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<A HREF="#fa11401_index_to_financial_statements">  INDEX TO FINANCIAL STATEMENTS</A><BR></font>
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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>As filed with the Securities and Exchange Commission on November 3, 2011  </B></FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B> Registration No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </B></FONT></P>


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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=1><B>Washington, D.C. 20549  </B></FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>FORM S-1<BR>  </B></FONT><FONT SIZE=1><B>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF&nbsp;1933  </B></FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>VERASTEM,&nbsp;INC.<BR>  </B></FONT><FONT SIZE=1>(Exact name of registrant as specified in its charter) </FONT></P>

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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Delaware</B></FONT><FONT SIZE=1><BR>
(State or other jurisdiction of<BR>
incorporation or organization)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B> 2834</B></FONT><FONT SIZE=1><BR>
(Primary Standard Industrial<BR>
Classification Code Number)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B> 27-3269467</B></FONT><FONT SIZE=1><BR>
(I.R.S. Employer<BR>
Identification Number)</FONT></TD>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>215 First Street, Suite&nbsp;440<BR>
Cambridge, MA 02142<BR>
(617)&nbsp;252-9300</B></FONT><FONT SIZE=1><BR>
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Christoph Westphal, M.D., Ph.D.<BR>
Chief Executive Officer<BR>
Verastem,&nbsp;Inc.<BR>
215 First Street, Suite&nbsp;440<BR>
Cambridge, Massachusetts 02142<BR>
(617)&nbsp;252-9300</B></FONT><FONT SIZE=1><BR>
(Name, address, including zip code, and telephone number, including area code, of agent for service) </FONT></P>

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<TD COLSPAN=3 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><I>Copies to:</I></FONT></TD>
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<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=1><B> David E. Redlick, Esq.<BR>
Brian A. Johnson, Esq.<BR>
Wilmer Cutler Pickering Hale and Dorr&nbsp;LLP<BR>
60 State Street<BR>
Boston, Massachusetts 02109<BR>
(617)&nbsp;526-6000</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=1><B>Patrick O'Brien, Esq.<BR>
Ropes&nbsp;&amp; Gray&nbsp;LLP<BR>
Prudential Tower<BR>
800 Boylston Street<BR>
Boston, Massachusetts 02199<BR>
(617)&nbsp;951-7000</B></FONT></TD>
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<P style="font-family:times;"><FONT SIZE=1><B>Approximate date of commencement of proposed sale to public: </B></FONT><FONT SIZE=1>As soon as practicable after this Registration Statement is declared effective. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the
following box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is filed to register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule&nbsp;12b-2 of the Exchange Act. </FONT></P>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Large&nbsp;accelerated&nbsp;filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Accelerated&nbsp;filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Non-accelerated&nbsp;filer&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT><BR></FONT> <FONT SIZE=1>(Do not check if a<BR>
smaller reporting company)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Smaller&nbsp;reporting&nbsp;company&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>CALCULATION OF REGISTRATION FEE  </B></FONT></P>

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<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Title of Each Class of Securities<BR>
To Be Registered</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Proposed Maximum<BR>
Aggregate Offering Price(1)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Amount of<BR>
Registration Fee(2)</B></FONT><BR></TH>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:4pt;text-indent:-4pt;"><FONT SIZE=1><B> </B></FONT><FONT SIZE=1>Common Stock, $0.0001 par value per share</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$50,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$5,730</FONT></TD>
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<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Estimated
solely for the purpose of calculating the registration fee pursuant to Rule&nbsp;457(o) under the Securities Act of 1933, as amended.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Calculated
pursuant to Rule&nbsp;457(o) based on an estimate of the proposed maximum aggregate offering price. </FONT></DD></DL>
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<P style="font-family:times;"><FONT SIZE=1><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file&nbsp;a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may determine.</B></FONT></P>

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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

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</FONT> <FONT COLOR="#FF4040" SIZE=2><B>The information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. </B></FONT></P>
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</FONT> <FONT COLOR="#FF4040" SIZE=1>PRELIMINARY PROSPECTUS</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT COLOR="#FF4040" SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT COLOR="#FF4040" SIZE=1>Subject to Completion</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT COLOR="#FF4040" SIZE=1>November&nbsp;3, 2011</FONT></TD>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares



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Common Stock


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<P style="font-family:times;"><FONT SIZE=2>This is the initial public offering of our common stock. No public market currently exists for our common stock. We are offering all of the shares of common
stock offered by this prospectus. We expect the public offering price to be between $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We
are applying to list our common stock on The NASDAQ Global Market under the symbol "VSTM." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common
stock in "Risk factors" beginning on page&nbsp;10.</B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.</B></FONT></P>

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<TH ALIGN="CENTER" style="font-family:ARIAL;"><FONT  style="font-size:8pt;line-height:9pt;" >&nbsp;</FONT><BR></TH>
<TH style="font-family:ARIAL;"><FONT  style="font-size:8pt;line-height:9pt;" >&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:ARIAL;"><FONT  style="font-size:8pt;line-height:9pt;" ><B>Per share</B></FONT><BR></TH>
<TH style="font-family:ARIAL;"><FONT  style="font-size:8pt;line-height:9pt;" >&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:ARIAL;"><FONT  style="font-size:8pt;line-height:9pt;" ><B>Total</B></FONT><BR></TH>
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<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><p style="font-family:ARIAL;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Public offering price</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=7 VALIGN="BOTTOM" style="font-family:ARIAL;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;">&nbsp;</TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><p style="font-family:ARIAL;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Underwriting discounts and commissions</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=7 VALIGN="BOTTOM" style="font-family:ARIAL;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;">&nbsp;</TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><p style="font-family:ARIAL;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds to Verastem, before expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=7 VALIGN="BOTTOM" style="font-family:ARIAL;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:ARIAL;">&nbsp;</TD>
</TR>
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<P style="font-family:times;"><FONT SIZE=2>The
underwriters may also purchase up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock at
the public offering price, less the underwriting discounts and commissions
payable by us, to cover over-allotments, if any, within 30&nbsp;days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts
and commissions will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and our total proceeds, after underwriting discounts and
commissions but before expenses, will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
 </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
underwriters are offering the common stock as set forth under "Underwriting." Delivery of the shares will be made on or
about&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2012. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:100%;margin-left:0%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD style="font-family:times;"><FONT SIZE=4><B>


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 UBS Investment Bank


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=4><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;" --><font style="font-family:ARIAL;">


 Leerink Swann


</font><!-- COMMAND=ADD_ETF,"A" -->


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<BR>  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=4><B>

<!-- COMMAND=ADD_TF,"font-family:ARIAL;" --><font style="font-family:ARIAL;">


Lazard Capital Markets


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>


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Oppenheimer&nbsp;&amp;&nbsp;Co.


</font><!-- COMMAND=ADD_ETF,"A" -->


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<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=4><B>


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Rodman&nbsp;&amp; Renshaw,&nbsp;LLC


</font><!-- COMMAND=ADD_ETF,"A" -->


  </B></FONT></P>

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<!-- TOC_END -->

<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to
which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking
offers to buy, shares of our common stock only in jurisdictions where such offers and sales are permitted. The information in this prospectus or any free writing prospectus is accurate only as of its
date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><A
NAME="BG11401A_main_toc"></A> </FONT></P>

<A NAME="bg11401_table_of_contents"> </A>

<P style="font-family:times;"><FONT SIZE=2><B> TABLE OF CONTENTS  </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A NAME="BG11401_TOC"></A> </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="28pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Page </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#ca11401_prospectus_summary"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prospectus summary</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ca11401_prospectus_summary"><FONT SIZE=2><B> 1</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#ck11401_risk_factors"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk factors</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ck11401_risk_factors"><FONT SIZE=2><B> 10</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#ct11401_special_note_regarding_forward-looking_statements"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Special note regarding forward-looking statements</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ct11401_special_note_regarding_forward-looking_statements"><FONT SIZE=2><B> 38</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#cv11401_use_of_proceeds"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Use of proceeds</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#cv11401_use_of_proceeds"><FONT SIZE=2><B> 39</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#cy11401_dividend_policy"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dividend policy</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#cy11401_dividend_policy"><FONT SIZE=2><B> 40</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#da11401_capitalization"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capitalization</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#da11401_capitalization"><FONT SIZE=2><B> 41</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#dc11401_dilution"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dilution</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dc11401_dilution"><FONT SIZE=2><B> 43</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#de11401_selected_financial_data"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selected financial data</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#de11401_selected_financial_data"><FONT SIZE=2><B> 45</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#dg11401_management_s_discussion_and_an__man03466"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Management's discussion and analysis of financial condition and results of
operations</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dg11401_management_s_discussion_and_an__man03466"><FONT SIZE=2><B> 47</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#dk11401_business"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Business</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dk11401_business"><FONT SIZE=2><B> 61</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#dq11401_management"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Management</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dq11401_management"><FONT SIZE=2><B> 93</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#ds11401_executive_compensation"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Executive compensation</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ds11401_executive_compensation"><FONT SIZE=2><B> 98</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#dx11401_transactions_with_related_persons"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Transactions with related persons</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dx11401_transactions_with_related_persons"><FONT SIZE=2><B> 115</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#dz11401_principal_stockholders"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Principal stockholders</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dz11401_principal_stockholders"><FONT SIZE=2><B> 120</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#ea11401_description_of_capital_stock"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Description of capital stock</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ea11401_description_of_capital_stock"><FONT SIZE=2><B> 124</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#ec11401_shares_eligible_for_future_sale"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares eligible for future sale</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ec11401_shares_eligible_for_future_sale"><FONT SIZE=2><B> 128</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#ee11401_underwriting"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Underwriting</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ee11401_underwriting"><FONT SIZE=2><B> 131</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#eg11401_legal_matters"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Legal matters</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#eg11401_legal_matters"><FONT SIZE=2><B> 138</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#eg11401_experts"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Experts</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#eg11401_experts"><FONT SIZE=2><B> 138</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#eg11401_where_you_can_find_more_information"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Where you can find more information</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#eg11401_where_you_can_find_more_information"><FONT SIZE=2><B> 138</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><A HREF="#fa11401_index_to_financial_statements"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Index to financial statements</FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fa11401_index_to_financial_statements"><FONT SIZE=2><B> F-1</B></FONT></A></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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  </I></FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>i </B></FONT></P>

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<BR></FONT><FONT SIZE=4>  Prospectus summary    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>This summary highlights information contained elsewhere in this prospectus. This summary does not contain all
of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the "Risk factors" section and our financial statements and
the related notes appearing at the end of this prospectus, before making an investment decision.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR BUSINESS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are a biopharmaceutical company focused on discovering and developing proprietary small molecule drugs targeting cancer stem cells along with
proprietary companion diagnostics. A cancer stem cell is a particularly aggressive type of tumor cell, resistant to
conventional cancer therapy, that we believe is an underlying cause of tumor recurrence and metastasis. We also believe that the presence of cancer stem cells in tumors may be a key reason for the
ultimate failure of many existing chemotherapeutics and other cancer therapies to achieve a durable clinical response. Building on discoveries by our scientific co-founders, Robert
Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., published in the peer reviewed scientific journal </FONT><FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2>, we use our proprietary technology
to create a stable population of cancer stem cells to screen for and identify small molecule compounds that target cancer stem cells. We believe that our technology and approach provide an opportunity
to develop a next generation of oncology therapeutics addressing the large unmet medical need of patients with many types of cancers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> THE PROBLEM  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Cancer is one of the world's most serious health problems and the second most common cause of death in the United States after heart disease. Current
treatments for cancer include surgery, radiation therapy, chemotherapy, hormone therapy and targeted therapy. According to estimates by the National Institutes of Health, in the United States in 2010,
the direct medical costs of cancer of all types exceeded $100&nbsp;billion. IMS Health estimates that in the United States in 2010, approximately $22&nbsp;billion was spent on drugs to treat
cancer, representing the largest class of drug spending in the United States. Despite years of intensive research and clinical use, current treatments often fail to cure cancer. Cancer patients who
relapse often develop metastatic disease. Metastatic disease is the cause of more than 90% of cancer deaths. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
believe that cancer stem cells, or CSCs, which are also sometimes referred to as tumor-initiating cancer cells, are responsible for the initiation, metastasis and recurrence of many cancers and may
be a key reason for the ultimate failure of many current therapies to achieve a durable clinical response. CSCs have the ability to: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>move
freely and proliferate without attachment to other cells or surfaces;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>initiate
a tumor;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>self-renew;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>produce
other cancer cell types; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>resist
many current cancer treatments. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>CSCs
have been identified in many types of cancer, including breast, pancreatic, colon, brain, lung and leukemia. As illustrated in the figure below, while current treatments may succeed at initially
decreasing tumor burden, they may leave behind a population of CSCs that can regenerate tumors. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>1 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> OUR SOLUTION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our solution is to discover and develop a next generation of oncology therapeutics targeting CSCs along with companion diagnostics. We believe that
by developing therapeutics that target CSCs we can address the problem of cancer recurrence and metastasis so as to deliver a durable clinical response. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Our
scientific co-founders at the Whitehead Institute for Biomedical Research, an affiliate of the Massachusetts Institute of Technology, or MIT, and the Broad Institute, an affiliate of
MIT and Harvard University, made discoveries that link the epithelial-to-mesenchymal transition, or EMT, to the emergence of CSCs. This transition involves the transformation
of one type of cancer cell into a more aggressive and drug resistant type of cancer cell. Our solution utilizes proprietary technology based on these discoveries along with rapid and automated assays,
referred to as high-throughput screening, to identify drugs targeting CSCs and develop companion diagnostics. To achieve a durable clinical response, we believe that it may be necessary to
kill both CSCs and other types of cancer cells in a tumor, as illustrated in the figure below, either with a combination of current cancer treatments and CSC-targeted drugs or a single
therapeutic found to target both cancer cell populations. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Our proprietary technology  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A persistent problem in the discovery of drugs targeting CSCs is the difficulty of isolating large numbers of CSCs. Without such large numbers, the
discovery of drugs targeting CSCs using high-throughput screening is extremely difficult. Moreover, when CSCs are isolated, they typically do not remain stable in culture. Instead, over a
short period of time, CSCs convert into other types of cancer cells. To address this problem, our scientific co-founders developed proprietary technology based on the EMT process to create
a stable population of CSCs that are suitable for use in high-throughput screening of small molecule compounds. We license this proprietary technology from the Whitehead Institute. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>2 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>To
identify compounds that are selective for CSCs, we grow cancer non-stem cells in the laboratory and then induce the EMT process to create a stable population of CSCs. As illustrated in
the figure below, we then screen compounds to assess their ability to kill the CSCs. Because these CSCs are stable in culture, the screening process can be conducted using high-throughput
technology on a large number and wide variety of small molecule compound libraries. These compound libraries include new chemical entities, approved drugs and compounds that are in preclinical and
clinical development. We then profile the compounds that are identified as targeting CSCs using additional assays to identify suitable clinical candidates. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> OUR PRODUCT CANDIDATES AND COMPANION DIAGNOSTICS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Using our proprietary technology, we have identified a pipeline of small molecule compounds with the potential to target CSCs. Our most advanced
product candidate is the small molecule VS-507. Our scientific co-founders identified VS-507 as a drug candidate for killing breast cancer stem cells and published
their research in </FONT><FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2> in 2009. This study included an analysis of the effect of VS-507 on cell lines derived from triple negative breast
cancer, or TNBC, a type of breast cancer in which a high percentage of CSCs have been identified. TNBC has a poorer prognosis and lower overall survival rate than other types of breast cancers. We are
currently evaluating VS-507 in preclinical studies as a potential therapy for breast cancer and believe that VS-507 may be especially beneficial as a therapeutic for the
treatment of TNBC. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
believe that the targeted action of VS-507 on CSCs is effected through the inhibition of a network of proteins, known as the Wnt/beta-catenin cell signaling pathway, which
Dr.&nbsp;Weinberg described in 2011 in </FONT><FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2> as critical for the development and maintenance of CSCs. Additional third-party published research has
reported that VS-507's activity may be mediated through the blockade of the Wnt/beta-catenin cell signaling pathway. In mouse models of breast cancer, VS-507
treatment decreased biophysical or biochemical markers, referred to as biomarkers, of CSCs. In contrast, treatment in the same model with a standard chemotherapeutic agent, paclitaxel, increased
biomarkers of CSCs. Assuming successful completion of preclinical studies, we expect to file an investigational new drug application, or IND, with the U.S. Food and Drug Administration, or FDA, in
late 2012 to initiate a Phase&nbsp;1 clinical trial of VS-507. We also are currently evaluating additional proprietary product candidates in preclinical studies for their use in breast
and other cancers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>An
important element of our business strategy is the development and use of proprietary, companion diagnostics in connection with the development of our therapeutic drug candidates. CSCs are often
characterized by a distinctive set of biomarkers, which we believe may be a key to identifying patients with tumors that are likely to respond to therapies targeting CSCs. We plan to use diagnostics,
based on these biomarkers, as part of a personalized medicine approach to identify patients with aggressive tumors that have a high percentage of CSCs. We also believe that these diagnostics may be
used to monitor patients' progress on therapy and aid physicians' ongoing treatment decisions. In addition, we expect that our use of proprietary diagnostics may accelerate the clinical development
process for our drug candidates by enabling smaller, targeted trials and providing early, objective signals of drug activity. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>3 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> OUR STRATEGY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our goal is to build a leading biopharmaceutical company focused on the discovery, development and, ultimately, commercialization of novel drugs and
companion diagnostics targeting CSCs. Key elements of our strategy to achieve this goal are: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>continue
to screen and identify small molecules that target CSCs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>in-license
rights to additional compounds to expand our pipeline of candidates that target CSCs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>rapidly
advance our drug candidates into clinical development;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>develop
diagnostics for therapeutic products targeting CSCs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collaborate
selectively to augment and accelerate development and commercialization; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>maintain
scientific leadership in the CSC field. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> OUR MANAGEMENT TEAM AND SCIENTIFIC CO-FOUNDERS AND ADVISORS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our management team includes our Chief Executive Officer, Chairman and co-founder Christoph Westphal, M.D., Ph.D., our Chief Operating
Officer, Robert Forrester, and our Vice President, Head of Research, Jonathan Pachter, Ph.D. </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Dr.&nbsp;Westphal
has been involved in founding a number of biotechnology companies as chief executive officer, including Sirtris Pharmaceuticals,&nbsp;Inc.,
which was acquired by GlaxoSmithKline&nbsp;plc in 2008, as well as Alnylam Pharmaceuticals,&nbsp;Inc. and Momenta Pharmaceuticals,&nbsp;Inc. Dr.&nbsp;Westphal also co-founded
Alnara Pharmaceuticals,&nbsp;Inc., which was acquired by Eli Lilly and&nbsp;Co. in 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Forrester
has held executive level positions at both private and public life science companies, including Forma Therapeutics,&nbsp;Inc.,
CombinatoRx,&nbsp;Inc., now Zalicus&nbsp;Inc., and Coley Pharmaceutical Group,&nbsp;Inc., which was acquired by Pfizer&nbsp;Inc. in 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Dr.&nbsp;Pachter
has over 20&nbsp;years of experience in leading the discovery of small molecule and monoclonal antibody therapeutics for the treatment of
cancer, most recently as the Senior Director of Cancer Biology at OSI Pharmaceuticals&nbsp;Inc., which was acquired by Astellas Pharma&nbsp;Inc. in 2010. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Our
management team is supported by our scientific advisory board comprised of leading academic and industry scientists. Our scientific advisory board consists of: </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
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 Robert Weinberg, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Founding Member of the Whitehead Institute for Biomedical</FONT></TD>
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 Scientific co-founder</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Research, Professor of Biology at the Massachusetts Institute of Technology and recipient of the 1997 National Medal of Science</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2> Eric Lander, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Founding Director of the Broad Institute, Professor of Biology</FONT></TD>
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<TD style="font-family:times;"><FONT SIZE=2><I>Scientific co-founder</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>at the Massachusetts Institute of Technology and Professor of Systems Biology at Harvard Medical School</FONT></TD>
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 Piyush Gupta, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Member of the Whitehead Institute for Biomedical Research</FONT></TD>
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 Scientific co-founder</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>and Assistant Professor of Biology at the Massachusetts Institute of Technology</FONT></TD>
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<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
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<TD style="font-family:times;"><BR><FONT SIZE=2> Julian Adams, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>President of Research and Development of Infinity Pharmaceuticals,&nbsp;Inc., former Senior Vice President of Drug Discovery and Development of Millennium Pharmaceuticals,&nbsp;Inc. and co-inventor and co-developer of
Velcade</FONT></TD>
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  Jos&eacute; Baselga, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>


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 Chief of Hematology and Oncology at Massachusetts General Hospital, Associate Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2> George Daley, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Professor of Hematology and Oncology and Director of the Stem Cell Transplantation Program at Children's Hospital and Professor of Biological Chemistry and Molecular Pharmacology at Harvard Medical School</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2>


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  Peter Elliott, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Former Senior Vice President and Head of Research and Development of Sirtris Pharmaceuticals,&nbsp;Inc., former Vice President of Pharmacology and Drug Development of Millennium Pharmaceuticals,&nbsp;Inc. and
co-developer of Velcade</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2> Daniel Haber, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School</FONT></TD>
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  Joseph (Yossi) Schlessinger, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Chairman and Professor in the Department of Pharmacology at Yale School of Medicine</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2> Phillip A. Sharp, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Institute Professor at the David H. Koch Institute for Integrative Cancer Research at the Massachusetts Institute of Technology and recipient of the 1993 Nobel Prize in Medicine and Physiology</FONT></TD>
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  Roger Tung, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>President and Chief Executive Officer of Concert Pharmaceuticals,&nbsp;Inc., former Vice President of Drug Discovery of Vertex Pharmaceuticals,&nbsp;Inc. and co-inventor of Lexiva and Agenerase</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2> Christopher Walsh, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Hamilton Kuhn Professor in the Department of Biological Chemistry and Molecular Pharmacology at Harvard Medical School</FONT></TD>
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  Eric Winer, M.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Director of the Breast Oncology Center at the Dana Farber Cancer Institute and Professor of Medicine at Harvard Medical School</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2><B> RISKS ASSOCIATED WITH OUR BUSINESS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully
in the "Risk factors" section of this prospectus immediately following this prospectus summary. These risks include the following: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We
have incurred significant losses since our inception and will need substantial additional funding. To date, we have not generated any revenues. We expect to incur
losses for the foreseeable future and may never achieve profitability. Our net loss was $7.7&nbsp;million for the nine months ended September&nbsp;30, 2011 and $784,000 for the period from
August&nbsp;4, 2010 (inception) </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>5 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>to
December&nbsp;31, 2010. As of September&nbsp;30, 2011, we had a deficit accumulated during the development stage of $8.5&nbsp;million. </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We
have a short operating history. All of our product candidates are still in preclinical development, and we have not received marketing approval from the FDA or
any other regulatory authority for any product candidate.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
approach to the discovery and development of product candidates that target CSCs is unproven. Our focus on using our proprietary EMT technology to screen for and
identify product candidates targeting CSCs may not result in the discovery and development of commercially viable drugs to treat cancer. Research on CSCs is an emerging field and, consequently, there
is ongoing debate regarding the existence of CSCs, whether the appropriate nomenclature to refer to these cells is cancer stem cells, tumor-initiating cells or another term and the importance of these
cells as an underlying cause of tumor recurrence and metastasis. We do not believe that any drugs that target CSCs have been successfully developed to date for the treatment of cancer.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We
may be unable to acquire or in-license from third parties any compounds or product candidates that we identify using our proprietary EMT technology or
otherwise.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Clinical
trials of our product candidates may not be successful. If we are unable to obtain required marketing approvals for, commercialize, obtain and maintain
patent protection for or gain sufficient market acceptance by physicians, patients and healthcare payors of our product candidates, or experience significant delays in doing so, our business will be
materially harmed and our ability to generate revenue will be materially impaired.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>If
we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may not
realize the full commercial potential of our therapeutics.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We
may depend on collaborations with third parties for the development and commercialization of our product candidates. If those collaborations are not successful,
we may not be able to capitalize on the market potential of these product candidates. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> OUR CORPORATE INFORMATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We were incorporated under the laws of the State of Delaware in August 2010. Our principal executive offices are located at 215 First Street,
Suite&nbsp;440, Cambridge, Massachusetts 02142 and our telephone number is (617)&nbsp;252-9300. Our website address is www.verastem.com. The information contained on, or that can be
accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
this prospectus, unless otherwise stated or the context otherwise requires, references to "Verastem," "we," "us," "our" and similar references refer to Verastem,&nbsp;Inc. The Verastem name and
logo are our trademarks. The other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>This
prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications
and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or
completeness of such information. While we believe these industry publications and third party research, surveys and studies are reliable, we have not independently verified such data. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>6 </B></FONT></P>

<HR NOSHADE>
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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="ce11401_the_offering"> </A>
<A NAME="toc_ce11401_1"> </A>
<BR></FONT><FONT SIZE=4>  The offering    <BR></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD style="font-family:times;"><FONT SIZE=2>Common stock offered by us</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>Common stock to be outstanding after this offering</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>Over-allotment option</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>The underwriters have an option for a period of 30&nbsp;days to purchase up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of our common stock to
cover over-allotments.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>Use of proceeds</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>We intend to use the net proceeds from this offering for preclinical and clinical development of VS-507, discovery, research and preclinical studies of our other product candidates, additional
compounds and companion diagnostics and other general corporate purposes.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>Risk factors</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>You should read the "Risk factors" section starting on page&nbsp;10 of this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common
stock.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>Proposed NASDAQ Global Market&nbsp;symbol</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>VSTM</FONT></TD>
</TR>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The number of shares of our common stock to be outstanding after this offering is based on 10,476,652&nbsp;actual shares of our common stock outstanding as of
September&nbsp;30, 2011 and 40,959,493&nbsp;additional shares of our common stock issuable upon the automatic conversion of all outstanding shares of our preferred stock, including shares of our
series&nbsp;C preferred stock that we issued and sold in November 2011, upon the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
number of shares of our common stock to be outstanding after this offering excludes: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1,418,000
shares of our common stock issuable upon the exercise of stock options outstanding as of September&nbsp;30, 2011 at a weighted-average exercise price of
$0.21 per share;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>105,348
additional shares of our common stock available for future issuance as of September&nbsp;30, 2011 under our 2010 equity incentive plan; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>additional
 shares of our common stock that will be available for future issuance, as of the closing of this offering, under our 2012 stock incentive
plan. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Unless
otherwise indicated, all information in this prospectus assumes: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>no
exercise of the outstanding options described above;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>no
exercise by the underwriters of their option to purchase up
to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of our common
stock to cover over-allotments;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
automatic conversion of all outstanding shares of our preferred stock into an aggregate of 40,959,493 shares of our common stock upon the closing of this
offering; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
restatement of our amended and restated certificate of incorporation and the amendment and restatement of our bylaws upon the closing of this offering. </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>7 </B></FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="ci11401_summary_financial_information"> </A>
<A NAME="toc_ci11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Summary financial information    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>You should read the following summary financial data together with our financial statements and the related notes appearing at the
end of this prospectus and the "Selected financial data" and "Management's discussion and analysis of financial condition and results of operations" sections of this prospectus. We have derived the
statements of operations data for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010 from our audited financial statements included in this prospectus. We have derived the
statements of operations data for the nine months ended September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011 and the balance sheet data as of
September&nbsp;30, 2011 from our unaudited financial statements included in this prospectus. The unaudited financial data include, in the opinion of our management, all adjustments, consisting only
of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Our historical results for any prior period are not
necessarily indicative of results to be expected in any future period, and our results for any interim period are not necessarily indicative of results to be expected for a full fiscal year. </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2><B>


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 Statement of operations data:


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4, 2010<BR>
(inception) to<BR>
December&nbsp;31, 2010



</font><!-- COMMAND=ADD_ETF,"A" -->


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months ended<BR>
September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4, 2010<BR>
(inception) to<BR>
September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (in thousands, except per share data)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>400</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,483</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,883</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>384</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,195</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,579</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accretion of preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss applicable to common stockholders</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(786</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,696</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,482</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.26</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.79</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average number of common shares used in net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,976</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,291</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,841</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.17</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average number of common shares used in pro forma net loss per share applicable to common stockholders&#151;basic and
diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
4,638</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
20,474</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>Pro forma basic and diluted net loss per common share is calculated assuming the automatic conversion of all outstanding shares of our preferred stock,
including shares of our series&nbsp;C preferred stock that we issued and sold in November 2011, into an aggregate of 40,959,493&nbsp;shares of our common stock upon the closing of this offering. </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>8 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=11,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=163288,FOLIO='8',FILE='DISK104:[11ZDM1.11ZDM11401]CI11401A.;13',USER='CDESORM',CD=';2-NOV-2011;11:45' -->
<A NAME="page_ci11401_1_9"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
pro forma balance sheet data set forth below gives effect to: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
issuance and sale in November 2011 of an aggregate of 8,934,493 shares of our series&nbsp;C preferred stock at a price per share of $2.25 for an aggregate
purchase price of $20.1&nbsp;million; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
automatic conversion of all outstanding shares of our preferred stock, including shares of our series&nbsp;C preferred stock that we issued and sold in
November 2011, into an aggregate of 40,959,493&nbsp;shares of our common stock upon the closing of this offering. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>The
pro forma as adjusted balance sheet data set forth below give further effect to our issuance and sale
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in this offering at an assumed initial public
offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the price range listed on the
cover page of this prospectus, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="60pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 As of September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;" --><font style="font-family:ARIAL;">


 Balance sheet data:


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Actual


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Pro forma


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Pro forma<BR>
as adjusted


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (in thousands)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>61,524</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Working capital</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39,419</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>59,522</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>42,364</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>62,467</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Redeemable convertible preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,878</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deficit accumulated during the development stage</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' (deficit) equity</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7,639</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>60,342</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="ck11401_risk_factors"> </A>
<A NAME="toc_ck11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Risk factors    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Investing in our common stock involves a high degree of risk. Before investing in our common stock, you
should consider carefully the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of
this prospectus. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these
circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITAL  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Since inception, we have incurred significant operating losses. Our net loss was $7.7&nbsp;million for the nine months ended September&nbsp;30,
2011 and $784,000 for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010. As of September&nbsp;30, 2011, we had a deficit accumulated during the development stage of
$8.5&nbsp;million. To date, we have not generated any revenues and have financed our operations through private placements of our preferred stock. We have devoted substantially all of our efforts to
research and development. We have not initiated clinical development of any product candidates and expect that it will be many years, if ever, before we have a product candidate ready for
commercialization. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to
quarter. We anticipate that our expenses will increase substantially if and as we: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>continue
our research and preclinical development of our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>seek
to identify additional product candidates that target cancer stem cells, or CSCs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>acquire
or in-license other products and technologies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>initiate
clinical trials for our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>seek
marketing approvals for our product candidates that successfully complete clinical trials;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>ultimately
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>maintain,
expand and protect our intellectual property portfolio;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>hire
additional clinical, quality control and scientific personnel; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>add
operational, financial and management information systems and personnel, including personnel to support our product development and planned future
commercialization efforts. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>To
become and remain profitable, we must develop and eventually commercialize a product or products with significant market potential. This will require us to be successful in a range of challenging
activities, including completing preclinical testing and clinical trials of our product candidates, obtaining marketing approval for these product candidates and manufacturing, marketing and selling
those products for which we may obtain marketing approval. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve
profitability. We are currently only in the preclinical testing stages for our most advanced product candidates and have not yet completed formulation development of our lead product candidate,
VS-507. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>10 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risk factors </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>decrease
the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value
of our company could also cause you to lose all or part of your investment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are an early stage company. We commenced active operations in the second half of 2010. Our operations to date have been limited to organizing and
staffing our company, business planning, raising capital, acquiring and developing our technology, identifying potential product candidates and undertaking preclinical studies of our most advanced
product candidates. All of our product candidates are still in preclinical development. We have not yet demonstrated our ability to initiate or successfully complete any clinical trials, including
large-scale, pivotal clinical trials, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities
necessary for successful product commercialization. It takes about ten to 15&nbsp;years to develop one new medicine from the time it is discovered to when it is available for treating patients.
Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>In
addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research
focus to a company capable of supporting commercial activities. We may not be successful in such a transition. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our product development programs
or commercialization efforts.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development and later
initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with
operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on
attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
expect that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements for at
least&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. Our future capital requirements will depend on many factors, including:
</FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
scope, progress, results and costs of compound discovery, preclinical development, laboratory testing and clinical trials for our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
extent to which we acquire or in-license other products and technologies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
costs, timing and outcome of regulatory review of our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we
receive marketing approval; </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>11 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risk factors </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>revenue,
if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual
property-related claims; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to establish collaborations on favorable terms, if at all. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Identifying
potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we
may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success.
Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on
additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish
rights to our technologies or product candidates.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity
offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital
through the sale of equity or convertible
debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or
declaring dividends. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If
we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue
streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when
needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO THE DISCOVERY, DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCT CANDIDATES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Our approach to the discovery and development of product candidates that target CSCs is unproven, and we do not know whether we will be able to develop any products of
commercial value.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our scientific approach focuses on using proprietary technology to create a stable population of CSCs in the laboratory that we then use to screen
for and identify product candidates targeting these CSCs. Research on CSCs is an emerging field and, consequently, there is ongoing debate regarding the existence of CSCs, whether the appropriate
nomenclature to refer to these cells is cancer stem cells, tumor-initiating cells or another term and the importance of these cells as an underlying cause of tumor recurrence and metastasis. In
addition, there is some debate in the scientific community regarding the defining characteristics of CSCs and whether CSCs are stem cells or, instead, cancer cells </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>12 </B></FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>with
tumor-initiating capabilities. As such, the discovery by our scientific co-founders of the link between the epithelial-to-mesenchymal transition, or EMT, and the emergence of cancer
stem cells is not universally accepted. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Even
if our beliefs regarding the existence, characteristics and function of CSCs are correct, any drugs that we develop may not effectively target CSCs. We do not believe that any drugs that target
CSCs have been successfully developed to date for the treatment of cancer. If we are able to develop a drug that targets CSCs in preclinical studies, we may nonetheless not succeed in demonstrating
safety and efficacy of the drug in clinical trials. Our focus on using our proprietary EMT technology to screen for and identify product candidates targeting CSCs may not result in the discovery and
development of commercially viable drugs to treat cancer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We may not be successful in our efforts to identify or discover additional potential product candidates.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A key element of our strategy is to identify and test additional compounds that target CSCs in a variety of different types of cancer. A significant
portion of the research that we are conducting involves new compounds, new uses of existing compounds and new and unproven drug discovery methods, including our proprietary technology. The drug
discovery that we are conducting using our EMT technology may not be successful in identifying compounds that are useful in treating cancer. Our research programs may initially show promise in
identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
research methodology used may not be successful in identifying potential product candidates; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>potential
product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be
products that will receive marketing approval and achieve market acceptance. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>In
particular, because our EMT technology induces the EMT process to create a stable population of CSCs, it is possible that these stable CSCs may not react in precisely the same manner as naturally
occurring CSCs when treated with a particular product candidate. As a result, a product candidate that shows initial promise in targeting our stable population of CSCs may not have the same effect on
tumors with naturally occurring CSCs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Research
programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus our efforts and resources on a potential product candidate
that ultimately proves to be unsuccessful. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If
we are unable to identify suitable compounds for preclinical and clinical development, we will not be able to obtain product revenues in future periods, which likely would result in significant
harm to our financial position and adversely impact our stock price. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We may not be successful in obtaining necessary rights to compounds and product candidates for our development pipeline through acquisitions and in-licenses.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Because we are screening a range of compounds, including compounds with proprietary rights held by third parties, for their activity against CSCs,
the growth of our business will depend in significant part on our ability to acquire or in-license rights to these compounds. However, we may be unable to acquire or in-license
any compounds or product candidates from third parties that we identify using our proprietary EMT technology or otherwise. The licensing and acquisition of proprietary compounds is a competitive area,
and a number of more established companies are also pursuing strategies to </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>13 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>license
or acquire compounds and product candidates that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater
clinical development and commercialization capabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>For
example, although the Broad Institute has granted us a right of first negotiation for specified compounds and other intellectual property owned by the Broad Institute, we may be unable to
negotiate a license within the specified time frame. If we are unable to do so, the Broad Institute may offer the intellectual property to other parties. In addition, the Whitehead Institute has
retained the right to use the EMT technology that we license from it for research, teaching and educational purposes and could seek to license to third parties any intellectual property rights that it
discovers using the EMT technology while pursuing these purposes. Pursuant to our license agreement with the Whitehead Institute, we will have an opportunity, subject to the Whitehead Institute's
obligations under any third-party research funding agreements, to negotiate a license to any such intellectual property that is developed or conceived on or prior to a specified date in Robert
Weinberg's laboratory at the Whitehead Institute. Our failure to reach an agreement with either the Broad Institute or the Whitehead Institute for any applicable intellectual property could result in
a third party acquiring the related rights. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire the relevant compound or product candidate on
terms that would allow us to make an appropriate return on our investment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition, we expect competition for acquisition and in-licensing product candidates that are attractive to us may increase in the future, especially if our approach of targeting CSCs
gains greater scientific acceptance, which may mean fewer suitable opportunities for us as well as higher acquisition or licensing prices. If we are unable to successfully obtain rights to suitable
compounds or product candidates, our business, financial condition and prospects for growth could suffer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> All of our product candidates are still in preclinical development. Preclinical testing and clinical trials of our product candidates may not be successful. If we are unable
to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We have invested a significant portion of our efforts and financial resources in the identification and preclinical development of drugs that target
CSCs. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our
product candidates. The success of our product candidates will depend on several factors, including the following: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>successful
completion of preclinical studies and clinical trials;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>receipt
of marketing approvals from applicable regulatory authorities;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>establishing
commercial manufacturing capabilities or making arrangements with third-party manufacturers;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>obtaining
and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>launching
commercial sales of the products, if and when approved, whether alone or in collaboration with others; </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>14 </B></FONT></P>

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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Risk factors  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>acceptance
of the products, if and when approved, by patients, the medical community and third-party payors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>effectively
competing with other therapies; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a
continued acceptable safety profile of the products following approval. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product
candidates, which would materially harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive
results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical development and
then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing 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 early clinical trials may not be
predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to
varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to
obtain marketing approval of their products. For example, standard measures of clinical activity with respect to solid tumors, such as Response Criteria in Solid Tumors, or RECIST, measurement
guidelines, which are based on gross changes in the size of tumor lesions, may not be sufficient to detect the targeting of CSCs by our product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates,
including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>regulators
or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial
site;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we
may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>clinical
trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional
clinical trials or abandon product development programs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>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 these clinical trials at a higher rate than we anticipate;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we
might have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to
unacceptable health risks; </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>15 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risk factors </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>regulators
or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including
noncompliance with
regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
cost of clinical trials of our product candidates may be greater than we anticipate;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate;
and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review
boards to suspend or terminate the trials. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>If
we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical
trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>be
delayed in obtaining marketing approval for our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>not
obtain marketing approval at all;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>obtain
approval for indications or patient populations that are not as broad as intended or desired;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>obtain
approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>be
subject to additional post-marketing testing requirements; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>have
the product removed from the market after obtaining marketing approval. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Our
product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether 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 to commercialize our product
candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of
operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of
eligible patients to participate in these trials as required by the U.S. Food and Drug Administration, or FDA, or similar regulatory authorities outside the United States. In addition, many of our
competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may
instead enroll in clinical trials of our competitors' product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Patient
enrollment is affected by other factors including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>severity
of the disease under investigation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>eligibility
criteria for the study in question;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>perceived
risks and benefits of the product candidate under study; </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>16 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>efforts
to facilitate timely enrollment in clinical trials;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>patient
referral practices of physicians;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
ability to monitor patients adequately during and after treatment; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>proximity
and availability of clinical trial sites for prospective patients. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Our
inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment
delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional
financing. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If serious adverse or inappropriate side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of
our product candidates.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>All of our product candidates are still in preclinical development and their risk of failure is high. It is impossible to predict when or if any of
our product candidates will prove effective or safe in humans or will receive marketing approval. If our product candidates are associated with undesirable side effects or have characteristics that
are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less
severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in early stage
testing for treating cancer have later been found to cause side effects that prevented further development of the compound. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more
profitable or for which there is a greater likelihood of success.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific
indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource
allocation 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 indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product
candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to
retain sole development and commercialization rights to such product candidate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may not realize the
full commercial potential of our therapeutics.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We plan to develop companion diagnostics for our therapeutic product candidates. There has been limited success to date industry wide in developing
these types of companion diagnostics. To be successful, we would need to address a number of scientific, technical and logistical challenges. We have only recently initiated development of companion
diagnostics. We have limited experience in the development of diagnostics and may not be successful in developing appropriate diagnostics to pair with any of our therapeutic product candidates that
receive marketing approval. Companion </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>17 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>diagnostics
are subject to regulation by the FDA and similar regulatory authorities outside the United States as medical devices and require separate regulatory approval prior to commercialization.
Given our limited experience in developing diagnostics, we expect to rely in part on third parties for their design and manufacture. If we, or any third parties that we engage to assist us, are unable
to
successfully develop companion diagnostics for our therapeutic product candidates, or experience delays in doing so: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
development of our therapeutic product candidates may be adversely affected if we are unable to appropriately select patients for enrollment in our clinical
trials;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
therapeutic product candidates may not receive marketing approval if safe and effective use of a therapeutic product candidate depends on an </FONT> <FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> diagnostic; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we
may not realize the full commercial potential of any therapeutics that receive marketing approval if, among other reasons, we are unable to appropriately select
patients who are likely to benefit from therapy with our drugs. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>As
a result, our business would be harmed, possibly materially. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and
others in the medical community necessary for commercial success.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients,
healthcare payors and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community, and doctors may
continue to rely on these treatments. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The
degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>efficacy
and potential advantages compared to alternative treatments;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
ability to offer our products for sale at competitive prices;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>convenience
and ease of administration compared to alternative treatments;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
strength of marketing and distribution support;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>sufficient
third-party coverage or reimbursement; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
prevalence and severity of any side effects. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we may
not be successful in commercializing our product candidates if and when they are approved.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To
achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. In </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>18 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risk factors </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>the
future, we may choose to build a focused sales and marketing infrastructure to market or co-promote some of our product candidates if and when they are approved. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>There
are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and
training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing
capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if
we cannot retain or reposition our sales and marketing personnel. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Factors
that may inhibit our efforts to commercialize our products on our own include: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
inability to recruit and retain adequate numbers of effective sales and marketing personnel;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product
lines; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>unforeseen
costs and expenses associated with creating an independent sales and marketing organization. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>If
we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues to us are likely to be lower
than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product
candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and
attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be
successful in commercializing our product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates,
and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the
treatment of the disease indications for which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as or
similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We
are developing our product candidates for the treatment of cancer. There are a variety of available therapies marketed for cancer. In many cases, these drugs are administered in combination to
enhance efficacy. Some of these drugs are branded and subject to patent protection, and others are available on </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>19 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>a
generic basis. Many of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also
encourage the use of generic products. We expect that if our product candidates are approved, they will be priced at a significant premium over competitive generic products. This may make it difficult
for us to achieve our business strategy of using our product candidates in combination with existing therapies or replacing existing therapies with our product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>There
are also a number of products in clinical development by third parties to treat cancer by targeting CSCs. These companies include divisions of large pharmaceutical companies, including Astellas
Pharma US,&nbsp;Inc., Sanofi-Aventis US&nbsp;LLC, GlaxoSmithKline&nbsp;plc and others. There are also biotechnology companies of various size that are developing therapies against CSCs,
including OncoMed Pharmaceuticals,&nbsp;Inc., Boston Biomedical,&nbsp;Inc. and Stemline Therapeutics,&nbsp;Inc. Our competitors may develop products that are more effective, safer, more
convenient or less costly than any that we are developing or that would render our product candidates obsolete or non-competitive. In addition, our competitors may discover biomarkers that
more efficiently measure CSCs than our methods, which may give them a competitive advantage in developing potential products. Our competitors may also obtain marketing approval from the FDA or other
regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the
market. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Many
of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory
approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller
number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies complementary to, or necessary for, our programs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations, third-party reimbursement practices or
healthcare reform initiatives, which would harm our business.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. In the United
States, recently passed legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require
approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets,
prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a
particular country, but then 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 pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates
obtain marketing approval. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>20 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risk factors  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>Our ability to commercialize any products successfully also will depend in part on the extent to which reimbursement for these products and related treatments will be available
from government health 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 they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that
drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any
product that we commercialize and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain
marketing approval. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician.
If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>There
may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory
authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for 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 be made permanent. Reimbursement
rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into
existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of
laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment
limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products
that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an
even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will
incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>decreased
demand for any product candidates or products that we may develop;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>injury
to our reputation and significant negative media attention;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>withdrawal
of clinical trial participants;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>significant
costs to defend the related litigation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>substantial
monetary awards to trial participants or patients; </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>21 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>loss
of revenue; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
inability to commercialize any products that we may develop. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>We
currently hold $3.0&nbsp;million in product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage when
we begin clinical trials or the commercialization of our product candidates, if ever. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable
cost or in an amount adequate to satisfy any liability that may arise. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material
adverse effect on the success of our business.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling,
use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our
operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from
these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.
We also could incur significant costs associated with civil or criminal fines and penalties. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Although
we maintain workers' compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may
not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our
storage or disposal of biological, hazardous or radioactive materials. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our
research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We expect to depend on collaborations with third parties for the development and commercialization of our product candidates. If those collaborations are not successful, we
may not be able to capitalize on the market potential of these product candidates.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We may seek third-party collaborators for the development and commercialization of our product candidates. Our likely collaborators for any
collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any such
arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product
candidates. Our ability to generate revenues from these arrangements will depend on our collaborators' abilities to successfully perform the functions assigned to them in these arrangements. </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>22 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Collaborations
involving our product candidates would pose the following risks to us: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collaborators
have significant discretion in determining the efforts and resources that they will apply to these collaborations;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collaborators
may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization
programs based on clinical trial results, changes in the collaborator's strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing
priorities;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collaborators
may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or
conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collaborators
could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the
collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a
collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product
or products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collaborators
may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that
could jeopardize or invalidate our proprietary information or expose us to potential litigation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>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 or arbitration that diverts management attention and resources; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collaborations
may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable
product candidates. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Collaboration
agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator of ours were to be involved
in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If we are not able to establish collaborations, we may have to alter our development and commercialization plans.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund
expenses. For some of our
product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for 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 of factors. Those factors may include the design
or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and
complexities 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 </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>23 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>challenge
to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or
technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. We may also be
restricted under existing license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and
document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future
collaborators. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of such product candidate, reduce or
delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our
expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we
may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates
or bring them to market and generate product revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We expect to rely on third parties to conduct our clinical trials and some aspects of our compound formulation research and preclinical testing, and those third parties may
not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We do not plan to independently conduct clinical trials of our product candidates. In addition, we do not expect to independently conduct all aspects
of our compound formulation research or preclinical testing of our product candidates. We expect to rely on third
parties, such as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials. We currently rely and expect
to continue to rely on third parties to conduct some aspects of our compound formulation research and preclinical testing. For example, we currently rely on third parties in the development of various
formulations of VS-507. We cannot finish preclinical testing and initiate clinical trials of VS-507 until the development of a formulation is complete. Any of these third
parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product development activities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain
responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with
standards, commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate
and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a
government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties,
meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing
approvals </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>24 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>for
our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or
marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We contract with third parties for the manufacture of our product candidates for preclinical testing and expect to continue to do so for clinical trials and for
commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which
could delay, prevent or impair our development or commercialization efforts.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We do not have any manufacturing facilities or personnel. We currently rely, and expect to continue to rely, on third-party manufacturers for the
manufacture of our product candidates for preclinical testing, other than small amounts of compounds that we may synthesize ourselves for such purpose. To date, we have obtained starting materials for
our supply of the cGMP bulk drug substance for our product candidates from one third-party manufacturer. We do not have a long term supply agreement with this third-party manufacturer, and we purchase
our required drug supply on a purchase order basis. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
expect to rely on third-party manufacturers or third-party collaborators for the manufacture of our product candidates for clinical trials and for commercial supply of any of these product
candidates for which we or our collaborators obtain marketing approval. We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able
to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reliance
on the third party for regulatory compliance and quality assurance;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
possible breach of the manufacturing agreement by the third party; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Third-party
manufacturers may not be able to comply with current good manufacturing practices, or cGMP, regulations or similar regulatory requirements outside the United States. Our failure, or the
failure of our third-party manufacturers, 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 of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely
affect supplies of our products and harm our business and results of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Any
products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP
regulations and that might be capable of manufacturing for us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Any
performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply
or a second source for bulk drug substance. If our current contract manufacturer cannot perform as agreed, we may be required to replace that manufacturer. Although we believe that there </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>25 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>are
several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any
products that receive marketing approval on a timely and competitive basis. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO OUR INTELLECTUAL PROPERTY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If we fail to comply with our obligations under our intellectual property licenses with third parties, we could lose license rights that are important to our business.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are a party to a number of intellectual property license agreements with third parties, including the Whitehead Institute, and expect to enter
into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty,
insurance and other obligations on us. For example, under our license agreement with the Whitehead Institute, we are required to use commercially reasonable efforts to develop and commercialize
licensed products under the agreement and to satisfy other specified obligations. If we fail to comply with our obligations under these licenses, our licensors may have the right to terminate these
license agreements, in which event we might not be able to market any product that is covered by these agreements, or to convert the license
to a non-exclusive license, which could materially adversely affect the value of the product candidate being developed under the license agreement. Termination of these license agreements
or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms. If the Whitehead Institute were to terminate its license
agreement with us for any reason, we would lose access to the EMT technology and the ability to use the stable population of CSCs for high-throughput screening. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> If we are unable to obtain and maintain patent protection for our technology and products, or if our licensors are unable to obtain and maintain patent protection for the
technology or products that we license from them, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products
similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our success depends in large part on our and our licensors' ability to obtain and maintain patent protection in the United States and other countries
with respect to our proprietary technology and products. We and our licensors seek to protect our proprietary position by filing patent applications in the United States and abroad related to our
novel technologies and products that are important to our business. To date, no patents have issued that cover any of our proprietary technology or product candidates, and we cannot be certain that
any patents will issue with claims that cover any of our proprietary technology or product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a
timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some
circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology or products that we license from
third parties and are reliant on our licensors. For example, we do not control the prosecution of the patent applications licensed to us under our agreement with the Whitehead Institute. Therefore, we
cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. If such licensors fail to maintain such patents,
or lose rights to those patents, the rights we have licensed may be reduced or eliminated. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>26 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex 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 and our licensors' pending
and future patent applications may not result in patents being issued which protect our technology or products or which effectively prevent others from commercializing competitive technologies and
products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent
protection. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>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 in the United States and other jurisdictions are typically not published until 18&nbsp;months after filing, or in some cases not at all. Therefore we cannot be
certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for
patent protection of such inventions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Assuming
the other requirements for patentability are met, currently, in the United States, the first to make the claimed invention is entitled to the patent, while outside the United States, the
first to file&nbsp;a patent application is entitled to the patent. In March 2013, the United States will transition to a first inventor to file system in which, assuming the other requirements for
patentability are met, the first inventor to file&nbsp;a patent application will be entitled to the patent. We may be subject to a third party preissuance submission of prior art to the U.S. Patent
and Trademark Office, or become involved in opposition, derivation, reexamination, </FONT><FONT SIZE=2><I>inter parties</I></FONT><FONT SIZE=2> review or interference proceedings challenging our
patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties
to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party
patent rights. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Even
if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or
otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a
non-infringing manner. For example, although we expect to file patent applications with respect to our product candidate VS-507 with claims directed to its formulation and
method of use, patent protection is not available for composition of matter claims directed to its active pharmaceutical ingredient. Because VS-507 lacks composition of matter protection
for its active pharmaceutical ingredient, competitors will be able to offer and sell products with the same active pharmaceutical ingredient so long as these competitors do not infringe any other
patents that we may obtain covering this drug. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United
States
and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others
from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and 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 or shortly after such candidates are commercialized. As a result, our owned
and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>27 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be
expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the
technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation 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 of litigation. In addition, our licensors may have rights to file and prosecute such claims and we are reliant on them. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a
material adverse effect on the success of our business.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates
and use our proprietary technologies without infringing the proprietary rights of third parties. We have yet to conduct comprehensive freedom-to-operate searches to determine
whether certain of the patent rights licensed to us by the Whitehead Institute would infringe patents issued to third parties. We may become party to, or threatened with, future adversarial
proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference proceedings before the U.S. Patent and Trademark Office. Third
parties may assert
infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party's intellectual property rights, we could be required to
obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or
at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by
court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing
our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets
of third parties could have a similar negative impact on our business. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or
potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we
or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. Litigation may be necessary to defend
against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in
defending against such claims, litigation could result in substantial costs and be a distraction to management. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>28 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant
expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other
interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such
litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any
future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to
sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented know-how,
technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality
agreements with parties who have access to them, 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 assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and
disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing
or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that
technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO REGULATORY APPROVAL OF OUR PRODUCT CANDIDATES AND OTHER LEGAL COMPLIANCE MATTERS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our
ability to generate revenue will be materially impaired.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,
safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the
United States and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not
received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain
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 </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>29 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>preclinical
and clinical data and supporting information to the FDA for each therapeutic indication to establish the product candidate's safety and efficacy. Securing FDA approval also requires the
submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA. Our product candidates may not be effective, may be only moderately
effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and
can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development
period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an
application. The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional
preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product
candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If
we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate
revenues will be materially impaired. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In order to market and sell our products in the European Union and many other jurisdictions, we or our third-party collaborators must obtain separate
marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval
may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA
approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or
these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities
in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the
FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Any product candidate for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to penalties if we fail to
comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data,
labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include
submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>30 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>and
corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is
granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure
drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers' communications
regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results,
including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>restrictions
on such products, manufacturers or manufacturing processes;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>restrictions
on the labeling or marketing of a product;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>restrictions
on product distribution or use;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>requirements
to conduct post-marketing clinical trials;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>warning
or untitled letters;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>withdrawal
of the products from the market;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>refusal
to approve pending applications or supplements to approved applications that we submit;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>recall
of products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fines,
restitution or disgorgement of profits or revenue;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>suspension
or withdrawal of marketing approvals;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>refusal
to permit the import or export of our products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>product
seizure; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>injunctions
or the imposition of civil or criminal penalties. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations,
which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription 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 and regulations that may
constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable
federal and state healthcare laws and regulations, include the following: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>31 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<UL>

