree of granting, vesting and/or payout shall be subject to the achievement of one or moreobjective performance measures established by the Committee, which shall be based on the relative or absolute attainment ofspecified levels of one or any combination of the following, which may be determined pursuant to generally accepted accountingprinciples (“GAAP”) or on a non-GAAP basis, as determined by the Committee: scientific progress, product developmentprogress, business development progress, including in-licensing, net income/(loss), earnings/(loss) before or after discontinuedoperations, interest, taxes, depreciation and/or amortization, operating profit/(loss) before or after discontinued operations and/ortaxes, sales, sales growth, earnings growth, cash flow or cash position, gross margins, stock price, financings (issuance of debt orequity), refinancings, market share, return on sales, assets, equity or investment, improvement of financial ratings, achievement ofbalance sheet or income statement objectives or total stockholder return. Such goals may reflect absolute entity or business unitperformance or a relative comparison to the performance of a peer group of entities or other external measure of the selectedperformance criteria and may be absolute in their terms or measured against or in relationship to other companies comparably,similarly or otherwise situated. The Committee 12  may specify that such performance measures shall be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains orlosses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) thewritedown of any asset, (vi) fluctuation in foreign currency exchange rates, and (vi) charges for restructuring and rationalizationprograms. Such performance measures: (i) may vary by Participant and may be different for different Awards; (ii) may be particularto a Participant or the department, branch, line of business, subsidiary or other unit in which the Participant works and may coversuch period as may be specified by the Committee; and (iii) shall be set by the Committee within the time period prescribed by,and shall otherwise comply with the requirements of, Section 162(m). Awards that are not intended to qualify as Performance-Based Compensation may be based on these or such other performance measures as the Board may determine. (4) Adjustments. Notwithstanding any provision of the Plan, with respect to any Performance Award that isintended to qualify as Performance-Based Compensation, the Committee may adjust downwards, but not upwards, the cash ornumber of shares payable pursuant to such Award, and the Committee may not waive the achievement of the applicableperformance measures except in the case of the death or disability of the Participant or a change in control of the Company. (5) Other. The Committee shall have the power to impose such other restrictions on Performance Awards as itmay deem necessary or appropriate to ensure that such Awards satisfy all requirements for Performance-Based Compensation. 11. Miscellaneous (a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award by virtueof the adoption of the Plan, and the grant of an Award shall not be construed as giving a Participant the right to continuedemployment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss orotherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly providedin the applicable Award. (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or DesignatedBeneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to anAward until becoming the record holder of such shares. (c) Effective Date and Term of Plan. The Plan, as amended and restated, shall become effective on the date the Plan isadopted by the Board. No Awards shall be granted under the Plan after the expiration of 10 years from the date the Plan wasinitially approved by the Company’s stockholders, but Awards previously granted may extend beyond that date. (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any timeprovided that (i) to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply withSection 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award,unless and until the Company’s stockholders approve such amendment in the manner required by 13  Section 162(m); and (ii) no amendment that would require stockholder approval under the rules of the NASDAQ Stock Marketmay be made effective unless and until the Company’s stockholders approve such amendment. In addition, if at any time theapproval of the Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code orany successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendmentwithout such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with thisSection 11(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendmentis adopted, provided the Board determines that such amendment, taking into account any related action, does not materially andadversely affect the rights of Participants under the Plan. No Award shall be made that is conditioned upon stockholder approvalof any amendment to the Plan unless the Award provides that (i) it will terminate or be forfeited if stockholder approval of suchamendment is not obtained within no more than 12 months from the date of grant and (2) it may not be exercised or settled (orotherwise result in the issuance of Common Stock) prior to such stockholder approval. (e) Authorization of Sub-Plans (including for Grants to non-U.S. Employees). The Board may from time to time establishone or more sub-plans under the Plan for purposes of satisfying applicable securities, tax or other laws of various jurisdictions.The Board shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations on the Board’sdiscretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwiseinconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemedto be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shallnot be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of suchsupplement. (f) Compliance with Section 409A of the Code. Except as provided in individual Award agreements initially or byamendment, if and to the extent (i) any portion of any payment, compensation or other benefit provided to a Participant pursuantto the Plan in connection with his or her employment termination constitutes “nonqualified deferred compensation” within themeaning of Section 409A of the Code and (ii) the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of theCode, in each case as determined by the Company in accordance with its procedures, by which determinations the Participant(through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shallnot be paid before the day that is six months plus one day after the date of “separation from service” (as determined under Section409A of the Code) (the “New Payment Date”), except as Section 409A of the Code may then permit. The aggregate of anypayments that otherwise would have been paid to the Participant during the period between the date of separation from serviceand the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remainingpayments will be paid on their original schedule. The Company makes no representations or warranty and shall have no liability to the Participant or any other person if anyprovisions of or payments, compensation or other benefits under the Plan are determined to constitute nonqualified deferredcompensation subject to Section 409A of the Code but do not to satisfy the conditions of that section. 14  (g) Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer,employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other personfor any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable withrespect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer,employee or agent of the Company. The Company will indemnify and hold harmless each director, officer, employee or agent ofthe Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated,against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with theBoard’s approval) arising out of any act or omission to act concerning the Plan unless arising out of such person’s own fraud orbad faith. (h) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted inaccordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would requirethe application of the laws of a jurisdiction other than the State of Delaware. 15VERASTEM, INC.Incentive Stock Option AgreementGranted Under 2012 Incentive Plan1. Grant of Option.This agreement (this “Agreement”) evidences the grant by Verastem, Inc., a Delawarecorporation (the “Company”), on date (the “Grant Date”) to Employee Name, an employee of theCompany (the “Participant”), of an option to purchase, in whole or in part, on the terms providedherein and in the Company’s 2012 Incentive Plan (the “Plan”), a total of number shares (the“Shares”) of common stock, $0.0001 par value per share, of the Company (“Common Stock”) at$price per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on date(the “Final Exercise Date”).It is intended that the option evidenced by this Agreement shall be an incentive stock option asdefined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulationspromulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term“Participant”, as used in this option, shall be deemed to include any person who acquires the right toexercise this option validly under its terms.2. Vesting Schedule.This option will become exercisable (“vest”) as to [ ]% of the Shares on [ ], subject to theParticipant’s continued employment or other service relationship with the Company on each suchvesting date. For purposes of this Agreement, “Vesting Commencement Date” shall mean date.The right of exercise shall be cumulative so that to the extent the option is not exercised in anyperiod to the maximum extent permissible it shall continue to be exercisable, in whole or in part, withrespect to all Shares for which it is vested until the earlier of the Final Exercise Date or the terminationof this option under Section 3 hereof or under the terms of the Plan.3. Exercise of Option.(a) Form of Exercise. Each election to exercise this option shall be effected by a writingsigned by the Participant (whether in the form attached hereto as Exhibit A or in electronic form) andaccompanied by payment in full in the manner provided in the Plan. The Participant may purchase lessthan the number of Shares covered hereby, provided that no partial exercise of this option may be forany fractional share.(b) Continuous Relationship with the Company Required. Except as otherwise providedin this Section 3, this option may not be exercised unless the Participant, at the time he or she exercisesthis option, is, and has been at all times since the Grant Date, an employee, officer or director of, orconsultant or advisor to, the Company or any parent or subsidiary of the Company as defined inSection 424(e) or (f) of the Code (an “Eligible Participant”).- 1 - (c) Termination of Relationship with the Company. If the Participant ceases to be anEligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the rightto exercise this option shall terminate three months after such cessation (but in no event after the FinalExercise Date), provided that this option shall be exercisable only to the extent that the Participant wasentitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if theParticipant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisionsof any employment contract, confidentiality and nondisclosure agreement or other agreement betweenthe Participant and the Company, the right to exercise this option shall terminate immediately uponsuch violation.(d) Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled(within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she isan Eligible Participant and the Company has not terminated such relationship for “cause” as specifiedin paragraph (e) below, this option shall be exercisable, within the period of one year following thedate of death or disability of the Participant, by the Participant (or in the case of death by an authorizedtransferee), provided that this option shall be exercisable only to the extent that this option wasexercisable by the Participant on the date of his or her death or disability, and further provided that thisoption shall not be exercisable after the Final Exercise Date.(e) Termination for Cause. If, prior to the Final Exercise Date, the Participant’semployment or other service relationship with the Company is terminated by the Company for Cause(as defined below), the right to exercise this option shall terminate immediately upon the effective dateof such termination of employment or other service relationship. If, prior to the Final Exercise Date,the Participant is given notice by the Company of the termination of his or her employment or otherservice relationship by the Company for Cause, and the effective date of such termination issubsequent to the date of delivery of such notice, the right to exercise this option shall be suspendedfrom the time of the delivery of such notice until the earlier of (i) such time as it is determined orotherwise agreed that the Participant’s employment or other service relationship shall not be terminatedfor Cause as provided in such notice or (ii) the effective date of such termination of employment orother service relationship (in which case the right to exercise this option shall, pursuant to the precedingsentence, terminate immediately upon the effective date of such termination of employment or otherservice relationship). If the Participant is party to an employment or severance agreement with theCompany that contains a definition of “cause” for termination of employment or other servicerelationship, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise,“Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to performhis or her responsibilities to the Company (including, without limitation, breach by the Participant ofany provision of any employment, consulting, advisory, nondisclosure, non-competition or othersimilar agreement between the Participant and the Company), as determined by the Company, whichdetermination shall be conclusive. The Participant’s employment or other service relationship shall beconsidered to have been terminated for Cause if the Company determines, within 30 days after theParticipant’s resignation, that termination for Cause was warranted.4. Change of Control. - 2 - If within 90 days prior to a Change of Control or within 18 months following a Change ofControl, the Company or any successor thereto terminates the Participant’s employment other than forCause, or the Participant terminates his or her employment for Good Reason (as defined below), then,this option will become exercisable (“vest”) as to 100% of the Shares on the date the Participant’semployment terminates. For purposes of this Agreement, “Change of Control” shall mean (i) the acquisition ofbeneficial ownership (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly by any“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) of securities of theCompany representing a majority or more of the combined voting power of the Company’s thenoutstanding securities, other than an acquisition of securities for investment purposes pursuant to a bonafide financing of the Company; (ii) a merger or consolidation of the Company with any othercorporation in which the holders of the voting securities of the Company prior to the merger orconsolidation do not own more than 50% of the total voting securities of the surviving corporation; or(iii) the sale or disposition by the Company of all or substantially all of the Company’s assets other thana sale or disposition of assets to an affiliate of the Company or a holder of securities of the Company;notwithstanding the foregoing, no transaction or series of transactions shall constitute a Change ofControl unless such transaction or series of transactions constitutes a “change in control event” withinthe meaning of Treasury Regulation Section 1.409A-3(i)(5)(i). If the Participant is party to an employment, consulting or severance agreement with theCompany that contains a definition of “good reason” for termination of employment or other servicerelationship, “Good Reason” shall have the meaning ascribed to such term in such agreement. Otherwise, “Good Reason” shall mean, without the Participant’s consent, the occurrence of any one ormore of the following events: (i) material diminution in the nature or scope of the Participant’sresponsibilities, duties or authority, provided that neither (x) the Company’s failure to continue theParticipant’s appointment or election as a director or officer of any of its Affiliates nor (y) anydiminution in the nature or scope of the Participant’s responsibilities, duties or authority that isreasonably related to a diminution of the business of the Company or any of its affiliates shall constitute“Good Reason”; (ii) a material reduction in the Participant’s base salary other than one temporaryreduction of not more than 120 days and not in excess of 20% of the Participant’s base salary inconnection with and in proportion to a general reduction of the base salaries of the Company’sexecutive officers; (iii) failure of the Company to provide the Participant the base salary or benefitsowed to the Participant in accordance with his or her employment agreement with the Company, ifany, after 30 days’ notice during which the Company does not cure such failure; or (iv) relocation ofthe Participant’s principal place of business more than forty (40) miles from the then current location ofthe Participant’s principal place of business. 5. Tax Matters.(a) Withholding. No Shares will be issued pursuant to the exercise of this option unlessand until the Participant pays to the Company, or makes provision satisfactory to the Company forpayment of, any federal, state or local withholding taxes required by law to be withheld in respect ofthis option.- 3 - (b) Disqualifying Disposition. If the Participant disposes of Shares acquired upon exerciseof this option within two years from the Grant Date or one year after such Shares were acquiredpursuant to exercise of this option, the Participant shall notify the Company in writing of suchdisposition.(c) Annual Limit for Incentive Stock Options. To the extent that the aggregate fair marketvalue (determined at the time of grant) of the shares of Common Stock subject to this option and allother incentive stock options the Participant holds that are exercisable for the first time during anycalendar year (under all plans of the Company and its related corporations) exceeds $100,000, theoptions held by the Participant or portions thereof that exceed such limit (according to the order inwhich they were granted in accordance with the regulations under Section 422 of the Code) shall betreated as non-qualified stock options.6. Transfer Restrictions.This option may not be sold, assigned, transferred, pledged or otherwise encumbered by theParticipant, either voluntarily or by operation of law, except by will or the laws of descent anddistribution or pursuant to a qualified domestic relations order, and, during the lifetime of theParticipant, this option shall be exercisable only by the Participant. 7. Provisions of the Plan.This option is subject to the provisions of the Plan (including the provisions relating toamendments to the Plan), a copy of which is furnished to the Participant with this option. Capitalizedterms used in this Agreement and not otherwise defined herein have the meanings provided for them inthe Plan. [Remainder of Page Intentionally Left Blank] - 4 -  IN WITNESS WHEREOF, the Company has caused this option to be executed under itscorporate seal by its duly authorized officer. This option shall take effect as a sealed instrument. VERASTEM, INC. By:____________________________________ Name:Joe Chiapponi Title:Chief Financial OfficerSIGNATURE PAGE TO INCENTIVE STOCK OPTION AGREEMENT PARTICIPANT’S ACCEPTANCEThe undersigned hereby accepts the foregoing option and agrees to the terms and conditionsthereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2012 IncentivePlan.PARTICIPANT:____________________________Name of Employee Exhibit ANOTICE OF STOCK OPTION EXERCISEDate: ____________Verastem, Inc.117 Kendrick Street, Suite 500Needham, MA 02494Attention: Treasurer Dear Sir or Madam:I am the holder of an Incentive Stock Option granted to me under the Verastem, Inc. 2012Incentive Plan on __________ for the purchase of __________ shares of Common Stock of theCompany at a purchase price of $__________ per share.I hereby exercise my option to purchase _________ shares of Common Stock, for which I haveenclosed __________ in the amount of ________. Please register my stock certificate as follows:Name(s):_______________________Address:______________________________________________________Tax I.D. #:_______________________Very truly yours,_____________________________(Signature) VERASTEM, INC. Nonstatutory Stock Option AgreementGranted Under 2012 Incentive Plan 1. Grant of Option. This agreement (this “Agreement”) evidences the grant by Verastem, Inc. a Delaware corporation (the“Company”), on date (the “Grant Date”) to name, an employee, consultant and/or director of the Company (the“Participant”), of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s2012 Incentive Plan (the “Plan”), a total of number shares (the “Shares”) of common stock, $0.0001 par valueper share, of the Company (“Common Stock”) at $price per Share. Unless earlier terminated, this option shallexpire at 5:00 p.m., Eastern time, on date (the “Final Exercise Date”). It is intended that the option evidenced by this Agreement shall not be an incentive stock option asdefined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgatedthereunder (the “Code”). Except as otherwise indicated by the context, the term “Participant”, as used in thisoption, shall be deemed to include any person who acquires the right to exercise this option validly under itsterms. 2. Vesting Schedule. This option will become exercisable (“vest”) as to [ ]% of the Shares on [ ], provided that theParticipant continues to serve as an employee, consultant and/or director of the Company on each such vestingdate. For purposes of this Agreement, “Vesting Commencement Date” shall mean date. The right of exercise shall be cumulative so that to the extent the option is not exercised in any periodto the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to allShares for which it is vested until the earlier of the Final Exercise Date or the termination of this option underSection 3 hereof or under the terms of the Plan. 3. Exercise of Option. (a) Form of Exercise. Each election to exercise this option shall be effected by a writing signedby the Participant (whether in the form attached hereto as Exhibit A or in electronic form) and accompanied bypayment in full in the manner provided in the Plan. The Participant may purchase less than the number ofShares covered hereby, provided that no partial exercise of this option may be for any fractional share. (b) Continuous Relationship with the Company Required. Except as otherwise provided in thisSection 3, this option may not be exercised unless the Participant, at the time he  or she exercises this option, is, and has been at all times since the Grant Date, an employee, officer or directorof, or consultant or advisor to, the Company or any other entity the employees, officers, directors, consultants,or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”). (c) Termination of Relationship with the Company. If the Participant ceases to be an EligibleParticipant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise thisoption shall terminate three months after such cessation (but in no event after the Final Exercise Date),provided that this option shall be exercisable only to the extent that the Participant was entitled to exercisethis option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the FinalExercise Date, violates the non-competition or confidentiality provisions of any employment contract,confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, theright to exercise this option shall terminate immediately upon such violation. (d) Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (withinthe meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an EligibleParticipant and the Company has not terminated such relationship for “cause” as specified in paragraph(e) below, this option shall be exercisable, within the period of one year following the date of death ordisability of the Participant, by the Participant (or in the case of death by an authorized transferee),provided that this option shall be exercisable only to the extent that this option was exercisable by theParticipant on the date of his or her death or disability, and further provided that this option shall not beexercisable after the Final Exercise Date. (e) Termination for Cause. If, prior to the Final Exercise Date, the Participant’s employment orother service relationship with the Company is terminated by the Company for Cause (as defined below), theright to exercise this option shall terminate immediately upon the effective date of such termination ofemployment or other service relationship. If, prior to the Final Exercise Date, the Participant is given notice bythe Company of the termination of his or her employment or other service relationship by the Company forCause, and the effective date of such termination is subsequent to the date of the delivery of such notice, theright to exercise this option shall be suspended from the time of the delivery of such notice until the earlier of(i) such time as it is determined or otherwise agreed that the Participant’s employment or other servicerelationship shall not be terminated for Cause as provided in such notice or (ii) the effective date of suchtermination of employment or other service relationship (in which case the right to exercise this option shall,pursuant to the preceding sentence, terminate immediately upon the effective date of such termination ofemployment or other service relationship). If the Participant is party to an employment, consulting orseverance agreement with the Company that contains a definition of “cause” for termination of employment orother service relationship, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise,“Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his orher responsibilities to the Company (including, without limitation, breach by the Participant of any provisionof any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement betweenthe Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant’s employment or other service relationship shall be considered to 2  have been terminated for “Cause” if the Company determines, within 30 days after the Participant’sresignation, that termination for Cause was warranted. 4.Change of Control. If within 90 days prior to a Change of Control or within 18 months following a Change of Control, theCompany or any successor thereto terminates the Participant’s employment other than for Cause, or theParticipant terminates his or her employment for Good Reason (as defined below), then, this option willbecome exercisable (“vest”) as to 100% of the Shares on the date the Participant’s employment terminates. For purposes of this Agreement, “Change of Control” shall mean (i) the acquisition of beneficial ownership (asdefined in Rule 13d-3 under the Exchange Act) directly or indirectly by any “person” (as such term is used inSections 13(d) and 14(d) of the Exchange Act) of securities of the Company representing a majority or more ofthe combined voting power of the Company’s then outstanding securities, other than an acquisition ofsecurities for investment purposes pursuant to a bona fide financing of the Company; (ii) a merger orconsolidation of the Company with any other corporation in which the holders of the voting securities of theCompany prior to the merger or consolidation do not own more than 50% of the total voting securities of thesurviving corporation; or (iii) the sale or disposition by the Company of all or substantially all of theCompany’s assets other than a sale or disposition of assets to an affiliate of the Company or a holder ofsecurities of the Company; notwithstanding the foregoing, no transaction or series of transactions shallconstitute a Change of Control unless such transaction or series of transactions constitutes a “change in controlevent” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i). If the Participant is party to an employment, consulting or severance agreement with the Company thatcontains a definition of “good reason” for termination of employment or other service relationship, “GoodReason” shall have the meaning ascribed to such term in such agreement. Otherwise, “Good Reason” shallmean, without the Participant’s consent, the occurrence of any one or more of the following events: (i) materialdiminution in the nature or scope of the Participant’s responsibilities, duties or authority, provided that neither(x) the Company’s failure to continue the Participant’s appointment or election as a director or officer of any ofits Affiliates nor (y) any diminution in the nature or scope of the Participant’s responsibilities, duties orauthority that is reasonably related to a diminution of the business of the Company or any of its affiliates shallconstitute “Good Reason”; (ii) a material reduction in the Participant’s base salary other than one temporaryreduction of not more than 120 days and not in excess of 20% of the Participant’s base salary in connectionwith and in proportion to a general reduction of the base salaries of the Company’s executive officers; (iii)failure of the Company to provide the Participant the base salary or benefits owed to the Participant inaccordance with his or her employment agreement with the Company, if any, after 30 days’ notice duringwhich the Company does not cure such failure; or (iv) relocation of the Participant’s principal place of businessmore than forty (40) miles from the then current location of the Participant’s principal place of business. 5. Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays tothe Company, or makes provision satisfactory to the Company for payment of, any federal, state or localwithholding taxes required by law to be withheld in respect of this option. 6. Transfer Restrictions. This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, eithervoluntarily or by operation of law, except by will or the laws of descent and distribution or pursuant to aqualified domestic relations order, and, during the lifetime of the Participant, this option shall be exercisableonly by the Participant. 7. Provisions of the Plan.  This option is subject to the provisions of the Plan (including the provisions relating to amendmentsto the Plan), a copy of which is furnished to the Participant with this option. Capitalized terms used in thisAgreement and not otherwise defined herein have the meanings provided for them in the Plan. [Remainder of Page Intentionally Left Blank.] 