<P style="font-family:times;"><FONT SIZE=2>recommendation
of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid; </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or </FONT><FONT SIZE=2><I>qui tam</I></FONT><FONT SIZE=2> actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid,
decrease or conceal an obligation to pay money to the federal government;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act,
imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding
the privacy, security and transmission of individually identifiable health information;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement
in connection with the delivery of or payment for healthcare benefits, items or services;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and medical supplies to report to the
Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>analogous
state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims
involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with
the pharmaceutical industry's voluntary compliance guidelines and the relevant
compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental
authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations 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 or restructuring of our operations. If any of the
physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusions from government funded healthcare programs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the
prices we may obtain.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding
the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any
product candidates for which we obtain marketing approval. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>32 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risk factors  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, changed the way Medicare covers and pays for
pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician
administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of
this legislation could decrease the coverage and price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private
payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization
Act may result in a similar reduction in payments from private payors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>More
recently, in March 2010, President Obama signed into law the Health Care Reform Law, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare
spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose
additional health policy reforms. Effective October&nbsp;1, 2010, the Health Care Reform Law revises the definition of "average manufacturer price" for reporting purposes, which could increase the
amount of Medicaid drug rebates to states. Further, the new law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions
affecting compliance have also been enacted, which may affect our business practices with health care practitioners. We will not know the full effects of the Health Care Reform Law until applicable
federal and state agencies issue regulations or guidance under the new law. Although it is too early to determine the effect of the Health Care Reform Law, the new law appears likely to continue the
pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Legislative
and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure
whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of
our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA's approval process may significantly delay or prevent marketing approval, as well as subject us
to more stringent product labeling and post-marketing testing and other requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO EMPLOYEE MATTERS AND MANAGING GROWTH  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified personnel.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are highly dependent on Christoph Westphal, our Chief Executive Officer, Robert Forrester, our Chief Operating Officer, and Jonathan Pachter, our
Vice President, Head of Research, as well as the other principal members of our management and scientific teams, including our scientific co-founders, Robert Weinberg, Eric Lander and
Piyush Gupta. Although we have formal employment agreements with Robert Forrester and Jonathan Pachter, these agreements do not prevent them from terminating their employment with us at any time. We
do not have an employment agreement with Christoph Westphal. We do not maintain "key person" insurance for any of our executives or other employees. The loss of the services of any of these persons
could impede the achievement of our research, development and commercialization objectives. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition to his role as Chairman of the board of directors and Chief Executive Officer of our company, Dr.&nbsp;Westphal also serves as a general partner of Longwood Founders Fund,&nbsp;LP, a
venture </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>33 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>capital
investment fund and one of our principal stockholders. We and Dr. Westphal anticipate that he will transition to an executive Chairman role at our company in the future based on our having
meaningfully advanced our discovery, research and development efforts, the overall growth of our company and our identifying and hiring a suitable successor. In connection with Dr.&nbsp;Westphal's
transition to this role, we will need to recruit and hire a new principal executive officer. Our inability to hire a suitable executive to assume this position in a timely fashion could delay the
execution of our business plans or disrupt our operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Recruiting
and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel
on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical
personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and
development and commercialization strategy. Our consultants and advisors, including our scientific co-founders, may be employed by employers other than us and may have commitments under
consulting or advisory contracts with other entities that may limit their availability to us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> We expect to expand our development, regulatory and future sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which
could disrupt our operations.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug
development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand
our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with
such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead
to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO OUR COMMON STOCK AND THIS OFFERING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> After this offering, our executive officers, directors and principal stockholders will maintain the ability to control all matters submitted to stockholders for approval.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon the closing of this offering, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock before
this offering will, in the aggregate, beneficially own shares representing approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our capital stock. As a result, if these stockholders were to choose to act together, they
would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control the
election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our
company on terms that other stockholders may desire. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may
prevent attempts by our stockholders to replace or remove our current management.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Provisions in our corporate charter and our bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a
merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions
could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board
of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by
making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>establish
a classified board of directors such that not all members of the board are elected at one time;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>allow
the authorized number of our directors to be changed only by resolution of our board of directors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>limit
the manner in which stockholders can remove directors from the board;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>establish
advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>require
that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>limit
who may call stockholder meetings;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>authorize
our board of directors to issue preferred stock without stockholder approval, which could be used to institute 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
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>require
the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our
charter or bylaws. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Moreover,
because we are incorporated in Delaware, we are governed by the provisions of Section&nbsp;203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15%
of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting
stock, unless the merger or combination is approved in a prescribed manner. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock.
Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the
extent outstanding options are exercised, you will incur further dilution. Based on an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the
price range set
forth on the cover page of this prospectus, you will experience immediate dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, representing the difference between our pro forma net tangible book value
per </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>35 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>share
after giving effect to this offering and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the aggregate price paid by all purchasers of our stock but will own only approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our common stock outstanding after this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> An active trading market for our common stock may not develop.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be
determined through negotiations with the underwriters. Although we are applying to have our common stock listed on The NASDAQ Global Market, an active trading market for our shares may never develop
or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the
market price for the shares or at all. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> If our stock price is volatile, purchasers of our common stock could incur substantial losses.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our stock price is likely to be volatile. The stock market in general and the market for biopharmaceutical companies in particular have experienced
extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this
volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
success of competitive products or technologies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>results
of clinical trials of our product candidates or those of our competitors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>regulatory
or legal developments in the United States and other countries;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>developments
or disputes concerning patent applications, issued patents or other proprietary rights;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
recruitment or departure of key personnel;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
level of expenses related to any of our product candidates or clinical development programs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
results of our efforts to discover, develop, acquire or in-license additional product candidates or products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>actual
or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>variations
in our financial results or those of companies that are perceived to be similar to us;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes
in the structure of healthcare payment systems;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>market
conditions in the pharmaceutical and biotechnology sectors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>general
economic, industry and market conditions; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
other factors described in this "Risk factors" section. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not
improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>36 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risk factors </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>result
in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their
use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the
growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will
be your sole source of gain for the foreseeable future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future, which could cause the market
price of our common stock to drop significantly, even if our business is doing well.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the
market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have
outstanding&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of
common stock based on the number of shares outstanding as of September&nbsp;30, 2011. This includes the shares that we are selling in this offering, which may be resold in the public market
immediately without restriction, unless purchased by our affiliates. Of the remaining shares,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares are currently restricted as a result of securities laws or lock-up
agreements but will be able to be sold after the offering as described in the "Shares eligible for future sale" section of this prospectus. Moreover, after this offering, holders of an aggregate of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in
registration
statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these
shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Underwriting"
section of this prospectus. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>37 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="ct11401_special_note_regarding_forward-looking_statements"> </A>
<A NAME="toc_ct11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Special note regarding forward-looking statements    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than
statements of historical facts, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects,
plans and objectives of management, are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential,"
"will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying
words. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
forward-looking statements in this prospectus include, among other things, statements about: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ongoing and planned discovery and development of drugs targeting cancer stem cells;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
expectations regarding the role of cancer stem cells in tumor recurrence and metastasis;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
potential advantages of our EMT technology;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to acquire or in-license any compounds or product candidates from third parties that we identify using our proprietary technology or
otherwise;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
plans to develop and commercialize our product candidates and companion diagnostics;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to establish and maintain collaborations;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
rate and degree of market acceptance and clinical utility of our products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
intellectual property position;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
expectations regarding the use of proceeds from this offering; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
estimates regarding expenses, future revenues, capital requirements and needs for additional financing. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>We
may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results
or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements
included in this prospectus, particularly in the "Risk factors" section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our
forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>You
should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with
the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this prospectus are made as of the date of this
prospectus,
and we do not assume any obligation to update any forward-looking statements except as required by applicable law. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>38 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="cv11401_use_of_proceeds"> </A>
<A NAME="toc_cv11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Use of proceeds    <BR></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We estimate that the net proceeds from our issuance and sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in this
offering will be
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the price range listed on the cover page of this
prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in
full, we estimate that the net proceeds from this offering will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>A
$1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share would increase (decrease) the net
proceeds from this offering by approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated
underwriting
discounts and commissions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
currently estimate that we will use the net proceeds from this offering as follows: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to complete preclinical and Phase&nbsp;1 clinical development of VS-507;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for preclinical studies of our other proprietary product candidates and companion diagnostics;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for discovery, research and preclinical studies of additional compounds; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
balance, if any, to fund working capital, capital expenditures and other general corporate purposes, which may include the acquisition or in-license
of additional compounds, product candidates or technology. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>This
expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary
significantly depending on numerous factors, including the progress of our development efforts, the status of and results from clinical trials, as well as any collaborations that we may enter into
with third parties for our product candidates, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We
have no current understandings, agreements or commitments for any material acquisitions or licenses of any compounds, product candidates or technology. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Based
on our planned use of the net proceeds from this offering, we expect that such funds, together with our existing cash and cash equivalents, will be sufficient to enable us to complete
preclinical and Phase&nbsp;1 clinical development of VS-507 and, subject to successfully completing Phase&nbsp;1 clinical development, initiate Phase&nbsp;2 clinical development of VS-507.
However, it is possible that we will not achieve the progress that we expect because the actual costs and timing of research and development are difficult to predict, subject to substantial risks and
delays and often vary depending on the particular indication and development strategy. We do not expect that the net proceeds from this offering and our existing cash and cash equivalents will be
sufficient to enable us to fund the completion of development of any of our product candidates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Pending
our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade,
interest bearing instruments and U.S. government securities. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>39 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_cy11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Dividend policy    <BR></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any,
to finance the growth and development of our business. We do not intend to pay cash dividends to holders of our common stock in the foreseeable future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>40 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="da11401_capitalization"> </A>
<A NAME="toc_da11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Capitalization    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth our cash and cash equivalents and capitalization as of September&nbsp;30, 2011: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on
an actual basis;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on
a pro forma basis to give effect to:
<BR><BR></FONT>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
issuance and sale in November 2011 of an aggregate of 8,934,493 shares of our series&nbsp;C preferred stock at a price per share of $2.25 for an aggregate
purchase price of $20.1&nbsp;million; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
automatic conversion of all outstanding shares of our preferred stock, including shares of our series&nbsp;C preferred stock that we issued and sold in
November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering.
<BR><BR></FONT></DD></DL>
</DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on
a pro forma as adjusted basis to give further effect to our issuance and sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in this offering at an assumed initial
public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts
and
commissions and estimated offering expenses payable by us. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Our
capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read
this table
together with "Selected financial data," our financial statements and the related notes appearing at the end of this prospectus and the "Management's discussion and analysis of financial condition and
results of operations" section of this prospectus. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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</FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 As of September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Actual


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>



<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Pro forma


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Pro forma as<BR>
adjusted


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (in thousands, except per share data)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>61,524</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A redeemable convertible preferred stock, $0.0001 par value, 16,000 shares authorized, issued and outstanding, actual; and no shares authorized,
 issued and outstanding, pro forma and pro forma as adjusted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,935</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B redeemable convertible preferred stock, $0.0001 par value, 16,025 shares authorized, issued and outstanding, actual; and no shares authorized,
 issued and outstanding, pro forma and pro forma as adjusted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>31,943</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;C redeemable convertible preferred stock, $0.0001 par value, no shares authorized, issued and outstanding, actual, pro forma and pro forma as
adjusted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock, $0.0001 par value, 45,000 shares authorized and 4,986 shares issued and outstanding<SUP>(1)</SUP>, actual; and 52,961&nbsp;shares authorized
and 51,436&nbsp;shares issued and outstanding, pro forma;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares authorized and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding, pro forma as
adjusted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>822</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>68,799</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deficit accumulated during the development stage</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' (deficit) equity</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,639</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>60,342</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total capitalization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>40,239</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>60,342</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <P style="font-family:times;"><FONT SIZE=1><I>

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  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Common stock issued and outstanding does not include 5,490&nbsp;shares of unvested restricted stock.  </I></FONT></DD></DL>
 </DIV>
 <P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>41 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_da11401_1_42"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Capitalization </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the price range listed on the
cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders' equity (deficit) and total capitalization on a
pro forma as adjusted basis by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains
the same and
after deducting estimated underwriting discounts and commissions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
table above does not include: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1,418,000
shares of our common stock issuable upon the exercise of stock options outstanding as of September&nbsp;30, 2011 at a weighted-average exercise price of
$0.21 per share;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>105,348
additional shares of our common stock available for future issuance as of September&nbsp;30, 2011 under our 2010 equity incentive plan; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock available for future issuance, as of the closing of this offering, under our 2012 stock incentive plan. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>42 </B></FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
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NAME="page_dc11401_1_43"> </A>


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</FONT></P>

<!-- TOC_END -->

<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="dc11401_dilution"> </A>
<A NAME="toc_dc11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Dilution    <BR></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the
difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
historical net tangible book value as of September&nbsp;30, 2011 was $(7.7)&nbsp;million, or $(0.73) per share of our common stock. Historical net tangible book value per share represents the
amount of our total tangible assets less total liabilities, divided by the number of shares of our common stock outstanding. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
pro forma net tangible book value as of September&nbsp;30, 2011 was $60.3&nbsp;million, or $1.18 per share of our common stock. Pro forma net tangible book value per share represents the
amount of our total tangible assets less our total liabilities, divided by the pro forma number of shares of our common stock outstanding after giving effect to our issuance and sale in November 2011
of an aggregate of 8,934,493 shares of our series&nbsp;C preferred stock at a price per share of $2.25 for an aggregate purchase price of $20.1&nbsp;million and the automatic conversion of all
outstanding shares of our preferred stock, including shares of our series&nbsp;C preferred stock that we issued and sold in November 2011, into an aggregate of 40,959,493 shares of our common stock
upon the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>After
giving effect to our issuance and sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in this offering at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the
midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma
net tangible book value as of September&nbsp;30, 2011 would have been $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. This represents an immediate increase in pro forma net tangible
book value per share of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to existing stockholders and immediate dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in pro forma net
tangible book value per share to new investors purchasing common stock in
this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Dilution
per share to new investors is determined by subtracting pro forma net tangible book value per share after this offering from the initial public offering price per share paid by new investors.
The following table illustrates this dilution on a per share basis. </FONT></P>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Assumed initial public offering price per share</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Historical net tangible book value per share as of September&nbsp;30, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(0.73</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Increase attributable to the conversion of outstanding preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1.91</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net tangible book value per share as of September&nbsp;30, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1.18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Increase in net tangible book value per share attributable to new investors</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net tangible book value per share after this offering</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dilution per share to new investors</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>A $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the price range listed on the
cover page of this prospectus, would increase (decrease) our pro forma net tangible book value by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, our pro forma net tangible book value per share by
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and dilution per share to new investors by approximately </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>43 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=46,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=1042288,FOLIO='43',FILE='DISK104:[11ZDM1.11ZDM11401]DC11401A.;11',USER='MSULLIV',CD=';2-NOV-2011;16:18' -->
<A NAME="page_dc11401_1_44"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Dilution </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and
commissions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If
the underwriters exercise their over-allotment option or if any additional shares are issued in connection with outstanding options, you will experience further dilution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
following table summarizes, on a pro forma basis as of September&nbsp;30, 2011, the total number of shares purchased from us, the total consideration paid, or to be paid, and the average price
per share paid, or to be paid, by existing stockholders and by new investors in this offering at an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the
midpoint of the
price range listed on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new
investors purchasing shares in this offering will pay an average price per share substantially higher than our existing stockholders paid. </FONT></P>
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 Shares purchased


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 Total consideration


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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 Average price<BR>
per share


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 Number


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 Percentage


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 Amount


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 Percentage


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Existing stockholders</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>New investors</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
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<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>A $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the price range listed on the
cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million and increase (decrease) the percentage of total
consideration
paid by new investors by approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
table above is based on actual shares of our common stock outstanding as of September&nbsp;30, 2011 and 40,959,493 additional shares of our common stock issuable upon the automatic conversion of
all outstanding shares of our preferred stock, including shares of our series&nbsp;C preferred stock that we issued and sold in November 2011, upon the closing of this offering. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>The
table above excludes: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1,418,000
shares of our common stock issuable upon the exercise of stock options outstanding as of September&nbsp;30, 2011 at a weighted-average exercise price of
$0.21 per share;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>105,348
additional shares of our common stock available for future issuance as of September&nbsp;30, 2011 under our 2010 equity incentive plan; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>additional
 shares of our common stock available for future issuance, as of the closing of this offering, under our 2012 stock incentive plan. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>If
the underwriters exercise their over-allotment option in full, the following will occur: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
percentage of shares of our common stock held by existing stockholders will decrease to approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the total number of shares of our
common stock outstanding after this offering; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
number of shares of our common stock held by new investors will increase to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total number of shares of
our common stock outstanding after this offering. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>44 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="de11401_selected_financial_data"> </A>
<A NAME="toc_de11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Selected financial data    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>You should read the following selected financial data together with our financial statements and the related notes appearing at the
end of this prospectus and the "Management's discussion and analysis of financial condition and results of operations" section of this prospectus. We have derived the statements of operations data for
the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010 and the balance sheet data as of December&nbsp;31, 2010 from our audited financial statements included in this
prospectus. We have derived the statements of operations data for the nine months ended September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011 and
the balance sheet data as of September&nbsp;30, 2011 from our unaudited financial statements included in this prospectus. The unaudited financial data include, in the opinion of our management, all
adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Our historical results
for any prior period are not necessarily indicative of results to be expected in any future period, and our results for any interim period are not necessarily indicative of results to be expected for
a full fiscal year. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:73%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"110%" -->


 </FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="110%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="96pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="100pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="100pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;" --><font style="font-family:ARIAL;">


 Statement of operations data:


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4, 2010<BR>
(inception) to<BR>
December&nbsp;31, 2010



</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months ended<BR>
September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4, 2010<BR>
(inception) to<BR>
September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (in thousands, except per share data)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>400</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,483</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,883</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>384</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,195</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,579</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accretion of preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss applicable to common stockholders</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(786</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,696</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,482</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.26</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.79</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average number of common shares used in net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,976</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,291</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,841</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(0.17</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(0.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average number of common shares used in pro forma net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,638</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,474</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>Pro forma basic and diluted net loss per common share is calculated assuming the automatic conversion of all outstanding shares of our preferred stock,
including shares of our series&nbsp;C preferred </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>45 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=48,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=1000143,FOLIO='45',FILE='DISK104:[11ZDM1.11ZDM11401]DE11401A.;16',USER='MSULLIV',CD=';2-NOV-2011;15:25' -->
<A NAME="page_de11401_1_46"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Selected financial data </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>stock
that we issued and sold in November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
pro forma balance sheet data set forth below gives effect to: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
issuance and sale in November 2011 of an aggregate of 8,934,493 shares of our series&nbsp;C preferred stock at a price per share of $2.25 for an aggregate
purchase price of $20.1&nbsp;million; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
automatic conversion of all outstanding shares of our preferred stock, including shares of our series&nbsp;C preferred stock that we issued and sold in
November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>The
pro forma as adjusted balance sheet data set forth below give further effect to our issuance and sale
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in this offering at an assumed initial public
offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and
commissions and
estimated offering expenses payable by us. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="60pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 As of September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;" --><font style="font-family:ARIAL;">


 Balance sheet data:


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Actual


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Pro forma


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Pro forma<BR>
as adjusted


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (in thousands)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>61,524</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Working capital</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39,419</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>59,522</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>42,364</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>62,467</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Redeemable convertible preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,878</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deficit accumulated during the development stage</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' (deficit) equity</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7,639</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>60,342</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<P style="font-family:times;"><FONT SIZE=2><B>

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<A NAME="toc_dg11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Management's discussion and analysis of financial condition and results of operations    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>You should read the following discussion and analysis of our financial condition and results of operations
together with our financial statements and related notes appearing at the end of this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this
prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should
read the "Risk factors" section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OVERVIEW  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are a biopharmaceutical company focused on discovering and developing proprietary small molecule drugs targeting cancer stem cells in breast and
other cancers along with proprietary companion diagnostics. A cancer stem cell is a particularly aggressive type of tumor cell, resistant to conventional cancer therapy, that we believe is an
underlying cause of tumor recurrence and metastasis. Our scientific co-founders, Robert Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., have made discoveries that link the
epithelial-to-mesenchymal transition, or EMT, to the emergence of cancer stem cells. This transition involves the transformation of one type of cancer cell into a more
aggressive and drug resistant type of cancer cell. Building on these discoveries, our scientific co-founders developed proprietary technology to create a stable population of cancer stem
cells that we use to screen for and identify small molecule compounds that target cancer stem cells. We expect to file an investigational new drug application, or IND, with the U.S. Food and Drug
Administration, or FDA, in late 2012 to initiate a Phase&nbsp;1 clinical trial of our most advanced drug candidate, VS-507. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
commenced active operations in the second half of 2010. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring and developing
our technology, identifying potential product candidates and undertaking preclinical studies of our most advanced product candidates. To date, we have not generated any revenues and have financed our
operations with net proceeds from the private placement of our preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As
of September&nbsp;30, 2011, we had a deficit accumulated during the development stage of $8.5&nbsp;million. Our net loss was $7.7&nbsp;million for the nine months ended September&nbsp;30,
2011, $784,000 for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010 and $8.5&nbsp;million for the period from August&nbsp;4, 2010 (inception) to September&nbsp;30,
2011. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as
we continue the research and development and later initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our
product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, upon the closing of this offering, we
expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.
Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or
eliminate our research and development programs or any future commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>47 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> FINANCIAL OPERATIONS OVERVIEW  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Revenue  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>To date, we have not generated any revenues. Our ability to generate product revenues, which we do not expect will occur for many years, if ever,
will depend heavily on the successful development and eventual commercialization of our product candidates. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Research and development expenses  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Research and development expenses consist of costs associated with our research activities, including our drug discovery efforts, and the development
of our therapeutic product candidates and companion diagnostics. Our research and development expenses consist of: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>employee-related
expenses, including salaries, benefits, travel and stock-based compensation expense;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>external
research and development expenses incurred under arrangements with third parties, such as contract research organizations, or CROs, manufacturing
organizations and consultants, including our scientific advisory board;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>license
fees; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>facilities,
depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold
improvements and equipment, and laboratory and other supplies. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>We
expense research and development cost to operations as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities
as expenses when the service has been performed or when the goods have been received, rather than when the payment is made. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We
use our employee and infrastructure resources across multiple research and development projects. We do not allocate employee-related expenses or depreciation to any particular project. Because all
of our development projects are in preclinical development, we do not track research and development costs by project. The components of our research and development costs are described in more detail
in "&#151;Results of operations." We expect to track specific project costs when product candidates enter toxicology studies to enable the filing of an IND with the FDA. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
anticipate that our research and development expenses will increase significantly in future periods as we increase the scope and rate of our drug discovery efforts and begin costlier development
activities, including clinical trials for our current and additional product candidates in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
most advanced product candidate is the small molecule VS-507. We are currently evaluating VS-507 in preclinical studies as a potential therapy for breast cancer. We expect
to initiate IND-enabling toxicology studies for VS-507 in late 2011. Assuming successful completion of preclinical studies, including IND-enabling toxicology
studies, we expect to file an IND with the FDA in late 2012 to initiate a Phase&nbsp;1 clinical trial of VS-507. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
successful development of our product candidates is highly uncertain. As this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be
necessary to complete development of our product candidates or the period, if any, in which material net cash </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>48 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>inflows
from our product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
scope, rate of progress and expense of our drug discovery efforts and other research and development activities;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
potential benefits of our product candidates over other therapies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to market, commercialize and achieve market acceptance for any of our product candidates that we are developing or may develop in the future;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>clinical
trial results;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
terms and timing of regulatory approvals; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>A
change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that
product candidate. For example, if the FDA or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of
clinical development of a product candidate or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and
time on the completion of clinical development. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> General and administrative expenses  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>General and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation expense, in our
executive, finance and business development functions. Other general and administrative expenses include allocated facility costs and professional fees for legal, patent, investor and public
relations, consulting and accounting services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
anticipate that our general and administrative expenses will increase in future periods to support increases in our research and development activities and as a result of increased headcount,
expanded infrastructure, increased legal, compliance, accounting and investor and public relations expenses associated with being a public company and increased insurance premiums, among other
factors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Interest income  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Prior to September&nbsp;30, 2011, our cash and cash equivalents were invested in non-interest-bearing accounts. As a result, we have
not earned any interest through September&nbsp;30, 2011. We expect interest income to increase in future periods as we invest the proceeds from our series&nbsp;B and series&nbsp;C preferred
stock financings. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Accretion of preferred stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our preferred stock is redeemable beginning in 2016 at its original issue price plus any declared but unpaid dividends upon a specified vote of the
preferred stockholders. Accretion of preferred stock reflects the periodic accretion of issuance costs on our preferred stock to its redemption value. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have
prepared in accordance with U.S. generally accepted </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>accounting
principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure
of contingent assets 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 base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this prospectus. However, we believe that the following accounting
policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Accrued research and development expenses  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing
quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not
yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make
estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our
estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include fees paid to CROs in connection with research
and development activities for which we have not yet been invoiced. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
base our expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct research and development on our behalf. The
financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will
exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed
and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid
accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual
status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Stock-based compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As we continue to expand our headcount, we expect to make additional stock option and restricted stock grants, which will result in additional
stock-based compensation expense. Accordingly, we describe below the methodology we have employed to date in measuring such expenses. Following the consummation of this offering, stock option values
will be determined based on the market price of our common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>50 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>Since
our inception in August 2010, we have applied the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718, </FONT> <FONT SIZE=2><I>Compensation-Stock Compensation</I></FONT><FONT SIZE=2>,
which we refer to as ASC 718. Determining the amount of stock-based compensation to be recorded requires us to develop
estimates of the fair value of stock options as of their grant date. Stock-based compensation expense is recognized ratably over the requisite service period, which in most cases is the vesting period
of the award. Calculating the fair value of stock-based awards requires that we make highly subjective assumptions. We use the Black-Scholes option pricing model to value our stock option awards. Use
of this valuation methodology requires that we make assumptions as to the volatility of our common stock, the expected term of our stock options, the risk free interest rate for a period that
approximates the expected term of our stock options and our expected dividend yield. Because we are a privately-held company with a limited operating history, we utilize data from a
representative group of companies to estimate expected stock price volatility. We selected companies from the biopharmaceutical industry with similar characteristics to us, including early stage of
product development and therapeutic focus. We use the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No.&nbsp;107, </FONT> <FONT SIZE=2><I>Share-Based Payment</I></FONT><FONT SIZE=2>, to calculate
the expected term of stock option grants to employees as we do not have sufficient historical exercise data to provide
a reasonable basis upon which to estimate the expected term of stock options granted to employees. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have
no current intention to pay cash dividends. The risk-free interest rate used for each grant is based on the U.S. Treasury yield curve in effect at the time of grant for instruments with a
similar expected life. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Stock-based
compensation expense associated with stock options granted to employees was insignificant for the period August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, and totaled $7,000
for the nine months ended September&nbsp;30, 2011. As of September&nbsp;30, 2011, we had $169,000 of total unrecognized compensation expense, net of related forfeiture estimates, which we expect
to recognize over a weighted-average remaining vesting period of approximately 3.8&nbsp;years. While our stock-based compensation for stock options granted to employees to date has not been material
to our financial results, we expect the impact to grow in future periods due to the potential increases in the value of our common stock and headcount. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Under
ASC 718, we are required to estimate the level of forfeitures expected to occur and record compensation expense only for those awards that we ultimately expect will vest. Due to the lack of
historical forfeiture activity of our plan, we estimated our forfeiture rate based on data from a representative group of companies with similar characteristics to us. Through September&nbsp;30,
2011, forfeitures have not been material. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
following table sets forth information with respect to stock options granted to employees since August&nbsp;4, 2010 (inception). </FONT></P>
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 Number of shares<BR>
underlying options<BR>
granted


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 Exercise price per<BR>
share


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 Common stock fair<BR>
value per share on<BR>
grant date


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<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>December&nbsp;3, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>235,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>March&nbsp;3, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>75,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>June&nbsp;8, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>280,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>September&nbsp;6, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>403,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.55</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.55</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>September&nbsp;20, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.55</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.55</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>We have granted stock options at exercise prices not less than the estimated fair market value of our common stock. As there was no public market for our common
stock, our board of directors </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>51 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>determined
the estimated fair value of our common stock, taking into consideration various objective and subjective factors, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>external
market conditions affecting the biopharmaceutical industry;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>prices
at which we sold shares of preferred stock to third-party investors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
superior rights and preferences of securities senior to our common stock at the time of each grant;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
historical operating and financial performance;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
status of our research and development efforts;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or sale of our company; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>estimates
and analysis provided by management and contemporaneous valuations. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>For
the period from November&nbsp;30, 2010 through June&nbsp;30, 2011, our board of directors determined the fair value of our common stock to be $0.08 per share. Because of the minimal value of
non-cash assets owned during this period, including the early stage of our research and development efforts under our licensed rights, the superior preferences associated with our
series&nbsp;A preferred stock in relation to our common stock and our focus on start-up activities, we attributed a nominal fair value to our common stock during this time. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
performed contemporaneous valuations of our common stock as of November&nbsp;30, 2010, July&nbsp;31, 2011 and September&nbsp;30, 2011 in accordance with the framework of the 2004 American
Institute of Certified Public Accountants Technical Practice Aid, </FONT><FONT SIZE=2><I>Valuation of Privately-Held-Company Equity Securities Issued as
Compensation</I></FONT><FONT SIZE=2>, or the Practice Aid. Based on the valuation methodology selection criteria set forth in the Practice Aid, with a focus on the early stage of our development as a
company, including the early stage status of our development efforts, very limited operations and the fact that we had an incomplete management team, as of November&nbsp;30, 2010, we determined that
an asset-based approach was the most appropriate method to use to determine the enterprise value of our company. We then allocated the enterprise value using the current value method. We concluded
that this was the most appropriate method since we did not have any projections as of the valuation date due to the early stage of our research and development. As such, an income approach would not
have provided a reliable fair value determination. In addition, as a result of the lack of comparative information available for publicly-traded or privately-held start-up enterprises, and
because any investments in shares of stock are unlikely to be a reliable indicator of fair value at such an early stage, we concluded that the market approach would also not provide a reliable fair
value determination as of this date. The results of this valuation methodology were consistent with our expectations, as we would not have expected any significant value to have been created for the
common stockholders. We concluded that there were no significant transactions affecting our capital structure or significant developments in our research and development which would have indicated
that an update to our valuation was required at dates until after June&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
July 2011, we completed our series&nbsp;B preferred stock financing for total net proceeds of $31.9&nbsp;million and hired our Vice President, Head of Research. Based on the significance of
these transactions, we deemed it appropriate to update the valuation of our common stock as of July&nbsp;31, 2011. For the period from July&nbsp;31, 2011 to September&nbsp;20, 2011, our board of
directors determined the fair value of our common stock to be $0.55 per share. We performed a contemporaneous valuation of our common stock as of July&nbsp;31, 2011 in accordance with the framework
of the Practice Aid. Based on the valuation methodology selection criteria set forth in the Practice Aid and the stage of our </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>52 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>development
as a company as of July&nbsp;31, 2011, we determined that the option pricing method was the most appropriate valuation methodology to estimate the fair value of our common stock. Key
variables in the option pricing method were as follows: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Underlying
equity value&#151;To estimate the value of our total equity, including both common and preferred equity, we utilized the marketable equity value
based on the most recent round of preferred stock financing, our series&nbsp;B preferred stock financing with a price
of $2.00&nbsp;per share, which we believed to be the most indicative of our value. This valuation technique used to estimate the enterprise value of our company is referred to as the reverse
backsolve method.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Volatility&#151;We
estimated volatility based on guideline publicly-traded companies over a 2.0-year period.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Time
to liquidity&#151;We estimated time to a liquidity event based on the projected time to significant clinical development events for our product
candidates that we believed could lead to an IPO or sale. The estimated time to a liquidity event of 2.0&nbsp;years assumed a weighted average timeline of either an IPO or sale. The IPO timeline was
1.0&nbsp;year and the sale timeline was 2.25&nbsp;years. The probability of an IPO was 25% and the probability of a sale was 75%.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Risk-free
interest rate&#151;We determined the risk-free interest rate based on the yield of a U.S. Treasury bill with a maturity date
closest to the estimated time to a liquidity event for our stockholders.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Discounts
for lack of marketability&#151;Because we are a privately-held company, shares of our common stock are highly illiquid and, as such,
warrant a discount in value from their estimated "marketable" price. We estimated the discount factor of 30% for illiquidity using legal guidelines from U.S. Tax Court cases regarding
privately-held business valuations, fundamental business factors and empirical studies on the discount for lack of marketability. We corroborated the discount factor based on the value of
a put option compared to the value of common stock using a Black-Scholes option pricing model. We also considered that our preferred stock has rights that our common stock does not have, including
anti-dilution protection, redemption rights, protective provisions in our certificate of incorporation and rights to participate in future rounds of financing. Our preferred stockholders
have control and influence over the enterprise, which provides them with the optionality over future liquidity, financing and other decisions that the common stock optionholders do not control. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>For
our valuation as of July&nbsp;31, 2011, we assumed a weighted-average two-year time to a liquidity event based on a probability-weighted analysis of the time to a liquidity event under an IPO
scenario and several sale scenarios. Our estimates were supported by our belief that we would have multiple product candidates in clinical trials in mid-2013. At that time, we believed
that an IPO or other liquidity event could occur in anticipation of the availability of those data. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
updated the valuation of our common stock again on September&nbsp;30, 2011, which resulted in a fair value of $1.52 per share. As of September&nbsp;30, 2011, we concluded that a liquidity event
was possible
within six months due to the fact that we had selected investment bankers and initiated the initial process of preparing to file&nbsp;a registration statement for an IPO. We also believed that a
sale was equally likely to occur after the availability of the clinical data from our initial clinical trial, which was still expected within two years of the valuation date. We calculated valuations
using both liquidity event assumptions and equally weighted the results to estimate the fair value of our common stock. We believed that an equal weight applied to both scenarios was appropriate based
upon our assessment of the probability of each scenario occurring, acknowledging market risks and other factors that might impact our ability to complete an IPO. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>In the IPO scenario, we assumed all of our preferred shares would convert into common stock and the present value of the future projected enterprise value was based on the
value of the anticipated series&nbsp;C preferred stock financing at $2.25 per share, which was contemplated as of the valuation date. There was no discount for lack of marketability applied to the
IPO scenario. The estimated time to complete an IPO was six months. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>For
the sale scenario, we utilized the option pricing method and key assumptions were as follows: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Underlying
equity value&#151;To estimate the value of our total equity, including both common and preferred equity, we utilized the marketable equity value
based on the anticipated closing of the series&nbsp;C preferred stock financing, which we believed to be the most indicative of our value. This financing closed in November 2011 and was led by
previously unrelated investors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Volatility&#151;We
estimated volatility based on guideline publicly-traded companies over a 2.25-year period.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Time
to liquidity&#151;We estimated a weighted-average time to a sale event of 2.25&nbsp;years based on the projected time to significant clinical
development events for our product candidates.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Risk-free
interest rate&#151;We determined the risk-free interest rate based on the yield of a U.S. Treasury bill with a maturity date
closest to the estimated time to a sale event for our stockholders.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Discounts
for lack of marketability&#151;Because we are a privately-held company, shares of our common stock are highly illiquid and, as such,
warrant a discount in value from their estimated "marketable" price. We estimated the discount factor of 15% for illiquidity using legal guidelines from U.S. Tax Court cases regarding
privately-held business valuations, fundamental business factors, and empirical studies on the discount for lack of marketability. We corroborated the discount factor based on the value of
a put option compared to the value of common stock using a Black-Scholes option pricing model. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>The
primary reason for the lower fair value per share of our common stock in comparison to the fair value per share of our preferred stock on each valuation date was the value of the superior rights
and preferences associated with the preferred stock, the most significant of which are the liquidation rights held by the preferred stockholders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>There
are significant judgments and estimates inherent in the determination of these valuations. These judgments and estimates include assumptions regarding our future performance, including the
successful completion of our preclinical studies and clinical trials and the time to completing an IPO or sale, as well as the determination of the appropriate valuation methods at each valuation
date. If we had made different assumptions, our stock-based compensation expense could have been different. The foregoing valuation methodologies are not the only methodologies available and they will
not be used to value our common stock once this offering is complete. Accordingly, investors are cautioned not to place undue reliance on the foregoing valuation methodologies as an indicator of our
future stock price. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RESULTS OF OPERATIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We were incorporated on August&nbsp;4, 2010. As a result, our results of operations reflect the period from August&nbsp;4, 2010 (inception) to
December 31, 2010 and the nine month period ended September&nbsp;30, 2011. There is no comparable period for 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>54 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> Discussion of the nine month period ended September&nbsp;30, 2011  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I> Research and development expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses were $5.5&nbsp;million for the nine month period ended September&nbsp;30, 2011. Expenses
during the period included: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Contract
research organization expenses of $2.2&nbsp;million, representing 40% of total research and development expenses during the period, comprised of expenses
for outsourced biology, chemistry and development services.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consulting
fees of $898,000, representing 16% of total research and development expenses during the period, including $352,000 for our scientific advisory board,
$232,000 for recruitment consultants and $106,000 for database consultants.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Payroll
expense of $820,000, representing 15% of total research and development expenses during the period, including salaries, payroll taxes and benefits for our
employees in research and development. We had 11&nbsp;employees in research and development at September&nbsp;30, 2011. Payroll expense also included stock-based compensation expense for employees
of&nbsp;$19,000.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Laboratory
supply expense of $687,000, representing 13% of total research and development expenses during the period.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Non-employee
stock-based compensation expense of $417,000, representing 8% of total research and development expenses during the period, related to stock
options and restricted stock awarded to members of our scientific advisory board.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Occupancy
expense of $327,000, representing 6% of total research and development expenses during the period, which is an allocated portion of rent and other
occupancy costs. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><I> General and administrative expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses were $2.2&nbsp;million for the nine month period ended September&nbsp;30, 2011.
Expenses during the period included: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Payroll
expense of $908,000, representing 42% of total general and administrative expenses during the period, including salaries, payroll taxes and benefits for our
general and administrative employees. Payroll expense included stock-based compensation expense for employees of&nbsp;$3,000.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consulting
fees of $365,000, representing 17% of total general and administrative expenses during the period, including business development, public relations and
finance consultants.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Professional
fee expense of $302,000, representing 14% of total general and administrative expenses during the period, comprised of fees for audit, tax and legal
services, including the reimbursement to the Whitehead Institute of patent costs related to our licenses with the Whitehead Institute.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Non-employee
stock-based compensation expense of $302,000, representing 14% of total general and administrative expenses during the period, related to
restricted stock awarded to our co-founders.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Occupancy
expense of $164,000, representing 7% of total general and administrative expenses during the period, which is an allocated portion of rent and other
occupancy costs.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Travel
expense of $135,000, representing 6% of total general and administrative expenses during the period, including travel, meals, entertainment and conferences. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><I> Accretion of preferred stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We recorded $18,000 of accretion in the nine month period ended September&nbsp;30, 2011 reflecting the periodic accretion of
issuance costs associated with our series A and series B preferred stock. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>55 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> Discussion of the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I> Research and development expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses were $400,000 for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31,
2010. Expenses during the period included: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>License
fee expense of $182,000, representing 46% of total research and development expenses during the period, comprised of fees for our exclusive and
non-exclusive licenses, as well as the fair value of common stock that we issued to the Whitehead Institute in connection with our exclusive license.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consulting
fees of $137,000, representing 34% of total research and development expenses during the period, primarily for our scientific advisory board.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Contract
research organization expenses of $42,000, representing 11% of total research and development expenses during the period, including expenses for outsourced
biology and chemistry.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Non-employee
stock-based compensation expense of $24,000, representing 6% of total research and development expenses during the period, related to stock
options and restricted stock awarded to members of our scientific advisory board.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Laboratory
supply expense of $13,000, representing 3% of total research and development expenses during the period. </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=2><I> General and administrative expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses were $384,000 for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31,
2010. Expenses during the period included: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Professional
fee expense of $182,000, representing 47% of total general and administrative expenses during the period, comprised of fees for audit, tax and legal
services, including the reimbursement to the Whitehead Institute of patent costs related to our exclusive license with the Whitehead Institute.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Payroll
expense of $96,000, representing 25% of total general and administrative expenses during the period, including salaries, payroll taxes and benefits for our
general and administrative employees. Stock-based compensation expense was not material to the financial statements.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Occupancy
expense of $36,000, representing 9% of total general and administrative expenses during the period, which is an allocated portion of rent and other
occupancy costs.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Non-employee
stock-based compensation expense of $28,000, representing 7% of total general and administrative expenses during the period, related to
restricted stock awarded to our co-founders.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consulting
fees of $26,000, representing 7% of total general and administrative expenses during the period, including business development, public relations and
information technology consultants.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Travel
expense of $16,000, representing 4% of total general and administrative expenses during the period, including travel, meals, entertainment and conferences. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><I> Accretion of preferred stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We recorded $2,000 of accretion in the period from August&nbsp;4, 2010 (inception) to December 31, 2010 reflecting the periodic
accretion of issuance costs associated with our series A and series B preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>56 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LIQUIDITY AND CAPITAL RESOURCES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Sources of liquidity  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>To date, we have not generated any revenues. We have financed our operations to date through private placements of our preferred stock. As of
September&nbsp;30, 2011, we had received $47.9&nbsp;million in net proceeds from the issuance of preferred stock. As of September&nbsp;30, 2011, we had cash and cash equivalents totaling
$41.4&nbsp;million. In November 2011, we received proceeds of $20.1&nbsp;million from the issuance of our series&nbsp;C preferred stock. We primarily invest our cash and cash equivalents in a
U.S. Treasury money market fund. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Cash flows  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth the primary sources and uses of cash for each of the periods set forth below. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="96pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="100pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4, 2010<BR>
(inception) to<BR>
December&nbsp;31, 2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months ended<BR>
September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=7 VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash used in operating activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(330</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5,298</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(840</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,922</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43,975</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net increase in cash and cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,584</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37,837</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><I> Operating activities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and favorable changes in the
components of working capital. The significant increase in cash used in operating activities for the nine month period ended September&nbsp;30, 2011 compared to the period from August&nbsp;4, 2010
(inception) to December&nbsp;31, 2010 is due to an increase in research and development expenses as we increased our research and development headcount, increased spending on external research and
development costs and increases in the balance of accounts payable, accrued expenses and deferred rent. In addition, we commenced operations in August 2010 and, as such, the period ended
December&nbsp;31, 2010 reflects only five months of activity. We expect cash used in operating activities to continue to increase for the foreseeable future as we fund our increased research and
development activities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Investing activities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The cash used in investing activities for all periods reflects the purchases of property and equipment. The majority of such purchases in the
nine month period ended September&nbsp;30, 2011 were for laboratory equipment. In addition, during the nine month period ended September&nbsp;30, 2011, investing activities included an $86,000
increase in restricted cash related to a standby letter of credit issued as a security deposit for our facility lease. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Financing activities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The cash provided by financing activities in the nine month period ended September&nbsp;30, 2011 is the result of the sale and issuance of
12,000,000 shares of our series&nbsp;A preferred stock for net proceeds of $12.0&nbsp;million, the sale and issuance of 16,025,000 shares of our series&nbsp;B preferred stock for net proceeds of
$31.9&nbsp;million and $38,000 of net proceeds from the sale of restricted stock to employees. The cash provided by financing activities in the period from August&nbsp;4, 2010 (inception) to
December&nbsp;31, 2010 is primarily the result of the sale and issuance of 4,000,000 shares of our series&nbsp;A preferred stock for net proceeds of $3.9&nbsp;million. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>57 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Funding requirements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>All of our product candidates are still in preclinical development. We expect to continue to incur significant expenses and increasing operating
losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>continue
our research and preclinical development of our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>seek
to identify additional product candidates that target cancer stem cells;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>acquire
or in-license other products and technologies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>initiate
clinical trials for our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>seek
marketing approvals for our product candidates that successfully complete clinical trials;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>ultimately
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>maintain,
expand and protect our intellectual property portfolio;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>hire
additional clinical, quality control and scientific personnel; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>add
operational, financial and management information systems and personnel, including personnel to support our product development and planned future
commercialization efforts. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>We
expect that the net proceeds from this offering, together with our existing cash and cash equivalents, including the $20.1&nbsp;million in proceeds from the issuance and sale of our
series&nbsp;C preferred stock in November&nbsp;2011, will enable us to fund our operating expenses and capital expenditure requirements for at
least&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. We have based this estimate on
assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the
development and commercialization of our product candidates, and the extent to which we may enter into collaborations with third parties for development and commercialization of our product
candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates. Our future capital
requirements will depend on many factors, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
scope, progress, results and costs of compound discovery, preclinical development, laboratory testing and clinical trials for our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
extent to which we acquire or in-license other products and technologies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
costs, timing and outcome of regulatory review of our product candidates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we
receive marketing approval;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>revenue,
if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual
property-related claims; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to establish collaborations on favorable terms, if at all. </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=1><B>58 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>Until
such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic
alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional 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 our
technologies, future revenue streams, research
programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required
to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and
market ourselves. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> CONTRACTUAL OBLIGATIONS AND COMMITMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table summarizes our contractual obligations at September&nbsp;30, 2011. </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="53pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="53pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


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 (in thousands)


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Total


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Remainder<BR>
of 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 2012-2013


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 2014-2015


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Beyond<BR>
2015


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=16 VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating lease obligations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,104</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>86</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>710</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>308</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>License agreements<SUP>(1)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1><I>

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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> As discussed in Note&nbsp;10 to the financial statements appearing at the end of this prospectus, we have executed several agreements to license intellectual property. The license
agreements require us to pay upfront license fees and ongoing annual&nbsp;license maintenance fees, totaling a minimum of $95,000 per year beginning in 2012 up to a maximum amount of $170,000 per
year beginning in 2015, as well as reimburse certain patent costs previously incurred by the licensors. We have not included maintenance fees beyond the remainder of 2011 in the table above since the
minimum annual payments are perpetual and the agreements are cancelable by us at any time upon 90 days' prior written notice to the licensor. Amounts for 2011 were paid prior to September&nbsp;30,
2011.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>Under our exclusive license agreement with the Whitehead Institute, we also have agreed to make milestone payments to the Whitehead Institute upon achieving
various development, regulatory and commercialization milestones. For each licensed product, we agreed to make milestone payments of up to an aggregate of $1,560,000 plus an additional amount for each
subsequent approval of additional indications for a maximum number of licensed products. For each identified product that is not a licensed product, we agreed to make milestone payments of up to an
aggregate of $815,000 plus an additional amount for each subsequent approval of additional indications for a maximum number of identified products. Each type of specified milestone payment is payable
only for each of the maximum number of licensed products and the maximum number of identified products, as the case may be, to achieve the applicable milestone. In addition, a separate milestone
payment is due upon the first commercial sale of each licensed product or identified product that is a diagnostic or prognostic test. A single additional milestone payment is due for the first
issuance of licensed patent rights in the United&nbsp;States, the United Kingdom, France, Germany, Spain or Italy. In addition, we have agreed to pay the Whitehead Institute royalties as a
percentage of net sales of licensed products. The royalty rate is in the low single digits as a percentage of net sales for licensed products that are therapeutics, the mid single digits for licensed
products that are diagnostics or prognostics and less than one percent for identified products. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>59 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Management's discussion and analysis of financial condition and results of operations </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> OFF-BALANCE SHEET ARRANGEMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under
Securities and Exchange Commission rules. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> TAX LOSS CARRYFORWARDS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As of December&nbsp;31, 2010, we had federal net operating loss carryforwards of $570,000 and state net operating loss carryforwards of $578,000,
which are available to reduce future taxable income. We also had federal tax credits of $15,000 and state tax credits of $5,000, which may be used to offset future tax liabilities. The net operating
loss and tax credit carryforwards will expire at various dates through 2030. Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue
Service and state tax authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a
three-year period in excess of 50%, as defined under Sections&nbsp;382 and 383 of the Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax
attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of our company immediately prior to
the ownership change. Subsequent ownership changes may further affect the limitation in future years. At December&nbsp;31, 2010, we recorded a 100% valuation allowance against our net operating loss
and tax credit carryforwards of approximately $320,000, as we believe it is more likely than not that the tax benefits will not be fully realized. In the future, if we determine that a portion or all
of the tax benefits associated with our tax carryforwards will be realized, net income would increase in the period of determination. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are exposed to market risk related to changes in interest rates. We had cash and cash equivalents of $3.6&nbsp;million as of December&nbsp;31,
2010 and $41.4&nbsp;million as of September&nbsp;30, 2011, consisting of cash and money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes
in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available for sale securities are subject to interest rate risk and will
fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change
in interest rates would not have a material effect on the fair market value of our portfolio. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
contract with CROs and contract manufacturers globally. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactions denominated in currencies other
than the functional currency are recorded based on exchange rates at the time such transactions arise. As of September&nbsp;30, 2011, approximately $36,000 of our total liabilities were denominated
in currencies other than the functional currency. As of December&nbsp;31, 2010, all of our liabilities were denominated in our functional currency. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RECENTLY ADOPTED ACCOUNTING STANDARDS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We have not recently adopted any new accounting standards. There are no recently issued accounting standards that have a material impact on us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>60 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="dk11401_business"> </A>
<A NAME="toc_dk11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Business    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OVERVIEW  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are a biopharmaceutical company focused on discovering and developing proprietary small molecule drugs targeting cancer stem cells in breast and
other cancers along with proprietary companion diagnostics. A cancer stem cell is a particularly aggressive type of tumor cell, resistant to conventional cancer therapy, that we believe is an
underlying cause of tumor recurrence and metastasis. Our scientific co-founders, Robert Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., have made discoveries that link the
epithelial-to-mesenchymal transition, or EMT, to the emergence of cancer stem cells. This transition involves the transformation of one type of cancer cell into a more
aggressive and drug resistant type of cancer cell. Building on these discoveries, our scientific co-founders developed proprietary technology to create a stable population of cancer stem
cells that we use to screen for and identify small molecule compounds that target cancer stem cells. We expect to file an investigational new drug application, or IND, with the U.S. Food and Drug
Administration, or FDA, in late 2012 to initiate a Phase&nbsp;1 clinical trial of our most advanced drug candidate, VS-507. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Cancer
is a group of diseases characterized by uncontrolled growth and spread of abnormal cells. The American Cancer Society estimates that in the United States in 2011, approximately
1.6&nbsp;million new cases of cancer will be diagnosed and nearly 600,000 people will die from the disease. Current treatments for cancer include surgery, radiation therapy, chemotherapy, hormone
therapy and targeted therapy. According to estimates by the National Institutes of Health, in the United States in 2010, the direct medical costs of cancer of all types exceeded $100&nbsp;billion.
IMS Health estimates that in the United States in 2010, approximately $22&nbsp;billion was spent on drugs to treat cancer, representing the largest class of drug spending in the United States.
Despite years of intensive research and clinical use, current treatments often fail to cure cancer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
believe that a key reason for the ultimate failure of many current therapies to achieve a durable clinical response may be the presence of cancer stem cells, or CSCs, which are also sometimes
referred to as tumor-initiating cancer cells, within tumors. CSCs have been identified in many types of cancer,
including breast, pancreatic, colon, brain, lung and leukemia. Following many cancer treatments, the tumor can remain with a high percentage of CSCs and become more aggressive and resistant to further
treatment. In addition, patients who relapse often develop metastatic disease in which the cancer spreads to other sites in the body. Tumor metastasis to critical organs is the cause of more than 90%
of cancer deaths. We believe that it is the drug resistance and ability of CSCs to spread to other sites in the body that may be the root causes of these failed therapies. Accordingly, our mission is
to develop drugs targeting CSCs that either in combination with other cancer treatments or alone can kill all of the cells comprising a tumor and, thus, create a durable clinical response. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We
license our EMT technology from the Whitehead Institute for Biomedical Research, an affiliate of the Massachusetts Institute of Technology, or MIT. We also have a first right to negotiate a license
for additional related intellectual property from the Broad Institute, an affiliate of MIT and Harvard University. Using our proprietary technology, we can create a stable population of CSCs in the
laboratory for use in rapid and automated assays, referred to as high-throughput screening, to enable discovery of novel drugs targeting these CSCs. We are using our discovery approach to
identify a pipeline of small molecule compounds with the potential to target CSCs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
most advanced product candidate is the small molecule VS-507. We are currently evaluating VS-507 in preclinical studies as a potential therapy for breast cancer. We believe
that VS-507 may be especially beneficial as a therapeutic in aggressive cancers with a high percentage of CSCs, such as triple negative breast cancer, or TNBC. TNBC is a type of breast
cancer in which a high percentage of CSCs have been identified and that has a poorer prognosis and lower overall survival rate than other </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>61 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Business </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>types
of breast cancer. Using our EMT technology, our scientific co-founders identified VS-507 as a drug candidate for killing breast CSCs. Their research on
VS-507, which included an analysis of the effect of VS-507 on cell lines derived from TNBC, was published in the peer reviewed scientific journal </FONT> <FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2> in 2009. Recently published third-party research
has reported that VS-507's activity may be mediated through the blockade of the
Wnt/beta-catenin cell signaling pathway, a network of proteins that Dr.&nbsp;Weinberg described in 2011 in </FONT><FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2> as critical for the
development and maintenance of CSCs. In mouse models of breast cancer, VS-507 treatment decreased biophysical or biochemical markers, referred to as biomarkers, of CSCs. In contrast,
treatment in the same model with a standard chemotherapeutic agent, paclitaxel, increased biomarkers of CSCs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>An
important element of our business strategy is the development and use of proprietary, companion diagnostics in connection with the development of our therapeutic drug candidates. We plan to use
these diagnostics as part of a personalized medicine approach to identify patients with aggressive cancers that have a high percentage of CSCs, which is the group that we believe will benefit most
from our therapies. We also believe that these diagnostics may be used to monitor patients' progress on therapy and aid physicians' ongoing treatment decisions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR MANAGEMENT TEAM AND SCIENTIFIC CO-FOUNDERS AND ADVISORS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our experienced management team includes our Chief Executive Officer, Chairman and co-founder Christoph Westphal, M.D., Ph.D., our Chief
Operating Officer, Robert Forrester, and our Vice President, Head of Research, Jonathan Pachter, Ph.D. Dr.&nbsp;Westphal has been involved in founding a number of biotechnology companies as chief
executive officer, including Sirtris Pharmaceuticals,&nbsp;Inc., which was acquired by GlaxoSmithKline&nbsp;plc in 2008, as well as Alnylam Pharmaceuticals,&nbsp;Inc. and Momenta
Pharmaceuticals,&nbsp;Inc. Dr.&nbsp;Westphal also co-founded Alnara Pharmaceuticals,&nbsp;Inc., which was acquired by Eli Lilly and&nbsp;Co. in 2010. Mr.&nbsp;Forrester has been
the chief executive officer, chief operating officer and chief financial officer of both private and public life science companies, including Forma Therapeutics,&nbsp;Inc., CombinatoRx,&nbsp;Inc.,
now Zalicus&nbsp;Inc., and Coley Pharmaceutical Group,&nbsp;Inc., which was acquired by Pfizer&nbsp;Inc. in 2007. Dr.&nbsp;Pachter has over 20&nbsp;years of experience in leading the
discovery of small molecule and monoclonal antibody therapeutics for the treatment of cancer, most recently as the Senior Director of Cancer Biology at OSI Pharmaceuticals&nbsp;Inc., which was
acquired by Astellas Pharma&nbsp;Inc. in 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>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 the genetic basis of cancer. Dr.&nbsp;Weinberg discovered the first tumor oncogene, the first tumor suppressor gene, the role of a protein related to the cell
surface receptor HER2 in preclinical studies and the mechanisms underlying the formation of CSCs. Eric Lander, Ph.D., Founding Director of the Broad Institute, Professor of Biology at MIT and
Professor of Systems Biology at Harvard Medical School, played a central role in the Human Genome Project. Piyush Gupta, Ph.D., Member of the Whitehead Institute and Assistant Professor of Biology at
MIT, co-developed with Dr.&nbsp;Lander and Dr.&nbsp;Weinberg our proprietary EMT technology for use in the identification of drugs targeting CSCs and a genetic expression signature,
useful as a biomarker, to monitor the effect of treatment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>62 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Business </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>Our
management team is supported by our scientific advisory board comprised of leading academic and industry scientists. Our scientific advisory board consists of: </FONT></P>
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<TD style="font-family:times;"><FONT SIZE=2>Robert Weinberg, Ph.D.<BR></FONT> <FONT SIZE=2><I>Scientific co-founder</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Founding Member of the Whitehead Institute for Biomedical Research, Professor of Biology at the Massachusetts Institute of Technology and recipient of the 1997 National Medal of&nbsp;Science</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Eric Lander, Ph.D.<BR></FONT> <FONT SIZE=2><I>Scientific co-founder</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Founding Director of the Broad Institute, Professor of Biology at the Massachusetts Institute of Technology and Professor of Systems Biology at Harvard Medical School</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>Piyush Gupta, Ph.D.<BR></FONT> <FONT SIZE=2><I>Scientific co-founder</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Member of the Whitehead Institute for Biomedical Research and Assistant Professor of Biology at the Massachusetts Institute of Technology</FONT></TD>
</TR>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Julian Adams, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>President of Research and Development of Infinity Pharmaceuticals,&nbsp;Inc., former Senior Vice President of Drug Discovery and Development of Millennium Pharmaceuticals,&nbsp;Inc. and co-inventor and co-developer of
Velcade</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>Jos&eacute; Baselga, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Chief of Hematology and Oncology at Massachusetts General Hospital, Associate Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School</FONT></TD>
</TR>
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<TD style="font-family:times;"><BR><FONT SIZE=2>George Daley, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Professor of Hematology and Oncology and Director of the Stem Cell Transplantation Program at Children's Hospital and Professor of Biological Chemistry and Molecular Pharmacology at Harvard Medical School</FONT></TD>
</TR>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Peter Elliott, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Former Senior Vice President and Head of Research and Development of Sirtris Pharmaceuticals,&nbsp;Inc., former Vice President of Phamacology and Drug Development of Millennium Pharmaceuticals,&nbsp;Inc. and
co-developer of Velcade</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Daniel Haber, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School</FONT></TD>
</TR>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Joseph (Yossi) Schlessinger, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Chairman and Professor in the Department of Pharmacology at Yale School of Medicine</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Phillip A. Sharp, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Institute Professor at the David H. Koch Institute for Integrative Cancer Research at the Massachusetts Institute of Technology and recipient of the 1993 Nobel Prize in Medicine and Physiology</FONT></TD>
</TR>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Roger Tung, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>President and Chief Executive Officer of Concert Pharmaceuticals,&nbsp;Inc., former Vice President of Drug Discovery of Vertex Pharmaceuticals,&nbsp;Inc. and co-inventor of Lexiva and Agenerase</FONT></TD>
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<P style="font-family:times;"><FONT SIZE=2><B> Business </B></FONT></P>

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 Scientific advisory board


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<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
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<TD style="font-family:times;"><FONT SIZE=2>Christopher Walsh, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Hamilton Kuhn Professor in the Department of Biological Chemistry and Molecular Pharmacology at Harvard Medical&nbsp;School</FONT></TD>
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<TD style="font-family:times;"><BR><FONT SIZE=2>Eric Winer, M.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Director of the Breast Oncology Center at the Dana Farber Cancer Institute and Professor of Medicine at Harvard Medical School</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2><B> THE PROBLEM  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The cancer death rate in the United States has only decreased modestly since the early 1990s. Cancer remains one of the world's most serious health
problems and is the second most common cause of death in the United States after heart disease. The American Cancer Society estimates that in the United States in 2011, approximately
1.6&nbsp;million new cases of cancer will be diagnosed and nearly 600,000 people will die from the disease. According to estimates by the National Institutes of Health, in the United States in 2010,
the direct medical cost of cancer of all types exceeded $100&nbsp;billion and the cancer type responsible for the highest individual disease costs was breast cancer at $16.5&nbsp;billion. The
following table sets forth the U.S. annual incidence, based on 2011 estimates from the American Cancer Society, and the prevalence, or the number of people in the United States who have been
previously diagnosed with cancer, based on 2010 estimates from the National Cancer Institute, for select cancers in which CSCs have been implicated. </FONT></P>
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<TD WIDTH="107pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="78pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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 Cancer type


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 U.S. annual incidence


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 U.S. prevalence


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=7 VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Breast</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>230,480</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,645,621</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Lung and bronchus</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>221,130</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>373,489</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Colorectal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>141,210</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,110,077</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Leukemia</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>44,600</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>253,350</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pancreatic</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>44,030</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>34,657</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Brain and other nervous system cancers</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,340</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>128,193</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2>For tumors that have not yet metastasized and remain localized to the site of original tumor formation, current treatments for cancer can be effective in
initially reducing tumor burden. However, for many forms of cancer, current treatments lack sufficient efficacy to achieve a durable clinical response. Following initial treatment, the tumor may recur
at the same site or metastasize and spread to other sites in the body. The vast majority of patients who succumb to cancer are killed by tumors that have metastasized. This is illustrated by the
information in the following table, which shows, according to the National Cancer Institute's </FONT><FONT SIZE=2><I>SEER Cancer Statistics Review, 2001-2007</I></FONT><FONT SIZE=2>, the
reduction in five-year survival rate for breast cancer patients based on the stage of the disease at the
time at which the disease is diagnosed. The percentage of patients diagnosed at each stage of disease, referred to as stage distribution, is included below for comparative purposes. </FONT></P>
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 Breast cancer stage at diagnosis


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 Stage distribution<font
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 Five-year relative<BR>
survival rate


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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Localized (confined to primary site)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>60</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>98.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Regional (spread to regional lymph nodes)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>83.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Distant (cancer has metastasized)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> 2% of breast cancer cases were designated as unknown stage.  </I></FONT></DD></DL>
 </DIV>


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<P style="font-family:times;"><FONT SIZE=2>With the application of new technologies and key discoveries, we believe that we are now entering an era of cancer research characterized by a more
sophisticated understanding of the biology of cancer. We believe that the discovery of CSCs and the role that they play in cancer development are important new insights that present the opportunity to
develop more effective treatments. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Epithelial-to-mesenchymal transition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In most solid tumors, the cells that make up the tissue mass have a characteristic epithelial appearance. Epithelial cells generally have a
multi-sided, uniform shape. Epithelial cells also have well-defined contact points with neighboring cells and a strong attachment to the underlying connective tissue that creates a
framework for solid tumors in the body. Epithelial cells generally lack the ability to separate from these connection points to move, invade or metastasize into surrounding tissue or other sites in
the body. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Epithelial
cells can undergo a transformation to a different cell type, called mesenchymal cells, through a process called epithelial-to-mesenchymal transition, or EMT. In
contrast with epithelial cells, mesenchymal cells have an elongated spindle shape, lack orderly contacts with neighboring cells and can survive without contact with a surface or connective tissue. The
EMT process is a series of reprogramming events that normally operates during the development of tissues and organs prior to birth. However, the EMT process also can be appropriated by epithelial
cancer cells that are referred to as carcinoma cells. When epithelial carcinoma cells residing in a solid tumor undergo the EMT process, the resulting mesenchymal cancer cells have the capability to
invade through local barriers and metastasize to other sites in the body. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Another
consequence of epithelial carcinoma cells undergoing the EMT process is that the resulting mesenchymal cancer cells have significantly increased resistance to current cancer treatments.
Retrospective analyses of data from two Phase&nbsp;3 clinical trials in lung cancer, one published in </FONT><FONT SIZE=2><I>Clinical Cancer Research</I></FONT><FONT SIZE=2> in 2005 and the other
presented at the 2009 World Conference on Lung Cancer, revealed that patients with high expression of epithelial biomarkers responded better to the anti-cancer drug Tarceva in terms of
both progression-free survival and overall survival than patients in the same two trials with low levels of epithelial biomarkers in their tumors. These results suggest that the
mesenchymal cancer cell population, which lacks epithelial biomarkers, is resistant to these therapies. These clinical observations are consistent with preclinical studies published in </FONT> <FONT SIZE=2><I>Cancer Research</I></FONT><FONT SIZE=2>
in 2005 reporting that lung cancer cells expressing mesenchymal biomarkers appeared to be resistant to Tarceva and other targeted
anti-cancer agents when transplanted into mice. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Cancer stem cells  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We believe that CSCs, which are sometimes referred to as tumor-initiating cancer cells, are responsible for the initiation, metastasis and recurrence
of many cancers. CSCs have the ability to: </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>move
freely and proliferate without attachment to other cells or surfaces;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>initiate
a tumor;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>self-renew;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>produce
other cancer cell types; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>resist
many current cancer treatments. </FONT></DD></DL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>CSCs
are often characterized by a distinctive set of biomarkers, which we believe may be a key to identifying patients with tumors that are likely to respond to therapies targeting CSCs. </FONT></P>

</UL>
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<UL>

<P style="font-family:times;"><FONT SIZE=2>CSCs
may be more resistant to current cancer treatments than other types of cancer cells. Thus, as illustrated in the figure below, while current treatments may succeed at initially decreasing tumor
burden, they may leave behind a population of CSCs that can regenerate tumors. Therefore, the presence of a mixture of CSCs and other types of cancer cells within a tumor may necessitate a therapeutic
approach combining drugs that can kill both cell populations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g223609.jpg" ALT="GRAPHIC" WIDTH="633" HEIGHT="181">
  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
need to target CSCs may apply across the treatment of a broad range of cancers. CSCs have been isolated and characterized from many types of cancer, including breast, pancreatic, colon, brain,
lung and leukemia. The CSCs isolated from each of these tumor types have been found to confer greater tumor-forming capability when transplanted into mice than other types of cancer cells from the
same tumor. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Several
specific signaling pathways have been implicated in CSC biology. The combined action </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> of the TGF-beta and Wnt signaling
pathways in the formation of CSCs was described by Dr.&nbsp;Weinberg in </FONT><FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2> in 2011. Separately, Focal Adhesion Kinase, a protein which is involved
in cell adhesion and motility, has been found to increase the metastatic capability of breast cancer cells following the EMT process. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>CSCs
from breast cancer have been characterized in several studies. For example, in a study conducted at the Baylor College of Medicine, breast cancer biopsies were taken from patients at the time of
initial diagnosis and again following 12&nbsp;weeks of treatment with docetaxel, a standard cancer chemotherapy widely used to treat breast cancer. The biopsies taken after 12&nbsp;weeks of
treatment showed increased expression of biomarkers for CSCs and an increased number of chemoresistant cells as compared to biopsies taken at the time of initial diagnosis. This result indicates that
the CSC component of the tumor was relatively resistant to the chemotherapy. Moreover, it supports our belief that either a
combination of treatments or a single therapy that can effectively target both CSCs and other types of cancer cells is critical to create a durable clinical response. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR SOLUTION  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Our solution is to discover and develop a next generation of oncology therapeutics targeting cancer stem cells along with companion diagnostics. We
believe that by developing therapeutics that target CSCs we can address the problem of cancer recurrence and metastasis and create a durable clinical response. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
scientific co-founders at the Whitehead Institute and the Broad Institute made discoveries linking the activation of the EMT process in epithelial cancer cells to the emergence of
CSCs. Their studies demonstrated that the EMT process can be activated </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> by forcing a higher level of expression of genes that direct the EMT
process or by eliminating key epithelial proteins. The mesenchymal cancer cells that emerge from this induced EMT process have the hallmarks of CSCs, including tumor-forming </FONT></P>

</UL>

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<UL>
<BR>

<P style="font-family:times;"><FONT SIZE=2>ability
and increased resistance to chemotherapeutic drugs. Our solution utilizes proprietary technology based on the discovery linking the EMT process to the emergence of CSCs. We use this technology
along with high-throughput screening methods to identify drugs targeting CSCs and develop companion diagnostics. To achieve a durable clinical response, we believe that it may be necessary
to kill both CSCs and other types of cancer cells in a tumor, as illustrated in the figure below, either with a combination of current cancer treatments and CSC-targeted drugs or a single
therapeutic found to target both cancer cell populations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g1000752.jpg" ALT="GRAPHIC" WIDTH="633" HEIGHT="190">
  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Our proprietary technology  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A persistent problem in the discovery of drugs targeting CSCs is the difficulty of isolating large numbers of CSCs. Without such large numbers, the
discovery of drugs targeting CSCs using high-throughput screening is extremely difficult. Moreover, when CSCs are isolated, they typically do not remain stable in culture. Instead, over a
short period of time, CSCs convert into other types of cancer cells. To address this problem, our scientific co-founders developed proprietary technology based on the EMT process to create
a stable population of CSCs that are suitable for use in high-throughput screening of small molecule compounds. These stable CSCs are similar to natural CSCs in that they are drug
resistant and capable of forming new tumors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
license our EMT technology from the Whitehead Institute. Through September&nbsp;30, 2011, we and scientists at the Whitehead Institute and the Broad Institute had used our technology and
high-throughput screening methods to evaluate the ability of over 300,000 compounds to kill CSCs. We hold exclusive license rights to compounds and uses identified under our agreement with the
Whitehead Institute and a right of first negotiation to compounds identified under our agreement with the Broad Institute. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>To
identify compounds that are selective for CSCs, we grow cancer non-stem cells in the laboratory and then induce the EMT process to create a stable population of CSCs. As illustrated in
the figure below, we then screen compounds to assess their ability to kill the CSCs. Because these CSCs are stable in culture, the screening process can be conducted using high-throughput
technology on a large number and wide variety of small molecule compound libraries. These compound libraries include new chemical entities, or NCEs, approved drugs and compounds that are in
preclinical and clinical development. We then profile the compounds that are identified as selective for CSCs using additional assays to identify suitable clinical candidates. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g162751.jpg" ALT="GRAPHIC" WIDTH="633" HEIGHT="103">
  </B></FONT></P>

</UL>
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<P style="font-family:times;"><FONT SIZE=2><B> Business  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> Biomarkers and diagnostics  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Because of the high level of toxicity of traditional chemotherapies and the variability in response of tumors to these treatments, it is critically
important to get the right cancer drug to the right patient. As a result, the oncology field has been at the forefront of developing diagnostics to select patients who may benefit from specific
therapies, which is sometimes referred to as personalized medicine. We plan to build on the methods incorporated in our EMT technology to develop diagnostics designed to enhance our ability to deliver
the right drug to the right patient. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
particular, we are identifying specific protein and gene biomarkers that are either present or conspicuously absent in CSCs. We are also developing panels of multiple biomarkers, which we believe
may be more effective at identifying CSCs than individual biomarkers alone. We believe that our diagnostics will enable us to identify patients with aggressive cancers that have a high percentage of
CSCs. We further believe that these patients are the most likely to benefit from our drug candidates. By screening to identify these patients, we expect to be able to select appropriate patients for
enrollment in our clinical trials and ultimately, if we obtain marketing approval, patients who are likely to respond to our therapies. We also plan to use these diagnostics to measure the selective
killing of CSCs by our drug candidates as one of the ways of determining their efficacy. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
expect that our use of proprietary diagnostics may accelerate the clinical development process for our drug candidates by enabling smaller, targeted trials. We believe that use of these diagnostics
may provide early, objective signals of drug activity to guide us to optimal dosing and the sequencing of agents more quickly. We also believe that this approach may ultimately enable physicians to
identify patients who are likely to benefit most from these therapies and make better clinical decisions during therapy. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
are working on companion diagnostics for our therapeutic programs based on both in-licensed and internally developed technology and science. We believe that augmenting our internal
capabilities with external collaborations with experienced third parties can reduce development risk and accelerate our progress in this field. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR STRATEGY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We believe that a key reason for the failure of many current cancer treatments is that they fail to kill CSCs, which we believe are responsible for
the initiation, metastasis and recurrence of many cancers. Our goal is to build a leading biopharmaceutical company focused on
the discovery, development and, ultimately, commercialization of novel drugs and companion diagnostics targeting CSCs. Key elements of our strategy to achieve this goal are: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Continue to screen and identify small molecules that target CSCs.</I></FONT><FONT SIZE=2> We plan to use our proprietary EMT technology and
high-throughput screening methods to identify additional compounds that target CSCs. We also plan to further optimize these agents through medicinal chemistry as necessary to create drug
candidates.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>In-license rights to additional compounds to expand our pipeline of candidates that target CSCs.</I></FONT><FONT SIZE=2> We plan
to pursue the acquisition or in-license from third parties of rights to additional compounds that target CSCs, including compounds that are in preclinical and clinical development. We
believe that our approach of identifying drug candidates from external sources at various stages of development to supplement our internal programs may allow us to initiate clinical development of a
diverse pipeline of compounds more quickly than if we were to focus solely on internally developed NCEs. </FONT></DD></DL>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Rapidly advance our drug candidates into clinical development.</I></FONT><FONT SIZE=2> We expect to file an IND with the FDA in late 2012 to
initiate a Phase&nbsp;1 clinical trial of our most advanced drug candidate, VS-507. Our goal is to initiate clinical development of a number of additional therapeutic candidates over the
next several years.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Develop diagnostics for therapeutic products targeting CSCs.</I></FONT><FONT SIZE=2> We plan to develop companion diagnostic products to
support our therapeutic product candidates. We believe that use of these diagnostics may aid in the selection of patients for enrollment in our clinical trials and, if we obtain marketing approval,
patients who are most likely to benefit from therapy with our drugs. We also believe that these diagnostics may be used to monitor patients' progress on therapy and aid physicians' ongoing treatment
decisions.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Collaborate selectively to augment and accelerate development and commercialization.</I></FONT><FONT SIZE=2> We may seek third-party
collaborators for the development and commercialization of our product candidates. In particular, we may enter into third-party arrangements for target oncology indications in which our potential
collaborator has particular expertise or for which we need access to additional research, development or commercialization resources.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Maintain scientific leadership in the CSC field.</I></FONT><FONT SIZE=2> We plan to continue to conduct research in the field of EMT and CSCs
to further our understanding of the underlying biology of cancer progression and metastasis. We also plan to continue fostering relationships with top scientific advisors, researchers and physicians.
We believe that investing in the recruitment of exceptional advisors, employees and management is critical to leadership in the CSC field. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> OUR PRODUCT CANDIDATES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Using our proprietary technology and high-throughput screening methods, we are evaluating compounds for their activity in CSCs in a way
that we believe has not been previously possible. We are focused on the discovery and development of small molecules to expedite the path to human clinical trials and to allow flexibility in the
design of molecules for optimized efficacy and safety regardless of the route of administration. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> VS-507  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our most advanced product candidate is the small molecule VS-507. We are currently evaluating VS-507 in preclinical studies
as a potential therapy for breast cancer. Because we believe that VS-507 may be especially beneficial as a therapeutic in triple negative breast cancer, or TNBC, we are pursuing TNBC as
our first clinical indication. We believe that VS-507 targets the CSCs that have been implicated in aggressive cancer, metastases and chemotherapeutic resistance. Our scientific
co-founders identified VS-507 using the proprietary technology that we license from the Whitehead Institute and published the results in the peer reviewed scientific journal </FONT> <FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2> in 2009. We hold an
exclusive license from the Whitehead Institute for use of VS-507 in treating cancer. We expect to file an IND with
the FDA in late 2012 to initiate a Phase&nbsp;1 clinical trial of VS-507. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
believe VS-507 targets CSCs by disrupting signaling inside these cells. A group of scientific researchers recently reported in the </FONT><FONT SIZE=2><I>Proceedings of the National
Academy of Sciences of the United States of America</I></FONT><FONT SIZE=2>, or </FONT><FONT SIZE=2><I>PNAS</I></FONT><FONT SIZE=2>, that VS-507's activity may be mediated through the
blockade of the Wnt/beta-catenin cell signaling pathway. Numerous research reports, including a 2011 paper published in </FONT><FONT SIZE=2><I>Cell</I></FONT><FONT SIZE=2> by our
scientific co-founder Robert Weinberg, describe a critical role of the Wnt/beta-catenin signaling pathway in the development and maintenance of CSCs. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>69 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Wnts
are a family of proteins that bind to receptor proteins, called Frizzled receptors, on the tumor cell surface. We believe that blocking Wnt function could dramatically impair survival and growth
of CSCs. However, Wnt signaling is extremely complex, involving 19 different Wnt proteins stimulating through 10 different Frizzled receptors. While it may be possible to develop a small molecule or
antibody that can block binding of one or perhaps a few Wnts to their receptors, such a drug likely would not effectively eliminate CSCs because other Wnt and Frizzled proteins that remain unblocked
would be sufficient to maintain CSC function. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A
potential breakthrough solution to this problem has come through the identification of the LRP6 protein, which interacts with multiple Wnt proteins and appears to be necessary for the development
and maintenance of CSCs. LRP6 may represent a single common point of the Wnt system that can be targeted to kill CSCs. In the </FONT><FONT SIZE=2><I>PNAS</I></FONT><FONT SIZE=2> study referenced
above, VS-507 decreased the levels of LRP6 protein </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> and blocked the ability of Wnt proteins to stimulate beta-catenin, a
signaling protein that regulates genes responsible for CSC function. We believe this disruption of the Wnt/beta-catenin signaling pathway is responsible for the inhibitory effects of
VS-507 on CSCs that we have observed in preclinical studies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Breast cancer  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The National Cancer Institute estimated that in January 2008 there were approximately 2.6&nbsp;million women in the United States with a history of
breast cancer. Breast cancer is currently the second most frequently diagnosed and the second most deadly cancer among women in the United States. The American Cancer Society estimates that in the
United States in 2011, approximately 230,500 new cases of invasive breast cancer will be diagnosed in women and approximately 39,500 women will die from the disease. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Breast
cancers can be segregated into subtypes based upon the positive presence of three protein receptors: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>estrogen
receptor, or ER;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>progesterone
receptor, or PR; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>human
epidermal growth factor receptor 2, or HER2. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>TNBC
is a type of breast cancer that does not express any of these three receptors. According to results from a population-based study of the California Cancer Registry published by the American
Cancer Society in 2007, approximately 15% of all breast cancers were classified as TNBC. In comparison with other breast cancers, TNBC tends to grow faster and has a higher rate of metastases.
Furthermore, TNBC tends to recur more often than other subtypes of breast cancer. Patients with TNBC generally have a poorer prognosis and lower overall survival rate than patients with breast cancers
that are positive for the hormone receptors ER and PR. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
believe that the natural disease progression of TNBC exhibits the key hallmarks of CSCs. Specifically, we believe that: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>TNBC
is initially responsive to chemotherapy because chemotherapy kills the majority of cancer cells, but not the CSCs.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>TNBC
returns more often than other types of breast cancer in part because there are CSCs that are not killed by current cancer treatments.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
site of recurrence is often at another place in the body than the original tumor because the CSCs not killed are able to metastasize.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
recurring tumor may be resistant to therapy because it contains a high percentage of CSCs. </FONT></DD></DL>