3  IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate sealby its duly authorized officer. This option shall take effect as a sealed instrument. VERASTEM, INC. By: ____________________________________ Name: Joseph Chiapponi Title: Vice President, Finance SIGNATURE PAGE TO NONSTATUTORY STOCK OPTION AGREEMENT 4  PARTICIPANT’S ACCEPTANCE The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2012 Incentive Plan. PARTICIPANT: Address: Exhibit ANOTICE OF STOCK OPTION EXERCISEDate: ____________Verastem, Inc.117 Kendrick Street, Suite 500Needham, MA 02494Attention: Treasurer Dear Sir or Madam:I am the holder of a Nonstatutory Stock Option granted to me under the Verastem, Inc.2012 Incentive Plan on __________ for the purchase of __________ shares of Common Stockof the Company at a purchase price of $__________ per share.I hereby exercise my option to purchase _________ shares of Common Stock, forwhich I have enclosed __________ in the amount of ________. Please register my stockcertificate as follows:Name(s):_______________________Address:______________________________________________________Tax I.D. #:_______________________  VERASTEM, INC. Restricted Stock Unit AgreementGranted under 2012 Incentive Plan NOTICE OF GRANT This Restricted Stock Unit Agreement (this “Agreement”) is made as of the Agreement Date between Verastem, Inc. (the“Company”), a Delaware corporation, and the Participant. I. Agreement Date Date: [ ] II. Participant Information Participant: [ ] Participant Address: [ ] III. Grant Information Grant Date: [ ] Restricted Stock Units: [ ] IV. Vesting Up to [ ]% of the Participant’s Restricted Stock Units shall vest on [ ], provided that the Participant continues to serve as anemployee, consultant and/or director of the Company on each such vesting date.. This Agreement includes this Notice of Grant and the following General Terms and Conditions (attached as Exhibit A), which areexpressly incorporated by reference in their entirety herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Agreement Date. VERASTEM, INC. PARTICIPANT By: Name: [ ] Name: [ ] Title: [ ]  Restricted Stock Unit Agreement EXHIBIT A GENERAL TERMS AND CONDITIONS For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows: 1. Grant of RSUs; Condition of Grant. In consideration of services rendered to the Company by the Participant, theCompany has granted to the Participant, subject to the terms and conditions set forth in this Agreement and in the Company’s2012 Incentive Plan (the “Plan”), an award of Restricted Stock Units (the “RSUs”), representing an award of the number of RSUs(the “Share Number”) set forth in the Notice of Grant that forms part of this Agreement (the “Notice of Grant”). The RSUs entitlethe Participant to receive, upon and subject to the vesting of the RSUs (as described in Section 2 below), one share of commonstock, $0.0001 par value per share, of the Company (the “Common Stock”) for each RSU that vests. The shares of Common Stockthat are issuable upon vesting of the RSUs are referred to in this Agreement as the “Shares.” 2. Vesting of the RSUs; Issuance of Shares. (a) Vesting of the RSUs. Subject to the other provisions of this Section 2, the RSUs shall vest in accordance withthe vesting schedule set forth in the Notice of Grant (the “Vesting Schedule”). Any fractional RSU resulting from the applicationof the percentages in the Vesting Schedule shall be rounded down to the nearest whole number of RSUs. Within thirty days ofeach vesting date shown in the Vesting Schedule (the “Vesting Dates”), the Company will issue to the Participant, in certificatedor uncertificated form, such number of Shares as is equal to the number of RSUs that vested on such Vesting Date and shalldeliver such Shares to the Participant, or to the broker designated by the Participant. (b) Termination of Relationship with the Company. Except to the extent specifically otherwise provided herein,in the Plan or in another agreement between the Company and the Participant, if the Participant ceases to be an EligibleParticipant for any reason, all RSUs that have not vested pursuant to Section 2(a) shall be automatically forfeited as of suchtermination. For purposes of this agreement, an “Eligible Participant” is an employee, officer or director of, or consultant oradvisor to, the Company or any other entity the employees, officers, directors, consultants, or advisors of which are eligible toreceive RSU grants under the Plan (an “Eligible Participant”). 3. Change of Control. If within 90 days prior to a Change of Control or within 18 months following a Change of Control, theCompany or any successor thereto terminates the Participant’s employment other than for Cause, or the Participant terminates hisor her employment for Good Reason (as defined below), then, each RSU will become exercisable (“vest”) as to 100% of the Shareson the date the Participant’s employment terminates. For purposes of this Agreement, “Change of Control” shall mean (i) the acquisition of beneficial ownership (asdefined in Rule 13d-3 under the Exchange Act) directly or indirectly by any “person” (as such term is used in Sections 13(d) and14(d) of the Exchange Act) of securities of the Company representing a majority or more of the combined voting power of theCompany’s then outstanding securities, other than an acquisition of securities for investment purposes pursuant to a bona fidefinancing of the Company; (ii) a merger or consolidation of the Company with any other corporation in which the holders of thevoting securities of the Company prior to the merger or consolidation do not own more than 50% of the total voting securities ofthe surviving corporation; or (iii) the sale or disposition by the Company of all or substantially all of the Company’s assets otherthan a sale or disposition of assets to an affiliate of the Company or a holder of securities of the Company; notwithstanding theforegoing, no transaction or series of transactions shall constitute a Change of Control unless such transaction or series oftransactions constitutes a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i). If the Participant is party to an employment, consulting or severance agreement with the Company that containsa definition of “cause” for termination of employment or other service relationship, “Cause” shall have the meaning ascribed tosuch term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by theParticipant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of anyprovision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between theParticipant and the Company), as determined by the Company, which determination shall be conclusive. The Participant’semployment or other service relationship shall be considered to have been terminated for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that termination for Cause was warranted. If the Participant is party to an employment, consulting or severance agreement with the Company that containsa definition of “good reason” for termination of employment or other service relationship, “Good Reason” shall have the meaningascribed to such term in such agreement. Otherwise, “Good Reason” shall mean, without the Participant’s consent, the occurrenceof any one or more of the following events: (i) material diminution in the nature or scope of the Participant’s responsibilities,duties or authority, provided that neither (x) the Company’s failure to continue the Participant’s appointment or election as adirector or officer of any of its Affiliates nor (y) any diminution in the nature or scope of the Participant’s responsibilities, dutiesor authority that is reasonably related to a diminution of the business of the Company or any of its affiliates shall constitute“Good Reason”; (ii) a material reduction in the Participant’s base salary other than one temporary reduction of not more than 120days and not in excess of 20% of the Participant’s base salary in connection with and in proportion to a general reduction of thebase salaries of the Company’s executive officers; (iii) failure of the Company to provide the Participant the base salary orbenefits owed to the Participant in accordance with his or her employment agreement with the Company, if any, after 30 days’notice during which the Company does not cure such failure; or (iv) relocation of the Participant’s principal place of businessmore than forty (40) miles from the then current location of the Participant’s principal place of business. 4. Dividends. The RSUs shall have no rights with respect to dividends declared by the Company with respect to itscapital stock, provided that the foregoing shall not prohibit or otherwise limit the adjustment of the terms of this Agreement inaccordance with Section 9 of the Plan. 5. Withholding Taxes. (a) Acknowledgments; No Section 83(b) Election. The Participant acknowledges that he or she is responsiblefor obtaining the advice of the Participant’s own tax advisors with respect to the grant of the RSUs and the Shares upon vestingthereof and the Participant is relying solely on such advisors and not on any statements or representations of the Company or anyof its agents with respect to the tax consequences relating to the RSUs or Shares. The  Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s tax liability that mayarise in connection with the acquisition, vesting and/or disposition of the RSUs and the Shares underlying the RSUs. TheParticipant acknowledges that no election under Section 83(b) of the Internal Revenue Code, as amended, is available withrespect to the issuance of the RSUs and the Shares underlying the RSUs. (b) Withholding. As a condition to the granting of the RSUs and the vesting thereof, the Participantacknowledges and agrees that he or she is responsible for the payment of income and employment taxes (and any other taxesrequired to be withheld) payable in connection with the grant or vesting of, or otherwise in connection with, the RSUs.Accordingly, the Participant agrees to remit to the Company or any applicable subsidiary an amount sufficient to pay such taxes.Such payment shall be made to the Company or the applicable subsidiary of the Company in a form that is reasonably acceptableto the Company, as the Company may determine in its discretion. The Company in its discretion may permit such payment to bemade by “net settlement” through which the Company retains and withholds from delivery at the time of vesting that number ofshares of Common Stock having a fair market value sufficient to satisfy the applicable tax withholding requirements (but not inexcess of the maximum withholding amount consistent with the award being subject to equity accounting treatment under theapplicable accounting rules). Alternatively, the Company may require the Participant to provide a designated broker withirrevocable instructions directing the designated broker to, on the date of the designated broker’s receipt of any shares ofCommon Stock in accordance with Section 2, sell in accordance with ordinary principles of best execution that number of suchshares of Common Stock as is necessary to yield net proceeds to the Participant equal to the amount of withholding taxes withrespect to the income recognized by the Participant as a result of the vesting of the RSUs (but not in excess of the maximumwithholding amount consistent with the award being subject to equity accounting treatment under the applicable accountingrules) and remit such proceeds to the Company in satisfaction of such tax withholding obligations of the Company. 6. Transferability. (a) Restrictions on Transfer. The Participant shall not sell, assign, transfer, pledge, hypothecate or otherwiseencumber, by operation of law or otherwise, any RSUs, or any interest therein, until such RSUs have vested and the Sharesunderlying the RSUs have been issued.  7. Miscellaneous. (a) No Rights to Employment. The Participant acknowledges and agrees that the grant of the RSUs and theirvesting pursuant to Section 2 do not constitute an express or implied promise of continued employment for any period. (b) Section 409A. This Agreement is intended to comply with or be exempt from the requirements of Section409A and shall be construed consistently therewith. In any event, the Company makes no representations or warranties and willhave no liability to the Participant or to any other person, if any of the provisions of or payments under this Agreement aredetermined to constitute nonqualified deferred compensation subject to Section 409A but that do not satisfy the requirements ofthat Section. (c) Entire Agreement. This Agreement and the Plan constitute the entire agreement between the parties, andsupersede all prior agreements and understandings, relating to the subject matter of this Agreement; provided that any separateemployment or severance agreement between the Company and the Participant that includes terms relating to the acceleration ofvesting of equity awards shall not be superseded by this Agreement. In the event of a conflict between the terms and provisions ofthe Plan and the terms and provisions of this Agreement, the Plan terms and provisions shall prevail. Capitalized terms used inthis Agreement and not otherwise defined herein have the meanings provided for them in the Plan. (d) Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internallaws of the State of Delaware, without regard to any applicable conflict of law principles. (e) Authority of Compensation Committee. In making any decisions or taking any actions with respect to thematters covered by this Agreement, the Compensation Committee shall have all of the authority and discretion, and shall besubject to all of the protections, provided for in the Plan. All decisions and actions by the Compensation Committee with respectto this Agreement shall be made in the Compensation Committee’s discretion and shall be final and binding on the Participant. VERASTEM, INC.Nonstatutory Stock Option AgreementInducement Award 1. Grant of Option.1 This agreement (this “Agreement”) is made and entered into on [___], 20[___] (the “GrantDate”) by and between Verastem, Inc., a Delaware corporation (the “Company”), and [___] (the“Participant”). This Agreement evidences an inducement award granted by the Company to theParticipant, of an option to purchase, in whole or in part, a total of [___] shares (the “Shares”) ofcommon stock, $0.0001 par value per share, of the Company (“Common Stock”) at $[___] per Share.This option is granted to the Participant in connection with the Participant entering into employmentwith the Company and is regarded by the parties as an inducement material to the Participant’s enteringinto employment within the meaning of NASDAQ Listing Rule 5635(c)(4). Unless earlier terminated,this option shall expire at 5:00 p.m., Eastern Time, on [___] (the “Final Exercise Date”).2 It is intended that the option evidenced by this Agreement shall not be an incentive stock optionas defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulationspromulgated thereunder (the “Code”). Except as otherwise indicated by the context, the term“Participant”, as used in this option, shall be deemed to include any person who acquires the right toexercise this option validly under its terms.2. Relationship to and Incorporation of the 2012 Incentive Plan. 1 This option shall be subject to and governed by, and shall be construed and administered inaccordance with, the terms and conditions of the Company’s 2012 Incentive Plan, as amended fromtime to time (the “Plan”), which terms and conditions are incorporated herein by reference, except forthose terms and conditions contained in Sections 3(c), 4(a), 4(b), 5(b), 6, 7 and 8 of the Plan and anyamendments to such sections of the Plan. Notwithstanding the foregoing, this option is not awardedunder the Plan and the grant of this option and issuance of any Shares pursuant to the exercise of thisoption shall not reduce the number of shares of Common Stock available for issuance under awardspursuant to the Plan. Capitalized terms in this Agreement have the meanings specified in the Plan,unless a different meaning is specified in this Agreement.2 By accepting all or any part of this option the Participant agrees to be bound by the terms andconditions set forth in this Agreement and the Plan, a copy of which has been furnished to theParticipant.3. Vesting Schedule.1 This option will become exercisable (“vest”) as to [ ]% of the Shares on [ ], subject to theParticipant’s continued employment or other service relationship with the Company on each suchvesting date. For purposes of this Agreement, “Vesting Commencement Date” shall mean [___]. 