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<P style="font-family:times;"><FONT SIZE=2>We believe that VS-507 may be especially beneficial as a therapeutic for the treatment of TNBC, in particular for the subset of TNBC patients whose tumors are
classified as claudin-low. Claudin-low TNBC patients have tumors containing a low level of protein biomarkers called claudins. Claudin-low tumors are highly
aggressive, are resistant to treatment and have a high percentage of CSCs relative to other breast cancer types. The prognosis for patients with claudin-low TNBC is poor. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Current treatment of breast cancer  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Surgery, radiation therapy, targeted therapy, hormone therapy and combinations of conventional chemotherapy are often used to treat breast cancer.
However, these therapies carry significant side effects and frequently do not result in a durable clinical response, especially for patients with TNBC. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
choice of cancer drugs used to treat breast cancer is guided by clinical classification of the tumor as ER positive or negative, PR positive or negative and HER2 positive or negative. The
presence, absence or combination of these biomarkers in patient tumors informs the selection of prescribed drugs, which include the anti-estrogen therapies Tamoxifen and aromatase
inhibitors, as well as agents that directly target HER2, such as Herceptin and Tykerb. These treatments may slow or stop cancer growth and are currently considered the most successful treatments for
breast cancer. However, because TNBC patients are negative for ER, PR and HER2, the treatment options for these patients are limited. In particular, the targeted therapies, including Herceptin, Tykerb
and anti-estrogen treatments, are not effective for these patients. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Combinations
of conventional chemotherapy work 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, they kill cancer cells because cancer cells generally grow more rapidly than normal cells and, as a result, are relatively more affected by the chemotherapy than
normal cells. Because CSCs exhibit mechanisms of resistance, including a slower rate of growth than other cancer cells, they are often not susceptible to conventional chemotherapy. As a result, the
treatments may succeed at initially decreasing tumor burden but ultimately fail to kill the CSCs. For example, in a study conducted at Baylor College of Medicine, in which biopsies were taken from
breast cancer patients both before and after conventional chemotherapy treatment, the percentage of CSCs increased over the 12-week treatment period, indicating the survival of these
cells. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If
tumors recur, which happens more often in TNBC than other breast cancers, further therapy with conventional chemotherapy is generally palliative, not curative, as the CSCs are able to metastasize
and spread to other sites in the body. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Preclinical development  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are conducting a comprehensive preclinical program to study VS-507 as a potential treatment for breast cancer. Key results of this
program to date, based on experiments conducted by our scientific co-founders, are summarized below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Laboratory studies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The effect of VS-507 on CSCs as compared to other cancer cells was evaluated </FONT><FONT SIZE=2><I>in
vitro</I></FONT><FONT SIZE=2>. We believe that a biomarker useful for identifying breast CSCs is the expression ratio of the cell surface proteins CD44 to CD24, which can be measured for each
individual cell using a method known as flow cytometry. Using this method, the amount of each protein is measured on the cell surface and the number of CSCs in a cell culture is determined by
quantifying cell populations based on their expression of CD44 and CD24. As originally reported in </FONT><FONT SIZE=2><I>PNAS</I></FONT><FONT SIZE=2> in 2003, breast CSCs express high levels of CD44
and low levels of CD24 relative to other types of breast cancer cells. This differential expression is represented in the figure below as an increase in the shading in the top left portion of the flow
cytometry plot. Treatment of a breast cancer cell line containing CSCs with VS-507 resulted in a decrease in the population of CSCs compared to the placebo control. In contrast, </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>71 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>treatment
with paclitaxel resulted in an increase in the population of CSCs compared to the placebo control. We believe that the opposing actions of VS-507 and paclitaxel are due to a
selective effect of VS-507 on the killing of CSCs not observed with paclitaxel treatment. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I> Gene expression analysis.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Opposing effects of VS-507 and paclitaxel also were shown by gene expression analysis. Human breast cancer cells were treated
in culture with either VS-507 or paclitaxel for one week and then incubated in the absence of drug for three weeks prior to analysis. The two populations were subjected to comparative
global gene expression analysis, which can identify the genes that have the greatest differential change in expression in response to treatment. The panel of genes exhibiting the greatest differential
change in this analysis comprise a gene expression signature that may be used for the identification of CSCs. In this
experiment, VS-507 and paclitaxel had opposing actions on biomarkers of CSCs and genes known to be commonly expressed in epithelial tissue types. Unlike treatment with paclitaxel,
treatment with VS-507 resulted in the loss of expression of CSC-associated genes. Expression of these genes is correlated with poor-prognosis tumors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Mouse models of breast cancer.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The functional presence of CSCs was assessed by evaluating </FONT><FONT SIZE=2><I>in vivo</I></FONT><FONT SIZE=2> tumor-initiating,
or tumor-forming, ability after chemical compound treatment. In these experiments, a human breast cancer cell line containing a mixture of CSCs and other cancer cells was treated with
VS-507, paclitaxel or a placebo control </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> for seven days and expanded in culture for at least 14&nbsp;days in the absence of
treatment. The cells were then injected into mice. As shown in the figure below, treatment of these cells with VS-507 resulted in the formation of tumors in fewer mice than treatment with
paclitaxel. These findings suggest that CSCs within breast cancer cell populations may be resistant to paclitaxel but sensitive to treatment with VS-507. </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>72 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I> Mouse model of metastatic breast cancer.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To specifically evaluate the effects of a therapeutic compound on the metastatic potential of cells following treatment,
murine breast cancer cells treated </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> with VS-507, paclitaxel or a placebo control were injected into the tail vein of mice and the
number of metastases that subsequently appeared in the lungs was measured. After three weeks of growth of these cells </FONT><FONT SIZE=2><I>in vivo</I></FONT><FONT SIZE=2>, mice injected with cells
that had been treated with VS-507 displayed a four-fold reduction in metastatic burden compared to the placebo control while, in contrast, mice injected with cells that had
been treated with paclitaxel displayed a two-fold increase in metastatic burden compared to the placebo control. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> VS-507 clinical development plan  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We are developing VS-507 as an anti-cancer drug for the treatment of breast cancer, initially TNBC, and other cancers. To
enhance the therapeutic benefit, we may also use VS-507 in combination with existing therapies in an effort to target both the CSCs and other types of cancer cells. We are developing novel
formulations of VS-507, which we may use in our clinical development program. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Assuming
successful completion of preclinical studies, we anticipate filing an IND with the FDA to initiate clinical trials of VS-507. If this application is accepted, we anticipate
initiating a dose escalation portion of a Phase&nbsp;1 clinical trial in patients with advanced solid tumors. The dose escalation portion of the Phase&nbsp;1 clinical trial would be designed to
determine the maximum tolerated dose of VS-507. We also plan to assess safety and tolerability of VS-507 in this portion of the trial. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Upon
identification of the maximum tolerated dose, we plan to enroll an expanded cohort of breast cancer patients to further assess the safety of VS-507 and evaluate efficacy on a
preliminary basis in accordance with Response Criteria in Solid Tumors, or RECIST, measurement guidelines, and based on the presence of CSC-specific biomarkers. RECIST has traditionally
been used as a standard measure of activity in clinical trials. However, because RECIST is based on gross changes in the size of tumor lesions of more than 30%, it is possible that changes in the
tumor burden following selective targeting of CSCs in a single-agent, maximum-tolerated-dose study will not be detected using RECIST. As a result, we believe that sensitive
CSC-specific biomarkers may be useful in conjunction with RECIST to quantify the effect of VS-507 on CSCs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> VS-507 companion diagnostic  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We intend to incorporate CSC-specific biomarkers into a VS-507 companion diagnostic for use in identifying patients whose
tumors have a high percentage of CSCs and are likely to benefit from </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>73 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>treatment
with VS-507. We may use this information to aid in the selection of patients for late stage clinical trials. We also plan to utilize this diagnostic to measure the effect that
VS-507 has on CSCs in a tumor. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NEW CHEMICAL ENTITIES (NCEs)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We have initiated NCE programs on more than 10 series of chemical compounds identified using our proprietary EMT technology along with
high-throughput screening methods. In addition, we have synthesized several drug candidates that are chemically similar to VS-507 and are currently optimizing their activity in
blocking the Wnt/beta-catenin signaling pathway and CSC survival. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
evaluate the activity of chemical compounds </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> by measuring their potency and selectivity against CSCs. In general, the more potent a drug is,
the lower the dose required for a therapeutic effect. In an </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> assessment of cell proliferation, one of the series of NCE compounds that we have
identified has exhibited potent activity and greater than 10-fold preferential effect, or selectivity, for CSCs as compared to other types of cancer cells. A second series of compounds has
shown potent activity and greater than 50-fold selectivity for killing of CSCs compared to its effects on other types of cancer cells. Compounds from our NCE programs also have
demonstrated preclinical activity in a broad range of cancer cells, including breast cancer cell lines derived from TNBC tumors in which a high percentage of CSCs have been identified. We are
currently evaluating additional proprietary product candidates from our NCE programs in preclinical studies for their use in breast and other cancers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> INTELLECTUAL PROPERTY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We aggressively strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining patents
intended to cover our products and compositions, their methods of use and processes for their manufacture, as well as our diagnostic, biomarker, patient selection and drug discovery technologies and
any other inventions that are commercially important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not
consider appropriate for, patent protection. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
success will depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our
business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We
also rely on know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
seek to obtain domestic and international patent protection, and endeavor to promptly file patent applications for new commercially valuable inventions. We license a portfolio of patent
applications owned by MIT and the Whitehead Institute. As of September&nbsp;30, 2011, we hold licenses to three pending U.S. patent applications, as well as foreign counterparts to these patent
applications. Of these licensed patent applications, we license one on an exclusive basis and two on a non-exclusive basis. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
patent application that we license on an exclusive basis includes claims covering: methods of identifying compounds that inhibit the growth or survival of CSCs, methods of identifying CSCs and
methods of treating cancer, including methods of selecting courses of treatment for cancer therapy based, for example, on the presence of a biomarker. The application also includes claims to methods
of using certain compounds, identified for example by the claimed screening technology, in the treatment of cancer. Any U.S. or EU patents that may issue from this application would have a statutory
expiration date in 2029. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>74 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>The
two patent applications that we license on a non-exclusive basis include claims covering: additional methods of identifying CSCs, </FONT><FONT SIZE=2><I>in
vitro</I></FONT><FONT SIZE=2> methods of creating CSCs, for example through activation of the EMT process, progenitor cells and uses for those cells, methods of determining the metastatic potential of
a tumor and methods of diagnosing, preventing and treating cancer metastasis. Any U.S. patents that may issue from this application would have a statutory expiration date in 2026. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We
have an agreement with the Broad Institute, which grants us under certain circumstances the first right to negotiate a license for intellectual property. This intellectual property includes patent
applications and patents covering the use of biomarkers related to the EMT process. This intellectual property also includes compounds that can be used for treatment of cancer. An example is a
compound that is identified by screening the effects of compounds on CSCs, notably CSCs created through the EMT process. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in
part, by confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by
maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems,
agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by
competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in
their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LICENSES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Whitehead Institute for Biomedical Research  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Exclusive license agreement  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In October 2010, we entered into an exclusive license agreement with the Whitehead Institute, both on its own behalf and as sole and exclusive agent
of MIT. Under the license agreement, we acquired an exclusive, royalty-bearing, worldwide license under patent rights owned by the Whitehead Institute and MIT to develop, make, use and sell products
covered by the licensed patent rights, including VS-507 for use in treating cancer, and to develop and perform licensed processes, in each case, for all human therapeutic, prognostic and
diagnostic uses. These exclusive licensed patent rights are described in more detail above under "Intellectual Property." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
are required to use commercially reasonable efforts to develop and commercialize licensed products under the agreement. In particular, we are required to fulfill specific development and regulatory
milestones by particular dates and, during each calendar year, either spend a specified amount for research and development, actively conduct one or more clinical trials for a licensed product or a
product identified using a licensed process that does not constitute a licensed product, which we refer to as an identified product, prepare, file or pursue a filed application for regulatory approval
of a licensed product or an identified product, or launch or sell a licensed product or identified product. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Under
the agreement, we paid the Whitehead Institute an upfront license fee, reimbursed patent related fees and costs incurred by the Whitehead Institute and MIT and issued 583,333 shares of our
common stock to the Whitehead Institute and entities and individuals affiliated with the Whitehead Institute. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
also agreed to pay the Whitehead Institute annual license maintenance fees, milestone payments, royalties as a percentage of net sales and a percentage of sublicense income that we receive. Annual
license maintenance fees are creditable against royalties, which are described below, earned during the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>same
calendar year. Milestone payments are triggered upon the achievement of specified development, regulatory and commercialization milestones and are not creditable against the royalties described
below. For each licensed product, we agreed to make milestone payments of up to an aggregate of $1,560,000 plus an additional amount for each subsequent approval of additional indications for a
maximum number of licensed products. For each identified product that is not a licensed product, we agreed to make milestone payments of up to an aggregate of $815,000 plus an additional amount for
each subsequent approval of additional indications for a maximum number of identified products. Each type of specified milestone payment is payable only for each of the maximum number of licensed
products and the maximum number of identified products, as the case may be, to achieve the applicable milestone. In addition, a separate milestone payment is due upon the first commercial sale of each
licensed product or identified product that is a diagnostic or prognostic test. A single additional milestone payment is due for the first issuance of licensed patent rights in the United States, the
United Kingdom, France, Germany, Spain or Italy. The royalty rate is in the low single digits as a percentage of net sales for licensed products that are therapeutics, the mid single digits for
licensed products that are diagnostics or prognostics and less than one percent for identified products. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
Whitehead Institute and MIT retain the right to, and may grant licenses to other academic and non-profit institutions for the right to, practice the licensed patent rights for
research, teaching and educational purposes. The Whitehead Institute, MIT or any such other institution could seek to license to third parties any intellectual property rights that it discovers using
the licensed patent rights while pursuing these purposes. Under the agreement, we have a right, subject to the Whitehead Institute's obligations under third party research funding agreements, to
negotiate a license for any compounds identified prior to a specified date in the Whitehead Institute's laboratory run by Dr.&nbsp;Weinberg that selectively target CSCs generated by induction
through the EMT process. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>After
a specified period of time, if a third party requests to sublicense the patent rights for a product or process that is not directly competitive with our products or processes, we must enter into
good-faith negotiations to grant a sublicense for such proposed product or process. If we do not grant a sublicense within a specified period of time after receiving a written request, the
Whitehead Institute may grant a license to the third party and our rights in the field of use of such sublicense will terminate. Additionally, after a specified period of time, if we are not actively
conducting high-throughput screening using the licensed patent rights to identify product candidates, then, except for any rights directed to uses that we are actively developing, the
Whitehead Institute may convert our license to the licensed patent rights from exclusive to nonexclusive. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
have the right to terminate the agreement for any reason upon at least 90&nbsp;days' prior written notice. The Whitehead Institute has the right to terminate the agreement if we and all of our
sublicensees cease to carry on business related to the agreement for a specified period of time, we fail
to pay any amounts due and payable under the agreement to the Whitehead Institute, subject to a grace period, we materially breach the agreement and fail to cure such breach within a specified grace
period or we or a sublicensee challenge the licensed patent rights in a legal or administrative proceeding. The agreement otherwise terminates upon the expiration or abandonment of all licensed
patents and patent applications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Non-exclusive license agreement  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In October 2010, we entered into a separate non-exclusive license agreement with the Whitehead Institute under which we acquired a
non-exclusive, worldwide license to patent rights owned by the Whitehead Institute for our internal research purposes, including research as part of a program to develop and commercialize
small molecules or biologic molecules as pharmaceutical products. These non-exclusive licensed patent rights are described in more detail above under "Intellectual Property." </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Under
the agreement, we paid the Whitehead Institute upfront license fees. We also are obligated to pay the Whitehead Institute an annual license maintenance fee beginning in 2012. We have the right
to terminate the agreement for any reason upon at least 90&nbsp;days' prior written notice. The Whitehead Institute has the right to terminate the agreement if we cease to carry on business related
to the agreement for a period in excess of six months, we fail to pay any amounts due and payable under the agreement to the Whitehead Institute, subject to a grace period, we materially breach the
agreement and fail to cure such breach within a specified grace period or we challenge the licensed patent rights in a legal or administrative proceeding. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Broad Institute of MIT and Harvard  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In October 2010, the Broad Institute granted to us the first right to negotiate a license in good faith for specified intellectual property owned by
the Broad Institute if we have not breached the terms of the exclusive license agreement with the Whitehead Institute described above. Following written notice of the availability of such intellectual
property for licensing by the Broad Institute to us, the Broad Institute has agreed not to negotiate with any other party during our right of first negotiation period. If we and the Broad Institute
are unable to negotiate a license within such period, the Broad Institute may then offer the intellectual property for licensing to other parties.
The intellectual property subject to this right of first negotiation is described in more detail above under "Intellectual Property." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> COMPETITION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different
sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product
candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>There
are other companies working to develop therapies that target CSCs. These companies include divisions of large pharmaceutical companies including Astellas Pharma&nbsp;Inc., Sanofi-Aventis
U.S.&nbsp;LLC, GlaxoSmithKline&nbsp;plc and others. There are also biotechnology companies of various sizes that are developing therapies against CSCs, including OncoMed
Pharmaceuticals,&nbsp;Inc., Boston Biomedical&nbsp;Inc. and Stemline Therapeutics,&nbsp;Inc. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Many
of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining
regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic 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 and establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics
in guiding the use of related therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more
convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for
ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers
or other third-party payors seeking to encourage the use of generic products. There are many generic products currently on the market for the indications that we are pursuing, and additional products
are expected to become available on a generic basis over the coming years. If our therapeutic product candidates are approved, we expect that they will be priced at a significant premium over
competitive generic products. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
most common methods of treating patients with cancer are surgery, radiation and drug therapy, including chemotherapy, hormone therapy and targeted drug therapy. There are a variety of available
drug therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. While our product candidates may compete with many existing drug and other
therapies, to the extent they are ultimately used in combination with or as an adjunct to these therapies, our product candidates will not be competitive with them. Some of the currently approved drug
therapies are branded and subject to patent protection, and others are available on a generic basis. Many of these approved drugs are well established therapies and are widely accepted by physicians,
patients and third-party payors. In general, although there has been considerable progress over the past few decades in the treatment of cancer and the currently marketed therapies provide benefits to
many patients, these therapies all are limited to some extent in their efficacy and frequency of adverse events, and none of them are successful in treating all patients. As a result, the level of
morbidity and mortality from cancer remains high. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition to currently marketed therapies, there are also a number of products in late stage clinical development to treat cancer. These products in development may provide efficacy, safety,
convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain market
approval. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> MANUFACTURING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to rely,
on third parties for the manufacture of our product candidates and any products that we may develop, other than small amounts of compounds that we may synthesize ourselves for preclinical testing. To
date, we have obtained starting materials for our supply of the bulk drug substance for our product candidates from one third-party manufacturer. We obtain our supplies from this manufacturer on a
purchase order basis and do not have a long-term supply arrangement in place. We do not currently have arrangements in place for redundant supply or a second source for bulk drug
substance. If our current third-party manufacturer should become unavailable to us for any reason, we believe that there
are several potential replacements, although we might incur some delay in identifying and qualifying such replacements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>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 and reasonable cost of their starting materials. We expect to continue to develop drug candidates that can be produced cost-effectively at third-party
manufacturing facilities. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> GOVERNMENT REGULATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things,
the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing,
post-approval monitoring and reporting, import and export of pharmaceutical products, such as those we are developing. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> United States drug approval process  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health Service Act and implementing
regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of
substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may
subject an applicant to a variety of administrative or judicial sanctions, such as the FDA's refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance
of warning letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement of
profits or civil or criminal penalties. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
process required by the FDA before a drug may be marketed in the United States generally involves the following: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>completion
of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA's good laboratory practice, or GLP, regulations;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>submission
to the FDA of an IND, which must become effective before human clinical trials may begin;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>approval
by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>performance
of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and
efficacy of the proposed drug for each indication;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>submission
to the FDA of a new drug application, or NDA;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>satisfactory
completion of an FDA advisory committee review, if applicable;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>satisfactory
completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good
manufacturing practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>FDA
review and approval of the NDA. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><I> Preclinical studies  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as </FONT><FONT SIZE=2><I>in
vitro</I></FONT><FONT SIZE=2> and animal 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 for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing
information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>part
of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically
becomes effective 30&nbsp;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 places the trial on clinical
hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing
clinical trials to commence. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Clinical trials  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in
accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical
trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness
criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution
participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review. The IRB must review and
approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain
clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Human
clinical trials are typically conducted in three sequential phases, which may overlap or be combined: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Phase&nbsp;1:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The drug is initially introduced into healthy human subjects or patients with the target
disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Phase&nbsp;2:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The drug is administered to a limited patient population to identify possible adverse
effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Phase&nbsp;3:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The drug is administered to an expanded patient population in adequate and
well-controlled clinical trials to generate sufficient data to statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit
profile of the product and to provide adequate information for the labeling of the product. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Progress
reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase&nbsp;1, Phase&nbsp;2 and
Phase&nbsp;3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on
various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its
institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I> Marketing approval  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed
information relating to the product's chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product
for one or more indications. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently exceeding $1.8&nbsp;million, and the sponsor of
an approved NDA is also subject to annual product and establishment user fees, currently exceeding $98,000 per product and $520,000 per establishment. These fees are typically increased annually. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
FDA conducts a preliminary review of all NDAs within the first 60&nbsp;days after submission before accepting them for filing to determine whether they are sufficiently complete to permit
substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted
application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to
specified performance goals in the review of NDAs. Under these goals, the FDA has committed to review most such applications for non-priority products within 10&nbsp;months, and most
applications for priority review products, that is, drugs that the FDA determines represent a significant improvement over existing therapy, within six months. These performance goals likely will be
extended by several months when the Prescription Drug User Fee Act is reauthorized in 2012. The review process may be extended by the FDA for three additional months to consider certain information or
clarification regarding information already provided in the submission. The FDA may also refer applications for novel drugs or products that present difficult questions of safety or efficacy to an
advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by
the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Before
approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the
manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before
approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data submitted. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>The
testing and approval process requires substantial time, effort and financial resources, and each may take many years to complete. Data obtained from clinical activities are not always conclusive
and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties
or
unanticipated costs in our efforts to develop our product candidates and secure necessary governmental approvals, which could delay or preclude us from marketing our products. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>After
the FDA's evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial
marketing of the drug with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial
additional testing or information in order for the FDA to reconsider the application. 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 months depending on the type of information included. Even with submission of this additional </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>information,
the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve the NDA. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Even
if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require
that post-approval studies, including Phase&nbsp;4 clinical trials, be conducted to further assess a drug's safety after approval, require testing and surveillance programs to monitor
the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, which can materially affect the potential market and
profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, some types
of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I> Fast track designation  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or
life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the fast track program, the
sponsor of a new drug candidate may request the FDA to designate the product for a specific indication as a fast track product concurrent with or after the filing of the IND for the product candidate.
The FDA must determine if the product candidate qualifies for fast track designation within 60&nbsp;days after receipt of the sponsor's request. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition to other benefits, such as the ability to use surrogate endpoints and have greater interactions with the FDA, the FDA may initiate review of sections of a fast track product's NDA before
the application is complete. This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays
applicable user fees. However, the FDA's time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation
may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Priority review  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Under FDA policies, a product candidate may be eligible for priority review, or review within a six-month time frame from the time a
complete application is received. Products regulated by the FDA's Center for Drug Evaluation and Research, or CDER, are eligible for priority review if they provide a significant improvement compared
to marketed products in the treatment, diagnosis or prevention of a disease. A fast track designated product candidate would ordinarily meet the FDA's criteria for priority review. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Accelerated approval  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Under the FDA's accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides
meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. In clinical trials, a surrogate endpoint is a
measurement of laboratory 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. A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>completion
of Phase&nbsp;4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a
clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under
accelerated regulations are subject to prior review by the FDA. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Orphan drugs  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally
defined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug
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 and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to
a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other
applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity in that it
is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition,
or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Pediatric information  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Under the Pediatric Research Equity Act of 2003, as amended and reauthorized by the Food and Drug Administration Amendments Act of 2007, or the
FDAAA, an NDA or supplement to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and
to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant
deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Unless otherwise required
by regulation, the pediatric data requirements do not apply to products with orphan drug designation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> The Hatch-Waxman act  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Abbreviated new drug applications  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant's
product or a method of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA's Approved Drug Products with Therapeutic
Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug
application, or ANDA. Generally, an ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths, dosage form and route of administration as the listed drug
and has been shown to be bioequivalent through </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> or </FONT><FONT SIZE=2><I>in vivo</I></FONT><FONT SIZE=2> testing or otherwise to the listed
drug. ANDA applicants are not required to conduct or submit results of preclinical or clinical tests to prove the safety or effectiveness of their drug product, </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>other
than the requirement for bioequivalence testing. Drugs approved in this way are commonly referred to as "generic equivalents" to the listed drug, and can often be substituted by pharmacists
under prescriptions written for the original listed drug. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA's Orange Book, except for patents covering methods of use for which the ANDA
applicant is not seeking approval. Specifically, the applicant must certify with respect to each patent that: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
required patent information has not been filed;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
listed patent has expired;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
listed patent is invalid, unenforceable or will not be infringed by the new product. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>A
certification that the new product will not infringe the already approved product's listed patents or that such patents are invalid or unenforceable is called a Paragraph&nbsp;IV certification. If
the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved until all the listed patents
claiming the referenced product have expired. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If
the ANDA applicant has provided a Paragraph&nbsp;IV certification to the FDA, the applicant must also send notice of the Paragraph&nbsp;IV certification to the NDA and patent holders once the
ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph&nbsp;IV certification. The filing
of a patent infringement lawsuit within 45&nbsp;days after the receipt of a Paragraph&nbsp;IV certification automatically prevents the FDA from approving the ANDA until the earlier of
30&nbsp;months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
ANDA also will not be approved until any applicable non-patent exclusivity period, such as exclusivity for obtaining approval of a new chemical entity, for the referenced product has
expired. Federal law provides a period of five years following approval of a drug containing no previously approved active moiety during which ANDAs for generic versions of those drugs cannot be
submitted unless the submission contains a Paragraph&nbsp;IV challenge to a listed patent, in which case the submission may be made four years following the original product approval. Federal law
provides for a period of three years of exclusivity during which the FDA cannot grant effective approval of an ANDA if a listed drug contains a previously approved active moiety, but FDA requires as a
condition of approval new clinical trials conducted by or for the sponsor. This three-year exclusivity period often protects 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 of patent and non-patent marketing
exclusivity listed in the Orange Book for a drug may be extended by six months if the NDA sponsor conducts pediatric studies identified by the FDA in a written request. For written requests issued by
the FDA after September&nbsp;27, 2007, the date of enactment of the FDAAA, the FDA must grant pediatric exclusivity no later than nine months prior to the date of expiration of patent or
non-patent exclusivity in order for the six-month pediatric extension to apply to that exclusivity period. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Section&nbsp;505(b)(2) new drug applications  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is a special type of NDA, commonly referred to as
a Section&nbsp;505(b)(2) NDA, which enables the applicant to rely, in part, on the FDA's previous approval of a similar product, or published literature, in support of its application. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>505(b)(2)
NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Section&nbsp;505(b)(2) permits the filing of an NDA where
at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. If the 505(b)(2)
applicant can establish that reliance on the FDA's previous approval is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The
FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the
label indications for which the referenced product has been approved, as well as for any new indication sought by the Section&nbsp;505(b)(2) applicant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>To
the extent that the Section&nbsp;505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed
for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approval of a 505(b)(2) NDA can be stalled until all the listed patents claiming the
referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product
has expired, and, in the case of a Paragraph&nbsp;IV certification and subsequent patent infringement suit, until the earlier of 30&nbsp;months, settlement of the lawsuit or a decision in the
infringement case that is favorable to the Section&nbsp;505(b)(2) applicant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Combination products  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The FDA regulates combinations of products that cross FDA centers, such as drug, biologic or medical device components that are physically,
chemically or otherwise combined into a single entity, as a combination product. The FDA center with primary jurisdiction for the combination product will take the lead in the premarket review of the
product, with the other center consulting or collaborating with the lead center. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
FDA's Office of Combination Products, or OCP, determines which center will have primary jurisdiction for the combination product based on the combination product's "primary mode of
action." A mode of action is the means by which a product achieves an intended therapeutic effect or action. The primary mode of action is the mode of action that provides the most important
therapeutic action of the combination product, or the mode of action expected to make the greatest contribution to the overall intended therapeutic effects of the combination product. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Often
it is difficult for the OCP to determine with reasonable certainty the most important therapeutic action of the combination product. In those difficult cases, the OCP will consider consistency
with other combination products raising similar types of safety and effectiveness questions, or which center has the most expertise to evaluate the most significant safety and effectiveness questions
raised by the combination product. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A
sponsor may use a voluntary formal process, known as a Request for Designation, when the product classification is unclear or in dispute, to obtain a binding decision as to which center will
regulate the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>combination
product. If the sponsor objects to that decision, it may request that the agency reconsider that decision. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Overview of FDA regulation of companion diagnostics  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are developing </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> and </FONT><FONT SIZE=2><I>in vivo</I></FONT><FONT SIZE=2> companion
diagnostics for use in selecting the patients that we believe will respond to our cancer therapeutics. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>FDA
officials have issued draft guidance that, when finalized, would address issues critical to developing </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> companion diagnostics, such as
biomarker qualification, establishing clinical validity, the use of retrospective data, the appropriate patient population and when the FDA will require that the device and the drug be approved
simultaneously. The draft guidance issued in July 2011 states that if safe and effective use of a therapeutic product depends on an </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> diagnostic,
then the FDA generally will require approval or clearance of the diagnostic at the same time that the FDA approves the therapeutic product. The FDA has yet to issue further guidance, and it is unclear
whether it will do so, or what the scope would be. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
FDA previously has required </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> companion diagnostics intended to select the patients who will respond to the cancer treatment to obtain
Pre-Market Approval, or PMA, simultaneously with approval of the drug. Based on the draft guidance, and the FDA's past treatment of companion diagnostics, we believe that the FDA will
require one or more of our </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> companion
diagnostics to obtain PMA for our companion diagnostics to identify patient populations suitable for our cancer therapies, such as the </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2>
companion diagnostic for VS-507. The review of these </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> companion diagnostics in conjunction with the review of our cancer treatments
involves coordination of review by CDER and by the FDA's Center for Devices and Radiological Health Office of In Vitro Diagnostics Device Evaluation and Safety. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> PMA approval pathway  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A medical device, including an </FONT><FONT SIZE=2><I>in vitro</I></FONT><FONT SIZE=2> diagnostic, or IVD, to be commercially distributed in the
United States must receive either 510(k) clearance or PMA approval from the FDA prior to marketing. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life
supporting or implantable devices, or devices deemed not substantially equivalent to a previously 510(k) cleared device or a preamendment class&nbsp;III device for which PMA applications have not
been called, are placed in Class&nbsp;III requiring PMA approval. The PMA approval pathway requires proof of the safety and effectiveness of the device to the FDA's satisfaction. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
PMA approval pathway generally takes from one to three years or even longer from submission of the application. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A
PMA application for an IVD must provide extensive preclinical and clinical trial data. Preclinical data for an IVD includes many different tests, including how reproducible the results are when the
same sample is tested multiple times by multiple users at multiple laboratories. The clinical data need to establish that the test is sufficiently safe, effective and reliable in the intended use
population. In addition, the FDA must be convinced that a device has clinical utility, meaning that an IVD provides information that is clinically meaningful. A biomarker's clinical significance may
be obvious, or the applicant may be able to rely upon published literature or submit data to show clinical utility. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A
PMA application also must provide information about the device and its components regarding, among other things, device design, manufacturing and labeling. The sponsor must pay an application fee. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>As part of the PMA review, the FDA will typically inspect the manufacturer's facilities for compliance with Quality System Regulation, or QSR, requirements, which impose
elaborate testing, control, documentation and other quality assurance procedures. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon
submission, the FDA determines if the PMA application is sufficiently complete to permit a substantive review, and, if so, the FDA accepts the application for filing. The FDA then commences an
in-depth review of the PMA application. The entire process typically takes one to three years, but may take longer. The review time is often significantly extended as a result of the FDA
asking for more information or clarification of information already provided. The FDA also may respond with a not approvable determination based on deficiencies in the application and require
additional clinical trials that are often expensive and time-consuming and can substantially delay approval. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>During
the review period, an FDA advisory committee, typically a panel of clinicians, may be convened to review the application and recommend to the FDA whether, or upon what conditions, the device
should be approved. Although the FDA is not bound by the advisory panel decision, the panel's recommendation is important to the FDA's overall decision making process. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>If
the FDA's evaluation of the PMA application is favorable, the FDA typically issues an approvable letter requiring the applicant's agreement to specific conditions, such as changes in labeling, or
specific additional information, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA concludes that the applicable criteria have been met, the FDA will issue
a PMA for the approved indications, which can be more limited than those originally sought by the manufacturer. The PMA can include post-approval conditions that the FDA believes necessary
to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution. Failure to comply with the conditions of approval can
result in material adverse enforcement action, including the loss or withdrawal of the approval. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Even
after approval of a PMA, a new PMA or PMA supplement may be required in the event of a modification to the device, its labeling or its manufacturing process. Supplements to a PMA often require
the submission of the same type of information required for an original PMA, except that the supplement is generally limited to the information needed to support the proposed change from the product
covered by the original PMA. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Clinical trials  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>A clinical trial is almost always required to support a PMA application. In some cases, one or more smaller Investigational Device Exemption, or IDE,
studies may precede a pivotal clinical trial intended to demonstrate the safety and efficacy of the investigational device. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>All
clinical studies of investigational devices must be conducted in compliance with the FDA's requirements. If an investigational device could pose a significant risk to patients pursuant to FDA
regulations, the FDA must approve an IDE application prior to initiation of investigational use. IVD trials usually do not require an IDE, as the FDA does not judge them to be a significant risk
because the results do not affect the patients in the study. However, for a trial where the IVD result directs the therapeutic care of patients with cancer, we believe that the FDA would consider the
investigation to present significant risk. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>An
IDE application must be supported by appropriate data, such as laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.
The FDA typically grants IDE approval for a specified number of patients. A nonsignificant risk device does not require FDA approval of an IDE. Both significant risk and nonsignificant risk
investigational devices require approval from IRBs at the study centers where the device will be used. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>During
the trial, the sponsor must comply with the FDA's IDE requirements for investigator selection, trial monitoring, reporting and record keeping. The investigators must obtain patient informed
consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices and comply with all reporting and record keeping requirements. Prior to
granting PMA approval, the FDA typically inspects the records relating to the conduct of the study and the clinical data supporting the PMA application for compliance with applicable requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Although
the QSR does not fully apply to investigational devices, the requirement for controls on design and development does apply. The sponsor also must manufacture the investigational device in
conformity with the quality controls described in the IDE application and any conditions of IDE approval that the FDA may impose with respect to manufacturing. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Post-market  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>After a device is on the market, numerous regulatory requirements apply. These requirements include: the QSR, labeling regulations, the FDA's general
prohibition against promoting products for unapproved or "off label" uses, the Medical Device Reporting regulation, which requires that manufacturers report to the FDA if their device may have caused
or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur, and the Reports of Corrections and
Removals regulation, which requires manufacturers to report recalls and field actions to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
FDA enforces these requirements by inspection and market surveillance. If the FDA finds a violation, it can institute a wide variety of enforcement actions, ranging from a public warning letter to
more severe sanctions such as: fines, injunctions and civil penalties; recall or seizure of products; operating restrictions, partial suspension or total shutdown of production; refusing requests for
PMA approval of new products; withdrawing PMA approvals already granted; and criminal prosecution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Other regulatory requirements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Any drug manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among
other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After
approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>The
FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including
Phase&nbsp;4 clinical trials, and surveillance to further assess and monitor the product's safety and effectiveness after commercialization. Regulatory approval of oncology products often requires
that patients in clinical trials be followed for long periods to determine the overall survival benefit of the drug. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are
subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require
prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any
third-party manufacturers that we may decide to use. Accordingly, manufacturers must </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>continue
to expend time, money and effort in the areas of production and quality control to maintain cGMP compliance. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Once
an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical trials to assess new safety risks or imposition
of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy program. Other potential consequences include, among other things: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>restrictions
on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fines,
warning letters or holds on post-approval clinical trials;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>refusal
of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>product
seizure or detention, or refusal to permit the import or export of products; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>consent
decrees, injunctions or the imposition of civil or criminal penalties. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>The
FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the
provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly
promoted off label uses may be subject to significant liability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Additional provisions  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Anti-kickback and false claims laws  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict
certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program
anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering
or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted
to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback statute are
punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory
safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended
to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Federal
false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a
false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>pricing
services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the
customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states
also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or,
in several states, apply regardless of the payor. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Physician drug samples  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The Prescription
Drug Marketing Act, or the PDMA, imposes requirements and limitations upon the provision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugs
unless the state licensing program meets certain federal guidelines that include minimum standards for storage, handling and record keeping. In addition, the PDMA sets forth civil and criminal
penalties for violations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Foreign regulation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In order to market any product outside of the United States, we would need to comply with numerous and varying 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 obtain FDA
approval for a product, we would need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product
in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval in
other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in
obtaining regulatory approval in one country may negatively impact the regulatory process in others. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>To
date, we have not initiated any discussions with the European Medicines Agency or any other foreign regulatory authorities with respect to seeking regulatory approval for any of our products in
Europe or in any other country outside the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> New legislation and regulations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the
testing, approval, manufacturing and marketing of products regulated by the FDA. For example, the FDAAA discussed above was enacted in 2007. In addition to new legislation, FDA regulations and
policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether further legislative changes will be
enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect of such changes, if any, may be. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Pharmaceutical coverage, pricing and reimbursement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory approval. Sales of any
of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as
Medicare and Medicaid, commercial health insurers and </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>managed
care organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the
payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the
approved drugs for a particular indication. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity
and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Our product candidates may not be considered medically
necessary or cost-effective. A payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Third-party
reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort. Third-party payors are increasingly
challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety
and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a
benefit under their 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 cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and
requirements for substitution of generic products for branded prescription drugs. Adoption of such controls and measures, and tightening of restrictive policies in jurisdictions with existing controls
and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and could adversely affect our net revenue and results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Pricing
and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may
require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the European Union
provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products
for human use. European Union member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the
drug product on the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure on health care costs in
general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border
imports from low-priced markets exert competitive pressure that may reduce pricing within a country. There can be no assurance that any country that has price controls or reimbursement
limitations for drug products will allow favorable reimbursement and pricing arrangements for any of our products. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement.
In addition, an increasing emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on drug pricing. Coverage policies, third-party
reimbursement rates and drug pricing regulation may change at any time. In particular, the Patient Protection and </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Affordable
Care Act was enacted in the United States in March 2010 and contain provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs sold
to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory
discounts for certain Medicare Part&nbsp;D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even if favorable coverage and
reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> EMPLOYEES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As of September&nbsp;30, 2011, we had 18 full-time employees, including a total of nine employees with M.D. or Ph.D. degrees. Of these
full-time employees, 11 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 consider our relationship with our employees to be good. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> FACILITIES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We occupy approximately 7,484 square feet of office and laboratory space in Cambridge, Massachusetts under a lease that expires in October 2014. We
believe that our facility is sufficient to meet our current needs and that suitable additional space will be available as and when needed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LEGAL PROCEEDINGS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are not currently a party to any material legal proceedings. </FONT></P>

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<BR></FONT><FONT SIZE=4>  Management    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth the name, age and position of each of our executive officers and directors. </FONT></P>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Christoph Westphal, M.D., Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Chief Executive Officer and Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert Forrester</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>48</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Chief Operating Officer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jonathan Pachter, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>54</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Vice President, Head of Research</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Richard Aldrich</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John K. Clarke</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>58</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ansbert Gadicke, M.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>53</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stephen Kraus</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>35</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Henri Termeer</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>65</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Member of the audit committee.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Member of the nominating and corporate governance committee.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Member of the compensation committee.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><I>Christoph Westphal, M.D., Ph.D.</I></FONT><FONT SIZE=2> has served as our Chief Executive Officer since September 2011. He has served on
our board of directors since August 2010 and as the Chairman of our board of directors since March 2011. Dr.&nbsp;Westphal has served as a partner of Longwood Founders Fund,&nbsp;LP, a venture
capital investment fund, since 2010. He served as the President of SR One, the corporate venture capital arm of GlaxoSmithKline, from 2010 until 2011. Dr. Westphal has previously been involved in
founding a number of biotechnology companies as chief executive officer. Dr.&nbsp;Westphal co-founded Sirtris Pharmaceuticals,&nbsp;Inc., which was acquired by GlaxoSmithKline plc in
2008, and served as its Chief Executive Officer from 2004 to 2010. He also co-founded Alnara Pharmaceuticals,&nbsp;Inc., Acceleron Pharma,&nbsp;Inc., Alnylam
Pharmaceuticals,&nbsp;Inc., serving as its Chief Executive Officer in 2002, and Momenta Pharmaceuticals,&nbsp;Inc., serving as its Chief Executive Officer in 2001. Dr.&nbsp;Westphal serves on
the Board of Fellows of Harvard Medical School and the Board of Overseers for the Boston Symphony Orchestra and is a member of the Research Advisory Council at the Massachusetts General Hospital. He
earned his M.D. from Harvard Medical School, his Ph.D. in genetics from Harvard University and his B.A. from Columbia University. We believe that Dr.&nbsp;Westphal is qualified to serve on our board
of directors due to his experience in the life sciences industry as an entrepreneur and venture capitalist and his service on the boards of directors of other life sciences companies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Robert Forrester</I></FONT><FONT SIZE=2> has served as our Chief Operating Officer since March 2011. Mr.&nbsp;Forrester has previously held executive level positions at both
private and public life sciences companies. Prior to joining us, Mr.&nbsp;Forrester served as Chief Operating Officer of Forma Therapeutics,&nbsp;Inc. from 2010 until 2011. Previously he served as
Interim President and Chief Executive Officer of CombinatoRx,&nbsp;Inc., now Zalicus Inc., from 2009 until 2010 and as its Executive Vice President and Chief Financial Officer from 2004 to 2009.
Mr.&nbsp;Forrester served as Senior Vice President, Finance and Corporate Development at Coley Pharmaceuticals Group, Inc. from 2000 to 2003. He earned his LL.B. from Bristol University in England. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Jonathan Pachter, Ph.D.</I></FONT><FONT SIZE=2> has served as our Vice President, Head of Research since July 2011. Prior to joining us, Dr.&nbsp;Pachter served as the Senior
Director of Cancer Biology at OSI Pharmaceuticals,&nbsp;Inc., which was acquired by Astellas Pharma Inc. in 2010, from 2005 to 2011. He earned his Ph.D. in Neuroscience and his M.S. in Pharmacology
from Baylor College of Medicine. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>93 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><I>Richard Aldrich</I></FONT><FONT SIZE=2> has served as a member of our board of directors since August 2010. Mr.&nbsp;Aldrich has served as a partner of Longwood Founders
Fund,&nbsp;LP, a venture capital investment fund, since 2010. He founded RA&nbsp;Capital Management LLC, a hedge fund, in 2004 and served as a Managing Member from 2004 to 2008 and as a
Co-Founding Member from 2008 until 2011. He co-founded Sirtris Pharmaceuticals,&nbsp;Inc., which was acquired by GlaxoSmithKline plc in 2008, and served on its board of directors from
2004 to 2008; co-founded Concert Pharmaceuticals,&nbsp;Inc. and has served as chairman of its board of directors since 2009; and co-founded Alnara
Pharmaceuticals,&nbsp;Inc. and served on its board of directors from 2008 to 2010. Mr.&nbsp;Aldrich also joined Vertex Pharmaceuticals,&nbsp;Inc. at its founding in 1989 and served as its Senior
Vice President and Chief Business Officer until 2001. He earned his M.B.A from the Amos Tuck School at Dartmouth College and his B.S. from Boston College. We believe that Mr.&nbsp;Aldrich is
qualified to serve on our board of directors due to his experience in the life sciences industry as an entrepreneur and venture capitalist and his service on the boards of directors of other life
sciences companies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>John K. Clarke</I></FONT><FONT SIZE=2> has served as a member of our board of directors since November 2010. Mr.&nbsp;Clarke co-founded Cardinal Partners, a venture capital
firm, and has served as its Managing General Partner since 1997. Mr. Clarke co-founded Alnylam Pharmaceuticals,&nbsp;Inc. and has served on its board of directors since 2002. He also
serves on the board of directors of Momenta Pharmaceuticals, Inc. Mr.&nbsp;Clarke also co-founded and has served as chief executive officer for a number of other companies, including
Alkermes,&nbsp;Inc., Arris Pharmaceuticals,&nbsp;Inc., Cubist Pharmaceuticals,&nbsp;Inc. and the DNX Corporation. He earned his M.B.A. from the Wharton School of the University of Pennsylvania
and his B.A. in Biology and Economics from Harvard College. We believe that Mr.&nbsp;Clarke is qualified to serve on our board of directors due to his financial expertise, years of experience
providing advisory services to organizations in the life sciences industry and his service on the boards of directors of other life sciences companies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Ansbert Gadicke, M.D.</I></FONT><FONT SIZE=2> has served as a member of our board of directors since November 2010. Dr.&nbsp;Gadicke co-founded MPM Group, a
venture capital firm, and has served as the managing director of MPM Asset Management LLC since 1996. He serves on the board of directors of Radius Health,&nbsp;Inc. and a number of
privately-held life sciences companies. Dr.&nbsp;Gadicke previously served as a member of the board of directors of Pharmasset, Inc. from 1999 until 2007 and as a member of the board of
directors of PharmAthene, Inc. from 2004 until 2007. Dr.&nbsp;Gadicke also serves on the Board of Fellows of Harvard Medical School. He earned his M.D. from J.W. Goethe University in Frankfurt. We
believe that Dr.&nbsp;Gadicke is qualified to serve on our board of directors due
to his experience in the life sciences industry as a venture capitalist, his training as a physician and his service on the boards of directors of other life sciences companies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Stephen Kraus</I></FONT><FONT SIZE=2> has served as a member of our board of directors since November 2010. Mr.&nbsp;Kraus has served as an investment professional at
Bessemer Venture Partners, a venture capital firm, since 2004 and has been employed as a Partner since 2010. He serves on the board of directors of a number of privately-held life sciences
companies. He previously served as a member of the board of directors of Sirtris Pharmaceuticals, Inc. from 2005 until 2007 and as a member of the board of directors of Restore Medical, Inc. from 2005
until 2008. He earned his M.B.A. from Harvard Business School and his B.A. from Yale University. We believe that Mr.&nbsp;Kraus is qualified to serve on our board of directors due to his experience
in the life sciences industry as a venture capitalist and his service on the boards of directors of other life sciences companies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Henri Termeer</I></FONT><FONT SIZE=2> has served as a member of our board of directors since June 2011. Mr.&nbsp;Termeer served as President and a member of the board of
directors of Genzyme Corporation from 1983 until its acquisition by sanofi-aventis U.S.,&nbsp;LLC in 2011, its Chief Executive Officer from 1985 to 2011 and the chairman of its board of directors
from 1988 to 2011. He serves on the Council of Economic </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>94 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Management </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>


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<BR>

<P style="font-family:times;"><FONT SIZE=2>Advisors
to Massachusetts Governor Deval Patrick and as co-chair of the Leadership Counsel of the Massachusetts Life Sciences Collaborative. Mr.&nbsp;Termeer is also chairman emeritus of
the New England Healthcare Institute and a trustee for the Boston Museum of Science. Mr.&nbsp;Termeer serves on the board of directors of ABIOMED&nbsp;Inc., AVEO Pharmaceuticals, Inc.,
Massachusetts General Hospital, the Massachusetts Institute of Technology Corporation and Partners HealthCare, and as chairman of the board of directors of the Federal Reserve Bank of Boston.
Mr.&nbsp;Termeer also serves on the Board of Fellows of Harvard Medical School. He earned his M.B.A. from the Darden School at the University of Virginia. We believe Mr.&nbsp;Termeer is qualified
to serve on our board of directors due to his senior executive experience in developing and managing Genzyme Corporation over the course of many years, his service on the boards of directors of
Genzyme Corporation and other life sciences companies and his deep life sciences industry experience and knowledge. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> BOARD COMPOSITION AND ELECTION OF DIRECTORS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our board of directors is currently authorized to have seven members. In accordance with the terms of our certificate of incorporation and bylaws
that will become effective upon the closing of this offering, our board of directors will be divided into three classes, class&nbsp;I, class&nbsp;II and class&nbsp;III, with members of each
class serving staggered three-year terms. Upon the closing of this offering, the members of the classes will be divided as follows: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
class&nbsp;I directors will
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and
their term will expire at the annual meeting of stockholders to be held in 2013;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
class&nbsp;II directors will
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and
their term will expire at the annual meeting of stockholders to be held in 2014; and

<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
class&nbsp;III directors will
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and
their term will expire at the annual meeting of stockholders to be held in 2015. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Upon
the expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year
in which their term expires. Our directors may be removed only for cause by the affirmative vote of the holders of 75% or more of our voting stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
board of directors has determined that&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of our directors,
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, are independent directors, as defined by the applicable NASDAQ Marketplace Rules. In making such
determination, the board of directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances that the board of
directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>There
are no family relationships among any of our directors or executive officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> BOARD COMMITTEES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our board of directors has established an audit committee, a nominating and corporate governance committee and a compensation committee, each of
which will operate, upon the closing of this offering, under a charter that has been approved by our board. The composition of each committee will be effective upon the closing of this offering. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Our
board of directors has determined that all of the members of the audit committee, the compensation committee and the nominating and corporate governance committee, other than&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
are
independent as defined under The NASDAQ Marketplace Rules, including, in the case of all the </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>95 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Management </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>members
of our audit committee, the independence requirements contemplated by Rule&nbsp;10A-3 under the Securities Exchange Act of 1934. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Audit committee  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The members of our audit committee
are&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;chairs the audit committee. Upon the closing of this offering, our audit
committee's responsibilities will include: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>appointing,
approving the compensation of and assessing the independence of our registered public accounting firm;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing
the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing
and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>monitoring
our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing
our internal audit function;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing
our risk assessment and risk management policies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>establishing
policies regarding hiring employees from the registered public accounting firm and procedures for the receipt and retention of accounting related
complaints and concerns;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>meeting
independently with our internal auditing staff, registered public accounting firm and management;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing
and approving or ratifying any related person transactions; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>preparing
the audit committee report required by Securities and Exchange Commission, or SEC, rules. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>All
audit and non-audit services, other than </FONT><FONT SIZE=2><I>de minimis</I></FONT><FONT SIZE=2> non-audit services, to be provided to us by our independent registered
public accounting firm must be approved in advance by our audit committee. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Our
board of directors has determined that&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;is an "audit committee financial expert" as defined in applicable SEC rules. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Nominating and corporate governance committee  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The members of our nominating and corporate governance committee
are&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;chairs the nominating and
corporate governance
committee. Upon the closing of this offering, our nominating and corporate governance committee's responsibilities will include: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>identifying
individuals qualified to become members of our board;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>recommending
to our board the persons to be nominated for election as directors and to each of our board's committees;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing
and making recommendations to our board with respect to our board leadership structure;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing
and making recommendations to our board with respect to management succession planning;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>developing
and recommending to our board corporate governance principles; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing
an annual evaluation of our board. </FONT></DD></DL>

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<P style="font-family:times;"><FONT SIZE=2><B> Management </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> Compensation committee  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The members of our compensation committee
are&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;chairs
the compensation committee. Upon the closing of this offering,
our compensation committee's responsibilities will include: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>annually
reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>determining
our chief executive officer's compensation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing
and approving, or making recommendations to our board with respect to, the compensation of our other executive officers;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing
an evaluation of our senior executives;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing
and administering our cash and equity incentive plans;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing
and making recommendations to our board with respect to director compensation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing
and discussing annually with management our "Compensation discussion and analysis" disclosure required by SEC rules; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>preparing
the compensation committee report required by SEC rules. </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=2><B> COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent
function, of any other
entity that has one or more of its executive officers serving as a member of our board of directors or our compensation committee. During 2011, the members of our compensation committee were
John&nbsp;K. Clarke, Stephen Kraus and Christoph Westphal, M.D., Ph.D. Neither Mr.&nbsp;Clarke nor Mr.&nbsp;Kraus is or has been an officer or employee of our company. Dr.&nbsp;Westphal has
served as our Chief Executive Officer since September 2011. For a description of transactions between us and members of our compensation committee and affiliates of such members, please see
"Transactions with related persons." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR CHIEF EXECUTIVE OFFICER  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In addition to his role as Chairman of the board of directors and Chief Executive Officer of our company, Dr.&nbsp;Westphal also serves as a
general partner of Longwood Founders Fund,&nbsp;LP, a venture capital investment fund and one of our principal stockholders. Dr.&nbsp;Westphal currently devotes a majority of his business time to
our company with responsibility for all aspects of our business and operations. We and Dr.&nbsp;Westphal anticipate that he will transition to an executive Chairman role at our company in the future
based on our having meaningfully advanced our discovery, research and development efforts, the overall growth of our company and our identifying and hiring a suitable successor. As executive Chairman,
we expect that Dr.&nbsp;Westphal will continue to devote significant time to our company. In such role, we and Dr.&nbsp;Westphal expect that he will particularly focus on our company's strategic
initiatives and key business, financial and scientific decisions. Dr.&nbsp;Westphal owns 2,200,000 shares of our common stock as a founder of our company, including shares currently held in a family
trust. As of September&nbsp;30, 2011, 1,237,500 of these shares remain subject to vesting on a quarterly basis through August 2014. In addition, Longwood Founders Fund has invested approximately
$12.0&nbsp;million in our company and, upon completion of this offering, will own 7,944,444 shares of our common stock. Dr.&nbsp;Westphal does not receive any cash compensation from us for his
services. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
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<BR></FONT><FONT SIZE=4>  Executive compensation    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> COMPENSATION DISCUSSION AND ANALYSIS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>This section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers and what we
believe are the most important factors relevant to an analysis of these policies and decisions. This section also describes the material elements of compensation awarded to, earned by or paid to each
of our named executive officers for 2011. Our "named executive officers" for 2011 consist of our three current executive officers, Christoph Westphal, M.D., Ph.D., our Chief Executive Officer, Robert
Forrester, our Chief Operating Officer who also serves as our principal financial officer, and Jonathan Pachter, Ph.D., our Vice President, Head of Research; and three individuals who previously
served as executives officers with us, Paul Brannelly, our current Vice President of Finance who served as our principal financial officer prior to the arrival of Mr.&nbsp;Forrester, Satish Jindal,
Ph.D., our former President and Chief Operating Officer who remains with us as a non-executive employee, and Peter Elliott, Ph.D., our former Head of Research and Development. In addition,
this section provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our executive officers and is intended to provide context for the data
presented in the tables and narrative that follow. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
commenced operations in November 2010 and hired each of our current executive officers in 2011. Dr.&nbsp;Westphal, our Chief Executive Officer, does not currently receive, and has not
historically received, any compensation from us for his service as Chief Executive Officer because of his service as a general partner of Longwood Founders Fund,&nbsp;LP, a venture capital
investment fund and one of our
principal stockholders. The compensation of each of our other current executive officers is based on individual terms approved by our board of directors at the time of hire. Our board of directors is
in the process of developing and implementing the executive compensation program that will be in place following this offering. This section highlights key aspects of this program that we expect to
implement in 2012. Following this offering, our compensation committee will oversee these compensation policies and, together with our board of directors, will periodically evaluate the need for
revisions to ensure our compensation program is competitive with the companies with which we compete for executive talent. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Objectives and philosophy of our executive compensation program  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The primary objectives of the board of directors in designing our executive compensation program are to: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>attract,
retain and motivate experienced and talented executives;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>ensure
executive compensation is aligned with our corporate strategies, research and development programs and business goals;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>recognize
the individual contributions of executives while fostering a shared commitment among executives by aligning their individual goals with our corporate
goals;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>promote
the achievement of key strategic, development and operational performance measures by linking compensation to the achievement of measurable corporate and
individual performance goals; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>align
the interests of our executives with our stockholders by rewarding performance that leads to the creation of stockholder value. </FONT></DD></DL>

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<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>Each
of our named executive officers was hired by us before our board of directors established a formal executive compensation program. To achieve these objectives in the future, we expect that our
board of directors and compensation committee will evaluate our executive compensation program for 2012 with the goal of setting and maintaining compensation at levels that are justifiable based on
each executive's level of experience, performance and responsibility and that the board believes are competitive with those of other companies in our industry and our region that compete with us for
executive talent. In addition, beginning in 2012, we expect that our executive compensation program will tie a substantial portion of each executive's overall compensation to key strategic, financial
and operational goals. We have provided, and expect to continue to provide, a portion of our executive compensation in the form of stock options and restricted stock grants that vest over time, which
we believe helps to retain our executives and aligns their interests with those of our stockholders by allowing them to participate in the longer term success of our company as reflected in stock
price appreciation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Use of compensation consultants and market benchmarking  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>For purposes of determining total compensation and the primary components of compensation for our executive officers in 2011, we did not retain the
services of a compensation consultant or use survey information or compensation data to engage in benchmarking. Beginning with 2012 compensation, we expect that our compensation committee will
consider publicly available compensation data for national and regional companies in the biotechnology industry to help guide its executive compensation decisions at the time of hiring and for
subsequent adjustments in compensation. In connection with designing our compensation program for future periods, our board of directors recently retained the services of Pearl Meyer&nbsp;&amp;
Partners, or Pearl Meyer, an independent compensation consultant, to provide additional comparative data on executive compensation practices in our industry and to advise on our executive compensation
program generally. Although we expect that our board of directors and compensation committee will consider Pearl Meyer's advice and recommendations about our executive compensation program, the board
of directors and compensation committee will ultimately make their own decisions about these matters. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
anticipate that Pearl Meyer will provide our board of directors and compensation committee with comparative data showing where our total compensation and each element of our compensation rate among
both public and private companies in the biotechnology and life sciences industry generally and a peer group of publicly-traded companies in the life science industry at a stage of development, market
capitalization and size comparable to ours with which the board of directors and compensation committee believe we compete for executive talent. We currently expect that the companies to be included
in this peer group will be: </FONT></P>
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<TD style="font-family:times;"><FONT SIZE=2>Aegerion Pharmaceuticals,&nbsp;Inc.<BR>
Alnylam Pharmaceuticals,&nbsp;Inc.<BR>
Amicus Therapeutics,&nbsp;Inc.<BR>
Anacor Pharmaceuticals,&nbsp;Inc.<BR>
Anthera Pharmaceuticals,&nbsp;Inc.<BR>
ARIAD Pharmaceuticals,&nbsp;Inc.<BR>
Aveo Pharmaceuticals,&nbsp;Inc.<BR>
Curis&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Cytokinetics,&nbsp;Inc.<BR>
Endocyte,&nbsp;Inc.<BR>
Infinity Pharmaceuticals,&nbsp;Inc.<BR>
Ironwood Pharmaceuticals,&nbsp;Inc.<BR>
Myrexis,&nbsp;Inc.<BR>
Osiris Therapeutics,&nbsp;Inc.<BR>
Synta Pharmaceuticals Corp.<BR>
Zalicus&nbsp;Inc.</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2>This peer group is subject to change, and we anticipate that our board of directors and compensation committee will periodically review and update the list. The
peer group will be used for purposes of gathering data to help develop our executive compensation practices and guide our compensation </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>decisions.
We also expect that our compensation consultant will make suggestions about our executive compensation practices based on the data it provides to us as well as compensation trends in our
industry. However, although we expect that the board of directors and compensation committee will consider peer group and other industry compensation data and the recommendations of our compensation
consultant when making decisions related to executive compensation, we do not expect that they will make adjustments to overall executive compensation or any element thereof solely or primarily to
target a specified threshold level of compensation or market benchmark within the peer group, our larger industry or some other group of comparable companies or to act on the recommendations of our
compensation consultant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Annual compensation review process  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We expect to conduct annual compensation reviews beginning in 2012. As part of the reviews we conduct in 2012, we expect to address bonus awards for
2011, our first full year of operations, and for all aspects of compensation for 2012. During the first quarter of 2012 and each subsequent year, we expect to evaluate each executive officer's
performance during the prior year. We expect that our chief executive officer will evaluate each executive other than himself from his own perspective and based on input from others within our
company. This process will lead to a recommendation by the chief executive officer to the compensation committee with respect to each executive officer, other than himself, as to: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
level of contributions made to the general management and guidance of the company;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
need for salary increases;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
amount of bonuses to be paid, including the achievement of stated corporate and individual performance goals with respect to the annual review for performance in
2012 and future years; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether
or not equity incentive awards should be made. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>These
recommendations will be reviewed by our compensation committee and taken into account when it makes a final determination on all such matters. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Components of our executive compensation program  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The primary elements of our executive compensation program are: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>base
salary;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>annual
performance-based cash bonuses;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>stock-based
awards;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>broad-based
health and welfare benefits; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>severance
and change in control benefits. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>We
do not, and do not expect in the future to, have a formal or informal policy for allocating between long-term and short-term compensation, between cash and
non-cash compensation or among the different forms of non-cash compensation. Instead, our board of directors, after reviewing data it considers relevant, has determined
subjectively what it believes to be the appropriate level and mix of the various compensation components. Beginning with 2012, we expect that our compensation committee also will consider information
provided to it by our compensation consultant in making this determination. Ultimately, the objective in allocating between long-term and currently paid </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>compensation
is to ensure adequate base compensation to attract and retain personnel, while providing incentives to maximize long-term value for our company and our stockholders.
Therefore, we provide cash compensation in the form of base salary to meet competitive salary norms and in the form of bonus compensation to incentivize and reward superior performance on an annual
basis. To further focus our executives on longer-term performance and the creation of stockholder value, we rely upon equity-based awards that vest over a meaningful period of time. In
addition, we provide our executives with benefits that are generally available to all our employees, including health and dental insurance, life and disability insurance and a 401(k) plan. Finally, we
offer our executives severance benefits to incentivize them to continue to achieve stockholder value in connection with change in control situations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
have employment agreements with two of our named executive officers, Mr.&nbsp;Forrester and Dr.&nbsp;Pachter. These employment agreements provide for specific base salaries, target annual
bonuses and severance and change in control arrangements for these executive officers. Dr.&nbsp;Pachter also received a signing bonus and reimbursement of certain relocation expenses in connection
with the commencement of his employment. Details of these employment agreements are provided below under the heading "&#151;Employment agreements." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Base salary  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our executive officers. Base
salaries for our named executive officers were established through arm's-length negotiation at the time the executive was hired, taking into account the position for which the executive was considered
and the executive's qualifications, prior experience and prior salary. None of our named executive officers is currently party to an employment agreement that provides for automatic or scheduled
increases in base salary. However, we expect that our compensation committee will annually review and evaluate, with input from our chief executive officer, the need for adjustment of the base
salaries of our executives based on changes and expected changes in the scope of an executive's responsibilities, including promotions, the individual contributions made by and performance of the
executive during the prior year, the executive's performance over a period of years, overall labor market conditions, the relative ease or difficulty of replacing the executive with a
well-qualified person, our overall growth and development as a company, general salary trends in our industry and among our peer group and where the executive's salary falls in the salary
range presented by that data. In making decisions regarding salary increases, we may also draw upon the experience of members of our board of directors with other companies. We do not expect that our
executive officers will receive any formulaic base salary increase, and we do not expect to target the base salaries of our named executive officers at a specified compensation level within our peer
group. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Dr.&nbsp;Westphal
does not currently receive, and has not historically received, a base salary from us. Mr.&nbsp;Forrester's 2011 annual base salary is $310,000 pursuant to the terms of the
employment agreement that we entered into with him upon the commencement of his employment in March 2011. Dr.&nbsp;Pachter's 2011 annual base salary is $280,000 pursuant to the terms of the
employment agreement that we entered into with him upon the commencement of his employment in July 2011. Our board of directors approved the base salaries of Mr.&nbsp;Forrester and
Dr.&nbsp;Pachter based on the recommendations of Dr.&nbsp;Westphal. In making his recommendations, Dr.&nbsp;Westphal considered the factors discussed above, including the qualifications, prior
experience and prior salary of each of Mr.&nbsp;Forrester and Dr.&nbsp;Pachter. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Brannelly's
2011 base salary was $125,000 for the first 8&nbsp;months when he was serving as our part-time employee and was increased to $250,000 in September 2011 when he
began serving as our full-time employee. Dr.&nbsp;Jindal was paid $300,000 in total salary for 2011 as our former President and Chief Operating Officer and in his current capacity as our
non-executive employee pursuant to the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>terms
of a transition services agreement we entered into with him in February 2011, which provides a current 2011 annual base salary of $300,000 through mid-April 2012. Prior to his
departure in August 2011, Dr.&nbsp;Elliott was paid $108,000 in total salary for 2011. As with our current executive officers, the base salary for each of these individuals was determined at the
time of hire based on the factors set forth above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
board of directors has not increased the base salaries for our current named executive officers for 2012. We believe that the base salaries established for our named executive officers for 2012
are aligned with our executive compensation objectives stated above and are competitive with those of similarly-situated companies. Our compensation committee may reevaluate this assessment as part of
its annual review process. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Annual performance-based cash bonus  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Because we only commenced operations in November 2010, none of our named executive offices received an annual cash bonus for 2010. Our board of
directors has not yet determined the amount of any annual cash bonuses for our current executive officers for 2011. We expect that our compensation committee will subjectively determine the amount of
any annual cash bonus for each executive officer other than Dr.&nbsp;Westphal based on the annual compensation review process discussed above. We did not establish specific corporate or individual
performance goals for our executive officers for 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
are in the process of designing an annual cash bonus program to reward our named executive officers in the future. Beginning with 2012, we expect that our annual cash bonus program will be based
upon the achievement of specified annual corporate and individual goals that will be established in advance by our compensation committee. We expect that our annual cash bonus program will emphasize
pay-for-performance and will be intended to closely align executive compensation with achievement of specified operating results as the amount will be calculated on the basis
of percentage of corporate goals achieved. The performance goals established by our compensation committee beginning with the 2012 fiscal year will be based on the business strategy of the company and
the objective of building shareholder value. We expect that there will be three steps to determine if and the extent to which an annual cash bonus is payable to a named executive officer. First, at
the beginning of the year, our compensation committee will determine the target annual cash incentive award for the named executive officer based on a percentage of the
officer's annual base salary for that year. Second, the compensation committee will establish the specific performance goals, including both corporate and individual objectives, that must be met for
the officer to receive the award. Third, shortly after the end of the year, the compensation committee will determine the extent to which these performance goals were met and the amount of the award.
We expect that, beginning in 2012, our compensation committee will work with our chief executive officer to develop corporate and individual goals that they believe can be reasonably achieved with
hard work over the course of the year. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
do not expect to pay Dr.&nbsp;Westphal an annual cash bonus for 2011. In accordance with the terms of their employment agreements with us, Mr.&nbsp;Forrester and Dr.&nbsp;Pachter each are
eligible to receive an annual bonus for 2011 based on a percentage of their base salary. Mr.&nbsp;Forrester is eligible to receive an annual bonus of up to 35% of his base salary, and
Dr.&nbsp;Pachter is eligible to receive an annual bonus of up to 30% of his base salary. We expect that the bonus payable to each of Mr.&nbsp;Forrester and Dr.&nbsp;Pachter will be pro rated to
reflect the date of commencement of employment with us. We expect that our board of directors will make a determination in the first quarter of 2012 about an annual bonus for 2011 for
Mr.&nbsp;Brannelly. In accordance with the terms of his transition services agreement with us, Dr.&nbsp;Jindal is eligible to receive an annual bonus for 2011 of up to 20% of his base salary.
Dr.&nbsp;Elliott has not received nor is he eligible to receive an annual cash bonus from us for 2011. </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>102 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><I> Stock-based awards  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our equity award program is the primary vehicle for offering long-term incentives to our executives. While we do not have any equity
ownership guidelines for our executives, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align
the interests of our executives and our stockholders. In addition, the vesting feature of our equity awards contributes to executive retention by providing an incentive for our executives to remain in
our employ during the vesting period. Prior to this offering, our executives were eligible to participate in our 2010 equity incentive plan, and all equity awards granted in 2011 were pursuant to the
2010 equity incentive plan. Following the closing of this offering, our employees and executives will be eligible to receive stock-based awards pursuant to our 2012 stock incentive plan. Under our
2012 stock incentive plan, executives will be eligible to receive grants of stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock-based equity
awards at the discretion of our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
equity awards have typically been in the form of stock options. Because our executives profit from stock options only if our stock price increases relative to the stock option's exercise price, we
believe stock options provide meaningful incentives for our executives to achieve increases in the value of our stock over time. While we currently expect to continue to use stock options as the
primary form of equity awards that we grant, we have used and may in the future continue to use alternative forms of equity awards, such as restricted stock. To date, we have used equity awards to
compensate our executive officers in the form of initial grants in connection with the commencement of employment. In the future, we also generally plan to grant equity awards on an annual basis to
our executive officers. We may also make additional discretionary grants, typically in connection with the promotion of an employee, to reward an employee, for retention purposes or in other
circumstances recommended by management. In general, the equity awards that we have granted to our executives vest with respect to 25% of the shares on the first anniversary of the grant date and with
respect to the remaining shares in approximately equal quarterly installments through the fourth anniversary of the grant date. Vesting ceases upon termination of employment and exercise rights cease
shortly after termination of employment. Prior to the exercise of a stock option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights
or the right to receive dividends or dividend equivalents. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
have granted stock options with exercise prices that are set at no less than the fair value of shares of our common stock on the date of grant as determined by our board of directors. The exercise
price of all stock options granted after the closing of this offering will be equal to the fair value of shares of our common stock on the date of grant, which generally will be determined by
reference to the closing market price of our common stock on the date of grant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
have not granted any equity awards to Dr.&nbsp;Westphal in connection with his service as our Chief Executive Officer. As one of our co-founders, we issued and sold to
Dr.&nbsp;Westphal 2,200,000 shares of our common stock in August 2010 in connection with our formation. These shares are subject to repurchase by us pursuant to the terms of a restricted stock
agreement, as further described under the heading "Transactions with related persons&#151;Restricted stock grants to co-founders." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
April 2011, in recognition of the commencement of Mr.&nbsp;Forrester's employment with us, we issued and sold to Mr.&nbsp;Forrester 448,000 shares of our common stock pursuant to his employment
agreement. These shares are subject to repurchase by us pursuant to the terms of a restricted stock agreement. These shares vest with respect to 25% of the shares on the first anniversary of his date
of hire and with respect to the remaining shares in approximately equal monthly installments through the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>fourth
anniversary of his date of hire. The purchase price of the restricted stock was $0.08 per share, the fair value of our common stock on the date of grant as determined by our board of directors. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>In
September 2011, in recognition of the commencement of Dr.&nbsp;Pachter's employment with us, we granted Dr.&nbsp;Pachter an option to purchase 240,000 shares of our common stock pursuant to his
employment agreement. This option vests with respect to 25% of the shares on the first anniversary of his date of hire and with respect to the remaining shares in approximately equal quarterly
installments through the fourth anniversary of his date of hire. The exercise price of this option is $0.55 per share, the fair value of our common stock on the date of grant as determined by our
board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
did not grant any equity awards to Mr.&nbsp;Brannelly in 2011. In December 2010, in recognition of the commencement of Mr.&nbsp;Brannelly's employment with us, we granted Mr.&nbsp;Brannelly
an option to purchase 210,000 shares of our common stock. This option vests with respect to 25% of the shares on the first anniversary of his date of hire and with respect to the remaining shares in
approximately equal quarterly installments through the fourth anniversary of his date of hire. The exercise price of this option is $0.08 per share, the fair value of our common stock on the date of
grant as determined by our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
did not grant any equity grants to Dr.&nbsp;Jindal in 2011. As one of our co-founders, we issued and sold to Dr.&nbsp;Jindal 1,250,000 shares of our common stock in August 2010 in
connection with our formation. Pursuant to a restricted stock agreement with Dr.&nbsp;Jindal, as amended, we repurchased 582,681 shares from him, as further described under the heading "Transactions
with related persons&#151;Restricted stock grants to co-founders." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
April 2011, in recognition of the commencement of Dr.&nbsp;Elliott's employment with us, we issued and sold to Dr.&nbsp;Elliott 448,000 shares of our common stock pursuant to his employment
agreement at a price of $0.08 per share, the fair value of our common stock on the date of grant as determined by
our board of directors. Pursuant to a restricted stock agreement with Dr.&nbsp;Elliott, we repurchased 420,000 shares in connection with Dr.&nbsp;Elliott's transition from our employee to a member
of our scientific advisory board. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Benefits and other compensation  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified
personnel. We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance and a 401(k) plan. All of our executives are
eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. Under our 401(k) plan, we match 100% of employee contributions up to an amount equal to
3% of the employee's salary and then match 50% of employee contributions up to an amount equal to an additional 2% of the employee's salary. The match vests immediately. Consistent with our
compensation philosophy, we intend to continue to maintain our current benefits for our named executive officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
certain circumstances, we may award cash signing bonuses or may reimburse relocation expenses when executives first join us. Whether a signing bonus is paid or relocation expenses are reimbursed,
and the amount of either such benefit, is determined by our board of directors on a case-by-case basis based on the specific hiring circumstances and the recommendation of our
chief executive officer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Dr.&nbsp;Pachter,
who joined us in June 2011, received a signing bonus of $50,000 payable upon commencement of employment. We also reimbursed Dr.&nbsp;Pachter for $30,000 of relocation expenses in
connection with his move to our area to commence employment with us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>104 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><I> Severance and change in control benefits  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Pursuant to employment agreements we have entered into with certain of our executives, these executives are entitled to specified benefits in the
event of the termination of their employment under specified circumstances, including termination following a change in control of our
company. Please refer to "&#151;Employment agreements" for a more detailed discussion of these benefits. We have provided estimates of the value of the severance payments made and other
benefits provided to executives under various termination circumstances, under the heading "&#151;Potential payments upon termination or change in control" below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
believe providing these benefits helps us compete for executive talent. After reviewing the practices of companies represented in the compensation peer group, we believe that our severance and
change in control benefits are generally in line with severance packages offered to executives of the companies in our peer group. Based on the substantial business experience of the members of our
board of directors, we believe that our severance and change in control benefits are generally in line with severance packages offered to executives by companies at comparable stages of development in
our industry and related industries. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Risk considerations in our compensation program  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our board of directors is evaluating the philosophy and standards on which our compensation plans will be implemented across our company. It is our
belief that our compensation programs do not, and in the future will not, encourage inappropriate actions or risk taking by our executive officers. We do not believe that any risks arising from our
employee compensation policies and practices are reasonably likely to have a material adverse effect on our company. In addition, we do not believe that the mix and design of the components of our
executive compensation program will encourage management to assume excessive risks. We believe that our current business process and planning cycle fosters the behaviors and controls that would
mitigate the potential for adverse risk caused by the action of our executives. We believe that the following aspects of our executive compensation program that we plan to implement will mitigate the
potential for adverse risk caused by the action of our executives: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>annual
establishment of corporate and individual objectives for our performance-based cash bonus programs for our executive officers, which we expect to be
consistent with our annual operating and strategic plans, designed to achieve the proper risk/reward balance and not require excessive risk taking to achieve;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
mix between fixed and variable, annual and long-term and cash and equity compensation, which we expect to be designed to encourage strategies and
actions that balance the company's short-term and long-term best interests; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>equity
incentive awards that vest over a period of time, which we believe will encourage executives to take a long-term view of our business. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> Tax and accounting considerations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended, which will become applicable to us upon the closing of this offering,
generally disallows a tax deduction for compensation in excess of $1.00&nbsp;million paid to our chief executive officer and our three other most highly paid officers (other than the chief executive
officer and the chief financial officer). Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. We will periodically review the
potential consequences of Section&nbsp;162(m) and we generally intend to structure </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>105 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>the
performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section&nbsp;162(m) so that the compensation will remain tax deductible to us. However, the
board of directors may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section&nbsp;162(m) when it believes that such payments are appropriate to attract
and retain executive talent and are in the best interests of our stockholders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
account for equity compensation paid to our employees in accordance with Financial Accounting Standards Board, or FASB, Accounting Standard Codification Topic 718, </FONT> <FONT SIZE=2><I>Compensation-Stock Compensation</I></FONT><FONT SIZE=2>, or
ASC&nbsp;718, which requires us to measure and recognize compensation expense in our financial statements for all
share-based payments based on an estimate of their fair value over the service period of the award. We record cash compensation as an expense at the time the obligation is accrued. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> SUMMARY COMPENSATION TABLE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth the total compensation awarded to, earned by or paid to our named executive officers during 2011. </FONT></P>
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 Salary<BR>
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</font><!-- COMMAND=ADD_ETF,"A" -->


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 Bonus<BR>
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 Stock<BR>
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 Option<BR>
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($)<font
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 All other<BR>
compensation<BR>
($)<font
style="font-size:6pt;position:relative;top:-2pt;add_sup:2pt;">(4)</font>


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 </B></FONT><BR></TH>
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 Total<BR>
($)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=22 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Christoph Westphal, M.D., Ph.D.<SUP>(5)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Chief Executive Officer</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert Forrester</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
252,769</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
35,840</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
288,609</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Chief Operating Officer</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Jonathan Pachter, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
129,231</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
50,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR><SUP>(6)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
81,336</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
30,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
290,567</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Vice President, Head of Research</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul Brannelly</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
164,423</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
164,423</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Vice President of Finance, Former principal financial officer</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Satish Jindal, Ph.D.<SUP>(7)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
300,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
300,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Former President and Chief Operating Officer</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peter Elliott, Ph.D.<SUP>(8)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
108,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
35,840</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
144,340</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Former Head of Research and Development</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <P style="font-family:times;"><FONT SIZE=1><I>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" >


  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Our compensation committee has not yet determined the amounts of discretionary annual cash bonuses payable to our executive officers for 2011. We expect that our compensation
committee will determine the amounts of these bonuses during the first quarter of 2012, at which time we will disclose such amounts in a filing under Item&nbsp;5.02(f) of
Form&nbsp;8-K.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> The amounts in the "Stock awards" column reflect the aggregate grant date fair value of restricted stock granted during the year computed in accordance with the
provisions of
ASC&nbsp;718, excluding the impact of estimated repurchases by us related to service-based vesting conditions. The assumptions that we used to calculate these amounts are discussed in Note 6 to our
financial statements appearing at the end of this prospectus.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> The amounts in the "Option awards" column reflect the aggregate grant date fair value of stock options granted during the year computed in accordance with the
provisions of
ASC&nbsp;718, excluding the impact of estimated forfeitures related to  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=1><B>106 </B></FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=109,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=554678,FOLIO='106',FILE='DISK104:[11ZDM1.11ZDM11401]DU11401A.;66',USER='DPERRY',CD=';2-NOV-2011;18:29' -->
<A NAME="page_du11401_1_107"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<UL>

<P style="font-family:times;"><FONT SIZE=1><I> service-based vesting conditions (which in our case were none). The assumptions that we used to calculate these amounts are discussed in Note 6 to our financial statements appearing at the end of this
prospectus.  </I></FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> The amounts in the "All other compensation" column reflect the value of perquisites and other personal benefits, which are further detailed below.  </I></FONT></DD></DL>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>Name


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 401(k) match<BR>
($)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Group life<BR>
insurance<BR>
premium<BR>
($)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Relocation<BR>
expense<BR>
reimbursement<BR>
($)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 Total<BR>
($)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=13 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Christoph Westphal, M.D., Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert Forrester</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jonathan Pachter, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>30,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul Brannelly</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Satish Jindal, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peter Elliott, Ph.D.&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Dr.&nbsp;Westphal does not receive any compensation from us for his service.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(6)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> The bonus amount for Dr.&nbsp;Pachter represents a signing bonus of $50,000 paid upon the commencement of his employment with us.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(7)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> In February 2011, Dr.&nbsp;Jindal transitioned from his former role as our President and Chief Operating Officer to his current capacity as our non-executive
employee
pursuant to the terms of a transition services agreement.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(8)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Dr.&nbsp;Elliott's employment with us ended in August 2011.  </I></FONT></DD></DL>
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> GRANTS OF PLAN-BASED AWARDS IN 2011  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth information regarding grants of plan-based awards to our named executive officers during 2011. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:54%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


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 Name


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Grant date


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 All other stock<BR>
awards: number<BR>
of shares of stock<BR>
(#)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 All other option awards:<BR>
number of securities<BR>
underlying options<BR>
(#)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Exercise price<BR>
of option<BR>
awards<BR>
($/share)<font
style="font-size:6pt;position:relative;top:-2pt;add_sup:2pt;">(1)</font>


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Grant date fair<BR>
value of stock<BR>
and option<BR>
awards<BR>
($)<font
style="font-size:6pt;position:relative;top:-2pt;add_sup:2pt;">(2)</font>


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
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<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=16 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Christoph Westphal, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Robert Forrester</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3/3/2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>448,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(3)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>35,840</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Jonathan Pachter, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>9/6/2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>240,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(4)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.55</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>81,336</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Paul Brannelly</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Satish Jindal, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Peter Elliott, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3/3/2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>448,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(5)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>35,840</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <P style="font-family:times;"><FONT SIZE=1><I>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" >


  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Option awards have been granted with exercise prices equal to the fair value of our common stock on the date of grant. For a discussion of our methodology for determining the fair
value of our common stock, see "Management's discussion and analysis of financial condition and results of operations&#151;Critical accounting policies and significant estimates."
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> The amounts in the "Grant date fair value of stock and option awards" column reflect the grant date fair value of stock and option awards granted in 2011 calculated
in accordance with
ASC 718.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Mr.&nbsp;Forrester paid $0.08 per share for the stock award. Stock award vests with respect to 25% of the shares on the first anniversary of Mr.&nbsp;Forrester's
date of hire,
which was in March&nbsp;2011, and with respect to the remaining shares in approximately equal quarterly installments through the first anniversary of his date of hire.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Option award vests with respect to 25% of the shares on the first anniversary of Dr.&nbsp;Pachter's date of hire, which was in July&nbsp;2011, and with respect to
the remaining
shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Dr.&nbsp;Elliott paid $0.08 per share for the stock award. Pursuant to a restricted stock agreement with Dr.&nbsp;Elliott, we repurchased 420,000 shares in
connection with
Dr.&nbsp;Elliott's transition from our employee to a member of our scientific advisory board. The remaining shares of stock are fully vested.  </I></FONT></DD></DL>
 </DIV>
 <P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>107 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=110,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=578300,FOLIO='107',FILE='DISK104:[11ZDM1.11ZDM11401]DU11401A.;66',USER='DPERRY',CD=';2-NOV-2011;18:29' -->
<A NAME="page_du11401_1_108"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2011  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December&nbsp;31, 2011. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:54%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


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<DIV ALIGN="CENTER"><TABLE width="150%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
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<TD WIDTH="60pt" style="font-family:times;"></TD>
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<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="53pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Option awards


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Number of<BR>
securities<BR>
underlying<BR>
unexercised<BR>
options<BR>
(#)<BR>
exercisable


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Number of<BR>
securities<BR>
underlying<BR>
unexercised<BR>
options<BR>
(#)<BR>
unexercisable


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Stock awards


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Name


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Option<BR>
exercise<BR>
price<BR>
($)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Option<BR>
expiration<BR>
date


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Number of<BR>
shares that<BR>
have not<BR>
vested<BR>
(#)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Market value<BR>
of shares that<BR>
have not<BR>
vested<BR>
($)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=19 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Christoph Westphal, M.D., Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,134,375</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(1)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(2)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Robert Forrester</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>448,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(3)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(2)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Jonathan Pachter, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>240,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(4)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.55</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>9/6/2021</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Paul Brannelly</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>210,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(5)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.08</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>12/3/2020</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Satish Jindal, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>61,851</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(6)</SUP></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><SUP>(2)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Peter Elliott, Ph.D.&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
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 <P style="font-family:times;"><FONT SIZE=1><I>

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  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stock award vested with respect to 25% of the shares on the grant date, which was in August&nbsp;2010, and vests with respect to the remaining shares in approximately equal
quarterly installments through the fourth anniversary of the grant date.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> The market value of the stock award is based on the fair value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share as of
December&nbsp;31, 2011. For a discussion of our methodology for determining the
fair value of our common stock, see "Management's discussion and analysis of financial condition and results of operations&#151;Critical accounting policies and significant estimates."
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stock award vests with respect to 25% of the shares on the first anniversary of Mr.&nbsp;Forrester's date of hire, which was in March&nbsp;2011, and with respect to
the remaining
shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Option award vests with respect to 25% of the shares on the first anniversary of Dr.&nbsp;Pachter's date of hire, which was in July&nbsp;2011, and with respect to
the remaining
shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Option award vests with respect to 25% of the shares on the first anniversary of Mr.&nbsp;Brannelly's date of hire, which was in November&nbsp;2010, and with respect
to the
remaining shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(6)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stock award vests in installments specified in a restricted stock agreement with Dr.&nbsp;Jindal, as amended, and will be fully vested in February&nbsp;2012.
</I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=1><B>108 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 <DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
<p style="font-family:times;"></FONT></P>
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><B> OPTIONS EXERCISED AND STOCK VESTED  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>None of our named executive officers exercised any options during 2011. The following table sets forth information regarding the vesting of stock
during 2011 for each of our named executive officers. </FONT></P>

</UL>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="78pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="87pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Stock awards


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Name


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Number of<BR>
shares acquired<BR>
on vesting<BR>
(#)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Value realized on<BR>
vesting<BR>
($)<font
style="font-size:6pt;position:relative;top:-2pt;add_sup:2pt;">(1)</font>


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Christoph Westphal, M.D., Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>412,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(2)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>229,969</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert Forrester</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jonathan Pachter, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul Brannelly</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Satish Jindal, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>234,375</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(3)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>130,663</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peter Elliott, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>28,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(4)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,400</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 <P style="font-family:times;"><FONT SIZE=1><I>

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  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> The value realized upon vesting is equal to the fair value of our common stock on the vesting date multiplied by number of shares acquired on vesting.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stock award vested with respect to 25% of the shares on the grant date, which was in August&nbsp;2010, and vests with respect to the remaining shares in
approximately equal
quarterly installments through the fourth anniversary of the grant date.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stock award vests in installments specified in a restricted stock agreement with Dr.&nbsp;Jindal, as amended, and will be fully vested in February&nbsp;2012.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Pursuant to a restricted stock agreement with Dr.&nbsp;Elliott, we repurchased 420,000 shares in connection with Dr.&nbsp;Elliott's transition from our employee to a
member of our
scientific advisory board. The remaining shares of stock are fully vested.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> PENSION BENEFITS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We do not maintain any defined benefit pension plans. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NONQUALIFIED DEFERRED COMPENSATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We do not maintain any nonqualified deferred compensation plans. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> STOCK OPTION AND OTHER EMPLOYEE BENEFIT PLANS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The two equity incentive plans described in this section are the 2010 equity incentive plan and the 2012 stock incentive plan. Prior to this
offering, we granted awards to eligible participants under the 2010 equity incentive plan. Following the closing of this offering, we expect to grant awards to eligible participants under the 2012
stock incentive plan, which we expect to adopt prior to the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 2012 stock incentive plan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We expect our board of directors to adopt and our stockholders to approve the 2012 stock incentive plan, which will become effective immediately
prior to the closing of this offering. The 2012 stock incentive plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted
stock awards, restricted stock units and other stock-based awards. Upon effectiveness of the plan, the number of shares of our common stock that will be reserved for issuance under the 2012 stock
incentive plan will be the sum of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares plus the number of shares (up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) equal to the sum of
the number of shares of our common stock then available for issuance </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>109 </B></FONT></P>

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<A NAME="page_du11401_1_110"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>under
the 2010 equity incentive plan described below and the number of shares of our common stock subject to outstanding awards under the 2010 equity incentive plan, described below, that expire,
terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
employees, officers, directors, consultants and advisors are eligible to receive awards under the 2012 stock incentive plan. However, incentive stock options may only be granted to our employees.
The maximum number of shares of our common stock with respect to which awards may be granted to any participant under the 2012 stock incentive plan is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per calendar year. For
purposes
of this limit on the maximum number of shares that may be awarded to any participant, the combination of an option in tandem with a stock appreciation right will be treated as a single award. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Pursuant
to the terms of the 2012 stock incentive plan, our board of directors administers the plan and, subject to any limitations in the plan, selects the recipients of awards and determines: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
number of shares of our common stock covered by options and the dates upon which the options become exercisable;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
type of options to be granted;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
duration of options, which may not be in excess of ten years;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
exercise price of options, which must be at least equal to the fair market value of our common stock on the date of grant; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
number of shares of our common stock subject to and the terms of any stock appreciation rights, restricted stock awards, restricted stock units or other
stock-based awards and the terms and conditions of such awards, including conditions for repurchase, issue price and repurchase price. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>If
our board of directors delegates authority to an executive officer to grant awards under the 2012 stock incentive plan, the executive officer has the power to make awards to all of our employees,
except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards, and the maximum number of
shares subject to awards that such executive officer may make. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon
a merger or other reorganization event, our board of directors may, in its sole discretion, take any one or more of the following actions pursuant to the 2012 stock incentive plan as to some or
all outstanding awards other than restricted stock: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>provide
that all outstanding awards shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring or successor corporation (or an
affiliate thereof);
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>upon
written notice to a participant, provide that all of the participant's unexercised awards will terminate immediately prior to the consummation of such
reorganization event unless exercised by the participant;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>provide
that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to an award shall lapse, in whole or in part, prior
to or upon such reorganization event;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>in
the event of a reorganization event pursuant to which holders of shares of our common stock will receive a cash payment for each share surrendered in the
reorganization event, make or provide for a cash payment to the participants with respect to each award held by a participant equal to (1)&nbsp;the number of shares of common stock subject to the
vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>110 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>reorganization
event) multiplied by (2)&nbsp;the excess, if any, of the cash payment for each share surrendered in the reorganization event over the exercise, measurement or purchase price of such
award and any applicable tax withholdings, in exchange for the termination of such award; </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>provide
that, in connection with a liquidation or dissolution, awards shall convert into the right to receive liquidation proceeds. </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=2>Our
board of directors does not need to take the same action with respect to all awards and may take different actions with respect to portions of the same award. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
the case of certain restricted stock units, no assumption or substitution is permitted, and the restricted stock units will instead be settled in accordance with the terms of the applicable
restricted stock unit agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon
the occurrence of a reorganization event other than a liquidation or dissolution, the repurchase and other rights with respect to outstanding restricted stock awards will continue for the benefit
of the successor company and will, unless the board of directors may otherwise determine, apply to the cash, securities or other property into which shares of our common stock are converted or
exchanged
pursuant to the reorganization event. Upon the occurrence of a reorganization event involving a liquidation or dissolution, all restrictions and conditions on each outstanding restricted stock award
will automatically be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>At
any time, our board of directors may, in its sole discretion, provide that any award under the 2012 stock incentive plan will become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>No
award may be granted under the 2012 stock incentive plan on or after&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2022. Our board of directors may amend, suspend or terminate
the 2012 stock incentive plan at any time, except
that stockholder approval may be required to comply with applicable law or stock market requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 2010 equity incentive plan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our 2010 equity incentive plan was adopted by our board of directors and approved by our stockholders in November 2010. Upon the closing of this
offering and the approval of the 2012 stock incentive plan, we do not expect to grant any additional awards under the 2010 equity incentive plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
2010 equity incentive plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units and stock appreciation
rights. The number of shares of our common stock that are reserved for issuance under the 2010 equity incentive plan is 1,999,348. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Our
employees, directors, consultants and advisors are eligible to receive awards under the 2010 equity incentive plan. However, incentive stock options may only be granted to our employees. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon
a merger or other reorganization event, our board of directors may, in its sole discretion, take any one or more of the following actions pursuant to the 2010 equity incentive plan as to some or
all outstanding awards: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>arrange
for all outstanding awards to be assumed, or equivalent awards shall be substituted, by the surviving or acquiring corporation (or the surviving or acquiring
corporation's parent company);
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>arrange
for the assignment of any reacquisition or repurchase rights to the surviving corporation or acquiring corporation (or the surviving or acquiring
corporation's parent company); </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>111 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>accelerate
the vesting of any outstanding award to a date on or prior to the effective time of such merger or other reorganization event;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>arrange
for the lapse of any of our reacquisition or repurchase rights;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>cancel
or arrange for the cancellation of the award, to the extent not vested or not exercised prior to the effective time of such merger or other reorganization
event; and/or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>make
a payment, in such form as may be determined by our board of directors, equal to the excess, if any, of (A)&nbsp;the value of the property the holder of the
award would have received upon the exercise of the award, over (B)&nbsp;any exercise price payable by such holder in connection with such exercise. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Our
board of directors does not need to take the same action with respect to all awards and may take different actions with respect to portions of the same award. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>At
any time, our board of directors may, in its sole discretion, provide that any award under the 2010 equity incentive plan will become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As
of September&nbsp;30, 2011, there were options to purchase an aggregate of 1,418,000 shares of common stock outstanding under the 2010 equity incentive plan at a weighted-average exercise price
of $0.21 per share and no shares of common stock issued upon the exercise of options granted under
the 2010 equity incentive plan. If the 2012 stock incentive plan is approved by our stockholders, we will grant no further stock options or other awards under the 2010 equity incentive plan. However,
any shares of common stock reserved for issuance under the 2010 equity incentive plan that remain available for issuance and any shares of common stock subject to awards under the 2010 equity
incentive plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at the original issuance price pursuant to a contractual repurchase right will be
available for issuance under the 2012 stock incentive plan up to a specified number of shares. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 401(K) RETIREMENT PLAN  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We maintain a defined contribution employee retirement plan for our employees. Our 401(k) plan is intended to qualify as a tax-qualified
plan under Section&nbsp;401 of the Internal Revenue Code so that contributions to our 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or
distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute up to 100% of his or her pre-tax compensation, up to a statutory limit, which is $17,000 for
2012. Participants who are at least 50&nbsp;years old can also make "catch-up" contributions, which in 2012 may be up to an additional $5,500 above the statutory limit. Under our 401(k)
plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan's trustee. Our 401(k) plan also permits us to make
discretionary contributions and matching contributions, subject to established limits and a vesting schedule. Beginning in July 2011, we made an employer matching contribution equal to (1)&nbsp;100%
of employee deferral contributions up to a deferral rate of 3% of compensation plus (2)&nbsp;50% of employee deferral contributions up to an deferral rate of an additional 2% of compensation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LIMITATION OF LIABILITY AND INDEMNIFICATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our certificate of incorporation, which will become effective upon the closing of this offering, limits the personal liability of directors for
breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law and provides that no director will have personal liability to us or </FONT></P>


<P style="font-family:times;"><FONT SIZE=1><B>112 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>to
our stockholders for monetary damages for breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for
any breach of the director's duty of loyalty to us or our stockholders;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for
acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for
voting for or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for
any transaction from which the director derived an improper personal benefit. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Any
amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such amendment or
repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will
be further limited to the greatest extent permitted by the Delaware General Corporation Law. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition, our certificate of incorporation, which will become effective upon the closing of this offering, provides that we must indemnify our directors and officers and we must advance expenses,
including attorneys' fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or
officers. In addition, we have entered into indemnification agreements with our directors. These indemnification agreements may require us, among other things, to indemnify each such director for some
expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by him in any action or proceeding arising out of his service as one of our directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Certain
of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members
of our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RULE 10B5-1 SALES PLANS  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Our directors and executive officers may adopt written plans, known as Rule&nbsp;10b5-1 plans, in which they will contract with a
broker to buy or sell shares of our common stock on a periodic basis. Under a Rule&nbsp;10b5-1 plan, a broker executes trades pursuant to parameters established by the director or
officer when entering into the plan, without further direction from the director or officer. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive
officers may also buy or sell additional shares outside of a Rule&nbsp;10b5-1 plan when they are not in possession of material, nonpublic information. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> DIRECTOR COMPENSATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>During 2011, we did not pay cash compensation to any director for his service as a director, except Henri Termeer. Mr.&nbsp;Termeer receives an
annual retainer fee of $25,000 for his service on our board of directors. We have historically reimbursed our non-employee directors for reasonable travel and other expenses incurred in
connection with attending board of director and committee meetings. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>113 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Executive compensation </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>As
discussed in the "Executive compensation" section of this prospectus, our chief executive officer, Christoph Westphal, M.D., Ph.D., who is also chairman of our board of directors, does not receive,
and has not historically received, any compensation in connection with his service. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>During
2011, we did not grant equity awards as compensation to any of our directors, except Henri Termeer. In June 2011, in recognition of the commencement of his service on our board of directors, we
granted Mr.&nbsp;Termeer an option to purchase 125,000 shares of our common stock. This option vests with respect to 25% of the shares on the first anniversary of the grant date and with respect to
the remaining shares in approximately equal quarterly installments through the fourth anniversary of the grant date. The exercise price of this option is $0.08 per share, the fair value of our common
stock on the date of grant as determined by our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Effective
upon the closing of this offering, our non-employee directors will be compensated as follows: </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition, we will continue to reimburse our non-employee directors for reasonable travel and other expenses incurred in connection with attending board of director and committee
meetings. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>114 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_dx11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Transactions with related persons    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Since our incorporation in August 2010, we have engaged in the following transactions with our directors, executive officers, holders
of more than 5% of our voting securities, and affiliates or immediately family members of our directors, executive officers and holders of more than 5% of our voting securities, and our
co-founders. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> SERIES C PREFERRED STOCK FINANCING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In November 2011, we issued and sold an aggregate of 8,934,493 shares of our series&nbsp;C preferred stock at a price per share of $2.25 for an
aggregate purchase price of $20.1 million. The following table sets forth the number of shares of our series&nbsp;C preferred stock that we issued to our 5% stockholders and their affiliates. </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="89pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