2 The right of exercise shall be cumulative so that to the extent the option is not exercised in anyperiod to the maximum extent permissible it shall continue to be exercisable, in whole or in part, withrespect to all Shares for which it is vested until the earlier of the Final Exercise Date or the terminationof this option under Section ​4 hereof or under the terms of the Plan.4. Exercise of Option.(a) Form of Exercise. Each election to exercise this option shall be effected by a writingsigned by the Participant (whether in the form attached hereto as Exhibit A or in electronic form) andaccompanied by payment in full in the manner provided in the Plan. The Participant may purchase lessthan the number of Shares covered hereby, provided that no partial exercise of this option may be forany fractional share.(b) Continuous Relationship with the Company Required. Except as otherwise provided inthis Section ​4, this option may not be exercised unless the Participant, at the time he or she exercisesthis option, is, and has been at all times since the Grant Date, employed by or otherwise providingservices to the Company.(c) Termination of Relationship with the Company. If the Participant’s employment orother service relationship ceases for any reason, then, except as provided in paragraphs (d) and (e)below, the right to exercise this option shall terminate three months after such cessation (but in no eventafter the Final Exercise Date), provided that this option shall be exercisable only to the extent that theParticipant was entitled to exercise this option on the date of such cessation. Notwithstanding theforegoing, if the Participant, prior to the Final Exercise Date, violates the non-competition orconfidentiality provisions of any employment contract, confidentiality and nondisclosure agreement orother agreement between the Participant and the Company, the right to exercise this option shallterminate immediately upon such violation.(d) Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled(within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she isemployed by or otherwise providing services to the Company and the Company has not terminatedsuch employment or other service relationship for “cause” as specified in paragraph (e) below, thisoption shall be exercisable, within the period of one year following the date of death or disability of theParticipant, by the Participant (or in the case of death by an authorized transferee), provided that thisoption shall be exercisable only to the extent that this option was exercisable by the Participant on thedate of his or her death or disability, and further provided that this option shall not be exercisable afterthe Final Exercise Date.(e) Termination for Cause. If, prior to the Final Exercise Date, the Participant’semployment or other service relationship with the Company is terminated by the Company for Cause(as defined below), the right to exercise this option shall terminate immediately upon the effective dateof such termination of employment or other service relationship. If, prior to the Final Exercise Date, theParticipant is given notice by the Company of the termination of his or her employment or other servicerelationship by the Company for Cause, and the effective date of such termination is subsequent to thedate of the delivery of such notice, the right to exercise this option shall be suspended from the time ofthe delivery of such notice until the earlier of (i) -2- such time as it is determined or otherwise agreed that the Participant’s employment or other servicerelationship shall not be terminated for Cause as provided in such notice or (ii) the effective date ofsuch termination of employment or other service relationship (in which case the right to exercise thisoption shall, pursuant to the preceding sentence, terminate immediately upon the effective date of suchtermination of employment or other service relationship). If the Participant is party to an employment,consulting or severance agreement with the Company that contains a definition of “cause” fortermination of employment or other service relationship, “Cause” shall have the meaning ascribed tosuch term in such agreement. Otherwise, “Cause” shall mean willful misconduct by the Participant orwillful failure by the Participant to perform his or her responsibilities to the Company (including,without limitation, breach by the Participant of any provision of any employment, consulting, advisory,nondisclosure, non-competition or other similar agreement between the Participant and the Company),as determined by the Company, which determination shall be conclusive. The Participant’semployment or other service relationship shall be considered to have been terminated for “Cause” if theCompany determines, within 30 days after the Participant’s resignation, that termination for Cause waswarranted.5. Change of Control.If within 90 days prior to a Change of Control or within 18 months following a Change of Control,the Company or any successor thereto terminates the Participant’s employment other than for Cause, orthe Participant terminates his or her employment for Good Reason (as defined below), then, this optionwill become exercisable (“vest”) as to 100% of the Shares on the date the Participant’s employmentterminates. For purposes of this Agreement, “Change of Control” shall mean (i) the acquisition ofbeneficial ownership (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly by any“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) of securities of theCompany representing a majority or more of the combined voting power of the Company’s thenoutstanding securities, other than an acquisition of securities for investment purposes pursuant to a bonafide financing of the Company; (ii) a merger or consolidation of the Company with any othercorporation in which the holders of the voting securities of the Company prior to the merger orconsolidation do not own more than 50% of the total voting securities of the surviving corporation; or(iii) the sale or disposition by the Company of all or substantially all of the Company’s assets other thana sale or disposition of assets to an affiliate of the Company or a holder of securities of the Company;notwithstanding the foregoing, no transaction or series of transactions shall constitute a Change ofControl unless such transaction or series of transactions constitutes a “change in control event” withinthe meaning of Treasury Regulation Section 1.409A-3(i)(5)(i).If the Participant is party to an employment, consulting or severance agreement with theCompany that contains a definition of “good reason” for termination of employment or other servicerelationship, “Good Reason” shall have the meaning ascribed to such term in such agreement. Otherwise, “Good Reason” shall mean, without the Participant’s consent, the occurrence of any one ormore of the following events: (i) material diminution in the nature or scope of the Participant’sresponsibilities, duties or authority, provided that neither (x) the Company’s failure to continue theParticipant’s appointment or election as a director or officer of -3- any of its Affiliates nor (y) any diminution in the nature or scope of the Participant’s responsibilities,duties or authority that is reasonably related to a diminution of the business of the Company or any ofits affiliates shall constitute “Good Reason”; (ii) a material reduction in the Participant’s base salaryother than one temporary reduction of not more than 120 days and not in excess of 20% of theParticipant’s base salary in connection with and in proportion to a general reduction of the base salariesof the Company’s executive officers; (iii) failure of the Company to provide the Participant the basesalary or benefits owed to the Participant in accordance with his or her employment agreement with theCompany, if any, after 30 days’ notice during which the Company does not cure such failure; or (iv)relocation of the Participant’s principal place of business more than forty (40) miles from the thencurrent location of the Participant’s principal place of business.6. Withholding.1 No Shares will be issued pursuant to the exercise of this option unless and until the Participantpays to the Company, or makes provision satisfactory to the Company for payment of, any federal,state or local withholding taxes required by law to be withheld in respect of this option.7. Transfer Restrictions.This option may not be sold, assigned, transferred, pledged or otherwise encumbered by theParticipant, either voluntarily or by operation of law, except by will or the laws of descent anddistribution or pursuant to a qualified domestic relations order, and, during the lifetime of theParticipant, this option shall be exercisable only by the Participant. [Remainder of Page Intentionally Left Blank.] -4-  IN WITNESS WHEREOF, the Company has caused this option to be executed under itscorporate seal by its duly authorized officer. This option shall take effect as a sealed instrument. VERASTEM, INC. By: Name: Title: PARTICIPANT’S ACCEPTANCE The undersigned hereby accepts the foregoing option and agrees to the terms and conditionsthereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2012 IncentivePlan. PARTICIPANT: Address: SIGNATURE PAGE TO NONSTATUTORY STOCK OPTION AGREEMENT NOTICE OF STOCK OPTION EXERCISE Date: ___ (1) Verastem, Inc.117 Kendrick, Suite 500Needham, MA 02494Attention: Treasurer Dear Sir or Madam: I am the holder of a Nonstatutory Stock Option granted to me as an inducement award subjectto the terms and conditions of the Verastem, Inc. 2012 Incentive Plan on ___ (2) for the purchase of___ (3) shares of Common Stock of the Company at a purchase price of $ ___ (4) per share.I hereby exercise my option to purchase ___ (5) shares of Common Stock, for which I haveenclosed ___ (6) in the amount of ___ (7). Please register my stock certificate as follows: Name(s): (8) Address: Tax I.D.#: (9)(1) Enter the date of exercise.(2) Enter the date of grant.(3) Enter the total number of shares of Common Stock for which the option was granted.(4) Enter the option exercise price per share of Common Stock.(5) Enter the number of shares of Common Stock to be purchased upon exercise of all or part of theoption.(6) Enter “cash”, “personal check” or if permitted by the option, “stock certificates No. XXXX andXXXX”.(7) Enter the dollar amount (price per share of Common Stock times the number of shares of CommonStock to be purchased), or the number of shares tendered. Fair market value of shares tendered,together with cash or check, must cover the purchase price of the shares issued upon exercise.(8) Enter name(s) to appear on stock certificate: (a) Your name only; (b) Your name and other name(i.e., John Doe and Jane Doe, Joint Tenants With Right of Survivorship); or (c) In the case of aNonstatutory option only, a Child’s name, with you as custodian (i.e., Jane Doe, Custodian forTommy Doe). Note: There may be income and/or gift tax consequences of registering shares in aChild’s name.(9) Social Security Number of Holder(s). -6-  (Signature) -7- SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT This Second Amendment to Loan and Security Agreement (this “Amendment”) is dated as ofMarch 6, 2018, is entered into by and among VERASTEM, INC., a Delaware corporation (the“Borrower”), the several banks and other financial institutions or entities from time to time parties tothe Loan Agreement (as defined below) as Lender, and HERCULES CAPITAL, INC., a Marylandcorporation, in its capacity as administrative agent for itself and Lender (in such capacity, “Agent”).WHEREAS, Lender and Borrower are parties to that certain Loan and Security Agreementdated as of March 21, 2017 (as amended by the First Amendment to Loan and Security Agreement,dated as of January 4, 2018, among the Borrower, Lender (as defined therein) and the Agent, and asmay from time to time be further amended, modified, supplemented or restated, the “LoanAgreement”); andWHEREAS, in accordance with Section 11.3 of the Loan Agreement, Borrower, Lender andAgent desire to amend the Loan Agreement as more fully set forth herein.NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuableconsideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legallybound, the parties hereto agree as follows:1. Definitions. Capitalized terms used but not defined in this Amendment shall have themeanings given to them in the Loan Agreement.2. Amendment to Loan Agreement- Subject to the satisfaction of the conditions setforth in Section 3 of this Amendment, the Loan Agreement is hereby amended as follows:(a) The Loan Agreement shall be amended by amending and replacingclause (vii) of the definition of “Permitted Indebtedness” in Section 1.1 thereof as follows:“(vii) reimbursement obligations in connection with letters of credit andcash management services (including credit cards, debit cards and similar instruments) that aresecured by Cash and issued on behalf of the Borrower or a Subsidiary thereof in an amount notto exceed Five Hundred Fifty Thousand Dollars ($550,000) at any time outstanding,”3. Conditions to Effectiveness. Agent, Lender and Borrower agree that this Amendmentshall become effective upon Agent’s and Lender’s receipt of a fully-executed counterpart of thisAmendment signed by Borrower.4. Representations and Warranties. The Borrower hereby represents and warrants toLender as follows:(a) Representations and Warranties in the Agreement. The representationsand warranties of Borrower set forth in Section 5 of the Loan Agreement (after giving effect to thisAmendment) are true and correct in all material respects on and as of the date hereof with the sameeffect as though made on and as of such date, except to the extent such67335341_2 representations and warranties expressly relate to an earlier date, in which case they are true and correctas of such date.(b) Authority, Etc. The execution and delivery by Borrower of thisAmendment and the performance by Borrower of all of its agreements and obligations under the LoanAgreement and the other Loan Documents, as amended hereby, are within the corporate authority ofBorrower and have been duly authorized by all necessary corporate action on the part ofBorrower. With respect to Borrower, the execution and delivery by Borrower of this Amendmentdoes not and will not require any registration with, consent or approval of, or notice to any Person(including any governmental authority).