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 Name<font
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 Shares of series&nbsp;C<BR>
preferred stock


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Advanced Technology Ventures VIII,&nbsp;L.P.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with Bessemer Venture Partners<SUP>(2)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>133,333</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(3)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CHP III,&nbsp;L.P.<SUP>(4)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>444,444</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Eastern Capital Limited</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Longwood Founders Fund,&nbsp;LP<SUP>(5)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>444,444</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>MPM Bioventures V,&nbsp;LP<SUP>(6)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>266,666</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> See "Principal stockholders" for more information about shares held by these entities.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stephen Kraus, a member of our board of directors, is employed by Bessemer Venture Partners and has no voting or dispositive power with respect to the shares held by
entities
affiliated with Bessemer Venture Partners.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;18,667 shares purchased by Bessemer Venture Partners VII Institutional&nbsp;L.P., (b)&nbsp;42,667 shares purchased by Bessemer Venture Partners
VII&nbsp;L.P. and (c)&nbsp;71,999 shares purchased by BVP VII Special Opportunity Fund&nbsp;L.P.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> John K. Clarke, a member of our board of directors, is a managing member of CHP&nbsp;III Management, LLC, the general partner of CHP III,&nbsp;L.P.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Christoph Westphal, M.D., Ph.D. and Richard Aldrich, members of our board of directors, are partners of Longwood Founders Fund,&nbsp;LP.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(6)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Ansbert Gadicke, M.D., a member of our board of directors, is the managing director of MPM Capital and a member of MPM Bioventures V&nbsp;LLC, the general partner of
MPM Bioventures
V&nbsp;GP,&nbsp;LLC, which is the general partner of MPM Bioventures V,&nbsp;LP.  </I></FONT></DD></DL>
 </DIV>
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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Transactions with related persons </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> SERIES B PREFERRED STOCK FINANCING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In July 2011, we issued and sold an aggregate of 16,025,000 shares of our series&nbsp;B preferred stock at a price per share of $2.00 for an
aggregate purchase price of $32,050,000. The following table sets forth the number of shares of our series&nbsp;B preferred stock that we issued to our 5% stockholders and their affiliates. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="89pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Name<font
style="font-size:6pt;position:relative;top:-2pt;add_sup:2pt;">(1)</font>


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Shares of series&nbsp;B<BR>
preferred stock


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Advanced Technology Ventures VIII,&nbsp;L.P.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,500,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with Bessemer Venture Partners<SUP>(2)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,500,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(3)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CHP III,&nbsp;L.P.<SUP>(4)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,500,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Longwood Founders Fund,&nbsp;LP<SUP>(5)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,500,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>MPM Bioventures V,&nbsp;LP<SUP>(6)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,500,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <P style="font-family:times;"><FONT SIZE=1><I>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" >


  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> See "Principal stockholders" for more information about shares held by these entities.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stephen Kraus, a member of our board of directors, is employed by Bessemer Venture Partners and has no voting or dispositive power with respect to the shares held by
entities
affiliated with Bessemer Venture Partners.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;350,000 shares purchased by Bessemer Venture Partners VII Institutional&nbsp;L.P., (b)&nbsp;800,000 shares purchased by Bessemer Venture
Partners
VII&nbsp;L.P. and (c)&nbsp;1,350,000 shares purchased by BVP VII Special Opportunity Fund&nbsp;L.P.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> John K. Clarke, a member of our board of directors, is a managing member of CHP&nbsp;III Management, LLC, the general partner of CHP III,&nbsp;L.P.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Christoph Westphal, M.D., Ph.D. and Richard Aldrich, members of our board of directors, are partners of Longwood Founders Fund,&nbsp;LP.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(6)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Ansbert Gadicke, M.D., a member of our board of directors, is the managing director of MPM Capital and a member of MPM Bioventures V&nbsp;LLC, the general partner of
MPM Bioventures
V&nbsp;GP,&nbsp;LLC, which is the general partner of MPM Bioventures V,&nbsp;LP.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> SERIES A PREFERRED STOCK FINANCING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In November 2010 and April 2011, we issued and sold an aggregate of 16,000,000 shares of our series&nbsp;A preferred stock at a price per share of
$1.00 for an aggregate purchase price of $16,000,000. The following table sets forth the number of shares of our series&nbsp;A preferred stock that we issued to our 5% stockholders and their
affiliates. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="91pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


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 Name<font
style="font-size:6pt;position:relative;top:-2pt;add_sup:2pt;">(1)</font>


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Shares of series&nbsp;A<BR>
preferred stock


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with Bessemer Venture Partners<SUP>(2)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(3)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CHP III,&nbsp;L.P.<SUP>(4)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Longwood Founders Fund,&nbsp;LP<SUP>(5)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>MPM Bioventures V,&nbsp;LP<SUP>(6)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <P style="font-family:times;"><FONT SIZE=1><I>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="10%" ALIGN="LEFT" >


  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> See "Principal stockholders" for more information about shares held by these entities.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Stephen Kraus, a member of our board of directors, is employed by Bessemer Venture Partners and has no voting or dispositive power with respect to the shares held by
entities
affiliated with Bessemer Venture Partners.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;560,000 shares purchased by Bessemer Venture Partners VII Institutional&nbsp;L.P., (b)&nbsp;1,280,000 shares purchased by Bessemer Venture
Partners
VII&nbsp;L.P. and (c)&nbsp;2,160,000 shares purchased by BVP VII Special Opportunity Fund&nbsp;L.P.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> John K. Clarke, a member of our board of directors, is a managing member of CHP&nbsp;III Management, LLC, the general partner of CHP III,&nbsp;L.P.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Christoph Westphal, M.D., Ph.D. and Richard Aldrich, members of our board of directors, are partners of Longwood Founders Fund,&nbsp;LP.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(6)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Ansbert Gadicke, M.D., a member of our board of directors, is the managing director of MPM Capital and a member of MPM Bioventures V&nbsp;LLC, the general partner of
MPM Bioventures
V&nbsp;GP,&nbsp;LLC, which is the general partner of MPM Bioventures V,&nbsp;LP.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=1><B>116 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Transactions with related persons </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RESTRICTED STOCK GRANTS TO CO-FOUNDERS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In August 2010, in connection with our formation, we issued and sold an aggregate of 10,000,000 shares of our common stock at a price per share of
$0.0001 for an aggregate purchase price of $1,000 to our co-founders. These shares are subject to repurchase by us pursuant to restricted stock agreements with each of our
co-founders. These shares vest with respect to 25% of the shares on the grant date and with respect to the remaining shares in approximately equal quarterly installments through the fourth
anniversary of the grant date. The following table sets forth the number of shares of common stock that we issued to our co-founders. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Name


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Shares of<BR>
common stock


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Richard Aldrich<SUP>(1)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,900,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(2)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Michelle Dipp</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>600,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Piyush Gupta, Ph.D.<SUP>(1)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,550,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(3)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Eric Lander, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,250,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Satish Jindal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,250,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(4)</SUP></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert Weinberg, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,250,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Christoph Westphal, M.D., Ph.D.<SUP>(1)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,200,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><SUP>(5)</SUP></FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Richard Aldrich and Christoph Westphal, M.D., Ph.D. are members of our board of directors. Piyush Gupta, Ph.D. is a former member of our board of directors.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> 475,000 of these shares were subsequently transferred to the Richard H. Aldrich Irrevocable Trust of 2011.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> 300,000 of these shares were issued to Dr. Gupta in connection with his role as a former member of our board of directors.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> In connection with the transition of Dr.&nbsp;Jindal from our President and Chief Operating Officer to our non-executive employee in February 2011, we repurchased
582,681 shares from him. Accordingly, Dr.&nbsp;Jindal owns 667,319 shares of our common stock as of September&nbsp;30, 2011.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> 440,000 of these shares were subsequently transferred to The Foundation Irrevocable Trust of 2010.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> SCIENTIFIC ADVISORY BOARD AGREEMENTS WITH CO-FOUNDERS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Three of our co-founders, Robert Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., are also members of our scientific
advisory board and receive compensation for their participation pursuant to our scientific advisory board agreements with them. The following table sets forth the amount of cash compensation paid to
each of these co-founders for their membership on our scientific advisory board since our formation. </FONT></P>
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<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Piyush Gupta, Ph.D.<SUP>(1)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Eric Lander, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>75,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert Weinberg, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>75,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Piyush Gupta, Ph.D. is a former member of our board of directors.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> AGREEMENTS WITH ENTITIES AFFILIATED WITH CO-FOUNDERS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>From our formation in August 2010 through May 2011, we rented office space from Longwood Founders Fund,&nbsp;LP, an entity affiliated with three of
our co-founders, Richard Aldrich, Michelle Dipp and Christoph Westphal, M.D., Ph.D. We paid Longwood Founders Fund,&nbsp;LP an aggregate of $46,000 for our office space. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>117 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Transactions with related persons </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>In
October 2010, we entered into agreements regarding the licensing of intellectual property with the Whitehead Institute, an entity affiliated with two of our co-founders, Robert
Weinberg, Ph.D. and Piyush Gupta, Ph.D., and the Broad Institute, an entity affiliated with one of our co-founders, Eric Lander, Ph.D. See "Business&#151;Licenses" for additional
information regarding these agreements. Pursuant to one of the agreements, we issued 583,333 shares of our common stock to the Whitehead Institute and entities and individuals affiliated with the
Whitehead Institute, including three of our co-founders. The following table sets forth the number of shares of common stock that we issued to our co-founders in connection
with our agreement with the Whitehead Institute. </FONT></P>
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<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Piyush Gupta, Ph.D.<SUP>(1)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27,609</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Eric Lander, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,088</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert Weinberg, Ph.D.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,088</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Piyush Gupta, Ph.D. is a former member of our board of directors.  </I></FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> REGISTRATION RIGHTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are a party to an investor rights agreement with certain holders of our common stock and holders of our series&nbsp;A preferred stock,
series&nbsp;B preferred stock and series&nbsp;C preferred stock, including some of our directors, executive officers and 5% stockholders and their affiliates and entities affiliated with our
directors. The investor rights agreement provides these holders the right, following the completion of this offering, to demand that we file&nbsp;a registration statement or request that their
shares be covered by a registration statement that we are otherwise filing. See "Description of capital stock&#151;Registration rights" for additional information regarding these registration
rights. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> INDEMNIFICATION AGREEMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our certificate of incorporation in effect upon the closing of this offering provides that we will indemnify our directors and officers to the
fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with our directors. See "Executive compensation&#151;Limitation of liability and
indemnification" for additional information regarding these agreements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Verastem
is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we refer to
as a "related person," has a direct or indirect material interest. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If
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 chief operating 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 entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion,
may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that arise between
committee meetings, </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>118 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Transactions with related persons </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>subject
to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A
related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full disclosure of the related person's interest in the
transaction. As appropriate for the circumstances, the committee will review and consider: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
related person's interest in the related person transaction;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
approximate dollar value of the amount involved in the related person transaction;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
approximate dollar value of the amount of the related person's interest in the transaction without regard to the amount of any profit or loss;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether
the transaction was undertaken in the ordinary course of our business;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether
the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
purpose of, and the potential benefits to us of, the transaction; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>any
other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors
in light of the circumstances of the particular transaction. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>The
committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in Verastem's best interests. The committee may impose any
conditions on the related person transaction that it deems appropriate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
addition to the transactions that are excluded by the instructions to the SEC's related person transaction disclosure rule, our board of directors has determined that the following transactions do
not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>interests
arising solely from the related person's position as an executive officer of another entity (whether or not the person is also a director of such entity)
that is a participant in the transaction, where (a)&nbsp;the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b)&nbsp;the related
person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and
(c)&nbsp;the amount involved in the transaction is less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a
transaction that is specifically contemplated by provisions of our charter or bylaws. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>The
policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee in the manner specified in its charter. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We
did not have a written policy regarding the review and approval of related person transactions prior to this offering. Nevertheless, with respect to such transactions, it was our policy for our
board of directors to consider the nature of and business reason for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and
whether such transactions were otherwise fair to and in the best interests of, or not contrary to, our best interests. In addition, all related person transactions required prior approval, or later
ratification, by our board of directors. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>119 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="dz11401_principal_stockholders"> </A>
<A NAME="toc_dz11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Principal stockholders    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth information with respect to the beneficial ownership of our common stock as of September&nbsp;30,
2011 by: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each
of our directors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each
of our named executive officers;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>all
of our directors and executive officers as a group; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each
person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock. </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=2>The
column entitled "Percentage of shares beneficially owned&#151;Before offering" is based on a total of 51,436,145 shares of our common stock outstanding as of September&nbsp;30, 2011,
updated to reflect our issuance and sale of an aggregate of 8,934,493 shares of our series&nbsp;C preferred stock in November 2011 and assuming the conversion of all outstanding shares of our
preferred stock into an aggregate of 40,959,493 shares of our common stock, including shares of our series&nbsp;C preferred stock that we issued and sold in November 2011, upon the closing of this
offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
column entitled "Percentage of shares beneficially owned&#151;After offering" is based on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock to be outstanding after
this offering, including the
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock that we are selling in this offering, but not including any additional shares issuable upon exercise of outstanding
options. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Beneficial
ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock. Shares of our common stock subject
to options that are currently exercisable or exercisable within 60&nbsp;days of September&nbsp;30, 2011 are considered outstanding and beneficially owned by the person holding the options for the
purpose of calculating the percentage ownership of that person but not for the purpose of calculating the percentage ownership of any other person. Except as otherwise noted, we believe the persons
and entities in this table have sole voting and investing power with respect to all of the shares of our common stock beneficially owned by them, subject to community property laws, where applicable.
Except as otherwise set forth below, the address of the beneficial owner is c/o Verastem,&nbsp;Inc., 215 First Street, Suite&nbsp;440, Cambridge, Massachusetts 02142. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>120 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Principal stockholders </B></FONT></P>

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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="96pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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 Percentage of shares<BR>
beneficially owned



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 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Name and address of beneficial owner


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 Number of shares<BR>
beneficially owned


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Before<BR>
offering


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 After<BR>
offering


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=12 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>5% stockholders:</B></FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>



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 Advanced Technology Ventures VIII,&nbsp;L.P.<SUP>(1)</SUP></FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,600,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 1000 Winter Street</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 Waltham, MA 02451</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with Bessemer Venture Partners<SUP>(2)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,633,333</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>196 Broadway, 2nd&nbsp;Floor</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cambridge, MA 02139</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>



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 CHP III,&nbsp;L.P.<SUP>(3)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,944,444</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 230 Nassau Street</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Princeton, NJ 08542</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Eastern Capital Limited<SUP>(4)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>c/o Foreshore Corporate Services Ltd.</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>4th Floor, Queensgate House</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>113 South Church Street</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>George Town, Grand Cayman KY1-1104</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cayman Islands</FONT></TD>
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 Longwood Founders Fund,&nbsp;LP<SUP>(5)</SUP></FONT></TD>
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<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,944,444</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15.5</FONT></TD>
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 800 Boylston Street, Suite&nbsp;1555</FONT></TD>
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 Boston, MA 02199</FONT></TD>
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<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>MPM Bioventures V,&nbsp;LP<SUP>(6)</SUP></FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,766,666</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13.2</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>c/o MPM Asset Management</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>200 Clarendon Street, 54th&nbsp;Floor</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Boston, MA 02116</FONT></TD>
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<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>



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 Directors and Executive Officers</B></FONT></TD>
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<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Christoph Westphal, M.D., Ph.D.<SUP>(7)</SUP></FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,144,444</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
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<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
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<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
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 Robert Forrester</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>448,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
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<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jonathan Pachter, Ph.D.&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 Satish Jindal, Ph.D.&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>667,319</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
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<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul Brannelly</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
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<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 Peter Elliot, Ph.D.&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>28,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
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<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Richard Aldrich<SUP>(8)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,844,444</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 John&nbsp;K. Clarke<SUP>(9)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,944,444</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ansbert Gadicke, M.D.<SUP>(10)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,766,666</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 Stephen Kraus<SUP>(11)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Henri Termeer</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 All executive officers and directors as a group (8&nbsp;persons)<SUP>(12)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>26,203,554</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>*</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Represents beneficial ownership of less than one percent of our outstanding common stock.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(1)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;2,500,000 shares of common stock underlying shares of series&nbsp;B preferred stock, and (b)&nbsp;100,000 shares of common stock underlying
shares of
series&nbsp;C preferred stock. No natural person holds voting or dispositive power for the shares of our common stock held by Advanced Technologies Ventures VIII, L.P ("ATV VIII"). ATV Associates
VIII,&nbsp;LLC ("ATV VIII&nbsp;LLC") is the general partner of ATV VIII and controls its investment and voting decisions. Decisions of ATV VIII&nbsp;LLC are made by a board of six managing
directors (the "ATV Managing Directors"). The ATV Managing Directors  </I></FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>121 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Principal stockholders </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<UL>

<P style="font-family:times;"><FONT SIZE=1><I> are Steve Baloff, Michael Carusi, Wes Raffel, Jean George, Bob Hower and William Wiberg. Each of the ATV Managing Directors disclaims beneficial ownership of the shares held by ATV VIII.  </I></FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(2)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;560,000 shares of common stock underlying shares of series&nbsp;A preferred stock held by Bessemer Venture Partners VII Institutional&nbsp;L.P. ("BVP
Institutional"), (b)&nbsp;1,280,000 shares of common stock underlying shares of series&nbsp;A preferred stock held by Bessemer Venture Partners VII&nbsp;L.P. ("BVP&nbsp;VII"),
(c)&nbsp;2,160,000 shares of common stock underlying shares of series&nbsp;A preferred stock held by BVP&nbsp;VII Special Opportunity Fund&nbsp;L.P. ("BVP Special Opportunity" and together
with BVP Institutional and BVP&nbsp;VII, "Bessemer Venture Partner Entities"), (d)&nbsp;350,000 shares of common stock underlying shares of series&nbsp;B preferred stock held by Bessemer Venture
Partners VII Institutional&nbsp;L.P., (e)&nbsp;800,000 shares of common stock underlying shares of series&nbsp;B preferred stock held by Bessemer Venture Partners VII&nbsp;L.P.,
(f)&nbsp;1,350,000 shares of common stock underlying shares of series&nbsp;B preferred stock held by BVP&nbsp;VII Special Opportunity Fund&nbsp;L.P., (g)&nbsp;18,667&nbsp;shares of common
stock underlying shares of series&nbsp;C preferred stock held by Bessemer Venture Partners VII Institutional&nbsp;L.P., (h)&nbsp;42,667&nbsp;shares of common stock underlying shares of
series&nbsp;C preferred stock held by Bessemer Venture Partners VII&nbsp;L.P., and (i)&nbsp;71,999&nbsp;shares of common stock underlying shares of series&nbsp;C preferred stock held by
BVP&nbsp;VII Special Opportunity Fund&nbsp;L.P. Deer VII&nbsp;&amp; Co. L.P. ("Deer L.P.") is the general partner of the Bessemer Venture Partner Entities. Deer VII&nbsp;&amp; Co. Ltd. is the general
partner of Deer L.P. J.&nbsp;Edmund Colloton, Robin&nbsp;S. Chandra, David&nbsp;J. Cowan, Robert&nbsp;P. Goodman, Jeremy&nbsp;S. Levine and Robert&nbsp;M. Stavis are the directors of Deer
VII&nbsp;&amp; Co. Ltd. and share voting and dispositive power over the shares of stock held by the Bessemer Venture Partner Entities. Each of Mr.&nbsp;Colloton, Ms.&nbsp;Chandra, Mr.&nbsp;Cowan,
Mr.&nbsp;Goodman, Mr.&nbsp;Levine and Mr.&nbsp;Stavis disclaims beneficial ownership of the shares identified in this footnote except as to his or her respective proportionate pecuniary interest
in such shares.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(3)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;4,000,000 shares of common stock underlying shares of series&nbsp;A preferred stock, (b)&nbsp;2,500,000 shares of common stock underlying shares
of
series&nbsp;B preferred stock, and (c)&nbsp;444,444 shares of common stock underlying shares of series&nbsp;C preferred stock. John&nbsp;K. Clarke, Brandon&nbsp;H. Hull, Charles&nbsp;G.
Hadley and John&nbsp;J. Park are the managing members of CHP III Management,&nbsp;LLC, the General Partner of CHP III,&nbsp;L.P., and exercise shared voting, investment, and dispositive rights
with respect to the shares of stock held by CHP III,&nbsp;L.P. Each of Messrs.&nbsp;Clarke, Hull, Hadley and Park disclaims beneficial ownership of the shares identified in this footnote except as
to his respective proportionate pecuniary interest in such shares.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(4)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of 4,000,000 shares of common stock underlying shares of series&nbsp;C preferred stock. Eastern Capital Limited is a direct wholly owned subsidiary of
Portfolio Services
Ltd., a Cayman Islands company. Kenneth Dart is the beneficial owner of all of the outstanding shares of Portfolio Services Ltd., which in turn owns all the outstanding shares of Eastern Capital
Limited. Eastern Capital Limited and Mr.&nbsp;Dart have shared voting and dispositive power with respect to the shares held.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(5)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;4,000,000 shares of common stock underlying shares of series&nbsp;A preferred stock, (b)&nbsp;3,500,000 shares of common stock underlying shares
of
series&nbsp;B preferred stock and (c)&nbsp;444,444 shares of common stock underlying shares of series&nbsp;C preferred stock. Longwood Founder&nbsp;GP,&nbsp;LLC (the "General Partner") is
the general partner of Longwood Founders Fund,&nbsp;LP and exercises voting and investment power with respect to securities owned directly by Longwood Founders Fund,&nbsp;LP. Richard Aldrich,
Michelle Dipp and Christoph Westphal are the managers of the General Partner and share voting and dispositive power with respect to the securities held by Longwood Founders Fund,&nbsp;LP. The
General Partner disclaims beneficial ownership of the securities owned directly by Longwood Founders Fund,&nbsp;LP and this report shall not be deemed an admission that the General Partner is the
beneficial owner of such securities, except to the extent of its pecuniary interest therein.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(6)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;4,000,000 shares of common stock underlying shares of series&nbsp;A preferred stock, (b)&nbsp;2,500,000 shares of common stock underlying shares
of
series&nbsp;B preferred stock and (c)&nbsp;266,666 shares of common stock underlying shares of series&nbsp;C preferred stock. MPM Bioventures V&nbsp;GP,&nbsp;LLC ("MPM V&nbsp;GP") is the
general partner of MPM Bioventures V,&nbsp;LP and MPM Bioventures V&nbsp;LLC ("MPM V&nbsp;LLC") is the managing member of MPM V&nbsp;GP. Luke Evnin, Todd Foley, Ansbert Gadicke, Vaughn Kalian,
James Scopa, Steven St.&nbsp;Peter and John Vander Vort are the members of MPM V&nbsp;LLC and have shared power to vote, hold and dispose of the shares held by MPM Bioventures&nbsp;V,&nbsp;LP.
Each disclaims beneficial ownership of the securities reported herein except to the extent of his respective pecuniary interest therein.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(7)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;1,760,000 shares of common stock held by Dr.&nbsp;Westphal, (b)&nbsp;440,000 shares of common stock held by The Foundation Irrevocable Trust of
2010 and
(c)&nbsp;7,944,444 shares held by Longwood Founders Fund,&nbsp;LP. The trustee of The Foundation Irrevocable Trust of 2010 is James Kittler and he exercises sole voting and investment power of the
shares of record held by the trust. The ultimate general partner of Longwood Founders Fund, LP is Longwood Founder&nbsp;GP,&nbsp;LLC. Voting and investment power with respect to the shares held by
Longwood Founders Fund,&nbsp;LP. are vested in Richard Aldrich, Michelle Dipp and Dr.&nbsp;Westphal, the managers of Longwood Founder&nbsp;GP,&nbsp;LLC.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(8)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of (a)&nbsp;1,425,000 shares of common stock held by Mr.&nbsp;Aldrich, (b)&nbsp;475,000 shares of common stock held by Richard&nbsp;H. Aldrich Irrevocable
Trust of
2011 and (c)&nbsp;7,944,444 shares held by Longwood Founders Fund,&nbsp;LP. The trustee  </I></FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>122 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Principal stockholders </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<UL>

<P style="font-family:times;"><FONT SIZE=1><I> of the Richard&nbsp;H. Aldrich Irrevocable Trust of 2011 is Nicole Aldrich and she exercises sole voting and investment power over the shares of record held by the trust. The ultimate general
partner of Longwood Founders Fund, LP is Longwood Founder&nbsp;GP,&nbsp;LLC. Voting and investment power with respect to the shares held by Longwood Founders Fund,&nbsp;LP. are vested in
Mr.&nbsp;Aldrich, Michelle Dipp and Christoph Westphal, the managers of Longwood Founder&nbsp;GP,&nbsp;LLC.  </I></FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(9)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of 6,944,444 shares held by CHP III,&nbsp;L.P. John&nbsp;K. Clarke, Brandon&nbsp;H. Hull, Charles&nbsp;G. Hadley and John&nbsp;J. Park are the managing members of
CHP III Management,&nbsp;LLC, the General Partner of CHP III,&nbsp;L.P., and exercise shared voting, investment, and dispositive rights with respect to the shares of stock held by CHP
III,&nbsp;L.P. Each of Messrs.&nbsp;Clarke, Hull, Hadley and Park disclaims beneficial ownership of the shares identified in this footnote except as to his respective proportionate pecuniary
interest in such shares.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(10)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of 6,766,666 shares held by MPM Bioventures V,&nbsp;LP. MPM V&nbsp;GP is the general partner of MPM Bioventures V,&nbsp;LP and MPM V&nbsp;LLC is the
managing member
of MPM V&nbsp;GP. Luke Evnin, Todd Foley, Ansbert Gadicke, Vaughn Kalian, James Scopa, Steven St.&nbsp;Peter and John Vander Vort are the members of MPM V&nbsp;LLC and have shared power to vote,
hold and dispose of the shares held by MPM Bioventures&nbsp;V,&nbsp;LP. Each disclaims beneficial ownership of the securities reported herein except to the extent of his respective pecuniary
interest therein.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(11)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Mr. Kraus serves as an employee of Bessemer Venture Partners, the management company affiliate of the Bessemer Venture Partner Entities that hold an aggregate of
6,333,333 shares of
our common stock underlying shares of preferred stock as described above. Mr.&nbsp;Kraus has no voting or dispositive power with respect to the shares held by the Bessemer Venture Partner Entities
and disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
<BR><BR> </I></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>(12)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> Consists of an aggregate of 26,203,554 shares of common stock.  </I></FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>123 </B></FONT></P>

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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="ea11401_description_of_capital_stock"> </A>
<A NAME="toc_ea11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Description of capital stock    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> GENERAL  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following description of our capital stock and provisions of our certificate of incorporation and bylaws are summaries and are qualified by
reference to the certificate of incorporation and the bylaws that will be in effect upon the closing of this offering. We have filed copies of these documents with the SEC as exhibits to our
registration statement of which this prospectus forms&nbsp;a part. The description of the capital stock reflects changes to our capital structure that will occur upon the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon
the closing of this offering, our authorized capital stock will consist of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock, par value $0.0001 per share,
and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our preferred
stock, par value $0.0001 per share, all of which preferred stock will be undesignated. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As
of September&nbsp;30, 2011, we had issued and outstanding: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>10,476,652
shares of our common stock outstanding held by 11 stockholders of record;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>16,000,000
shares of our series&nbsp;A preferred stock that will automatically convert into 16,000,000 shares of our common stock upon the closing of this
offering;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>16,025,000
shares of our series&nbsp;B preferred stock that will automatically convert into 16,025,000 shares of our common stock upon the closing of this
offering; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>8,934,493
shares of our series&nbsp;C preferred stock that will automatically convert into 8,934,493 shares of our common stock upon the closing of this offering. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>As
of September&nbsp;30, 2011, we also had outstanding options to purchase 1,418,000 shares of our common stock at a weighted-average exercise price of $0.21 per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> COMMON STOCK  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common
stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts
and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and
issue in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> PREFERRED STOCK  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one or more series
without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, of each series of preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>124 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>The
purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The
issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Upon the closing of this offering, there will be no shares of preferred
stock outstanding, and we have no present plans to issue any shares of preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAWS PROVISIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Delaware law  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are subject to Section&nbsp;203 of the Delaware General Corporation Law. Subject to certain exceptions, Section&nbsp;203 prevents a
publicly-traded Delaware corporation from engaging in a "business combination" with any "interested stockholder" for three years following the date that the person became an interested
stockholder, unless either the interested stockholder attained such status with the approval of our board of directors, the business combination is approved by our board of directors and stockholders
in a prescribed manner or the interested stockholder acquired at least 85% of our outstanding voting stock in the transaction in which it became an interested stockholder. A "business combination"
includes, among other things, a merger or consolidation involving us and the "interested stockholder" and the sale of more than 10% of our assets. In general, an "interested stockholder" is any entity
or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person. The restrictions contained in
Section&nbsp;203 are not applicable to any of our existing stockholders that will own 15% or more of our outstanding voting stock upon the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Staggered board  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our certificate of incorporation and our bylaws divide our board of directors into three classes with staggered three-year terms. In
addition, our certificate of incorporation and our bylaws provide that directors may be removed only for cause and only by the affirmative vote of the holders of 75% of our shares of capital stock
present in person or by proxy and entitled to vote. Under our certificate of incorporation and bylaws, any vacancy on our board of directors, including a vacancy resulting from an enlargement of our
board of directors, may be filled only by vote of a majority of our directors then in office. Furthermore, our certificate of incorporation provides that the authorized number of directors may be
changed only by the resolution of our board of directors. The classification of our board of directors and the limitations on the ability of our stockholders to remove directors, change the authorized
number of directors and fill vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Stockholder action; special meeting of stockholders; advance notice requirements for stockholder proposals and director nominations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our certificate of incorporation and our bylaws provide that any action required or permitted to be taken by our stockholders at an annual meeting or
special meeting of stockholders may only be taken if it is properly brought before such meeting and may not be taken by written action in lieu of a meeting. Our certificate of incorporation and our
bylaws also provide that, except as otherwise required by law, special meetings of the stockholders can only be called by our chairman of the board, our president or chief executive officer or our
board of directors. In addition, our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of
candidates for election to our board of directors. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>125 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Stockholders
at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors, or by a
stockholder of record on the record date for the meeting who is entitled to vote at the meeting and who has delivered timely written notice in proper form to our secretary of the stockholder's
intention to bring such business before the meeting. These provisions could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a
majority of our outstanding voting securities. These provisions also could discourage a third party from making a tender offer for our common stock, because even if it acquired a majority of our
outstanding voting stock, it would be able to take action as a stockholder, such as electing new directors or approving a merger, only at a duly called stockholders meeting and not by written consent. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Super-majority voting  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless a corporation's certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws
may be amended or repealed by a majority vote of our board of directors or the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in any
annual election of directors. In addition, the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in any election of directors is required
to amend or repeal or to adopt any provisions inconsistent with any of the provisions of our certificate of incorporation described above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Registration rights  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We have entered into a second amended and restated investor rights agreement, dated November&nbsp;1, 2011, which we refer to as the investor rights
agreement, with certain holders of shares of our common stock, series&nbsp;A preferred stock, series&nbsp;B preferred stock and series&nbsp;C preferred stock. Upon the completion of this
offering, holders of a total of 40,959,493 shares of our common stock as of September&nbsp;30, 2011, including shares issuable upon conversion of our preferred stock, will have the right to require
us to register these shares under the Securities Act of 1933, as amended, or Securities Act, and to participate in future registrations of securities by us, under the circumstances described below.
The holders of an additional 9,865,319 shares of our common stock as of September&nbsp;30, 2011 will have the right to participate in future registrations of securities by us, under the
circumstances described below. After registration pursuant to these rights, these shares will become freely tradable without restriction under the the Securities Act. If not otherwise exercised, the
rights described below will expire five years after the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Demand registration rights  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Beginning 180&nbsp;days after the effective date of the registration statement of which this prospectus forms&nbsp;a part, subject to specified
limitations set forth in the investor rights agreement, at any time, the holders of a majority of the then outstanding shares having rights under the investor rights agreement, which we refer to as
registrable shares, may at any time demand in writing that we register all or a portion of the registrable shares under the Securities Act if the total amount of registrable shares registered have an
aggregate offering price of at least $5.00&nbsp;million (based on the then current market price or fair value). We are not obligated to file&nbsp;a registration statement pursuant to this
provision on more than two occasions, and we are not obligated to file&nbsp;a registration
statement pursuant to this provision within 180&nbsp;days of the effective date of any other registration statement that we may file. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>Form&nbsp;S-3 registration rights  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In addition, at any time after we become eligible to file&nbsp;a registration statement on Form&nbsp;S-3, subject to specified
limitations set forth in the investor rights agreement, the holders of at least 30% of the registrable shares may demand in writing that we register on Form&nbsp;S-3 all or a portion of
the registrable shares so long as the total amount of registrable shares being registered have an aggregate offering price of at least $1.00&nbsp;million (based on the then current market price). We
are not obligated to file&nbsp;a Form&nbsp;S-3 pursuant to this provision on more than two occasions in any 12-month period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Incidental registration rights  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>If, at any time after the closing of this offering, we propose to file&nbsp;a registration statement under the Securities Act, other than pursuant
to the demand registration rights described above, the holders of registrable shares will be entitled to notice of the registration and, subject to specified exceptions, have the right to require us
to register all or a portion of the registrable shares then held by them. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
the event that any registration in which the holders of registrable shares participate pursuant to our investor rights agreement is an underwritten public offering, we agree to enter into an
underwriting agreement containing customary representation and warranties and covenants, including without limitation customary provisions with respect to indemnification of the underwriters of such
offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
the event that any registration in which the holders of registrable shares participate pursuant to our investor rights agreement is an underwritten public offering, we will use our best efforts to
include the requested registrable shares to be included, but may be limited by market conditions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Expenses  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Pursuant to the investor rights agreement, we are required to pay all registration expenses, including registration and filing fees, exchange listing
fees, printing expenses and accounting fees and the fees and expenses of one counsel to represent the selling stockholders, other than any underwriting discounts and commissions, related to any demand
or incidental registration. The registration rights agreement contains customary cross-indemnification provisions, pursuant to which we are obligated to indemnify the selling stockholders in the event
of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions in the registration statement
attributable to them. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> TRANSFER AGENT AND REGISTRAR  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The transfer agent and registrar for our common stock will
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> NASDAQ GLOBAL MARKET  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are applying to have our common stock listed on The NASDAQ Global Market under the symbol "VSTM." </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<BR></FONT><FONT SIZE=4>  Shares eligible for future sale    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Prior to this offering, there has been no public market for our common stock, and a liquid trading market for our common stock may
not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of outstanding options, or the
anticipation of these sales, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through sales of equity securities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon
the closing of this offering, we will have outstanding an aggregate of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock, assuming the underwriters do not exercise
their over-allotment
option and no options outstanding as of September&nbsp;30, 2011 are exercised. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Of
the shares to be outstanding immediately after the closing of this offering, we expect that the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares to be sold in this offering will be
freely tradable without restriction under
the Securities Act unless purchased by our "affiliates," as that term is defined in Rule&nbsp;144 under the Securities Act. The
remaining&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock outstanding after
this offering will be "restricted securities" under Rule&nbsp;144, and we expect that substantially all of these restricted securities will be subject to either the 180-day or
360-day lock-up period under the lock-up agreements as described below. These restricted securities may be sold in the public market only if registered or pursuant
to an exemption from registration, such as Rule&nbsp;144 or Rule&nbsp;701 under the Securities Act. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RULE 144  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In general, under Rule&nbsp;144, beginning 90&nbsp;days after the date of this prospectus, any person who is not our affiliate and has held their
shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, subject to the availability of current public
information about us. In addition, under Rule&nbsp;144, any person who is not our affiliate and has not been our affiliate at any time during the preceding three months and has held their shares for
at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of
shares immediately upon the closing of this offering without regard to whether current public information about us is available. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Beginning
90&nbsp;days after the date of this prospectus, a person who is our affiliate or who was our affiliate at any time during the preceding three months and who has beneficially owned
restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of shares within any three-month period
that does not exceed the greater of: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1%
of the number of shares of our common stock then outstanding, which will equal approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares immediately after this offering; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
average weekly trading volume of our common stock on The NASDAQ Global Market during the four calendar weeks preceding the filing of a notice of proposed sale of
securities pursuant to Rule&nbsp;144 with respect to the sale. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Sales
under Rule&nbsp;144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Upon
expiration of the 180-day lock-up period described below, approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock will be eligible for sale under
Rule&nbsp;144,
including shares eligible for resale immediately upon the closing of this offering as described above. We cannot estimate the number of shares of our common stock that our existing stockholders will
elect to sell under Rule&nbsp;144. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>128 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Shares eligible for future sale </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> RULE 701  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In general, under Rule&nbsp;701 of the Securities Act, any of our employees, consultants or advisors, other than our affiliates, who purchased
shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell these shares 90&nbsp;days after the date of this prospectus in reliance on
Rule&nbsp;144, but without compliance with the holding period requirements of Rule&nbsp;144 and without regard to the volume of such sales or the availability of public information about us.
Subject to the 180-day and 360-day lock-up periods described below, approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock will be eligible for sale in
accordance
with Rule&nbsp;701. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LOCK-UP AGREEMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We, each of our directors and executive officers and holders of substantially all of our outstanding shares of common stock have agreed that, without
the prior written consent of UBS Securities&nbsp;LLC and Leerink Swann&nbsp;LLC on behalf of the underwriters, we and they will not, subject to limited exceptions, during the period ending
180&nbsp;days after the date of this prospectus, in the case of us and holders of our common stock issued upon conversion of our preferred stock, or 360&nbsp;days after the date of this
prospectus, in the case of our directors, executive officers and other current holders of our common stock, subject to extension in specified circumstances: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>sell,
offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or
indirectly, any shares of our common stock or any securities convertible into or exchangeable or exercisable for shares of our common stock, or publicly announce an intention to do the same;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>establish
or increase a put equivalent position or liquidate or decrease a call equivalent position with respect to any shares of our common stock or any securities
convertible into or exchangeable or exercisable for shares of our common stock, or publicly announce an intention to do the same;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>enter
into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock or any
securities convertible into or exchangeable or exercisable for shares of our common stock, whether such
transaction is to be settled by delivery of shares of our common stock or such other securities, in cash or otherwise, or publicly announce an intention to do the same; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>make
any demand for or exercise any right with respect to the registration of any shares of our common stock or any securities convertible into or exchangeable or
exercisable for shares of our common stock. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>The
lock-up restrictions, specified exceptions and the circumstances under which either the 180-day or 360-day lock-up period may be extended are
described in more detail under "Underwriting." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> REGISTRATION RIGHTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Subject to the lock-up agreements described above, upon the closing of this offering, the holders of an aggregate of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares of our common stock will have the right to require us to register these shares under the Securities Act under specified circumstances. After registration pursuant to these rights, these shares
will become freely tradable without restriction under the Securities Act. See "Description of capital stock&#151;Registration rights" for additional information regarding these registration
rights. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>129 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Shares eligible for future sale </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> STOCK OPTIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As of September&nbsp;30, 2011, we had outstanding options to purchase 1,418,000 shares of our common stock, of which options to purchase 2,500
shares were vested. Following this offering, we intend to file one or more registration statements on Form&nbsp;S-8 under the Securities Act to register all of the shares of our common
stock subject to outstanding options and options and other awards issuable pursuant to our 2012 stock incentive plan and shares of our common stock subject to outstanding options issued pursuant to
our 2010 equity incentive plan. See "Executive compensation&#151;Stock option and other
employee benefit plans" for additional information regarding these plans. Accordingly, shares of our common stock registered under the registration statements will be available for sale in the open
market, subject to Rule&nbsp;144 volume limitations applicable to affiliates, and subject to any vesting restrictions and lock-up agreements applicable to these shares. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>130 </B></FONT></P>

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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="ee11401_underwriting"> </A>
<A NAME="toc_ee11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Underwriting    <BR></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We are offering the shares of our common stock described in this prospectus through the underwriters named below. UBS
Securities&nbsp;LLC and Leerink Swann&nbsp;LLC are acting as joint book-running managers of this offering and the representatives of the underwriters. We have entered into an
underwriting agreement with the representatives on behalf of the underwriters named below. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally
agreed to purchase the number of shares of common stock listed next to its name in the following table: </FONT></P>
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 Underwriters


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


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 Number of shares


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</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>UBS Securities&nbsp;LLC</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Leerink Swann&nbsp;LLC</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Lazard Capital Markets&nbsp;LLC</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Oppenheimer&nbsp;&amp;&nbsp;Co. Inc</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Rodman &amp; Renshaw, LLC</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take
or pay for the shares covered by the underwriters' over-allotment option described below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
common stock is offered subject to a number of conditions, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>receipt
and acceptance of our common stock by the underwriters, and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
underwriters' right to reject orders in whole or in part. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>In
connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OVER-ALLOTMENT OPTION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We have granted the underwriters an option to buy up to an aggregate
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of our common stock. The underwriters may
exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30&nbsp;days from the date of this
prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> COMMISSIONS AND DISCOUNTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share from the public offering price. Sales of shares made
outside the
United States may be made by affiliates of the underwriters. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other
selling terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>131 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Underwriting </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of our common stock. </FONT></P>
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 No exercise


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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 Full exercise


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
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<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Per share</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
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<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2>We estimate that the total expenses of this offering payable by us, not including the underwriting discounts and commissions, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NO SALES OF SIMILAR SECURITIES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We, each of our directors and executive officers and holders of substantially all of our common stock have entered into lock-up
agreements with the underwriters. Under these agreements, subject to certain exceptions, we and each of these persons may not offer, sell, contract or agree to sell, hypothecate, pledge, grant any
option to purchase or otherwise dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, or publicly disclose
the intention to do the same. These restrictions will be in effect for a period of 180&nbsp;days after the date of this prospectus, in the case of holders of our common stock issued upon conversion
of our preferred stock, or 360&nbsp;days after the date of this prospectus, in the case of our directors, executive officers and other current holders of our common stock, subject in each case to
extension in the circumstances described in the paragraph below. At any time and without public notice, UBS Securities&nbsp;LLC and Leerink Swann&nbsp;LLC, may, in their sole discretion, release
some or all of the securities held by our executive officers, directors and the holders of all of our common stock from these lock-up agreements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Notwithstanding
the foregoing, if (1)&nbsp;during the last 15 calendar days plus three business days of the 180-day or 360-day restricted period, we issue an earnings release
or
material news or a material event relating to us occurs or (2)&nbsp;prior to the expiration of the 180-day or 360-day restricted period, we announce that we will release
earnings results during the 16-day period beginning on the last day of the 180-day or 360-day period, the restrictions described above shall continue to apply until
the date that is 15 calendar days plus three business days after the date of the issuance of the earnings release or the occurrence of the material news or material event. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> INDEMNIFICATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We agreed to indemnify the underwriters against certain liabilities, including certain liabilities under the Securities Act. If we are unable to
provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NASDAQ GLOBAL MARKET LISTING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We are applying to list our common stock on The NASDAQ Global Market under the symbol "VSTM." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> PRICE STABILIZATION, SHORT POSITIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common
stock, including: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>stabilizing
transactions; </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>132 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Underwriting </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>short
sales;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>purchases
to cover positions created by short sales;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>imposition
of penalty bids; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>syndicate
covering transactions. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in progress. These
transactions may also include making short sales of our common stock, which involve the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in
this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered short sales," which are short positions in an amount not
greater than the underwriters' over-allotment option referred to above, or may be "naked short sales," which are short positions in excess of that amount. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>The
underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the
over-allotment option. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Naked
short sales are short sales made in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect
investors who purchased in this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives
have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As
a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued
by the underwriters at any time. The underwriters may carry out these transactions on The NASDAQ Global Market, in the over-the-counter market or otherwise. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> DETERMINATION OF OFFERING PRICE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Prior to this offering, there was no public market for our common stock. The initial public offering price will be determined by negotiation by us
and the representative of the underwriters. The principal factors to be considered in determining the initial public offering price include: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
information set forth in this prospectus and otherwise available to the representatives;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
history and prospects and the history of, and prospects for, the industry in which we compete;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
past and present financial performance and an assessment of our management;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
prospects for future earnings and the present state of our development;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
general condition of the securities markets at the time of this offering; </FONT></DD></DL>
<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>133 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Underwriting </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
recent market prices of, and the demand for, publicly-traded common stock of generally comparable companies; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>other
factors deemed relevant by the underwriters and us. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> AFFILIATIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Certain of the underwriters and their affiliates may in the future from time to time provide investment banking and other financing, trading,
banking, research, transfer agent and trustee services to us or our subsidiaries, for which they may in the future receive customary fees and expenses. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Lazard
Fr&egrave;res &amp; Co. LLC referred this transaction to Lazard Capital Markets&nbsp;LLC and will receive a referral fee from Lazard Capital Markets&nbsp;LLC in connection therewith. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NOTICE TO INVESTORS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in the European Economic Area  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In relation to each member state of the European Economic Area (EEA) that has implemented the Prospectus Directive (each, a relevant member state),
other than Germany, with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of securities
described in this prospectus may not be made to the public in that relevant member state other than: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to
any legal entity which is a qualified investor as defined in the Prospectus Directive;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>by
the Managers to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal
persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the Bookrunners for any such
offer; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>in
any other circumstances falling within Article&nbsp;3(2) of the Prospectus Directive. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>provided
that no such offer of securities shall require us or any underwriter to publish a prospectus pursuant to Article&nbsp;3 of the Prospectus Directive. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>For
purposes of this provision, the expression an "offer of securities to the public" in any relevant member state means the communication in any form and by any means of sufficient information on the
terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the expression may be varied in that member state by any
measure implementing the Prospectus Directive in that member state, and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and includes any relevant implementing measure in each
relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
have not authorized and do not authorize the making of any offer of securities through any financial intermediary on its behalf, other than offers made by the underwriters with a view to the final
placement of the securities as contemplated in this prospectus. Accordingly, no purchaser of the securities, other than the underwriters, is authorized to make any further offer of the securities on
behalf of us or the underwriters. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
EEA selling restriction is in addition to any other selling restrictions set out in this prospectus. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>134 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Underwriting </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Australia  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>This offering memorandum is not a formal disclosure document and has not been, nor will be, lodged with the Australian Securities and Investments
Commission. It does not purport to contain all information that an investor or its professional advisers would expect to find in a prospectus or other disclosure document (as defined in the
Corporations Act 2001 (Australia)) for the purposes of Part&nbsp;6D.2 of the Corporations Act 2001 (Australia) or in a product disclosure statement for the purposes of Part&nbsp;7.9 of the
Corporations Act 2001 (Australia), in either case, in relation to the securities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
securities are not being offered in Australia to "retail clients" as defined in sections&nbsp;761G and 761GA of the Corporations Act 2001 (Australia). This offering is being made in Australia
solely to "wholesale clients" for the purposes of section&nbsp;761G of the Corporations Act 2001 (Australia) and, as such, no prospectus, product disclosure statement or other disclosure document in
relation to the securities has been, or will be, prepared. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>This
offering memorandum does not constitute an offer in Australia other than to wholesale clients. By submitting an application for our securities, you represent and warrant to us that you are a
wholesale client for the purposes of section&nbsp;761G of the Corporations Act 2001 (Australia). If any recipient of this offering memorandum is not a wholesale client, no offer of, or invitation to
apply for, our securities shall be deemed to be made to such recipient and no applications for our securities will be accepted from such recipient. Any offer to a recipient in Australia, and any
agreement arising from acceptance of such offer, is personal and may only be accepted by the recipient. In addition, by applying for our securities you undertake to us that, for a period of
12&nbsp;months from the date of issue of the securities, you will not transfer any interest in the securities to any person in Australia other than to a wholesale client. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Hong Kong  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our securities may not be offered or sold in Hong Kong, by means of this prospectus or any document other than (1)&nbsp;to "professional investors"
within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or
(2)&nbsp;in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (3)&nbsp;in other circumstances which do not
result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong). No advertisement, invitation or document relating to our securities may be issued
or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by,
the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the securities which are or are intended to be disposed of only to persons
outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Japan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and
Exchange Law) and our securities will not be offered or sold, directly or indirectly, in Japan, or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident
in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan, or to a resident of Japan,
except pursuant to an exemption from the registration requirements of, and </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>135 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Underwriting </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>otherwise
in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Singapore  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>This document has not been registered as a prospectus with the Monetary Authority of Singapore and in Singapore, the offer and sale of our securities
is made pursuant to exemptions provided in sections&nbsp;274 and 275 of the Securities and Futures Act, Chapter&nbsp;289 of Singapore&nbsp;(SFA). Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered or
sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1)&nbsp;to an institutional investor as defined in
Section&nbsp;4A of the SFA pursuant to Section&nbsp;274 of the SFA, (2)&nbsp;to a relevant person as defined in section&nbsp;275(2) of the SFA pursuant to Section&nbsp;275(1) of the SFA, or
any person pursuant to Section&nbsp;275(1A) of the SFA, and in accordance with the conditions specified in Section&nbsp;275 of the SFA or (3)&nbsp;otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the SFA, in each case subject to compliance with the conditions
(if any) set forth in the SFA. Moreover, this document is not a prospectus as defined in the SFA. Accordingly, statutory liability under the SFA in relation to the content of prospectuses would not
apply. Prospective investors in Singapore should consider carefully whether an investment in our securities is suitable for them. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Where
our securities are subscribed or purchased under Section&nbsp;275 of the SFA by a relevant person which is: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>by
a corporation (which is not an accredited investor as defined in Section&nbsp;4A of the SFA) the sole business of which is to hold investments and the entire
share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an
accredited investor, </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>shares
of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferable for six months after that corporation or that trust has acquired the
shares under Section&nbsp;275 of the SFA, except: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to
an institutional investor (for corporations under Section&nbsp;274 of the SFA) or to a relevant person defined in Section&nbsp;275(2) of the SFA, or any
person pursuant to an offer that is made on terms that such shares of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its
equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the
conditions, specified in Section&nbsp;275 of the SFA;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>where
no consideration is given for the transfer; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>where
the transfer is by operation of law. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>In
addition, investors in Singapore should note that the securities acquired by them are subject to resale and transfer restrictions specified under Section&nbsp;276 of the SFA, and they, therefore,
should seek their own legal advice before effecting any resale or transfer of their securities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>136 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Underwriting </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Switzerland  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Prospectus does not constitute an issue prospectus pursuant to Article&nbsp;652a or Article&nbsp;1156 of the Swiss Code of Obligations (CO)
and the shares will not be listed on the SIX Swiss Exchange. Therefore, the Prospectus may not comply with the disclosure standards of the CO and/or the listing rules (including any prospectus
schemes) of the SIX Swiss Exchange. Accordingly, the shares may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors, which do not subscribe to
the shares with a view to distribution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in United Kingdom  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>This prospectus is only being distributed to and is only directed at: (1)&nbsp;persons who are outside the United Kingdom; (2)&nbsp;investment
professionals falling within Article&nbsp;19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (3)&nbsp;high net worth companies, and other persons
to whom it may lawfully be communicated, falling within Article&nbsp;49(2)(a) to (d)&nbsp;of the Order (all such persons falling within (1)-(3) together being referred to as "relevant persons").
The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this prospectus or any of its contents. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>137 </B></FONT></P>

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<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="eg11401_legal_matters"> </A>
<A NAME="toc_eg11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Legal matters    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The validity of the shares of common stock offered hereby is being passed upon for us by Wilmer Cutler Pickering Hale and
Dorr&nbsp;LLP. Ropes&nbsp;&amp; Gray&nbsp;LLP is acting as counsel for the underwriters in connection with this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="eg11401_experts"> </A>
<A NAME="toc_eg11401_2"> </A>
<BR></FONT><FONT SIZE=4>  Experts    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Ernst&nbsp;&amp; Young&nbsp;LLP, independent registered public accounting firm, has audited our financial statements as of
December&nbsp;31, 2010 and for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, as set forth in their report included in this prospectus. We have included our financial
statements in this prospectus and elsewhere in this registration statement in reliance on Ernst&nbsp;&amp; Young&nbsp;LLP's report, given on their authority as experts in accounting and auditing. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="eg11401_where_you_can_find_more_information"> </A>
<A NAME="toc_eg11401_3"> </A>
<BR></FONT><FONT SIZE=4>  Where you can find more information    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We have filed with the SEC a registration statement on Form&nbsp;S-1 under the Securities Act with respect to the
shares of common stock we are offering to sell. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement
and the exhibits, schedules and amendments to the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and to the
exhibits and schedules to the registration statement. Statements contained in this prospectus about the contents of any contract, agreement or other document are not necessarily complete, and, in each
instance, we refer you to the copy of the contract, agreement or other document filed as an exhibit to the registration statement. Each of theses statements is qualified in all respects by this
reference. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>You
may read and copy the registration statement of which this prospectus is a part at the SEC's public reference room, which is located at 100&nbsp;F Street, N.E., Room&nbsp;1580, Washington, DC
20549. You can request copies of the registration statement by writing to the Securities and Exchange Commission and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the SEC's public reference room. In addition, the SEC maintains an Internet website, which is located at
http://www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of
which this prospectus is a part at the SEC's Internet website. Upon completion of this offering, we will be subject to the information reporting requirements of the Securities Exchange Act of 1934,
and we will file reports, proxy statements and other information with the SEC. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>138 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<A NAME="fa11401_index_to_financial_statements"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="fa11401_verastem,_inc._(a_development___ver08272"> </A></FONT> <FONT SIZE=2><B><BR>  Verastem,&nbsp;Inc.<BR>  (A development stage company)    <BR>

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    <BR>    <BR>  <BR>  </B></FONT><FONT SIZE=2><B>FINANCIAL STATEMENTS    <BR>    <BR>  Period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010 and unaudited information for the nine months ended September&nbsp;30, 2011 and the period
    from  August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011    <BR>        <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>CONTENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="FA11401_TOC"></A> </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ACCOUNTING_REPORT"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Report of Independent Registered Public Accounting Firm</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ACCOUNTING_REPORT"><FONT SIZE=2><B> F-2</B></FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Financial Statements</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#BALANCE_SHEETS"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Balance Sheets</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#BALANCE_SHEETS"><FONT SIZE=2><B><BR>
F-3</B></FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#OPERATIONS"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Statements of Operations</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#OPERATIONS"><FONT SIZE=2><B> F-4</B></FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#EQUITY"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Statements of Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#EQUITY"><FONT SIZE=2><B> F-5</B></FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#CASH_FLOWS"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Statements of Cash Flows</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#CASH_FLOWS"><FONT SIZE=2><B> F-6</B></FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#NOTES"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Notes to Financial Statements</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#NOTES"><FONT SIZE=2><B> F-7</B></FONT></A></TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-1 </B></FONT></P>

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<!-- ZEQ.=1,SEQ=142,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=671041,FOLIO='F-1',FILE='DISK104:[11ZDM1.11ZDM11401]FA11401A.;10',USER='MALTRI',CD='28-OCT-2011;17:02' -->
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<P style="font-family:times;"><FONT SIZE=2><A
NAME="page_fb11401_1_2"> </A>


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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="ACCOUNTING_REPORT"></A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="fb11401_verastem,_inc._(a_development___ver03824"> </A>
<A NAME="toc_fb11401_1"> </A></FONT> <FONT SIZE=2><B><BR>  Verastem,&nbsp;Inc.<BR>  (A development stage company)    <BR>


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    <BR>    <BR>  <BR>  </B></FONT><FONT SIZE=2><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    <BR>        <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Board of Directors and Stockholders of<BR>
Verastem,&nbsp;Inc. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
have audited the accompanying balance sheet of Verastem,&nbsp;Inc. (a development stage company) (the Company) as of December&nbsp;31, 2010, and the related statements of operations, redeemable
convertible preferred stock and stockholders' deficit and cash flows for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Verastem,&nbsp;Inc. as of December&nbsp;31, 2010 and the results of
its operations and its cash flows for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, in conformity with U.S. generally accounting principles. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Boston,
Massachusetts<BR>
November&nbsp;2, 2011 </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-2 </B></FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=143,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=542755,FOLIO='F-2',FILE='DISK104:[11ZDM1.11ZDM11401]FB11401A.;11',USER='MSULLIV',CD=';2-NOV-2011;15:23' -->
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<P style="font-family:times;"><FONT SIZE=2><A
NAME="page_fc11401_1_3"> </A>


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 </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="BALANCE_SHEETS"></A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="fc11401_verastem,_inc._(a_deve__fc102146"> </A>
<A NAME="toc_fc11401_1"> </A></FONT> <FONT SIZE=2><B><BR>  Verastem,&nbsp;Inc.<BR>  (A development stage company)    <BR>


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<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


    <BR>    <BR>  <BR>  </B></FONT><FONT SIZE=2><B>BALANCE SHEETS    <BR>        <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="60pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="60pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


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 September&nbsp;30, 2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>



<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Actual


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Pro forma


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (In thousands except per share data)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Assets</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Current assets:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,584</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prepaid expenses and other current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,596</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,427</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,427</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:11pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property and equipment, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>132</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>132</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Restricted cash</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>86</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>86</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,604</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,364</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,364</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:11pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Current liabilities:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>279</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,246</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,246</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>89</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>762</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>762</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>368</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred rent</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>81</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>81</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liability for shares subject to repurchase</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>36</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>36</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:11pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Commitments and contingencies (</FONT><FONT SIZE=2><I>Note&nbsp;8</I></FONT><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:11pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A redeemable convertible preferred stock, $0.0001 par value; 16,000 shares authorized, 4,000 and 16,000 (unaudited) shares
issued and outstanding (actual) at December&nbsp;31, 2010 and September&nbsp;30, 2011, respectively and no shares issued and outstanding pro forma (Liquidation preference of $4,000 and $16,000 (unaudited) as of December&nbsp;31, 2010 and
September&nbsp;30, 2011, respectively)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
3,923</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
15,935</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B redeemable convertible preferred stock, $0.0001 par value; 16,025 shares authorized, issued and outstanding (actual) at September&nbsp;30,
2011(unaudited) and no shares issued and outstanding pro forma (Liquidation preference of $32,050 as of September&nbsp;30, 2011(unaudited))</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>31,943</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:11pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock, $0.0001 par value; 30,000 and 45,000 shares authorized at December&nbsp;31, 2010 and September&nbsp;30, 2011 (actual and
pro&nbsp;forma, unaudited), 3,552 shares issued and outstanding at December&nbsp;31, 2010, 4,986 shares issued and outstanding at September&nbsp;30, 2011 (actual, unaudited) and 37,011 shares issued and outstanding at September&nbsp;30, 2011
(pro&nbsp;forma, unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>96</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>822</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,697</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deficit accumulated during the development stage</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' (deficit) equity</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(687</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,639</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>40,239</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,604</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,364</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,364</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-3 </B></FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=144,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=919128,FOLIO='F-3',FILE='DISK104:[11ZDM1.11ZDM11401]FC11401A.;34',USER='GVINING',CD=';1-NOV-2011;13:06' -->
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NAME="page_fe11401_1_4"> </A>


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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="OPERATIONS"></A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="fe11401_verastem,_inc._(a_development___ver02607"> </A>
<A NAME="toc_fe11401_1"> </A></FONT> <FONT SIZE=2><B><BR>  Verastem,&nbsp;Inc.<BR>  (A development stage company)    <BR>


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    <BR>    <BR>  <BR>  </B></FONT><FONT SIZE=2><B>STATEMENTS OF OPERATIONS    <BR>        <BR>    </B></FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months<BR>
ended<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=10 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (In thousands except per share data)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>400</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,483</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,883</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>384</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,195</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,579</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss from operations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accretion of preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss applicable to common stockholders</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(786</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,696</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,482</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.26</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.79</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average number of common shares used in net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,976</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,291</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,841</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share applicable to common stockholders&#151;basic and diluted (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(0.17</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(0.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average number of common shares used in pro forma net loss per share applicable to common stockholders&#151;basic and diluted (unaudited)
</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,638</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,474</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-4 </B></FONT></P>

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</FONT> <FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="EQUITY"></A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Verastem,&nbsp;Inc.<BR>
(A development stage company)  </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:54%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"150%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="150%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="8pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="59pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Series&nbsp;A<BR>
redeemable convertible<BR>
preferred stock


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Series&nbsp;B<BR>
redeemable convertible<BR>
preferred stock


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=3 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=3 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Deficit<BR>
accumulated<BR>
during the<BR>
development<BR>
stage


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Common stock


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Additional<BR>
paid-in<BR>
capital


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Totals<BR>
stockholder's<BR>
(deficit) equity


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Shares


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Amount


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Share


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Amount


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Shares


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Amount


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=29 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=26 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (In thousands except for per share data)



</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at August&nbsp;4, 2010 (inception)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Sale of common stock to founders</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,500,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Vesting of restricted stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>468,747</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Issuance of common stock in exchange for license</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>583,333</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>46</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>46</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Issuance of Series&nbsp;A redeemable convertible preferred stock, net of offering costs of $79</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4,000,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3,921</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Accretion of redeemable convertible preferred stock to redemption value</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Stock-based compensation expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>52</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>52</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4,000,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3,923</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3,552,080</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>96</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(687</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Issuance of Series&nbsp;A redeemable convertible preferred stock(unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>12,000,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>12,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Issuance of Series&nbsp;B redeemable convertible preferred stock, net of offering costs of $113 (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>16,025,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>31,937</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Accretion of redeemable convertible preferred stock to redemption value (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Vesting of restricted stock (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,434,253</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Stock-based compensation expense (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>742</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>742</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net loss (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at September&nbsp;30, 2011 (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>16,000,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>15,935</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>16,025,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>31,943</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4,986,333</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>822</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(7,639</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Conversion of redeemable convertible preferred stock into common stock (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(16,000,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(15,935</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(16,025,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(31,943</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>32,025,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>47,875</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>47,878</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Pro forma, September&nbsp;30, 2011 (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>37,011,333</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>48,697</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>40,239</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-5 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=146,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=902114,FOLIO='F-5',FILE='DISK104:[11ZDM1.11ZDM11401]FG11401A.;32',USER='MALTRI',CD='28-OCT-2011;17:02' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P style="font-family:times;"><FONT SIZE=2><A
NAME="page_fi11401_1_6"> </A>


<!-- COMMAND=ADD_BASECOLOR,"Black" -->




<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->




<!-- COMMAND=ADD_TABLESHADECOLOR,"#CCEEFF" -->




<!-- COMMAND=ADD_STABLERULES,"border-bottom:solid #000000 1.0pt;" -->




<!-- COMMAND=ADD_DTABLERULES,"border-bottom:double #000000 2.25pt;" -->




<!-- COMMAND=ADD_SCRTABLERULES,"border-bottom:solid #000000 1.0pt;margin-bottom:0pt;" -->




<!-- COMMAND=ADD_DCRTABLERULES,"border-bottom:double #000000 2.25pt;margin-bottom:0pt;" -->


 </FONT></P>

<!-- TOC_END -->

<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="CASH_FLOWS"></A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="fi11401_verastem,_inc._(a_development___ver02580"> </A>
<A NAME="toc_fi11401_1"> </A></FONT> <FONT SIZE=2><B><BR>  Verastem,&nbsp;Inc.<BR>  (A development stage company)    <BR>


<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


    <BR>    <BR>  <BR>  </B></FONT><FONT SIZE=2><B>STATEMENTS OF CASH FLOWS    <BR>        <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months<BR>
ended<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=12 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (In thousands)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Operating activities</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Adjustments to reconcile net loss to net cash used in operating activities:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>43</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>43</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock-based compensation expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>52</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>742</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>794</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock issued in exchange for license</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prepaid expenses and other current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(132</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(132</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>279</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>967</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,246</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued expenses and deferred rent</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>89</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>754</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>843</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash used in operating activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(330</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,298</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,628</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Investing activities</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Purchases of property and equipment</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(754</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(762</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Increase in restricted cash</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(86</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(86</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(840</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(848</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Financing activities</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds from issuance of redeemable convertible preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,921</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>43,937</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47,858</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net proceeds from the issuance of common stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>39</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,922</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>43,975</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47,897</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Increase in cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,584</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37,837</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents at beginning of period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,584</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents at end of period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,584</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Supplemental disclosure of non-cash financing activity</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accretion of redeemable convertible preferred stock to redemption value</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-6 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="NOTES"></A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="fk11401_verastem,_inc._(a_development___ver06006"> </A>
<A NAME="toc_fk11401_1"> </A></FONT> <FONT SIZE=2><B><BR>  Verastem,&nbsp;Inc.<BR>  (A development stage company)    <BR>

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    <BR>    <BR>  <BR>  </B></FONT><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS    <BR>    <BR>  December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited)    <BR>        <BR>
    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Organization and basis of presentation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Verastem,&nbsp;Inc. (the "Company"), incorporated on August&nbsp;4, 2010 as a Delaware corporation, is a biopharmaceutical company focused on
discovering and developing proprietary small molecule drugs targeting cancer stem cells along with proprietary companion diagnostics. The Company's operations to date have been limited to organizing
and staffing the Company, business planning, raising capital, acquiring and developing its technology, identifying potential product candidates and undertaking preclinical studies of its most advanced
product candidates. The Company has not commenced its planned principal operations. Accordingly, the Company is considered to be in the development stage as defined in Financial Accounting Standards
Board Accounting Standards Codification Topic&nbsp;915, </FONT><FONT SIZE=2><I>Development Stage Entities</I></FONT><FONT SIZE=2>. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
Company is subject to a number of risks similar to other life science companies in the development stage, including, but not limited to, the need to obtain adequate additional funding, possible
failure of preclinical testing or clinical trials, inability to obtain marketing approval of product candidates, competitors developing new technological innovations, market acceptance of the
Company's products and protection of proprietary technology. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate product revenue or achieve
profitability. As of December&nbsp;31, 2010 and September&nbsp;30, 2011, the Company had a deficit accumulated during the development stage of $784,000 and $8.5&nbsp;million, respectively. The
Company expects that its cash balance at December&nbsp;31, 2010, the $12&nbsp;million of proceeds from the issuance of Series&nbsp;A redeemable convertible preferred stock in April&nbsp;2011,
the $32.1&nbsp;million of proceeds from the issuance of Series&nbsp;B redeemable convertible preferred stock in July&nbsp;2011 and the $20.1&nbsp;million of proceeds from the issuance of
Series C redeemable convertible preferred stock in November 2011 will fund its operations through at least January&nbsp;1, 2012. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 2. Significant accounting policies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Unaudited interim financial data  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The accompanying unaudited September&nbsp;30, 2011 interim balance sheet and the statements of operations, redeemable convertible preferred stock
and stockholders' deficit, and cash flows for the nine months ended September&nbsp;30, 2011 and the related interim information contained within the notes to the financial statements have been
prepared in accordance with the rules
and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and the notes required by U.S. generally accepted
accounting principles for complete financial statements. In the opinion of management, the unaudited interim financial statements reflect all adjustments, consisting of normal and recurring
adjustments, necessary for the fair statement of the Company's financial position at September&nbsp;30, 2011 and results of its operations and its cash flows for the nine months then ended. The
results for the nine months ended September&nbsp;30, 2011 are not necessarily indicative of future results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Unaudited pro forma presentation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>On October&nbsp;25, 2011, the Company's board of directors authorized management of the Company to file a registration statement with the
Securities and Exchange Commission permitting the Company to sell shares of its common stock to the public. The unaudited pro forma balance sheet as of </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-7 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>September&nbsp;30,
2011 reflects the conversion of all Series&nbsp;A and B convertible preferred stock outstanding as of that date into 32,025,000 shares of common stock, occurring immediately
prior to the closing of the Company's proposed initial public offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Unaudited
pro forma net loss per share is computed using the weighted-average number of common shares outstanding after giving effect to the pro forma effect of the conversion of all redeemable
convertible preferred stock during the year ended December&nbsp;31, 2010 and the nine months ended September&nbsp;30, 2011 into shares of the Company's common stock as if such conversion had
occurred at the beginning of the period presented, or the date of original issuance, if later. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Use of estimates  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The preparation of the Company's financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
Company utilizes significant estimates and assumptions in determining the fair value of its common stock. The Company granted stock options at exercise prices not less than the fair market
value of its common stock as determined by the board of directors, with input from management. The board of directors has determined the estimated fair value of the Company's common stock based on a
number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector and the prices at which the Company sold shares of redeemable convertible
preferred stock, the superior rights and preferences of securities senior to the Company's common stock at the time and the likelihood of achieving a liquidity event, such as an initial public
offering or sale of the Company. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
Company utilized various valuation methodologies in accordance with the framework of the 2004 American Institute of Certified Public Accountants Technical Practice Aid, </FONT> <FONT SIZE=2><I>Valuation of Privately-Held Company Equity Securities
Issued as Compensation</I></FONT><FONT SIZE=2>, to estimate the fair value of its common stock. The methodologies included
an asset-based approach and the current value method for the Company's initial common stock valuation as of November&nbsp;30, 2010, the option pricing method utilizing the reverse backsolve method
to estimate the Company's underlying equity value as of July&nbsp;31, 2011 and a methodology that determined an estimated value under an IPO scenario and a sale scenario based upon an assessment of
the probability of occurrence of each scenario as of September&nbsp;30, 2011. Each valuation methodology includes estimates and assumptions that require the Company's judgment. These estimates
include assumptions regarding future performance, including the successful completion of preclinical studies and clinical trials and the time to completing an IPO or sale. Significant changes to the
key assumptions used in the valuations could result in different fair values of common stock at each valuation date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Segment and geographic information  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief
operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-8 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>operations
and manages its business in one operating segment, which is the business of developing drugs that target cancer stem cells, and the Company operates in only one geographic segment. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Comprehensive income (loss)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive loss was equal to net loss for all periods presented. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Cash and cash equivalents  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash
equivalents. Cash equivalents of $40.0&nbsp;million as of September&nbsp;30, 2011 consist of money market funds. There were no cash equivalents as of December&nbsp;31, 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Fair value of financial instruments  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in
determining the reported fair values. The fair value hierarchy is now established that prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies
only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation
inputs: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:100%;margin-left:0%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="83pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Level&nbsp;1 inputs</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2> Quoted prices in active markets for identical assets or liabilities</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>Level&nbsp;2 inputs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2> Inputs other than quoted prices included within Level&nbsp;1 that are observable for the asset or liability, either directly or indirectly</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>Level&nbsp;3 inputs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2> Unobservable inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The
following table presents information about the Company's financial assets that have been measured at fair value at September&nbsp;30, 2011 and indicates the fair value hierarchy of the valuation
inputs utilized to determine such fair value (in thousands). </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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</FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="83pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>Description</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Total


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Quoted prices in<BR>
active markets<BR>
(Level&nbsp;1)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Significant<BR>
other<BR>
observable<BR>
inputs<BR>
(Level&nbsp;2)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Significant<BR>
unobservable<BR>
inputs<BR>
(Level&nbsp;3)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=13 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>40,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>40,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>There were no financial instruments recorded at fair value as of December&nbsp;31, 2010. The carrying amounts of accounts payable and accrued expenses
approximate their fair values due to their short-term maturities. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-9 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=150,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=371229,FOLIO='F-9',FILE='DISK104:[11ZDM1.11ZDM11401]FK11401A.;27',USER='MSULLIV',CD=';2-NOV-2011;12:00' -->
<A NAME="page_fk11401_1_10"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Concentrations of credit risk and off-balance sheet risk  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Cash and cash equivalents are financial instruments that potentially subject the Company to concentrations of credit risk. As of December&nbsp;31,
2010, substantially all of the Company's cash was deposited in accounts at a single financial institution. As of September&nbsp;30, 2011, the Company's cash and cash equivalents were deposited at
two financial institutions. The Company maintains its cash and cash equivalents with high quality, accredited financial institutions and, accordingly, such funds are subject to minimal credit risk.
The Company has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Property and equipment  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Property and equipment consists of laboratory equipment, office furniture, and computer equipment. Expenditures for repairs and maintenance are
recorded to expense as incurred, whereas major betterments are capitalized as additions to property and equipment. Depreciation is calculated over the following estimated useful lives of the assets: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Laboratory equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5&nbsp;years</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Furniture</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5&nbsp;years</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Computer equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3&nbsp;years</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is
recognized. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying value of assets may not be fully recoverable and
that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flow to the recorded value of the asset. If impairment is
indicated, the asset will be written down to its estimated fair value. To date, no such impairment losses have been recorded. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Organizational costs  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>All organizational costs have been expensed as incurred. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Research and development costs  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company expenses research and development costs to operations as incurred. Research and development expenses consist of costs associated with
research activities, including drug discovery efforts and the development of therapeutic product candidates and companion diagnostics. The Company accounts for nonrefundable advance payments for goods
and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received rather than when the payment is made.
Research and development expenses consist of: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>employee-related
expenses, including salaries, benefits, travel and stock-based compensation expense; </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=1><B>F-10 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=151,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=171661,FOLIO='F-10',FILE='DISK104:[11ZDM1.11ZDM11401]FK11401A.;27',USER='MSULLIV',CD=';2-NOV-2011;12:00' -->
<A NAME="page_fk11401_1_11"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>external
research and development expenses incurred under arrangements with third parties, such as contract research organizations, or CROs, manufacturing
organizations and consultants, including the scientific advisory board;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>license
fees; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#150;&gt;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>facilities,
depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold
improvements and equipment, and laboratory and other supplies. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> Stock-based compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company expenses the fair value of employee stock options over the requisite service period, which is the vesting period. Compensation expense is
measured using the fair value of the award at the grant date, net of estimated forfeitures, and is adjusted annually to reflect actual forfeitures. The fair value of each stock-based award is
estimated using the Black-Scholes option valuation model and is expensed on a straight-line basis over the vesting period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Stock-based
awards issued to nonemployees, including directors for non-board related services, are accounted for based on the fair value of such services received or of the equity
instruments issued, whoever is more reliably measured. These stock-based option awards are revalued at each vesting date using the fair value method. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Redeemable convertible preferred stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The carrying value of the Company's Series&nbsp;A and Series&nbsp;B redeemable convertible preferred stock is adjusted by periodic accretions
such that the carrying value will equal the redemption amount at the redemption date. The carrying value is also adjusted to reflect dividends when and if declared by the board of directors. No
dividends have been declared by the board of directors since inception. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Income taxes  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the
year in which the differences are expected to affect taxable income. Tax benefits are recognized when it is more likely than not that a tax position will be sustained during an audit. Deferred tax
assets are reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Net loss per share  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Basic and diluted net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of
common shares outstanding during the period, without consideration for common stock equivalents. The Company's potentially dilutive shares, which include redeemable convertible preferred stock,
outstanding stock options and unvested restricted stock are considered to be common stock equivalents and are only included in the calculation of diluted net </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-11 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=152,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=544997,FOLIO='F-11',FILE='DISK104:[11ZDM1.11ZDM11401]FK11401A.;27',USER='MSULLIV',CD=';2-NOV-2011;12:00' -->
<A NAME="page_fk11401_1_12"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>loss
per share when their effect is dilutive. The following table reconciles net loss to net loss applicable to common shareholders (in thousands, except per share data): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception)<BR>
through<BR>
December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months<BR>
ended<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=10 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(784</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,678</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accretion of redeemable convertible preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss applicable to common stockholders</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(786</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,696</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,482</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average number of common shares used in net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,976</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,291</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,841</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share applicable to common stockholders&#151;basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.26</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.79</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The amounts in the table below were excluded from the calculation of diluted net loss per share, prior to the use of the treasury stock method, due to their
anti-dilutive effect (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


</FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months<BR>
ended<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=10 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32,025</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32,025</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding stock options</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>620</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,418</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,418</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Unvested restricted stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,031</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,490</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,490</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=1><B>F-12 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=153,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=518363,FOLIO='F-12',FILE='DISK104:[11ZDM1.11ZDM11401]FK11401A.;27',USER='MSULLIV',CD=';2-NOV-2011;12:00' -->
<A NAME="page_fk11401_1_13"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>


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<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> 3. Property and equipment  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Property and equipment and related accumulated depreciation are as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Computer equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Laboratory equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>691</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Furniture</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>762</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less: accumulated depreciation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(43</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>719</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The Company did not record any depreciation expense in the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010. Depreciation expense was
$43,000 for the nine months ended September&nbsp;30, 2011 and for the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 4. Redeemable convertible preferred stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In November&nbsp;2010, the Company sold 4&nbsp;million shares of Series&nbsp;A redeemable convertible preferred stock (Series&nbsp;A
Preferred Stock) at a price of $1.00 per share for gross proceeds of $4&nbsp;million. In accordance with the terms of the Series&nbsp;A Stock Purchase Agreement, the Company sold an additional
12&nbsp;million shares at $1.00 per share in a second subsequent closing. The milestones necessary to achieve the subsequent closing were met in April&nbsp;2011 and the Company sold
12&nbsp;million shares of Series&nbsp;A Preferred Stock for gross proceeds of $12&nbsp;million. The Company incurred approximately $79,000 of issuance costs as part of the first closing of the
Series&nbsp;A Preferred Stock. No additional issuance costs were incurred as part of the second closing. The issuance costs are being accreted through the earliest redemption date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
July&nbsp;2011, the Company sold approximately 16&nbsp;million shares of series&nbsp;B redeemable convertible preferred stock (Series&nbsp;B Preferred Stock) at a price of $2.00 per share
for gross proceeds of approximately $32&nbsp;million. The Company incurred approximately $113,000 of issuance costs as part of the closing of the Series&nbsp;B Preferred Stock. The issuance costs
are being accreted through the earliest redemption date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
Company assessed the Series&nbsp;A Preferred Stock and B Preferred Stock (collectively, the Preferred Stock) for any beneficial conversion features or embedded derivatives that would require
bifurcation from the Preferred Stock and receive separate accounting treatment. On the date of each issuance, the value of the common stock into which the Preferred Stock is convertible had a fair
value less than the effective conversion price of the Preferred Stock and, as such, there was no intrinsic value on the respective commitment dates. No embedded derivatives were identified that would
require bifurcation. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-13 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=154,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=25637,FOLIO='F-13',FILE='DISK104:[11ZDM1.11ZDM11401]FK11401A.;27',USER='MSULLIV',CD=';2-NOV-2011;12:00' -->
<A NAME="page_fk11401_1_14"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>


<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
rights, preferences, and privileges of Preferred Stock are as follows: </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Conversion  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Shares of Preferred Stock are convertible into common stock based on a defined conversion ratio, which is originally set at
one-for-one, adjustable
for certain dilutive events. Conversion is at the option of the holders of Preferred Stock (Preferred Stockholders) at anytime without any additional considerations, although conversion is automatic
upon the earlier of the sale of shares of common stock to the public at a price of at least $3.00 per share, for gross proceeds of at least $35&nbsp;million, and where the shares are traded on
either the New York Stock Exchange or NASDAQ or upon the written consent of holders of at least 60% of the outstanding Preferred Stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Dividends  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Prior to the payment of any dividend, except a common stock dividend, to the common stockholders, the Preferred Stockholders are entitled to receive
an amount at least equal to the amount that would have been received by the Preferred Stockholders had all shares of Preferred Stock been converted to common stock immediately prior to issuance of the
dividend. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Liquidation preference  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In the event of any liquidation, dissolution or winding up of the Company, including a deemed liquidation event, such as certain mergers or a
disposition of substantially all the assets of the Company, unless holders of at least 60% of the outstanding Preferred Stock elect otherwise, the Preferred Stockholders are entitled to receive, in
preference to common stockholders, an amount equal to the Original Issue Price ($1.00 per share for Series&nbsp;A Preferred Stock and $2.00 per share for Series&nbsp;B Preferred Stock, adjustable
for certain dilutive events) plus all declared but unpaid dividends. If the Company has insufficient assets to pay the Preferred Stockholders the full amount to which they are entitled, the Preferred
Stockholders share ratably in any distribution in proportion to the respective amounts which would otherwise be payable. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>After
payment of these preferential amounts, the remaining assets of the Company are distributable ratably to the holders of common stock and Preferred Stock on an as-converted to common
basis. However, the Preferred Stockholders are limited to the receipt of an aggregate amount (including through payment of the preferential amounts described above) equal to the greater
of: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1.75&nbsp;times
the aggregate amount of the applicable Original Purchase Price, and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
amount the Preferred Stockholder would have received if all Preferred Stock had been converted to common stock immediately prior to the liquidation
event. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> Voting rights  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Holders of the Preferred Stock are entitled to vote as a single class with the holders of common stock, and have one vote for each equivalent common
share into which the Preferred Stock is convertible. A 60% vote of the Preferred Stockholders is required in order to effect a liquidation, reclassification or recapitalization of the Company's
capital stock or a deemed liquidation event, such as certain mergers or a disposition of substantially all the assets of the Company, amend the certificate of incorporation </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-14 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=8,SEQ=155,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=591411,FOLIO='F-14',FILE='DISK104:[11ZDM1.11ZDM11401]FK11401A.;27',USER='MSULLIV',CD=';2-NOV-2011;12:00' -->
<A NAME="page_fk11401_1_15"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>or
bylaws, create or issue shares of another class of stock that is pari passu or senior to the Preferred Stock, repurchase or redeem or pay any dividend on any capital stock, subject to limited
exceptions, issue any debt security such that the Company's aggregate indebtedness would exceed $1&nbsp;million, acquire capital stock of another entity, increase or decrease the authorized number
of directors or increase the number of shares of common stock reserved under the Company's equity incentive plan. The holders of the Series&nbsp;A Preferred Stock are entitled to elect four
directors, the Preferred Stockholders and common stockholders, voting as one class on an as-converted basis, are entitled to elect two directors, and the common stockholders are entitled
to elect one director. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Redemption  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Preferred Stock is redeemable at the applicable Original Issue Price plus any declared but unpaid dividends. The Series&nbsp;B Preferred Stock
is redeemable beginning in 2016 at the demand of holders of at least two-thirds of the Series&nbsp;B Preferred Stock. The Series&nbsp;A Preferred Stock is redeemable upon the
redemption of another series of Preferred Stock at the demand of holders of at least two-thirds of the Series&nbsp;A Preferred Stock. The redemption for the Preferred Stock is payable in
three equal annual installments. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 5. Common stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company has reserved the following shares of common stock for the potential conversion of outstanding Preferred Stock and the exercise of stock
options (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A Preferred Stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B Preferred Stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,025</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock options</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,417</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,971</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17,417</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33,996</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>Each share of common stock is entitled to one vote, subject to certain voting rights of the Preferred Stock as discussed in Note&nbsp;4. The holders of the
common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of the Preferred Stockholders. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Common stock issued for license  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company issued 583,333 shares of common stock in the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010 in exchange for
certain intellectual property
rights. The fair value of the common stock was determined to be $0.08 per share and the fair value was determined to be more readily determinable than the fair value of the license. As a result, the
fair value of the shares of approximately $46,000 was recorded as research and development expense. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-15 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=156,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=36719,FOLIO='F-15',FILE='DISK104:[11ZDM1.11ZDM11401]FK11401A.;27',USER='MSULLIV',CD=';2-NOV-2011;12:00' -->
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NAME="page_fm11401_1_16"> </A>


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</FONT> <FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


  </B></FONT></P>

<P style="font-family:times;"><BR><FONT SIZE=2><B>NOTES TO FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited)  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 6. Stock-based compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In November&nbsp;2010, the Company adopted the Verastem,&nbsp;Inc. 2010 Equity Incentive Plan (the Plan) under which it may grant incentive stock
options (ISOs), nonstatutory stock options (NSOs), restricted stock awards, restricted stock unit awards and stock appreciation rights to purchase up to approximately 1.4&nbsp;million shares of
common stock to eligible employees, officers, directors and consultants. In March&nbsp;2011, the Company increased the number of shares of common stock available under the Plan to approximately
2.0&nbsp;million shares. As of September&nbsp;30, 2011, 105,348 shares are available for future issuance under the Plan. Terms of stock option agreements, including vesting requirements, are
determined by the board of directors, subject to the provisions of the Plan. Generally, options granted by the Company vest over four years, expire no later than ten years from the date of grant and
have an exercise price equal to the estimated fair value of the common stock as determined by the board of directors on the date of grant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Restricted common stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In August&nbsp;2010, the Company issued 10&nbsp;million shares of its common stock to the founders at a purchase price of $0.0001 per share,
determined to be the fair value of the common stock on the date of issuance. The shares were issued under restricted stock purchase agreements, which allow the Company, at its discretion, to
repurchase unvested shares if the founders terminate their relationship with the Company. Upon execution of the restricted stock purchase agreements, 25% of the shares vested immediately and the
remaining shares vest ratably on a quarterly basis over a four year term. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>During
the nine months ended September&nbsp;30, 2011, the Company issued 896,000 shares of its common stock to new employees of the Company at a purchase price of $0.08 per share, determined to be
the fair value of the common stock on the date of issuance. The shares were issued under the terms of the Plan, and allow the Company, at its discretion, to repurchase unvested shares if the employees
terminate their relationship with the Company. The shares vest over a four year term, with 25% vesting after the first year and the remainder vesting ratably on a quarterly basis for the remaining
three years. The purchase price received for the shares was not material to the financial statements. The shares are recorded in stockholders deficit as they vest. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>The
Company records stock-based compensation expense for the common stock subject to repurchase based on the grant date intrinsic value for employees and the vesting date intrinsic value for
non-employees. All of the restricted shares were issued at fair value. The Company has recorded stock-based compensation expense of $51,000, $597,000 and $648,000 for the period from
August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, for the nine months ended September&nbsp;30, 2011 and for the period from August&nbsp;4, 2011 (inception) to September&nbsp;30,
2011, respectively, associated with restricted common stock. The $597,000 recorded for the nine&nbsp;months ended September&nbsp;30, 2011 includes $34,000 associated with modifications to certain
restricted stock purchase agreements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-16 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=157,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=16196,FOLIO='F-16',FILE='DISK104:[11ZDM1.11ZDM11401]FM11401A.;33',USER='MSULLIV',CD=';2-NOV-2011;15:08' -->
<A NAME="page_fm11401_1_17"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A
summary of the Company's restricted stock activity and related information is as follows (in thousands, except per share data): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="54pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Shares


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Weighted-<BR>
average<BR>
purchase<BR>
price per<BR>
share


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at August&nbsp;4, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Granted</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.0001</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,969</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.0001</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at December&nbsp;31, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,031</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.0001</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Granted (unaudited)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>896</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.0800</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested (unaudited)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,434</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.0017</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forfeited (unaudited)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,003</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.0335</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at September&nbsp;30, 2011 (unaudited)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,490</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.0066</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Stock options  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>A summary of the Company's stock option activity and related information follows (in thousands, except per share data): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="36pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="54pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Shares


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>



<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Weighted-<BR>
average price<BR>
per share


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Weighted-<BR>
average<BR>
remaining<BR>
contractual<BR>
term (years)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Aggregate<BR>
intrinsic<BR>
value


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at August&nbsp;4, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Granted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>620</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>620</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Granted (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>798</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.32</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at September&nbsp;30, 2011 (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,418</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.21</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>176</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exercisable at December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
0.08</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
9.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exercisable at September&nbsp;30, 2011 (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9.7</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested and expected to vest at December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>620</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested and expected to vest at September&nbsp;30, 2011 (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,418</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.21</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9.7</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>176</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-17 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=158,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=152993,FOLIO='F-17',FILE='DISK104:[11ZDM1.11ZDM11401]FM11401A.;33',USER='MSULLIV',CD=';2-NOV-2011;15:08' -->
<A NAME="page_fm11401_1_18"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The fair value of each stock-based award is estimated on the grant date using the Black-Scholes option-pricing model using the following assumptions: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Nine months<BR>
ended<BR>
September&nbsp;30,<BR>
2011


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.1-2.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dividend yield</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Volatility</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>67</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>69-70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected term (years)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.0-6.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No.&nbsp;107, </FONT> <FONT SIZE=2><I>Share-Based Payment</I></FONT><FONT SIZE=2>, to calculate the expected term
as it does not have sufficient historical exercise data to provide a reasonable basis upon which to
estimate the expected term for options granted to employees and utilizes the contractual term for options granted to non-employees. The expected term is applied to the stock option grant
group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. The computation of expected volatility
is based on the historical volatility of a representative group of companies with similar characteristics to us, including early stage of product development and therapeutic focus. The
risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. Management estimates expected forfeitures based on data from
a representative group of companies with similar characteristics to us and recognizes compensation costs only for those equity awards expected to vest. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>For
the period from August&nbsp;4, 2011 (inception) to December&nbsp;31, 2010, the Company did not recognize any stock-based compensation for employee stock option grants. The Company recognized
total stock-based compensation expense for employee stock option grants of $8,000 in the nine months ended September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to
September&nbsp;30, 2011. The weighted-average grant date fair value of options granted in the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, the nine months ended
September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011 was $0.05, $0.21 and $0.17 per share, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Stock-based
awards issued to nonemployees, including directors for non-board related services, are accounted for using the fair value method. These stock-based option awards are revalued
on each vesting and reporting date. The Company recognized total stock-based compensation expense of approximately $1,000, $137,000, and $138,000 in the period from August&nbsp;4, 2010 (inception)
to December&nbsp;31, 2010, the nine&nbsp;months ended September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011, respectively. Due to an
operating loss, the Company does not record tax benefits associated with stock-based compensation and option exercises. Tax benefits will be recorded when realized. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>At
December&nbsp;31, 2010 and September&nbsp;30, 2011, there was $35,000 and $625,000 of total unrecognized compensation cost related to nonvested stock options, respectively. As of
December&nbsp;31, </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-18 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=159,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=734100,FOLIO='F-18',FILE='DISK104:[11ZDM1.11ZDM11401]FM11401A.;33',USER='MSULLIV',CD=';2-NOV-2011;15:08' -->
<A NAME="page_fm11401_1_19"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>2010
and September&nbsp;30, 2011, the Company expects to recognize these costs over a remaining weighted-average period of 3.8&nbsp;years and 3.2&nbsp;years, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 7. Income taxes  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>As of December&nbsp;31, 2010 the Company had federal net operating loss carryforwards of approximately $570,000 and state net operating loss
carryforwards of $578,000, which are available to reduce future taxable income. The Company also had federal tax credits of $15,000 and state tax credits of $5,000, which may be used to offset future
tax liabilities. The net operating loss (NOL) and tax credit carryforwards will expire at various dates through 2030. The NOL and tax credit carryforwards are subject to review and possible adjustment
by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards are subject to review and possible adjustment and may become subject to an annual limitation
in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections&nbsp;382 and 383 of
the Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The
amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future
years. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>A
reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Period from<BR>
August&nbsp;4,<BR>
2010<BR>
(inception) to<BR>
December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Income tax benefit using U.S. federal statutory rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>34.00</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>State income taxes, net of federal benefit</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.62</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development tax credits</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.96</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Permanent items</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> (0.78</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in the valuation allowance</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> (40.80</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-19 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=160,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=170495,FOLIO='F-19',FILE='DISK104:[11ZDM1.11ZDM11401]FM11401A.;33',USER='MSULLIV',CD=';2-NOV-2011;15:08' -->
<A NAME="page_fm11401_1_20"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The principal components of the Company's deferred tax assets are as follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred tax assets:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net operating loss carryforwards</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>225</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capitalized research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>55</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development credits</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross deferred tax assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>320</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(320</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net deferred tax asset</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The Company has recorded a valuation allowance against its deferred tax assets at December&nbsp;31, 2010 because the Company's management believes that it is
more likely than not that these assets will not be fully realized. The increase in the valuation allowance in 2010 primarily relates to the net loss incurred by the Company. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Upon
inception, the Company adopted accounting guidance related to accounting for uncertainty in income taxes. The Company's reserves related to taxes are based on a determination of whether and how
much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax
benefit. Upon adoption, the Company recognized no material adjustment for unrecognized income tax benefits. As of the adoption date and through December&nbsp;31, 2010, the Company had no
unrecognized tax benefits or related interest and penalties accrued. The Company has not, as yet, conducted a study of research and development (R&amp;D) credit carryforwards. This study may result in an
adjustment to the Company's R&amp;D credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation
allowance has been provided against the Company's R&amp;D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no
impact to the balance sheet or statement of operations if an adjustment were required. The Company 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 tax authorities. Since the Company is in a loss carryforward position, the Company is
generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 8. Commitments and contingencies  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>From November&nbsp;2010 through May&nbsp;2011, the Company leased office space from a shareholder. There was no formal lease arrangement with the
shareholder. Rent paid to the shareholder was $12,000, $34,000 and $46,000 for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, the </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-20 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=161,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=508162,FOLIO='F-20',FILE='DISK104:[11ZDM1.11ZDM11401]FM11401A.;33',USER='MSULLIV',CD=';2-NOV-2011;15:08' -->
<A NAME="page_fm11401_1_21"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" >