(c) Enforceability of Obligations. This Amendment, the Loan Agreementand the other Loan Documents, as amended hereby, constitute the legal, valid and binding obligationsof Borrower enforceable against Borrower in accordance with their terms, except as enforceability islimited by bankruptcy, insolvency, reorganization, moratorium, general equitable principles or otherlaws relating to or affecting generally the enforcement of, creditors’ rights and except to the extent thatavailability of the remedy of specific performance or injunctive relief is subject to the discretion of thecourt before which any proceeding therefor may be brought.(d) No Default. Before and after giving effect to this Amendment (i) nofact or condition exists that would (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 aMaterial Adverse Effect has occurred and is continuing.(e) Event of Default. By its signature below, Borrower hereby agrees thatit shall constitute an Event of Default if any representation or warranty made herein should be false ormisleading in any material respect when made.5. Reaffirmations. Except as expressly provided in this Amendment, all of the terms andconditions of the Loan Agreement and the other Loan Documents remain in full force and effect.Nothing contained in this Amendment shall in any way prejudice, impair or effect any rights orremedies of Agent or Lender under the Loan Agreement and the other Loan Documents. Except asspecifically amended hereby, Borrower hereby ratifies, confirms, and reaffirms all covenants containedin the Loan Agreement and the other Loan Documents. The Loan Agreement, together with thisAmendment, shall be read and construed as a single agreement. All references in the Loan Documentsto the Loan Agreement or any other Loan Document shall hereafter refer to the Loan Agreement orany other Loan Document as amended hereby. 6. Execution in Counterparts. This Amendment may be signed in any number ofcounterparts, and by different parties hereto in separate counterparts, with the same effect as if thesignatures to each such counterpart were upon a single instrument. All counterparts shall be deemedan original of this Amendment. This Amendment may be executed by facsimile, portable documentformat (.pdf) or similar technology signature, and such signature shall constitute an original for allpurposes.7. Release. In consideration of the agreements of Agent and each Lender containedherein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, on behalf of itself and its successors, assigns, and other legalrepresentatives, hereby fully, absolutely, unconditionally and irrevocably releases, remises and foreverdischarges Agent and each Lender, and its successors and assigns, and its present and formershareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees,agents and other representatives (Agent, each Lender and all such other persons being hereinafterreferred to collectively as the “Releasees” and individually as a “Releasee”), of and from all demands,actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums ofmoney, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses,rights of set-off, demands and liabilities whatsoever of every name and nature, known or unknown,suspected or unsuspected, both at law and in equity, which Borrower, or any of its successors, assigns,or other legal representatives may now or hereafter own, hold, have or claim to have against theReleasees or any of them for, upon, or by reason of any circumstance, action, cause or thingwhatsoever which arises at any time on or prior to the day and date of this Amendment, for or onaccount of, or in relation to, or in any way in connection with the Loan Agreement, or any of the otherLoan Documents or transactions thereunder or related thereto. Borrower understands, acknowledgesand agrees that the release set forth above may be pleaded as a full and complete defense and may beused as a basis for an injunction against any action, suit or other proceeding which may be instituted,prosecuted or attempted in breach of the provisions of such release. Borrower agrees that no fact,event, circumstance, evidence or transaction which could now be asserted or which may hereafter bediscovered shall affect in any manner the final, absolute and unconditional nature of the release setforth above.8. Miscellaneous. (a) THIS AMENDMENT SHALL BE GOVERNED BY, ANDCONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OFCALIFORNIA, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSETHE APPLICATION OF LAWS OF ANY OTHER JURISDICTION. (b) The captions in this Amendment are for convenience of reference onlyand shall not define or limit the provisions hereof.(c) This Amendment expresses the entire understanding of the parties withrespect to the transactions contemplated hereby. No prior negotiations or discussions shall limit,modify, or otherwise affect the provisions hereof.(d) Any determination that any provision of this Amendment or anyapplication hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affectthe validity, legality, or enforceability of such provision in any other instance, or the validity, legality orenforceability of any other provisions of this Amendment.[Signature page follows.] In Witness Whereof, the parties hereto have caused this Amendment to be duly executed anddelivered as of the date first written above. LENDERBORROWER HERCULES FUNDING II, LLC By: /s/ Jennifer Choe____________Name: Jennifer Choe_____________Title: Assistant General Counsel ___ VERASTEM, INC. By: /s/ Julie B. Feder____________Name: Julie B. Feder_____________Title: CFO_____________________ AGENT HERCULES CAPITAL, INC. By: /s/ Jennifer Choe____________Name: Jennifer Choe_____________Title: Assistant General Counsel ___ EMPLOYMENT AGREEMENTTHIS EMPLOYMENT AGREEMENT (the “Agreement”), dated January 3, 2018 (the“Effective Date”), is by and between Verastem, Inc. (the “Company”), a Delaware corporation with itsprincipal place of business at 117 Kendrick Street, Suite 500, Needham, MA 02494, and JosephLobacki (the “Executive”). WHEREAS, the Executive has certain experience and expertise that qualify him to providemanagement direction and leadership for the Company.WHEREAS, the Company wishes to employ the Executive to serve as its Executive VicePresident, Chief Commercial Officer.NOW, THEREFORE, in consideration of the mutual covenants and promises contained hereinand other good and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the Company offers and the Executive accepts employment upon the following termsand conditions:1. Position and Duties. Upon the terms and subject to the conditions set forth in thisAgreement, the Company hereby offers and the Executive hereby accepts employment with theCompany to serve as its Executive Vice President, Chief Commercial Officer reporting to theCompany’s President and Chief Executive Officer. The Executive agrees to perform the duties of theExecutive’s position and such other duties as reasonably may be assigned to the Executive from time totime. The Executive also agrees that while employed by the Company, the Executive will devote onehundred percent (100%) of the Executive’s business time and the Executive’s reasonable commercialefforts, business judgment, skill and knowledge exclusively to the advancement of the business andinterests of the Company and to the discharge of the Executive’s duties and responsibilities for it,except for the agreed upon transition period through February 28, 2018, during which time theExecutive may dedicate up to ten (10) hours per week to his previous employer. Subject to priorapproval of the President and Chief Executive Officer, the Executive may join the board of directors oradvisory committee of two companies, provided such service does not interfere with the Executive’sduties hereunder, pose a conflict of interest or breach any provisions of this Agreement or theEmployee Non-Solicitation, Non-Competition, Confidential Information and Inventions AssignmentAgreement referenced below.2. Compensation and Benefits. During the Executive’s employment, as compensation forall services performed by the Executive for the Company and subject to his performance of his dutiesand responsibilities for the Company, pursuant to this Agreement or otherwise, the Company willprovide the Executive the following pay and benefits:a) Base Salary; Annual Bonus. The Company will pay the Executive a base salaryat the rate of four hundred thousand dollars ($400,000) per year. Such amount shall be payable inaccordance with the regular payroll practices of the Company for its executives, as in effect from timeto time, and subject to increase from time to time by the Board of Directors of the Company (the“Board”) in its discretion. Commencing with calendar year 2018, the Executive shall have theopportunity to earn an annual target bonus measured against performance criteria to be determined bythe Board (or a committee thereof) of forty percent (40%) of the Executive’s then current annual basesalary, with the actual amount of the bonus, if any, to be determined by the Board (or a committee thereof). Any bonus amount payable by theCompany, if any, shall be paid no later than March 15 of the year following the year in which suchbonus is earned. The Executive must remain employed through the last day of the year for which thebonus is earned in order to be eligible to receive any bonus.b) One Time Sign on Bonus. The Company will pay the Executive a one time signon bonus in the amount of sixty thousand dollars ($60,000). Such bonus shall be earned on the firstanniversary of the Effective Date, but will be advanced to the Executive on the first regular payrolldate following Effective Date. Should the Executive resign from his employment with the Companyfor any reason before the first anniversary of the Effective Date, he agrees to repay the sign on bonusin full, within thirty days of the date such resignation is effective, except as provided below. c) Stock Options. Subject to Board approval, the Company will grant theExecutive:(i) a non-statutory stock option to purchase 400,000 shares (the “Time-basedAward”) of the Company’s Common Stock, $0.0001 par value per share (the “Common Stock”), tobe granted on the effective date of his hiring (the “Grant Date”), to vest as to 25% of the shares subjectto the option on the first anniversary of the Grant Date and as to an additional 6.25% of the shares atthe end of each successive three-month period following the first anniversary of the Grant Date untilthe fourth anniversary of the Grant Date (with the number of shares vesting on each vesting daterounded down to the nearest whole share, except with respect to the final vesting date on which allremaining unvested shares shall vest), provided that the Executive continues to serve as an employeeof or other service provider to the Company on each such vesting date, and to have a purchase priceequal to the fair market value of the Common Stock on the Grant Date (determined to be the closingprice of a share of Common Stock on the Grant Date); and (ii) a non-statutory stock option to purchase 200,000 shares (the “Performance-based Award” and, together with the Time-based Award, the “Inducement Awards”) of the CommonStock, to be granted on the Grant Date and to vest (a) with respect to 100,000 shares, upon theachievement of $150 million in “net sales” of duvelisib within the first 24 months of the firstcommercial sale of duvelisib and (b) with respect to the other 100,000 shares, upon the achievementof “net sales” of duvelisib meeting or exceed the net sales target for duvelisib in the Company’s fiscal2020 budget approved by the Board, in each case such achievement as determined by the Committeeor the Board and provided in each case that the Executive continues to serve as an employee of orother service provider to the Company on each such vesting date, and to have a purchase price equalto the fair market value of the Common Stock on the Grant Date (determined to be the closing price ofa share of Common Stock on the Grant Date). For purposes of these resolutions and the Performance-based Award, “net sales” means the gross amount invoiced by the Company or its sub-licensees onsales of duvelisib less the following deductions (to the extent included in the gross amount invoiced orotherwise directly paid or incurred by Licensee, its Affiliates and/or its Sublicensees): (i) trade, cashand quantity discounts, (ii) taxes imposed upon and paid directly with respect to the delivery, sale oruse of duvelisib, and (iii) customary allowances for recalls, returns, rebates, refunds or chargebacks. Each stock option shall be subject to the terms of the Company’s equity plan, the applicableoption award, and any applicable shareholder and/or option holder agreements and other restrictionsand limitations generally applicable to common stock of the Company or equity awards held byCompany executives or otherwise imposed by law.d) Participation in Employee Benefit Plans. The Executive will be eligible toparticipate in all Employee Benefit Plans from time to time in effect for employees of the Companygenerally, except to the extent such plans are duplicative of benefits otherwise provided the Executiveunder this Agreement (e.g., severance pay) or under any other agreement. The Executive’sparticipation will be subject to the terms of the applicable plan documents and generally applicableCompany policies. The Company may alter, modify, add to or delete its Employee Benefit Plans atany time as it, in its sole judgment, determines to be appropriate, without recourse by theExecutive. For purposes of this Agreement, “Employee Benefit Plan” shall have the meaningascribed to such term in Section 3(3) of ERISA, as amended from time to time.e) Business Expenses. The Company will pay or reimburse the Executive for allreasonable business expenses incurred or paid by the Executive in the performance of his duties andresponsibilities for the Company, subject to any maximum annual limit and other restrictions on suchexpenses set by the Company and to such reasonable substantiation and documentation as it mayspecify from time to time. Any such payment or reimbursement that would constitute nonqualifieddeferred compensation subject to Section 409A of the Internal Revenue Code (including theregulations promulgated thereunder, “Section 409A”) shall be subject to the following additional rules:(i) no payment or reimbursement of any such expense shall affect the Executive’s right to payment orreimbursement of any other such expense in any other taxable year; (ii) payment or reimbursement ofthe expense shall be made, if at all, not later than the end of the calendar year following the calendaryear in which the expense was incurred; and (iii) the right to payment or reimbursement shall not besubject to liquidation or exchange for any other benefit.Additionally, the Company will reimburse the Executive for reasonable legal expenses incurredor paid by the Executive in the drafting and execution of this Employment Agreement, up to amaximum of ten thousand dollars ($10,000).3. Confidential Information, Non-Competition and Proprietary Information. TheExecutive has executed or will execute within five (5) days following the date hereof the Company’sstandard Employee Non-Solicitation, Non-Competition, Confidential Information and InventionsAssignment Agreement. It is understood and agreed that breach by the Executive of the EmployeeNon-Solicitation, Non-Competition, Confidential Information and Inventions Assignment Agreementshall constitute a material breach of this Agreement.4. Termination of Employment. The Executive’s employment under this Agreement shallcontinue until terminated pursuant to this Section 4.a) The Company may terminate the Executive’s employment for “Cause” uponwritten notice to the Executive received setting forth in reasonable detail the nature of the Cause. Thefollowing, as determined by the Board in good faith and using its reasonable judgment, shall constituteCause for termination: (i) the Executive’s willful failure to perform, or gross negligence in the performance of, the Executive’s material duties and responsibilities to the Companyor its Affiliates which is not remedied within thirty (30) days of written notice thereof; (ii) materialbreach by the Executive of any material provision of this Agreement or any other agreement with theCompany or any of its Affiliates which is not remedied within thirty (30) days of written notice thereof;(iii) fraud, embezzlement or other dishonesty with respect to the Company or any of its Affiliates; or(iv) the Executive’s conviction of a felony or other crime involving moral turpitude.b) The Company may terminate the Executive’s employment at any time other thanfor Cause upon written notice to the Executive.c) The Executive may terminate his employment hereunder for Good Reason byproviding notice to the Company of the condition giving rise to the Good Reason no later than thirty(30) days following the occurrence of the condition, by giving the Company thirty (30) days toremedy the condition and by terminating employment for Good Reason within thirty (30) daysthereafter if the Company fails to remedy the condition. For purposes of this Agreement, “GoodReason” shall mean, without the Executive’s consent, the occurrence of any one or more of thefollowing events: (i) material diminution in the nature or scope of the Executive’s responsibilities,duties or authority, provided that neither (x) the Company’s failure to continue the Executive’sappointment or election as a director or officer of any of its Affiliates nor (y) any diminution in thenature or scope of the Executive’s responsibilities, duties or authority that is reasonably related to adiminution of the business of the Company or any of its Affiliates shall constitute “Good Reason”; (ii)a material reduction in the Executive’s base salary other than one temporary reduction of not morethan one-hundred and twenty (120) days and not in excess of 20% of the Executive’s base salary inconnection with and in proportion to a general reduction of the base salaries of the Company’sexecutive officers; (iii) failure of the Company to provide the Executive the base salary or benefitsowed to Executive in accordance with Section 2 hereof after thirty (30) days’ notice during which theCompany does not cure such failure; or (iv) relocation of the Executive’s principal place of businessmore than forty (40) miles from the then current location of the Executive’s principal place ofbusiness.d) The Executive may terminate his employment with the Company other than forGood Reason at any time upon sixty (60) days notice to the Company. In the event of termination ofthe Executive’s employment in accordance with this Section 4(d), the Board may elect to waive theperiod of notice, or any portion thereof, and, if the Board so elects, the Company will pay theExecutive his then current base salary for the period so waived.e) This Agreement shall automatically terminate in the event of the Executive’s deathduring employment. The Company may terminate the Executive’s employment, upon notice to theExecutive, in the event the Executive becomes disabled during employment and, as a result, is unableto continue to perform substantially all of his material duties and responsibilities under this Agreementfor one-hundred and twenty (120) days during any period of three hundred and sixty-five (365)consecutive calendar days. If any question shall arise as to whether the Executive is disabled to theextent that the Executive is unable to perform substantially all of his material duties and responsibilitiesfor the Company and its Affiliates, the Executive shall, at the Company’s request and expense, submitto a medical examination by a physician selected by the Company to whom the Executive or theExecutive’s guardian, if any, has no reasonable objection to determine whether the Executive is so disabled and such determinationshall for the purposes of this Agreement be conclusive of the issue. If such a question arises and theExecutive fails to submit to the requested medical examination, the Company’s determination of theissue shall be binding on the Executive.5. Severance Payments and Other Matters Related to Termination.a) Termination pursuant to Section 4(b) or 4(c). Except as provided in Section5(c) below, in the event of termination of the Executive’s employment either by the Company otherthan for Cause pursuant to Section 4(b) of this Agreement or by the Executive for Good Reasonpursuant to Section 4(c) of this Agreement:i. The Company shall pay the Executive’s then-current annual base salary fora period of nine (9) months in accordance with the Company’s payroll practice then in effect,beginning on the Payment Commencement Date. ii. If the Executive is participating in the Company’s group health plan and/ordental plan at the time the Executive’s employment terminates, and the Executive exercises his right tocontinue participation in those plans under the federal law known as COBRA, or any successor law,the Company will pay the Executive a monthly cash amount equal to the full premium cost of thatparticipation (the “Benefits Payment”) for nine (9) months following the date on which the Executive’semployment with the Company terminates or, if earlier, until the date the Executive becomes eligible toenroll in the health (or, if applicable, dental) plan of a new employer, payable in accordance withregular payroll practices for benefits beginning on the Payment Commencement Date.iii. The Company will also pay the Executive on the date of termination anybase salary earned but not paid through the, date of termination (collectively, the “AccruedAmounts”). In addition, the Company will pay the Executive any bonus which has been to theExecutive, but not yet paid on the date of termination of his employment, payable in a lump sum on thelater of such date when bonuses are paid to executives of the Company generally in accordance withthe timing rules of Section 2(a) and the Payment Commencement Date. iv. Should the termination of the Executive’s employment pursuant to Extion4(b) or 4(c) of this Agreement occur prior to the first anniversary of the Effective Date, the Executiveshall be entitled to retain the sign on bonus the Executive received pursuant to Section 2(b). v. Any obligation of the Company to provide the Executive severancepayments or other benefits under this Section 5(a) (other than the Accrued Amounts) is conditioned onthe Executive’s signing, returning and not revoking an effective release of claims in the form providedby the Company (the “Employee Release”) within the deadline specified therein (and in all eventswithin sixty (60) days following the termination of the Executive’s employment), which release shallnot apply to (i) claims for indemnification in the Executive’s capacity as an officer or director of theCompany under the Company’s Certificate of Incorporation, By-laws or agreement, if any, providingfor director or officer indemnification, (ii) rights to receive insurance coverage and payments under anypolicy maintained by the Company and (iii) rights to receive retirement benefits that are accrued andfully vested at the time of the Executive’s termination and rights under such plans protected byERISA. Any severance payments to be made in the form of salary continuation pursuant to the terms of thisAgreement shall be payable in accordance with the normal payroll practices of the Company, and willbegin on the Payment Commencement Date but shall be retroactive to the date of termination. TheExecutive agrees to provide the Company prompt notice of the Executive’s eligibility to participate inthe health plan and, if applicable, dental plan of any employer. The Executive further agrees to repayany overpayment of health benefit premiums made by the Company hereunder. b) Termination other than pursuant to Section 4(b) or 4(c). In the event of anytermination of the Executive’s employment, other than a termination by the Company pursuant toSection 4(b) of this Agreement or a termination by the Executive for Good Reason pursuant to Section4(c) of this Agreement, the Company will pay the Executive the Accrued Amounts. In addition, theCompany will pay the Executive any bonus which has been awarded to the Executive, but not yetpaid on the date of termination of the Executive’s employment, at such time when bonuses are paid toexecutives of the Company generally in accordance with the timing rules of Section 2(a). TheCompany shall have no other payment obligations to the Executive under this Agreement. c) Upon a Change of Control. If, within ninety (90) days prior to a Change ofControl or within eighteen (18) months following a Change of Control (as defined in Section 6hereof), the Company or any successor thereto terminates the Executive’s employment other than forCause pursuant to Section 4(b) of this Agreement, or the Executive terminates his employment forGood Reason pursuant to Section 4(c) of this Agreement, then, in lieu of any payments to theExecutive or on the Executive’s behalf under Section 5(a) hereof: i. All of the Executive’s then remaining unvested stock options, restrictedstock and restricted stock units that are outstanding immediately prior to the date of termination shall(notwithstanding anything to the contrary in the applicable award agreement) remain outstanding andeligible to vest until the Payment Commencement Date and, subject to Section 5(c)(v), automaticallybecome fully vested as of the Payment Commencement Date ii. The Company shall pay, on the Payment Commencement Date, a lumpsum payment equal to twelve (12) months of the Executive’s then-current annual base salary; provided,however, that if such termination occurs prior to a Change of Control, such severance payments shallbe made at the time and in the manner set forth in Section 5(a)(i) during the period beginning on thedate of termination through the date of the Change of Control with any severance remaining to be paidunder this Section 5(c)(ii) payable in a lump sum on the closing date of the Change of Control (or, iflater, the Payment Commencement Date). iii. If the Executive is participating in the Company’s group health plan and/ordental plan at the time the Executive’s employment terminates, and the Executive exercises his right tocontinue participation in those plans under the federal law known as COBRA, or any successor law,the Company will pay the Executive the Benefits Payment for twelve (12) months following the dateon which the Executive’s employment with the Company terminates or, if earlier, until the date theExecutive becomes eligible to enroll in the health (or, if applicable, dental) plan of a new employer,with such amount payable on a pro-rata basis in accordance with the Company’s regular payroll practices for benefits beginning on the PaymentCommencement Date. iv. The Company will also pay the Executive the Accrued Amounts. Inaddition, the Company will pay the Executive any bonus which has been earned to the Executive, butnot yet paid on the date of termination of his employment, payable in a lump sum on the later of suchdate when bonuses are paid to executives of the Company generally in accordance with the timingrules of Section 2(a) and the Payment Commencement Date. v. Any obligation of the Company to provide the Executive severancepayments or other benefits under this Section 5(c) (other than the Accrued Amounts) is conditioned onthe Executive’s signing, returning and not revoking the Employee Release by the deadline specifiedtherein (and in all events within sixty (60) days following the termination of the Executive’semployment), which release shall not apply to (i) claims for indemnification in the Executive’s capacityas an officer or director of the Company under the Company’s Certificate of Incorporation, By-laws oragreement, if any, providing for director or officer indemnification, (ii) rights to receive insurancecoverage and payments under any policy maintained by the Company and (iii) rights to receiveretirement benefits that are accrued and fully vested at the time of the Executive’s termination andrights under such plans protected by ERISA. d) Except for any right the Executive may have under applicable law to continueparticipation in the Company’s group health and dental plans under COBRA, or any successor law,benefits shall terminate in accordance with the terms of the applicable benefit plans based on the dateof termination of the Executive’s employment, without regard to any continuation of base salary orother payment to the Executive following termination. Notwithstanding anything herein to thecontrary, if the payment by the Company of the Benefits Payments will subject or expose the Company to taxes or penalties, the Executive and the Company agree to renegotiate the provisions ofSection 5(a)(ii) or 5(c)(iii), as applicable, in good faith and enter into a substitute arrangement pursuantto which the Company will not be subjected or exposed to taxes or penalties and the Executive will beprovided with payments or benefits with an economic value that is no less than the economic value ofthe Benefits Payments.e) Provisions of this Agreement shall survive any termination if so provided in thisAgreement or if necessary or desirable to accomplish the purposes of other surviving provisions,including without limitation the Executive’s obligations under Section 3 of this Agreement and underthe Employee Non-Solicitation, Non- Competition, Confidential Information and InventionsAssignment Agreement. The obligation of the Company to make payments to the Executive or on theExecutive’s behalf under Section 5 of this Agreement is expressly conditioned upon the Executive’scontinued full performance of the Executive’s obligations under Section 3 hereof, under the EmployeeNon-Solicitation, Non-Competition, Confidential Information and Inventions Assignment Agreementto be executed herewith, and under any subsequent agreement between the Executive and theCompany or any of its Affiliates relating to confidentiality, non-competition, proprietary informationor the like. 6. Definitions. For purposes of this agreement; the following definitions apply:“Affiliates” means all persons and entities directly or indirectly controlling, controlled by orunder common control with the Company, where control may be by management authority, equityinterest or otherwise.“Change of Control” shall mean (i) the acquisition of beneficial ownership (as defined in Rule13d-3 under the Exchange Act) directly or indirectly by any “person” (as such term is used in Sections13(d) and 14(d) of the Exchange Act) of securities of the Company representing a majority or more ofthe combined voting power of the Company’s then outstanding securities, other than an acquisition ofsecurities for investment purposes pursuant to a bona fide financing of the Company; (ii) a merger orconsolidation of the Company with any other corporation in which the holders of the voting securitiesof the Company prior to the merger or consolidation do not own more than 50% of the total votingsecurities of the surviving corporation; or (iii) the sale or disposition by the Company of all orsubstantially all of the Company’s assets other than a sale or disposition of assets to an Affiliate of theCompany or a holder of securities of the Company; notwithstanding the foregoing, no transaction orseries of transactions shall constitute a Change of Control unless such transaction or series oftransactions constitutes a “change in control event” within the meaning of Treasury Regulation Section1.409A-3(i)(5)(i).“Payment Commencement Date” shall mean the Company’s next regular payday for executivesthat follows the expiration of sixty (60) calendar days from the date the Executive’s employmentterminates.“Person” means an individual, a corporation, an association, a partnership, an estate, a trust andany other entity or organization, other than the Company or any of its Affiliates.7. Conflicting Agreements. The Executive hereby represents and warrants that his signingof this Agreement and the performance of his obligations under it will not breach or be in conflict withany other agreement to which the Executive is a party or is bound and that the Executive is not nowsubject to any covenants against competition or similar covenants or any court order that could affectthe performance of the Executive’s obligations under this Agreement. The Executive agrees that hewill not disclose to or use on behalf of the Company any proprietary information of a third partywithout that party’s consent. 8. Withholding; Other Tax Matters. Anything to the contrary notwithstanding, (a) allpayments required to be made by the Company hereunder to Executive shall be subject to thewithholding of such amounts, if any, relating to tax and other payroll deductions as the Company mayreasonably determine it should withhold pursuant to any applicable law or regulation, and (b) allseverance payments and benefits payable pursuant to Sections 5(a) and 5(c) hereof shall be subject tothe terms and conditions set forth on Exhibit A attached hereto.9. Assignment. Neither the Executive nor the Company may make any assignment of thisAgreement or any interest in it, by operation of law or otherwise, without the prior written consent ofthe other; provided, however, that the Company may assign its rights and obligations under thisAgreement without the Executive’s consent to one of its Affiliates or to any Person with whom theCompany shall hereafter affect a reorganization, consolidate with, or merge into or to whom it transfersall or substantially all of its properties or assets. This Agreement shall inure to the benefit of and be binding upon the Executive and the Company, and each of our respectivesuccessors, executors, administrators, heirs and permitted assigns.10. Severability. If any portion or provision of this Agreement shall to any extent be declaredillegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, orthe application of such portion or provision in circumstances other than those as to which it is sodeclared illegal or unenforceable, shall not be affected thereby, and each portion and provision of thisAgreement shall be valid and enforceable to the fullest extent permitted by law.11. Miscellaneous. This Agreement, together with the Employee Non-Solicitation, Non-Competition, Confidential Information and Inventions Assignment Agreement, sets forth the entireagreement between the Executive and the Company and replaces all prior communications, agreementsand understandings, written or oral, with respect to the terms and conditions of the Executive’semployment. This Agreement may not be modified or amended, and no breach shall be deemed to bewaived, unless agreed to in writing by the Executive and an expressly authorized representative of theBoard. The headings and captions in this Agreement are for convenience only and in no way define ordescribe the scope or content of any provision of this Agreement. This Agreement may be executedin two or more counterparts, each of which shall be an original and all of which together shallconstitute one and the same instrument. This is a Massachusetts contract and shall be governed andconstrued in accordance with the laws of the Commonwealth of Massachusetts, without regard to theconflict-of-laws principles thereof.12. Notices. Any notices provided for in this Agreement shall be in writing and shall beeffective when delivered in person, consigned to a reputable national courier service for overnightdelivery or deposited in the United States mail, postage prepaid, and addressed to the Executive at theExecutive’s last known address on the books of the Company or, in the case of the Company, to it bynotice to the Chairman of the Board of Directors, c/o Verastem, Inc. at its principal place of business,or to such other addressees) as either party may specify by notice to the other actually received.[Rest of page intentionally left blank.] IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by theCompany, by its duly authorized representative, and by the Executive, as of the date first stated above. President and Chief Executive OfficerTHE EXECUTIVE/s/ Joseph LobackiJoseph LobackiTHE COMPANY/s/ Robert ForresterRobert ForresterPresident and Chief Executive Officer Exhibit A Payments Subject to Section 409A 1. Subject to this Exhibit A, any severance payments that may be due under the Agreementshall begin only upon the date of the Executive’s “separation from service” (determined as set forthbelow) which occurs on or after the termination of Executive’s employment. The following rules shallapply with respect to distribution of the severance payments, if any, to be provided to Executive underthe Agreement, as applicable: (a)It is intended that each installment of the severance payments under the Agreementprovided under shall be treated as a separate “payment” for purposes of Section 409A. Neitherthe Company nor Executive shall have the right to accelerate or defer the delivery of any suchpayments except to the extent specifically permitted or required by Section 409A. (b)If, as of the date of Executive’s “separation from service” from the Company,Executive is not a “specified employee” (within the meaning of Section 409A), then eachinstallment of the severance payments shall be made on the dates and terms set forth in theAgreement. (c)If, as of the date of Executive’s “separation from service” from the Company,Executive is a “specified employee” (within the meaning of Section 409A), then: (i)Each installment of the severance payments due under the Agreement that, inaccordance with the dates and terms set forth herein, will in all circumstances, regardlessof when Executive’s separation from service occurs, be paid within the short-termdeferral period (as defined under Section 409A) shall be treated as a short-term deferralwithin the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximumextent permissible under Section 409A and shall be paid on the dates and terms set forthin the Agreement; and (ii)Each installment of the severance payments due under the Agreement that isnot described in this Exhibit A, Section 1(c)(i) and that would, absent this subsection, bepaid within the six-month period following Executive’s “separation from service” fromthe Company shall not be paid until the date that is six months and one day after suchseparation from service (or, if earlier, Executive’s death), with any such installments thatare required to be delayed being accumulated during the six-month period and paid in alump sum on the date that is six months and one day following Executive’s separationfrom service and any subsequent installments, if any, being paid in accordance with thedates and terms set forth herein; provided, however, that the preceding provisions of thissentence shall not apply to any installment of payments if and to the maximum extentthat that such installment is deemed to be paid under a separation pay plan that does notprovide for a deferral of compensation by reason of the application of TreasuryRegulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntaryseparation from service). Any installments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last dayof Executive’s second taxable year following the taxable year in which the separationfrom service occurs. 2.The determination of whether and when Executive’s separation from service from theCompany has occurred shall be made and in a manner consistent with, and based on the presumptionsset forth in, Treasury Regulation Section 1.409A-1(h). Solely for purposes of this Exhibit A, Section2, “Company” shall include all persons with whom the Company would be considered a singleemployer under Section 414(b) and 414(c) of the Code. 3.The Company makes no representation or warranty and shall have no liability to Executive orto any other person if any of the provisions of the Agreement (including this Exhibit) are determined toconstitute deferred compensation subject to Section 409A but that do not satisfy an exemption from, orthe conditions of, that section. Exhibit 21.1List of Registrant’s SubsidiariesVerastem Securities Company, incorporated in Massachusetts, a wholly owned subsidiary. Exhibit 23.1Consent of Independent Registered Public Accounting Firm We 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 the 2012Incentive Plan of Verastem, Inc.,(2)Registration Statement (Form S-8 No. 333-190578) pertaining to the 2012 Incentive Plan of Verastem, Inc.,(3)Registration Statement (Form S-8 No. 333-201075) pertaining to the 2014 Inducement Award Program of Verastem,Inc.,(4)Registration Statement (Form S-8 No. 333-201076) pertaining to the 2012 Incentive Plan of Verastem, Inc.,(5)Registration Statement (Form S-8 No. 333-211235) pertaining to the 2012 Incentive Plan of Verastem, Inc.,(6)Registration Statement (Form S-3 No. 333-217048) of Verastem, Inc.,(7)Registration Statement (Form S-8 No. 333-218768) pertaining to the 2014 Inducement Award Program of Verastem,Inc., and(8)Registration Statement (Form S-8 No. 333-218769) pertaining to the 2012 Incentive Plan of Verastem, Inc.; of our reports dated March 13, 2018, with respect to the consolidated financial statements of Verastem, Inc. and theeffectiveness of internal control over financial reporting of Verastem, Inc., included in this Annual Report (Form 10-K) ofVerastem, Inc. for the year ended December 31, 2017./s/Ernst & Young LLPBoston, MassachusettsMarch 13, 2018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 13, 2018Exhibit 31.2CERTIFICATIONSI, Julie B. Feder, 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/ Julie B. Feder Julie B. Feder Chief Financial OfficerDate: March 13, 2018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, 2017 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 13, 2018A 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, 2017 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/ Julie B. Feder Julie B. Feder Chief Financial OfficerDate: March 13, 2018A 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 2017 Financial Results BOSTON, MA – March 13, 2018 – Verastem, Inc. (NASDAQ: VSTM), focused on developing and commercializing drugs to improve the survival and quality of life of cancer pa(cid:38)ents, today reported financial results for the year ended December 31,2017 and provided an overview of certain corporate developments and plans. “The last year has been marked by significant achievement for Verastem with the repor(cid:38)ng of posi(cid:38)ve data fromthe pivotal Phase 3 DUO™ study and culmina(cid:38)ng in the recent submission of a New Drug Applica(cid:38)on (NDA) tothe U.S. Food and Drug Administra(cid:38)on (FDA) seeking full approval for duvelisib for the treatment of relapsed orrefractory chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) and accelerated approval for thetreatment of relapsed or refractory follicular lymphoma (FL),” said Robert Forrester, President and ChiefExecu(cid:38)ve Officer of Verastem. “As we await the poten(cid:38)al acceptance and approval of the duvelisib NDA, we arediligently working to build our commercial infrastructure and preparing for our first poten(cid:38)al product launch. Iam delighted that Joe Lobacki has joined the team. Joe’s formidable exper(cid:38)se in commercialising oncology drugsat Mediva(cid:38)on, Micromet and Genzyme posi(cid:38)ons Verastem to successfully execute on our launch plan forduvelisib in the US.” Fourth Quarter 2017 and Recent Highlights: Duvelisib ·Duvelisib NDA submitted to FDA – In early February 2018, Verastem submi(cid:67)ed an NDA to the FDA seeking full approval forits lead product candidate duvelisib, a first-in-class oral dual inhibitor of phosphoinosi(cid:38)de-3-kinase (PI3K)-delta and PI3K-gamma, for the treatment of relapsed or refractory CLL/SLL and accelerated approval for the treatment of relapsed orrefractory FL. The NDA is supported by clinical data from the randomized Phase 3 DUO™ study, which met its primaryendpoint by demonstra(cid:38)ng sta(cid:38)s(cid:38)cally significant efficacy, along with a consistent and manageable safety profile, forduvelisib monotherapy in patients with relapsed or refractory CLL/SLL. The NDA is also supported by results from the Phase2 DYNAMO™ study, which also met its primary endpoint by demonstra(cid:38)ng a sta(cid:38)s(cid:38)cally significant improvement in overallresponse rate (ORR) compared to an historical control in pa(cid:38)ents with indolent non-Hodgkin’s lymphoma that are double-refractory to both rituximab and chemotherapy or radioimmunotherapy.·Clinical Data from Pivotal Phase 3 DUO Study Highlighted in an Oral Presenta(cid:32)on at ASH 2017 – Verastem presentedresults from the Phase 3 DUO study at the American Society of Hematology 2017 Annual Mee(cid:38)ng (ASH 2017). Thepresenta(cid:38)on, (cid:38)tled “Results from the Phase 3 DUO Trial: A Randomized Comparison of Duvelisib vs Ofatumumab in Pa(cid:38)entswith Relapsed/Refractory Chronic Lymphocy(cid:38)c Leukemia or Small Lymphocy(cid:38)c Lymphoma,” was presented by principalinves(cid:38)gator Ian Flinn, M.D., Ph.D., Director of the Blood Cancer Research Program at Sarah Cannon Research Ins(cid:38)tute. TheDUO study met its primary endpoint with oral duvelisib monotherapy achieving a sta(cid:38)s(cid:38)cally significant improvement inprogression free survival (PFS) compared to ofatumumab in pa(cid:38)ents with relapsed or refractory CLL/ SLL per a blindedindependent review commi(cid:67)ee (IRC) using modified interna(cid:38)onal workshop on CLL (iwCLL) and revised Interna(cid:38)onalWorking Group (IWG) Response Criteria (median PFS=13.3 months versus 9.9 months, respec(cid:38)vely; HR=0.52, p<0.0001),representing a 48% reduction in  the risk of progression or death. Oral duvelisib monotherapy also achieved a sta(cid:38)s(cid:38)cally significant improvement in ORRcompared to ofatumumab (74% vs 45%, respec(cid:38)vely; p<0.0001), and reduced lymph node burden of less than 50% in mostpa(cid:38)ents compared to ofatumumab (85% vs 16%, respec(cid:38)vely). Duvelisib monotherapy demonstrated a manageable safetyprofile, with results from this study consistent with the well-characterized safety profile of duvelisib monotherapy inpa(cid:38)ents with advanced hematologic malignancies in previous studies. For duvelisib-treated pa(cid:38)ents, the median (cid:38)me ontreatment was 50.3 weeks (range, 0.9 - 160.0) compared to 23.1 weeks (range, 0.1 - 26.1) for ofatumumab.·Addi(cid:32)onal Duvelisib Abstracts Presented at ASH 2017 – Along with the Phase 3 DUO results, two addi(cid:38)onal duvelisibabstracts were presented at ASH 2017. The abstract, (cid:38)tled “In Vitro, In Vivo, and Parallel Phase I Evidence Support theSafety and Activity of Duvelisib, a PI3K-δ,γ Inhibitor, in Combination with Romidepsin or Bortezomib in Relapsed/RefractoryT-Cell Lymphoma,” was given as an oral presentation by Alison Moskovitz, M.D., Memorial Sloan Kettering Cancer Center. ·Preclinical Data Highligh(cid:32)ng the Synergis(cid:32)c Effects in Combina(cid:32)on with Immunotherapy Presented at theAmerican Society of Clinical Oncology Clinical Immuno-Oncology Symposium (ASCO-SITC) – In January2018, Jonathan Pachter, Ph.D., Chief Scien(cid:38)fic Officer of Verastem, presented preclinical data highligh(cid:38)ngthe poten(cid:38)al synergis(cid:38)c effects of duvelisib in combina(cid:38)on with immune checkpoint or co-s(cid:38)mulatoryan(cid:38)bodies in B-cell lymphoma. This data, outlined in a poster (cid:38)tled “The Dual PI3K-δ,γ Inhibitor DuvelisibS(cid:38)mulates An(cid:38)-Tumor Immunity and Enhances Efficacy of Immune Checkpoint and Co-S(cid:38)mulatoryAn(cid:38)bodies in a B-Cell Lymphoma Model,” supports the further explora(cid:38)on of duvelisib in combina(cid:38)on withanti-PD-1/PD-L1 or co-stimulatory antibodies in patients with B-cell malignancies. Defactinib ·Defac(cid:32)nib Preclinical Abstract Presented at ASH 2017 – A poster describing preclinical data in combina(cid:38)onwith B-cell lymphoma 2 (BCL-2) was presented at ASH 2017. The abstract, (cid:38)tled “Combinatorial Inhibi(cid:38)on ofFocal Adhesion Kinase and BCL-2 in AML,” was presented by Xiangmeng Wang, Ph.D., MD Anderson CancerCenter. Corporate and Financial ·Joseph Lobacki Appointed Chief Commercial Officer – In January 2018, Verastem announced theappointment of Joseph Lobacki as Execu(cid:38)ve Vice President and Chief Commercial Officer. Mr. Lobacki,formerly Chief Commercial Officer and Execu(cid:38)ve Council Member at Mediva(cid:38)on, is responsible foroverseeing the commercial strategy and execu(cid:38)on for Verastem’s lead product candidate, duvelisib. Mr.Lobacki is a skilled leader in commercializing oncology drugs and his strong experience in hematologiconcology commercialization and marketing make him an invaluable addition to the Verastem team.·Addi(cid:32)onal Financing Through Increasing Debt Facility to up to $50.0 Million and a $25.0 Million PublicOffering – In January 2018, Verastem amended its loan and security agreement with Hercules Capital, Inc.(Hercules), increasing its exis(cid:38)ng borrowing limit under the loan facility from up to $25.0 million to up to$50.0 million in financing, subject to certain condi(cid:38)ons of funding. In December 2017, the Companysuccessfully completed an underwri(cid:67)en public offering of shares of common stock with gross proceedstotaling approximately $25.0 million.  ·NgocDiep Le, MD, PhD, Appointed Chief Medical Officer – In October 2017, Verastem announced theappointment of Dr. Le as its Chief Medical Officer. A trained medical oncologist, Dr. Le is board cer(cid:38)fied ininternal medicine and has 15 years of drug development experience across all phases in both solid and liquidtumors, with specialized exper(cid:38)se in clinical development. Dr. Le joins Verastem from MedImmune (a whollyowned subsidiary of AstraZeneca) where she served as Vice President, Immuno-Oncology Innova(cid:38)veMedicines and led the product development teams for mul(cid:38)ple high-priority immuno-oncology assets. Dr.Le oversees the development strategy and activities for Verastem’s core assets, duvelisib and defactinib.·Paid First Development Milestone to Infinity Pharmaceu(cid:32)cals – In October 2017, Verastem paid to InfinityPharmaceu(cid:38)cals, Inc. (Infinity) a $6.0 million milestone payment, represen(cid:38)ng the first milestone under theduvelisib license agreement. This milestone is based on the achievement of posi(cid:38)ve top-line results from thePhase 3 DUO study evalua(cid:38)ng the efficacy and safety of duvelisib in pa(cid:38)ents with relapsed or refractoryCLL/SLL. The milestone was paid using funds drawn from Verastem’s exis(cid:38)ng loan and security agreementwith Hercules.Full Year 2017 Financial Results Net loss for the year ended December 31, 2017 (2017 Period) was $67.8 million, or $1.76 per share, as compared to a net lossof $36.4 million, or $0.99 per share, for the year ended December 31, 2016 (2016 Period). Net loss includes non-cash stock-based compensation expense of $5.0 million and $6.2 million for the 2017 Period and 2016 Period,respectively. Verastem used $57.3 million of cash for operating activities during the 2017 Period. Research and development expense for the 2017 Period was $46.4 million compared to $19.8 million for the 2016Period. The $26.6 million increase from the 2016 Period to the 2017 Period was primarily related to an increase of $13.4million in external clinical research organization expense for outsourced biology, chemistry, development and clinicalservices, which includes our clinical trial costs, the achievement of a $6.0 million milestone pursuant to our licenseagreement with Infinity, an increase of $5.1 million in consulting fees, and an increase in personnel related costs of $1.9million. General and administrative expense for the 2017 Period was $21.4 million compared to $17.2 million for the 2016Period. The increase of $4.2 million from the 2016 Period to the 2017 Period primarily resulted from increases in consultingand professional fees of $4.4 million, including $2.5 million related to commercial launch preparation, and an increase inpersonnel costs of $1.0 million. These increases were partially offset by a decrease in stock-based compensation expense of$1.5 million. As of December 31, 2017, Verastem had cash, cash equivalents and investments of $86.7 million compared to $80.9million as of December 31, 2016. The number of outstanding common shares as of December 31, 2017, was 50,800,908. Financial Guidance Based on our current opera(cid:38)ng plans, we expect to have sufficient cash, cash equivalents and investments to fund our currentoperating plan and capital expenditure requirements into the second half of 2018.  About Duvelisib Duvelisib is a first-in-class inves(cid:38)ga(cid:38)onal, dual inhibitor of phosphoinosi(cid:38)de 3-kinase (PI3K)-delta and PI3K-gamma, twoenzymes known to help support the growth and survival of malignant B-cells and T-cells. PI3K signaling may lead to theprolifera(cid:38)on of malignant B- and T-cells and is thought to play a role in the forma(cid:38)on and maintenance of the suppor(cid:38)ve tumormicroenvironment. Duvelisib was evaluated in late- and mid-stage extension trials, including DUO™, a randomized, Phase 3monotherapy study in pa(cid:38)ents with relapsed or refractory chronic lymphocy(cid:38)c leukemia/small lymphocy(cid:38)c lymphoma(CLL/SLL), and DYNAMO™, a single-arm, Phase 2 monotherapy study in pa(cid:38)ents with refractory indolent non-Hodgkinlymphoma (iNHL). Both DUO and DYNAMO achieved their primary endpoints and Verastem has submi(cid:67)ed a new drugapplica(cid:38)on (NDA) reques(cid:38)ng the full approval of duvelisib for the treatment of pa(cid:38)ents with relapsed or refractory CLL/SLL, andaccelerated approval for the treatment of pa(cid:38)ents with relapsed or refractory follicular lymphoma (FL). Duvelisib is also beingdeveloped by Verastem for the treatment of peripheral T-cell lymphoma (PTCL), and is being inves(cid:38)gated in combina(cid:38)on withother agents through inves(cid:38)gator-sponsored studies. Informa(cid:38)on about duvelisib clinical trials can be found onwww.clinicaltrials.gov. About Defactinib Defac(cid:38)nib is an inves(cid:38)ga(cid:38)onal inhibitor of focal adhesion kinase (FAK), a non-receptor tyrosine kinase that mediates oncogenicsignaling in response to cellular adhesion and growth factors. Based on the mul(cid:38)-faceted roles of FAK, defac(cid:38)nib is used totreat cancer through modula(cid:38)on of the tumor microenvironment and enhancement of an(cid:38)-tumor immunity. Defac(cid:38)nib iscurrently being evaluated in three separate clinical collabora(cid:38)ons in combina(cid:38)on with immunotherapeu(cid:38)c agents for thetreatment of several different cancer types including pancrea(cid:38)c cancer, ovarian cancer, non-small cell lung cancer (NSCLC), andmesothelioma. These studies are combina(cid:38)on clinical trials with pembrolizumab and avelumab from Merck & Co. andPfizer/Merck KGaA, respectively. Informa(cid:38)on about these and addi(cid:38)onal clinical trials evalua(cid:38)ng the safety and efficacy ofdefactinib can be found on www.clinicaltrials.gov. About Verastem, Inc. Verastem, Inc. (NASDAQ:VSTM) is a biopharmaceutical company focused on developing and commercializingdrugs to improve the survival and quality of life of cancer patients. Verastem is currently developing duvelisib, adual inhibitor of PI3K-delta and PI3K-gamma, which has successfully met its primary endpoint in a Phase 2 studyin indolent Non-Hodgkin Lymphoma (iNHL) and a Phase 3 clinical trial in patients with chronic lymphocyticleukemia/small lymphocytic lymphoma (CLL/SLL). Verastem has submitted a New Drug Application (NDA)requesting the full approval of duvelisib for the treatment of patients with relapsed or refractory CLL/SLL, andaccelerated approval for the treatment of patients with relapsed or refractory follicular lymphoma (FL). Inaddition, Verastem is developing the FAK inhibitor defactinib, which is currently being evaluated in threeseparate clinical collaborations in combination with immunotherapeutic agents for the treatment of severaldifferent cancer types, including pancreatic cancer, ovarian cancer, non-small-cell lung cancer (NSCLC), andmesothelioma. Verastem’s product candidates seek to treat cancer by modulating the local tumormicroenvironment and enhancing anti-tumor immunity. For more information, please visit www.verastem.com. 1,2,345678,910,11,12 Verastem, Inc. 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:38)vity of Verastem's inves(cid:38)ga(cid:38)onal product candidates, including duvelisib anddefactinib, and Verastem's PI3K and FAK programs generally, the structure of our planned and pending clinical trials, Verastem’sfinancial guidance and the timeline and indications for clinical development and regulatory submissions. The words "anticipate,""believe," "es(cid:38)mate," "expect," "intend," "may," "plan," "predict," "project," "target," "poten(cid:38)al," "will," "would," "could,""should," "con(cid:38)nue," and similar expressions are intended to iden(cid:38)fy forward-looking statements, although not all forward-looking statements contain these iden(cid:38)fying words. Each forward-looking statement is subject to risks and uncertain(cid:38)es thatcould cause actual results to differ materially from those expressed or implied in such statement. Applicable risks anduncertain(cid:38)es include the risks that acceptance or approval of the NDA will not occur on the expected (cid:38)meframes or at all; thateven if data from clinical trials is posi(cid:38)ve, regulatory authori(cid:38)es may require addi(cid:38)onal studies for approval and the productmay not prove to be safe and effec(cid:38)ve; that the preclinical tes(cid:38)ng of Verastem's product candidates and preliminary or interimdata from clinical trials may not be predic(cid:38)ve of the results or success of ongoing or later clinical trials; that the full data fromthe DUO study will not be consistent with the previously presented results of the study; that data may not be available whenexpected, including for the Phase 3 DUO™ study; that the degree of market acceptance of product candidates, if approved, maybe lower than expected; that the (cid:38)ming, scope and rate of reimbursement for our product candidates is uncertain; that theremay be compe(cid:38)(cid:38)ve developments affec(cid:38)ng our product candidates; that data may not be available when expected; thatenrollment of clinical trials may take longer than expected; that our product candidates will cause unexpected safety events orresult in an unmanageable safety profile as compared to their level of efficacy; that duvelisib will be ineffec(cid:38)ve at trea(cid:38)ngpa(cid:38)ents with lymphoid malignancies; that Verastem will be unable to successfully ini(cid:38)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:38)ons; that Verastem or Infinity Pharmaceu(cid:38)cals, Inc.(Infinity) will fail to fully perform under the duvelisib license agreement; that Verastem may be unable to make addi(cid:38)onal drawsunder its debt facility or obtain adequate financing in the future through product licensing, co-promo(cid:38)onal arrangements,public or private equity, debt financing or otherwise; that Verastem will not pursue or submit regulatory filings for its productcandidates, including for duvelisib in pa(cid:38)ents with CLL/SLL or iNHL; and that Verastem's product candidates will not receiveregulatory approval, become commercially successful products, or result in new treatment op(cid:38)ons being offered to pa(cid:38)ents.Other risks and uncertain(cid:38)es include those iden(cid:38)fied under the heading "Risk Factors" in Verastem's Annual Report on Form10-K for the year ended December 31, 2017 and in any subsequent filings with the U.S. Securi(cid:38)es and Exchange Commission.The forward-looking statements contained in this press release reflect Verastem's views as of the date of this release, andVerastem does not undertake and specifically disclaims any obligation to update any forward-looking statements.  References Winkler et al. PI3K-delta and PI3K-gamma inhibi(cid:38)on by IPI-145 abrogates immune responses and suppresses ac(cid:38)vity inautoimmune and inflammatory disease models. Chem Biol 2013; 20:1-11. Reif et al. Cu(cid:92)ng Edge: Differen(cid:38)al roles for phosphoinosi(cid:38)de 3 kinases, p110-gamma and p110-delta, in lymphocytechemotaxis and homing. J Immunol 2004:173:2236-2240. Schmid et al. Receptor tyrosine kinases and TLR/IL1Rs unexpectedly ac(cid:38)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, NCT02158091 Schaller M.D. and Parsons J.T. Focal adhesion kinase: an integrin-linked protein tyrosine kinase. Trends Cell Biol. 1993 3: 258-62. Jiang H et al. Targe(cid:38)ng focal adhesion kinase renders pancrea(cid:38)c cancers responsive to checkpoint immunotherapy. Nat Med2016: Aug 22(8) 851-60. Sulzmaier F.J. et al. FAK in cancer: mechanistic findings and clinical applications. Nature Rev Cancer. 2014 14: 598-610. www.clinicaltrials.gov, NCT02546531 www.clinicaltrials.gov, NCT02943317 www.clinicaltrials.gov, NCT02758587 Verastem, Inc.Marianne M. LambertsonVice President, Corporate CommunicationsInvestor Relations/Public Relations+1 781-292-4273mlambertson@verastem.com 123456789101112 Verastem, Inc.Consolidated Balance Sheets(in thousands) December 31, December 31, 2017 2016 Cash, cash equivalents and investments $86,672 $80,897 Prepaid expenses and other current assets 1,115 398 Property and equipment, net 861 1,417 Other assets 1,143 917 Total assets $89,791 $83,629 Accounts payable and accrued expenses $17,128 $10,991 Long-term debt 14,828 — Other liabilities 151 341 Stockholders’ equity 57,684 72,297 Total liabilities and stockholders’ equity $89,791 $83,629  Verastem, Inc.Consolidated Statements of Operations(in thousands, except per share amounts) Year ended December 31, 2017 2016 Operating expenses: Research and development $46,423 $19,779 General and administrative 21,381 17,223 Total operating expenses 67,804 37,002 Loss from operations (67,804) (37,002) Interest income 561 562 Interest expense (559) — Net loss $(67,802) $(36,440) Net loss per share—basic and diluted $(1.76) $(0.99) Weighted-average number of common shares used in net loss per share-basic and diluted 38,422 36,988 

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