 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>nine&nbsp;months
ended September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
May&nbsp;2011, the Company entered into a non-cancelable operating lease for office and laboratory space, which expires October&nbsp;31, 2014. The lease agreement provides for free
rent for the first four months of the lease term and includes escalating rent payments. The rent expense is recorded on a straight-line basis over the lease term. The Company is also
obligated to pay for certain operating costs and a proportional share of certain common area costs. The Company has the right to extend the lease for a two-year period. The annual rent for each
additional year is determined
annually at the then fair market rate. The Company secured a letter of credit for $86,000 in connection with the lease, which is included in restricted cash on the balance sheet. The minimum aggregate
future lease commitments are as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>115</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2012</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>351</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2013</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>360</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2014</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>307</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,133</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>The Company recorded rent expense of $12,000, $199,000 and $211,000 for the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, the
nine&nbsp;months ended September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 9. Accrued expenses  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Accrued expenses consist of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 December&nbsp;31,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 September&nbsp;30,<BR>
2010


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 (Unaudited)


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Professional fees</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>35</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>173</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>License fees</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>30</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Compensation and related benefits</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>391</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred rent</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Contract research organizations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>103</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>89</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>762</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> 10. License agreements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In October&nbsp;2010, the Company entered into an exclusive license agreement with an institution for certain intellectual property. The Company
paid the licensor an upfront license fee, reimbursed patent related fees and costs incurred by the licensor and an affiliate of the licensor and issued 583,333 shares of common stock to the licensor
and entities and individuals affiliated with the licensor. Under the </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-21 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=162,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=91958,FOLIO='F-21',FILE='DISK104:[11ZDM1.11ZDM11401]FM11401A.;33',USER='MSULLIV',CD=';2-NOV-2011;15:08' -->
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<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>terms
of the agreement, the Company also agreed to pay annual license maintenance fees, milestone payments, royalties as a percentage of net sales and a percentage of sublicense income the Company
receives. Annual license maintenance fees are creditable against royalties earned during the same calendar year. Milestone payments are triggered upon the achievement of specified development,
regulatory and commercialization milestones and are not creditable against royalties. Actual amounts due under the agreement will vary depending on the number of products developed, the type and
development path of the products, and other related factors. The Company may terminate the agreement at any time with 90&nbsp;days' prior written notice. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
October&nbsp;2010, the Company also entered into a nonexclusive license agreement with an institution for certain intellectual property. The Company paid upfront license fees. The Company is
obligated to pay an annual license maintenance fee beginning in 2012. The Company may terminate the agreement at any time with 90&nbsp;days' prior written notice. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
December&nbsp;2010, the Company entered into a research-only license agreement with an institution for certain intellectual property. The Company paid an upfront license fee and
agreed to annual maintenance fees for each cell line licensed per year. The Company may terminate the agreement at any time with 60&nbsp;days' prior written notice. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
Company recorded total research and development expense of $135,000, $25,000 and $160,000 in the period from August&nbsp;4, 2010 (inception) to December&nbsp;31, 2010, the nine months ended
September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011, respectively, associated with the license agreements. Annual maintenance fees on the
licenses total $95,000 beginning in 2012 up to a maximum of $170,000 through the term of the agreements and the Company could make milestone payments of up to $1.6&nbsp;million under the licenses. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 11. Employee benefit plan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In June&nbsp;2011, the Company adopted a 401(k) retirement and savings plan (the 401(k) Plan) covering all employees. The 401(k) Plan allows
employees to make pre-tax contributions up to the maximum allowable amount set by the IRS. Under the 401(k) Plan, the Company may make discretionary contributions as approved by the board
of directors. During the nine months ended September&nbsp;30, 2011 and the period from August&nbsp;4, 2010 (inception) to September&nbsp;30, 2011, the Company made contributions to the 401(k)
Plan of $25,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 12. Subsequent events  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The Company reviews all activity subsequent to year end but prior to the issuance of the financial statements for events that could require
disclosure or that could impact the carrying value of assets or liabilities as of the balance sheet date. All significant subsequent events have been properly disclosed in the financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
November 2011, the Company sold approximately 8.9&nbsp;million shares of Series&nbsp;C redeemable convertible preferred stock (Series&nbsp;C Preferred Stock) at a price of $2.25 per share for
gross proceeds of $20.1&nbsp;million. The Original Issue Price of the Series&nbsp;C Preferred Stock is $2.25 per share. The rights, preferences and privileges of the Series&nbsp;C Preferred
Stock are substantially consistent with those described in Note&nbsp;4 with respect to conversion, dividends, liquidation, voting and redemption. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>F-22 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=163,EFW="2205882",CP="VERASTEM, INC.",DN="1",CHK=576612,FOLIO='F-22',FILE='DISK104:[11ZDM1.11ZDM11401]FM11401A.;33',USER='MSULLIV',CD=';2-NOV-2011;15:08' -->
<A NAME="page_fm11401_1_23"> </A>

<P style="font-family:times;"><FONT SIZE=1><B> <A HREF="#bg11401a_main_toc">Table of Contents</A> </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><BR>
Verastem,&nbsp;Inc.<BR>
(A development stage company) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

<!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="100%" ALIGN="LEFT" -->
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 </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><BR>
NOTES TO FINANCIAL STATEMENTS (Continued)<BR>
December&nbsp;31, 2010 (information as of September&nbsp;30, 2011 and for the nine months then ended is unaudited) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>However,
as a result of the issuance of the Series&nbsp;C Preferred Stock, the vote or consent of the Preferred Stock with respect to conversion, liquidation and the matters described in
Note&nbsp;4 under "Voting" now requires the vote or consent of holders of at least 60% of the Series&nbsp;A Preferred Stock, Series&nbsp;B Preferred Stock and Series&nbsp;C Preferred Stock
voting as a single class in addition to the vote or consent of holders of at least 60% of the Series&nbsp;A Preferred Stock and Series&nbsp;B Preferred Stock voting as a single class. In addition,
the Series&nbsp;C Preferred Stock is redeemable beginning in 2016 at the demand of specified holders of the Series&nbsp;C Preferred Stock. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>F-23 </B></FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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</FONT> <FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g1040037.jpg" ALT="GRAPHIC" WIDTH="333" HEIGHT="99">
  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2012
(25&nbsp;days after commencement of this offering), all dealers that buy, sell, or trade shares of our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions. </FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
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NAME="page_ja11401_1_1"> </A>


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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja11401_part_ii_#151;information_not_required_in_prospectus"> </A>
<A NAME="toc_ja11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Part&nbsp;II&#151;Information not required in prospectus    <BR></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> ITEM 13.&nbsp;&nbsp;&nbsp;&nbsp;OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The following table sets forth the expenses to be incurred in connection with the offering described in this Registration Statement, other than
underwriting discounts and commissions, all of which will be paid by us. All amounts are estimates except the Securities and Exchange Commission registration fee and the Financial Industry Regulatory
Authority,&nbsp;Inc. filing fee. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


<!-- COMMAND=ADD_TF,"font-family:ARIAL;font-size:8pt;" --><font style="font-family:ARIAL;font-size:8pt;">


 Amount


</font><!-- COMMAND=ADD_ETF,"A" -->


 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
<TH style="font-family:times;">&nbsp;</TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Securities and Exchange Commission registration fee</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,730</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Financial Industry Regulatory Authority,&nbsp;Inc. filing fee</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>NASDAQ listing fee</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accountants' fees and expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Legal fees and expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Blue Sky fees and expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Transfer Agent's fees and expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Printing and engraving expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Miscellaneous</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total Expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>*</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> To be filed by amendment.  </I></FONT></DD></DL>
 </DIV>

<P style="font-family:times;"><FONT SIZE=2><B> ITEM 14.&nbsp;&nbsp;&nbsp;&nbsp;INDEMNIFICATION OF DIRECTORS AND OFFICERS.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Section&nbsp;102 of the Delaware General Corporation Law permits a corporation to eliminate the personal liability of its directors or its
stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our
certificate of incorporation provides that no director shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any
provision of law imposing such liability, except to the extent that the Delaware General Corporation Law prohibits the elimination or limitation of liability of directors for breaches of fiduciary
duty. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Section&nbsp;145
of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons
serving at the request of the corporation in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which he or she is party or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in
view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the Court of Chancery or such other court shall deem proper. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>II-1 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Part&nbsp;II&#151;Information not required in prospectus </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>Our
certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative (other than an action by or in the right of us) by
reason of the fact that he or she is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or
trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by reason of any
action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best
interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Our
certificate of incorporation also provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of
the fact that the Indemnitee is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or
trustee or, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such
capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or
proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no
indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication
but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits
or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If we
don't assume the defense, expenses must be advanced to an Indemnitee under certain circumstances. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
have entered into indemnification agreements with our directors. In general, these agreements provide that we will indemnify the director to the fullest extent permitted by law for claims arising
in his or her capacity as a director of our company or in connection with his or her service at our request for another corporation or entity. The indemnification agreements also provide for
procedures that will apply in the event that a director makes a claim for indemnification and establish certain presumptions that are favorable to the director. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We
maintain a general liability insurance policy which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or
officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
underwriting agreement we will enter into in connection with the offering of common stock being registered hereby provides that the underwriters will indemnify, under certain conditions, our
directors and officers (as well as certain other persons) against certain liabilities arising in connection with such offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> ITEM 15.&nbsp;&nbsp;&nbsp;&nbsp;RECENT SALES OF UNREGISTERED SECURITIES.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Set forth below is information regarding shares of common stock and preferred stock issued, and options granted, by us within the past three years
that were not registered under the Securities Act of </FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B>II-2 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Part&nbsp;II&#151;Information not required in prospectus </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<BR>


<P style="font-family:times;"><FONT SIZE=2>1933,
as amended, or the Securities Act. Also included is the consideration, if any, received by us for such shares and options and information relating to the section of the Securities Act, or rule
of the Securities and Exchange Commission, under which exemption from registration was claimed.  </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><B>Issuances of securities</B></FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>In
August 2010, we sold an aggregate of 10,000,000 shares of our common stock at a price per share of $0.0001 for an aggregate purchase price of $1,000. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>In
October 2010 and November 2010, we issued an aggregate of 583,333 shares of common stock to the Whitehead Institute and entities and individuals affiliated with the Whitehead Institute pursuant to
the terms of our exclusive license agreement with the Whitehead Institute. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
November 2010, we sold an aggregate of 4,000,000 shares of our series&nbsp;A preferred stock at a price per share of $1.00 for an aggregate purchase price of $4.0&nbsp;million. In April 2011 we
sold an aggregate of 12,000,000 shares of our series&nbsp;A preferred stock at a price per share of $1.00 for an aggregate purchase price of $12&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
April 2011, we sold an aggregate of 896,000 shares of our common stock at a price per share of $0.08 for an aggregate purchase price of $71,680. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>In
July 2011, we sold an aggregate of 16,025,000 shares of our series&nbsp;B preferred stock at a price per share of $2.00 for an aggregate purchase price of $32.0&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>In
November 2011, we sold an aggregate of 8,934,493 shares of our series&nbsp;C preferred stock at a price per share of $2.25 for an aggregate purchase price of $20.1&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>No
underwriters were involved in the foregoing sales of securities. The securities described in this section&nbsp;(a) of Item&nbsp;15 were issued to investors in reliance upon the exemption from
the registration requirements of the Securities Act, as set forth in Section&nbsp;4(2) under the Securities Act, including in some cases, Regulation&nbsp;D promulgated thereunder, relative to
transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required. All purchasers of shares of preferred stock described above represented to
us in connection with their purchase that they were accredited investors and were acquiring the shares for their own account for investment purposes only and not with a view to, or for sale in
connection with, any distribution thereof. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to
a registration statement or an available exemption from such registration.  </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><B>Stock option grants</B></FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>Since
inception, we have issued to certain employees, directors and consultants options to purchase an aggregate of 1,418,000 shares of common stock as of September&nbsp;30, 2011, of which, as of
September&nbsp;30, 2011, no options had been exercised or forfeited, and options to purchase 1,418,000 shares of common stock remained outstanding at a weighted-average exercise price of $0.21 per
share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
issuance of stock options and the common stock issuable upon the exercise of such options as described in this section&nbsp;(b) of Item&nbsp;15 were issued pursuant to written compensatory
plans or arrangements with our employees, directors and consultants, in reliance on the exemption from the registration requirements of the Securities Act provided by Rule&nbsp;701 promulgated under
the Securities Act or the exemption set forth in Section&nbsp;4(2) under the Securities Act and Regulation&nbsp;D promulgated thereunder relative to transactions by an issuer not involving any
public offering. All recipients either received adequate information about us or had access, through employment or other relationships, to such information. </FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>II-3 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Part&nbsp;II&#151;Information not required in prospectus </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2>All
of the foregoing securities are deemed restricted securities for purposes of the Securities Act. All certificates representing the issued shares of capital stock described in this Item&nbsp;15
included appropriate
legends setting forth that the securities had not been registered and the applicable restrictions on transfer. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> ITEM 16.&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The exhibits to the Registration Statement are listed in the Exhibit Index attached hereto and incorporated by reference herein. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> ITEM 17.&nbsp;&nbsp;&nbsp;&nbsp;UNDERTAKINGS.  </B></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
undersigned registrant hereby undertakes that:
<BR><BR></FONT>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared effective.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>For
the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial </FONT><FONT SIZE=2><I>bona
fide</I></FONT><FONT SIZE=2> offering thereof. </FONT></DD></DL>
</DD></DL>

<P style="font-family:times;"><FONT SIZE=1><B>II-4 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_jc11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Signatures    <BR></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth of Massachusetts, on this 3rd day of November, 2011. </FONT></P>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2> VERASTEM,&nbsp;INC.</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>By:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;CHRISTOPH WESTPHAL, M.D., PH.D.<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Christoph Westphal, M.D., Ph.D.<BR>
Chief Executive Officer</FONT></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> SIGNATURES AND POWER OF ATTORNEY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>We, the undersigned officers and directors of Verastem,&nbsp;Inc., hereby severally constitute and appoint Christoph Westphal, M.D., Ph.D. and
Robert Forrester, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and any other registration statement for the same offering pursuant to Rule&nbsp;462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated. </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


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 Title


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


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 Date


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 </B></FONT><BR></TH>
</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
</TR>
<TR VALIGN="TOP">
<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;CHRISTOPH WESTPHAL, M.D., PH.D.<BR>



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</FONT> <FONT SIZE=2> Christoph Westphal, M.D., Ph.D.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Executive Officer and&nbsp;Director<BR>
(Principal executive officer)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>November 3, 2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;ROBERT FORRESTER<BR>


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</FONT> <FONT SIZE=2> Robert Forrester</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Chief Operating Officer<BR>
(Principal financial and<BR>
accounting officer)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November 3, 2011</FONT></TD>
</TR>
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<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;RICHARD ALDRICH<BR>


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</FONT> <FONT SIZE=2> Richard Aldrich</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November 3, 2011</FONT></TD>
</TR>
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<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;JOHN K. CLARKE<BR>


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</FONT> <FONT SIZE=2> John K. Clarke</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November 3, 2011</FONT></TD>
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 <P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B>II-5 </B></FONT></P>

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<A NAME="page_jc11401_1_6"> </A>

<P style="font-family:times;"><FONT SIZE=2><A HREF="#bg11401a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Signatures </B></FONT></P>

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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 Title


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 </B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>


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 Date


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</TR>
<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
</TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;ANSBERT GADICKE, M.D.<BR>


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</FONT> <FONT SIZE=2> Ansbert Gadicke, M.D.</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>November 3, 2011</FONT></TD>
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<TD ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;STEPHEN KRAUS<BR>


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</FONT> <FONT SIZE=2> Stephen Kraus</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>November 3, 2011</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;HENRI TERMEER<BR>


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</FONT> <FONT SIZE=2> Henri Termeer</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>November 3, 2011</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=1><B>II-6 </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg11401a_main_toc">Table of Contents</A> </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="je11401_exhibit_index"> </A>
<A NAME="toc_je11401_1"> </A>
<BR></FONT><FONT SIZE=4>  Exhibit index    <BR></FONT></P>
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 Exhibit<BR>
number


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>


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 Description of exhibit


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<TR style="font-size:1.5pt;" VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TH>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>1.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Underwriting Agreement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>3.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Amended and Restated Certificate of Incorporation of the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>3.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Bylaws of the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>3.3*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Restated Certificate of Incorporation of the Registrant to be effective upon the closing of this offering</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>3.4*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Amended and Restated Bylaws of the Registrant to be effective upon the closing of this offering</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>4.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Specimen certificate evidencing shares of common stock</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>4.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Second Amended and Restated Investors' Rights Agreement, dated November&nbsp;1,&nbsp;2011, by and among the Registrant and the other parties thereto</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>5.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Opinion of Wilmer Cutler Pickering Hale and Dorr&nbsp;LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>2010 Equity Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.2*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>2012 Stock Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.3*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Incentive Stock Option Agreement under 2012 Stock Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.4*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Nonqualified Stock Option Agreement under 2012 Stock Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.5*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Employment Agreement, dated&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2012, between the Registrant and Robert Forrester</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.6*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Employment Agreement, dated&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2012, between the Registrant and Jonathan Pachter</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.7*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Indemnification Agreement between the Registrant and each director</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Lease Agreement, dated May&nbsp;2, 2011, between the Registrant and ARE-MA Region No.&nbsp;38,&nbsp;LLC</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.9&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Exclusive Patent License Agreement and Tangible Property Agreement, dated October&nbsp;13, 2010, by and among the Registrant and the Whitehead Institute for Biomedical Research</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.10*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Non-exclusive Patent License Agreement, dated October&nbsp;13, 2010, by and among the Registrant and the Whitehead Institute for Biomedical Research</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.11&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Letter Agreement, dated October&nbsp;1, 2010, between the Registrant and the Broad Institute</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Letter Agreement, dated July&nbsp;30, 2010, as amended October&nbsp;18, 2010, between the Registrant and Piyush Gupta,&nbsp;Ph.D.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.13</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Letter Agreement, dated August&nbsp;20, 2010, between the Registrant and Eric Lander,&nbsp;Ph.D.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>10.14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Letter Agreement, dated July&nbsp;30, 2010, as amended October&nbsp;18, 2010, between the Registrant and Robert Weinberg,&nbsp;Ph.D.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>23.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Consent of Ernst&nbsp;&amp; Young&nbsp;LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>23.2*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Consent of Wilmer Cutler Pickering Hale and Dorr&nbsp;LLP (included in Exhibit&nbsp;5.1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>24.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Power of Attorney (included on signature page)</FONT></TD>
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<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1><I>*</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=1><I> To be filed by amendment.
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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
Table of Contents
As filed with the Securities and Exchange Commission on November 3, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VERASTEM, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2834
(Primary Standard Industrial
Classification Code Number)
27-3269467
(I.R.S. Employer
Identification Number)
215 First Street, Suite 440
Cambridge, MA 02142
(617) 252-9300
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Christoph Westphal, M.D., Ph.D.
Chief Executive Officer
Verastem, Inc.
215 First Street, Suite 440
Cambridge, Massachusetts 02142
(617) 252-9300
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
David E. Redlick, Esq.
Brian A. Johnson, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
(617) 526-6000
Patrick O'Brien, Esq.
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, Massachusetts 02199
(617) 951-7000
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement is declared effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box.
o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
ý
(Do not check if a
smaller reporting company)
Smaller reporting company
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities
To Be Registered
Proposed Maximum
Aggregate Offering Price(1)
Amount of
Registration Fee(2)
Common Stock, $0.0001 par value per share
$50,000,000
$5,730
(1)
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)
Calculated
pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents
The information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Subject to Completion
November 3, 2011
shares
Common Stock
This is the initial public offering of our common stock. No public market currently exists for our common stock. We are offering all of the shares of common
stock offered by this prospectus. We expect the public offering price to be between $                  and
$                  per share.
We
are applying to list our common stock on The NASDAQ Global Market under the symbol "VSTM."
Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common
stock in "Risk factors" beginning on page 10.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
Per share
Total
Public offering price
$
$
Underwriting discounts and commissions
$
$
Proceeds to Verastem, before expenses
$
$
The
underwriters may also purchase up to an additional                            shares of our common stock at
the public offering price, less the underwriting discounts and commissions
payable by us, to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise this option in full, the total underwriting discounts
and commissions will be $                           and our total proceeds, after underwriting discounts and
commissions but before expenses, will be $                           .
The
underwriters are offering the common stock as set forth under "Underwriting." Delivery of the shares will be made on or
about                                        ,
2012.
UBS Investment Bank
Leerink Swann
Lazard Capital Markets
Oppenheimer & Co.
Rodman & Renshaw, LLC
Table of Contents
We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to
which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking
offers to buy, shares of our common stock only in jurisdictions where such offers and sales are permitted. The information in this prospectus or any free writing prospectus is accurate only as of its
date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
TABLE OF CONTENTS
Page
Prospectus summary
1
Risk factors
10
Special note regarding forward-looking statements
38
Use of proceeds
39
Dividend policy
40
Capitalization
41
Dilution
43
Selected financial data
45
Management's discussion and analysis of financial condition and results of
operations
47
Business
61
Management
93
Executive compensation
98
Transactions with related persons
115
Principal stockholders
120
Description of capital stock
124
Shares eligible for future sale
128
Underwriting
131
Legal matters
138
Experts
138
Where you can find more information
138
Index to financial statements
F-1
i
Table of Contents
Prospectus summary
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all
of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the "Risk factors" section and our financial statements and
the related notes appearing at the end of this prospectus, before making an investment decision.
OUR BUSINESS
We are a biopharmaceutical company focused on discovering and developing proprietary small molecule drugs targeting cancer stem cells along with
proprietary companion diagnostics. A cancer stem cell is a particularly aggressive type of tumor cell, resistant to
conventional cancer therapy, that we believe is an underlying cause of tumor recurrence and metastasis. We also believe that the presence of cancer stem cells in tumors may be a key reason for the
ultimate failure of many existing chemotherapeutics and other cancer therapies to achieve a durable clinical response. Building on discoveries by our scientific co-founders, Robert
Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., published in the peer reviewed scientific journal
Cell
, we use our proprietary technology
to create a stable population of cancer stem cells to screen for and identify small molecule compounds that target cancer stem cells. We believe that our technology and approach provide an opportunity
to develop a next generation of oncology therapeutics addressing the large unmet medical need of patients with many types of cancers.
THE PROBLEM
Cancer is one of the world's most serious health problems and the second most common cause of death in the United States after heart disease. Current
treatments for cancer include surgery, radiation therapy, chemotherapy, hormone therapy and targeted therapy. According to estimates by the National Institutes of Health, in the United States in 2010,
the direct medical costs of cancer of all types exceeded $100 billion. IMS Health estimates that in the United States in 2010, approximately $22 billion was spent on drugs to treat
cancer, representing the largest class of drug spending in the United States. Despite years of intensive research and clinical use, current treatments often fail to cure cancer. Cancer patients who
relapse often develop metastatic disease. Metastatic disease is the cause of more than 90% of cancer deaths.
We
believe that cancer stem cells, or CSCs, which are also sometimes referred to as tumor-initiating cancer cells, are responsible for the initiation, metastasis and recurrence of many cancers and may
be a key reason for the ultimate failure of many current therapies to achieve a durable clinical response. CSCs have the ability to:
–>
move
freely and proliferate without attachment to other cells or surfaces;
–>
initiate
a tumor;
–>
self-renew;
–>
produce
other cancer cell types; and
–>
resist
many current cancer treatments.
CSCs
have been identified in many types of cancer, including breast, pancreatic, colon, brain, lung and leukemia. As illustrated in the figure below, while current treatments may succeed at initially
decreasing tumor burden, they may leave behind a population of CSCs that can regenerate tumors.
1
Table of Contents
OUR SOLUTION
Our solution is to discover and develop a next generation of oncology therapeutics targeting CSCs along with companion diagnostics. We believe that
by developing therapeutics that target CSCs we can address the problem of cancer recurrence and metastasis so as to deliver a durable clinical response.
Our
scientific co-founders at the Whitehead Institute for Biomedical Research, an affiliate of the Massachusetts Institute of Technology, or MIT, and the Broad Institute, an affiliate of
MIT and Harvard University, made discoveries that link the epithelial-to-mesenchymal transition, or EMT, to the emergence of CSCs. This transition involves the transformation
of one type of cancer cell into a more aggressive and drug resistant type of cancer cell. Our solution utilizes proprietary technology based on these discoveries along with rapid and automated assays,
referred to as high-throughput screening, to identify drugs targeting CSCs and develop companion diagnostics. To achieve a durable clinical response, we believe that it may be necessary to
kill both CSCs and other types of cancer cells in a tumor, as illustrated in the figure below, either with a combination of current cancer treatments and CSC-targeted drugs or a single
therapeutic found to target both cancer cell populations.
Our proprietary technology
A persistent problem in the discovery of drugs targeting CSCs is the difficulty of isolating large numbers of CSCs. Without such large numbers, the
discovery of drugs targeting CSCs using high-throughput screening is extremely difficult. Moreover, when CSCs are isolated, they typically do not remain stable in culture. Instead, over a
short period of time, CSCs convert into other types of cancer cells. To address this problem, our scientific co-founders developed proprietary technology based on the EMT process to create
a stable population of CSCs that are suitable for use in high-throughput screening of small molecule compounds. We license this proprietary technology from the Whitehead Institute.
2
Table of Contents
To
identify compounds that are selective for CSCs, we grow cancer non-stem cells in the laboratory and then induce the EMT process to create a stable population of CSCs. As illustrated in
the figure below, we then screen compounds to assess their ability to kill the CSCs. Because these CSCs are stable in culture, the screening process can be conducted using high-throughput
technology on a large number and wide variety of small molecule compound libraries. These compound libraries include new chemical entities, approved drugs and compounds that are in preclinical and
clinical development. We then profile the compounds that are identified as targeting CSCs using additional assays to identify suitable clinical candidates.
OUR PRODUCT CANDIDATES AND COMPANION DIAGNOSTICS
Using our proprietary technology, we have identified a pipeline of small molecule compounds with the potential to target CSCs. Our most advanced
product candidate is the small molecule VS-507. Our scientific co-founders identified VS-507 as a drug candidate for killing breast cancer stem cells and published
their research in
Cell
in 2009. This study included an analysis of the effect of VS-507 on cell lines derived from triple negative breast
cancer, or TNBC, a type of breast cancer in which a high percentage of CSCs have been identified. TNBC has a poorer prognosis and lower overall survival rate than other types of breast cancers. We are
currently evaluating VS-507 in preclinical studies as a potential therapy for breast cancer and believe that VS-507 may be especially beneficial as a therapeutic for the
treatment of TNBC.
We
believe that the targeted action of VS-507 on CSCs is effected through the inhibition of a network of proteins, known as the Wnt/beta-catenin cell signaling pathway, which
Dr. Weinberg described in 2011 in
Cell
as critical for the development and maintenance of CSCs. Additional third-party published research has
reported that VS-507's activity may be mediated through the blockade of the Wnt/beta-catenin cell signaling pathway. In mouse models of breast cancer, VS-507
treatment decreased biophysical or biochemical markers, referred to as biomarkers, of CSCs. In contrast, treatment in the same model with a standard chemotherapeutic agent, paclitaxel, increased
biomarkers of CSCs. Assuming successful completion of preclinical studies, we expect to file an investigational new drug application, or IND, with the U.S. Food and Drug Administration, or FDA, in
late 2012 to initiate a Phase 1 clinical trial of VS-507. We also are currently evaluating additional proprietary product candidates in preclinical studies for their use in breast
and other cancers.
An
important element of our business strategy is the development and use of proprietary, companion diagnostics in connection with the development of our therapeutic drug candidates. CSCs are often
characterized by a distinctive set of biomarkers, which we believe may be a key to identifying patients with tumors that are likely to respond to therapies targeting CSCs. We plan to use diagnostics,
based on these biomarkers, as part of a personalized medicine approach to identify patients with aggressive tumors that have a high percentage of CSCs. We also believe that these diagnostics may be
used to monitor patients' progress on therapy and aid physicians' ongoing treatment decisions. In addition, we expect that our use of proprietary diagnostics may accelerate the clinical development
process for our drug candidates by enabling smaller, targeted trials and providing early, objective signals of drug activity.
3
Table of Contents
OUR STRATEGY
Our goal is to build a leading biopharmaceutical company focused on the discovery, development and, ultimately, commercialization of novel drugs and
companion diagnostics targeting CSCs. Key elements of our strategy to achieve this goal are:
–>
continue
to screen and identify small molecules that target CSCs;
–>
in-license
rights to additional compounds to expand our pipeline of candidates that target CSCs;
–>
rapidly
advance our drug candidates into clinical development;
–>
develop
diagnostics for therapeutic products targeting CSCs;
–>
collaborate
selectively to augment and accelerate development and commercialization; and
–>
maintain
scientific leadership in the CSC field.
OUR MANAGEMENT TEAM AND SCIENTIFIC CO-FOUNDERS AND ADVISORS
Our management team includes our Chief Executive Officer, Chairman and co-founder Christoph Westphal, M.D., Ph.D., our Chief Operating
Officer, Robert Forrester, and our Vice President, Head of Research, Jonathan Pachter, Ph.D.
–>
Dr. Westphal
has been involved in founding a number of biotechnology companies as chief executive officer, including Sirtris Pharmaceuticals, Inc.,
which was acquired by GlaxoSmithKline plc in 2008, as well as Alnylam Pharmaceuticals, Inc. and Momenta Pharmaceuticals, Inc. Dr. Westphal also co-founded
Alnara Pharmaceuticals, Inc., which was acquired by Eli Lilly and Co. in 2010.
–>
Mr. Forrester
has held executive level positions at both private and public life science companies, including Forma Therapeutics, Inc.,
CombinatoRx, Inc., now Zalicus Inc., and Coley Pharmaceutical Group, Inc., which was acquired by Pfizer Inc. in 2007.
–>
Dr. Pachter
has over 20 years of experience in leading the discovery of small molecule and monoclonal antibody therapeutics for the treatment of
cancer, most recently as the Senior Director of Cancer Biology at OSI Pharmaceuticals Inc., which was acquired by Astellas Pharma Inc. in 2010.
Our
management team is supported by our scientific advisory board comprised of leading academic and industry scientists. Our scientific advisory board consists of:
Scientific advisory board
Robert Weinberg, Ph.D.
Founding Member of the Whitehead Institute for Biomedical
Scientific co-founder
Research, Professor of Biology at the Massachusetts Institute of Technology and recipient of the 1997 National Medal of Science
Eric Lander, Ph.D.
Founding Director of the Broad Institute, Professor of Biology
Scientific co-founder
at the Massachusetts Institute of Technology and Professor of Systems Biology at Harvard Medical School
Piyush Gupta, Ph.D.
Member of the Whitehead Institute for Biomedical Research
Scientific co-founder
and Assistant Professor of Biology at the Massachusetts Institute of Technology
4
Table of Contents
Scientific advisory board
Julian Adams, Ph.D.
President of Research and Development of Infinity Pharmaceuticals, Inc., former Senior Vice President of Drug Discovery and Development of Millennium Pharmaceuticals, Inc. and co-inventor and co-developer of
Velcade
José Baselga, M.D., Ph.D.
Chief of Hematology and Oncology at Massachusetts General Hospital, Associate Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School
George Daley, M.D., Ph.D.
Professor of Hematology and Oncology and Director of the Stem Cell Transplantation Program at Children's Hospital and Professor of Biological Chemistry and Molecular Pharmacology at Harvard Medical School
Peter Elliott, Ph.D.
Former Senior Vice President and Head of Research and Development of Sirtris Pharmaceuticals, Inc., former Vice President of Pharmacology and Drug Development of Millennium Pharmaceuticals, Inc. and
co-developer of Velcade
Daniel Haber, M.D., Ph.D.
Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School
Joseph (Yossi) Schlessinger, Ph.D.
Chairman and Professor in the Department of Pharmacology at Yale School of Medicine
Phillip A. Sharp, Ph.D.
Institute Professor at the David H. Koch Institute for Integrative Cancer Research at the Massachusetts Institute of Technology and recipient of the 1993 Nobel Prize in Medicine and Physiology
Roger Tung, Ph.D.
President and Chief Executive Officer of Concert Pharmaceuticals, Inc., former Vice President of Drug Discovery of Vertex Pharmaceuticals, Inc. and co-inventor of Lexiva and Agenerase
Christopher Walsh, Ph.D.
Hamilton Kuhn Professor in the Department of Biological Chemistry and Molecular Pharmacology at Harvard Medical School
Eric Winer, M.D.
Director of the Breast Oncology Center at the Dana Farber Cancer Institute and Professor of Medicine at Harvard Medical School
RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully
in the "Risk factors" section of this prospectus immediately following this prospectus summary. These risks include the following:
–>
We
have incurred significant losses since our inception and will need substantial additional funding. To date, we have not generated any revenues. We expect to incur
losses for the foreseeable future and may never achieve profitability. Our net loss was $7.7 million for the nine months ended September 30, 2011 and $784,000 for the period from
August 4, 2010 (inception)
5
Table of Contents
to
December 31, 2010. As of September 30, 2011, we had a deficit accumulated during the development stage of $8.5 million.
–>
We
have a short operating history. All of our product candidates are still in preclinical development, and we have not received marketing approval from the FDA or
any other regulatory authority for any product candidate.
–>
Our
approach to the discovery and development of product candidates that target CSCs is unproven. Our focus on using our proprietary EMT technology to screen for and
identify product candidates targeting CSCs may not result in the discovery and development of commercially viable drugs to treat cancer. Research on CSCs is an emerging field and, consequently, there
is ongoing debate regarding the existence of CSCs, whether the appropriate nomenclature to refer to these cells is cancer stem cells, tumor-initiating cells or another term and the importance of these
cells as an underlying cause of tumor recurrence and metastasis. We do not believe that any drugs that target CSCs have been successfully developed to date for the treatment of cancer.
–>
We
may be unable to acquire or in-license from third parties any compounds or product candidates that we identify using our proprietary EMT technology or
otherwise.
–>
Clinical
trials of our product candidates may not be successful. If we are unable to obtain required marketing approvals for, commercialize, obtain and maintain
patent protection for or gain sufficient market acceptance by physicians, patients and healthcare payors of our product candidates, or experience significant delays in doing so, our business will be
materially harmed and our ability to generate revenue will be materially impaired.
–>
If
we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may not
realize the full commercial potential of our therapeutics.
–>
We
may depend on collaborations with third parties for the development and commercialization of our product candidates. If those collaborations are not successful,
we may not be able to capitalize on the market potential of these product candidates.
OUR CORPORATE INFORMATION
We were incorporated under the laws of the State of Delaware in August 2010. Our principal executive offices are located at 215 First Street,
Suite 440, Cambridge, Massachusetts 02142 and our telephone number is (617) 252-9300. Our website address is www.verastem.com. The information contained on, or that can be
accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
In
this prospectus, unless otherwise stated or the context otherwise requires, references to "Verastem," "we," "us," "our" and similar references refer to Verastem, Inc. The Verastem name and
logo are our trademarks. The other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.
This
prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications
and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or
completeness of such information. While we believe these industry publications and third party research, surveys and studies are reliable, we have not independently verified such data.
6
Table of Contents
The offering
Common stock offered by us
shares
Common stock to be outstanding after this offering
shares
Over-allotment option
The underwriters have an option for a period of 30 days to purchase up to             additional shares of our common stock to
cover over-allotments.
Use of proceeds
We intend to use the net proceeds from this offering for preclinical and clinical development of VS-507, discovery, research and preclinical studies of our other product candidates, additional
compounds and companion diagnostics and other general corporate purposes.
Risk factors
You should read the "Risk factors" section starting on page 10 of this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common
stock.
Proposed NASDAQ Global Market symbol
VSTM
The number of shares of our common stock to be outstanding after this offering is based on 10,476,652 actual shares of our common stock outstanding as of
September 30, 2011 and 40,959,493 additional shares of our common stock issuable upon the automatic conversion of all outstanding shares of our preferred stock, including shares of our
series C preferred stock that we issued and sold in November 2011, upon the closing of this offering.
The
number of shares of our common stock to be outstanding after this offering excludes:
–>
1,418,000
shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2011 at a weighted-average exercise price of
$0.21 per share;
–>
105,348
additional shares of our common stock available for future issuance as of September 30, 2011 under our 2010 equity incentive plan; and
–>
additional
 shares of our common stock that will be available for future issuance, as of the closing of this offering, under our 2012 stock incentive
plan.
Unless
otherwise indicated, all information in this prospectus assumes:
–>
no
exercise of the outstanding options described above;
–>
no
exercise by the underwriters of their option to purchase up
to                                    additional shares of our common
stock to cover over-allotments;
–>
the
automatic conversion of all outstanding shares of our preferred stock into an aggregate of 40,959,493 shares of our common stock upon the closing of this
offering; and
–>
the
restatement of our amended and restated certificate of incorporation and the amendment and restatement of our bylaws upon the closing of this offering.
7
Table of Contents
Summary financial information
You should read the following summary financial data together with our financial statements and the related notes appearing at the
end of this prospectus and the "Selected financial data" and "Management's discussion and analysis of financial condition and results of operations" sections of this prospectus. We have derived the
statements of operations data for the period from August 4, 2010 (inception) to December 31, 2010 from our audited financial statements included in this prospectus. We have derived the
statements of operations data for the nine months ended September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011 and the balance sheet data as of
September 30, 2011 from our unaudited financial statements included in this prospectus. The unaudited financial data include, in the opinion of our management, all adjustments, consisting only
of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Our historical results for any prior period are not
necessarily indicative of results to be expected in any future period, and our results for any interim period are not necessarily indicative of results to be expected for a full fiscal year.
Statement of operations data:
Period from
August 4, 2010
(inception) to
December 31, 2010
Nine months ended
September 30, 2011
Period from
August 4, 2010
(inception) to
September 30, 2011
(in thousands, except per share data)
Operating expenses:
Research and development
$
400
$
5,483
$
5,883
General and administrative
384
2,195
2,579
Total operating expenses
784
7,678
8,462
Operating loss
(784
)
(7,678
)
(8,462
)
Net loss
$
(784
)
$
(7,678
)
$
(8,462
)
Accretion of preferred stock
(2
)
(18
)
(20
)
Net loss applicable to common stockholders
$
(786
)
$
(7,696
)
$
(8,482
)
Net loss per share applicable to common stockholders—basic and diluted
$
(0.26
)
$
(1.79
)
$
(2.20
)
Weighted-average number of common shares used in net loss per share applicable to common stockholders—basic and diluted
2,976
4,291
3,841
Pro forma net loss per share applicable to common stockholders—basic and diluted
$
(0.17
)
$
(0.38
)
Weighted-average number of common shares used in pro forma net loss per share applicable to common stockholders—basic and
diluted
4,638
20,474
Pro forma basic and diluted net loss per common share is calculated assuming the automatic conversion of all outstanding shares of our preferred stock,
including shares of our series C preferred stock that we issued and sold in November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering.
8
Table of Contents
The
pro forma balance sheet data set forth below gives effect to:
–>
our
issuance and sale in November 2011 of an aggregate of 8,934,493 shares of our series C preferred stock at a price per share of $2.25 for an aggregate
purchase price of $20.1 million; and
–>
the
automatic conversion of all outstanding shares of our preferred stock, including shares of our series C preferred stock that we issued and sold in
November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering.
The
pro forma as adjusted balance sheet data set forth below give further effect to our issuance and sale
of                           shares of our common stock in this offering at an assumed initial public
offering price of $                           per share, which is the midpoint of the price range listed on the
cover page of this prospectus, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
As of September 30, 2011
Balance sheet data:
Actual
Pro forma
Pro forma
as adjusted
(in thousands)
Cash and cash equivalents
$
41,421
$
61,524
Working capital
39,419
59,522
Total assets
42,364
62,467
Redeemable convertible preferred stock
47,878
—
Deficit accumulated during the development stage
(8,462
)
(8,462
)
Total stockholders' (deficit) equity
(7,639
)
60,342
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Risk factors
Investing in our common stock involves a high degree of risk. Before investing in our common stock, you
should consider carefully the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of
this prospectus. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these
circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL CAPITAL
We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.
Since inception, we have incurred significant operating losses. Our net loss was $7.7 million for the nine months ended September 30,
2011 and $784,000 for the period from August 4, 2010 (inception) to December 31, 2010. As of September 30, 2011, we had a deficit accumulated during the development stage of
$8.5 million. To date, we have not generated any revenues and have financed our operations through private placements of our preferred stock. We have devoted substantially all of our efforts to
research and development. We have not initiated clinical development of any product candidates and expect that it will be many years, if ever, before we have a product candidate ready for
commercialization. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to
quarter. We anticipate that our expenses will increase substantially if and as we:
–>
continue
our research and preclinical development of our product candidates;
–>
seek
to identify additional product candidates that target cancer stem cells, or CSCs;
–>
acquire
or in-license other products and technologies;
–>
initiate
clinical trials for our product candidates;
–>
seek
marketing approvals for our product candidates that successfully complete clinical trials;
–>
ultimately
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
–>
maintain,
expand and protect our intellectual property portfolio;
–>
hire
additional clinical, quality control and scientific personnel; and
–>
add
operational, financial and management information systems and personnel, including personnel to support our product development and planned future
commercialization efforts.
To
become and remain profitable, we must develop and eventually commercialize a product or products with significant market potential. This will require us to be successful in a range of challenging
activities, including completing preclinical testing and clinical trials of our product candidates, obtaining marketing approval for these product candidates and manufacturing, marketing and selling
those products for which we may obtain marketing approval. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve
profitability. We are currently only in the preclinical testing stages for our most advanced product candidates and have not yet completed formulation development of our lead product candidate,
VS-507. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would
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Risk factors
decrease
the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value
of our company could also cause you to lose all or part of your investment.
Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
We are an early stage company. We commenced active operations in the second half of 2010. Our operations to date have been limited to organizing and
staffing our company, business planning, raising capital, acquiring and developing our technology, identifying potential product candidates and undertaking preclinical studies of our most advanced
product candidates. All of our product candidates are still in preclinical development. We have not yet demonstrated our ability to initiate or successfully complete any clinical trials, including
large-scale, pivotal clinical trials, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities
necessary for successful product commercialization. It takes about ten to 15 years to develop one new medicine from the time it is discovered to when it is available for treating patients.
Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.
In
addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a research
focus to a company capable of supporting commercial activities. We may not be successful in such a transition.
We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our product development programs
or commercialization efforts.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development and later
initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with
operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on
attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
We
expect that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements for at
least                           . Our future capital requirements will depend on many factors, including:
–>
the
scope, progress, results and costs of compound discovery, preclinical development, laboratory testing and clinical trials for our product candidates;
–>
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;
–>
the
costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we
receive marketing approval;
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Risk factors
–>
revenue,
if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
–>
the
costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual
property-related claims; and
–>
our
ability to establish collaborations on favorable terms, if at all.
Identifying
potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we
may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success.
Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on
additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Raising additional capital may cause dilution to our stockholders, including purchasers of common stock in this offering, restrict our operations or require us to relinquish
rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity
offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital
through the sale of equity or convertible
debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional 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 our technologies, future revenue
streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when
needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves.
RISKS RELATED TO THE DISCOVERY, DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCT CANDIDATES
Our approach to the discovery and development of product candidates that target CSCs is unproven, and we do not know whether we will be able to develop any products of
commercial value.
Our scientific approach focuses on using proprietary technology to create a stable population of CSCs in the laboratory that we then use to screen
for and identify product candidates targeting these CSCs. Research on CSCs is an emerging field and, consequently, there is ongoing debate regarding the existence of CSCs, whether the appropriate
nomenclature to refer to these cells is cancer stem cells, tumor-initiating cells or another term and the importance of these cells as an underlying cause of tumor recurrence and metastasis. In
addition, there is some debate in the scientific community regarding the defining characteristics of CSCs and whether CSCs are stem cells or, instead, cancer cells
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Risk factors
with
tumor-initiating capabilities. As such, the discovery by our scientific co-founders of the link between the epithelial-to-mesenchymal transition, or EMT, and the emergence of cancer
stem cells is not universally accepted.
Even
if our beliefs regarding the existence, characteristics and function of CSCs are correct, any drugs that we develop may not effectively target CSCs. We do not believe that any drugs that target
CSCs have been successfully developed to date for the treatment of cancer. If we are able to develop a drug that targets CSCs in preclinical studies, we may nonetheless not succeed in demonstrating
safety and efficacy of the drug in clinical trials. Our focus on using our proprietary EMT technology to screen for and identify product candidates targeting CSCs may not result in the discovery and
development of commercially viable drugs to treat cancer.
We may not be successful in our efforts to identify or discover additional potential product candidates.
A key element of our strategy is to identify and test additional compounds that target CSCs in a variety of different types of cancer. A significant
portion of the research that we are conducting involves new compounds, new uses of existing compounds and new and unproven drug discovery methods, including our proprietary technology. The drug
discovery that we are conducting using our EMT technology may not be successful in identifying compounds that are useful in treating cancer. Our research programs may initially show promise in
identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:
–>
the
research methodology used may not be successful in identifying potential product candidates; or
–>
potential
product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be
products that will receive marketing approval and achieve market acceptance.
In
particular, because our EMT technology induces the EMT process to create a stable population of CSCs, it is possible that these stable CSCs may not react in precisely the same manner as naturally
occurring CSCs when treated with a particular product candidate. As a result, a product candidate that shows initial promise in targeting our stable population of CSCs may not have the same effect on
tumors with naturally occurring CSCs.
Research
programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus our efforts and resources on a potential product candidate
that ultimately proves to be unsuccessful.
If
we are unable to identify suitable compounds for preclinical and clinical development, we will not be able to obtain product revenues in future periods, which likely would result in significant
harm to our financial position and adversely impact our stock price.
We may not be successful in obtaining necessary rights to compounds and product candidates for our development pipeline through acquisitions and in-licenses.
Because we are screening a range of compounds, including compounds with proprietary rights held by third parties, for their activity against CSCs,
the growth of our business will depend in significant part on our ability to acquire or in-license rights to these compounds. However, we may be unable to acquire or in-license
any compounds or product candidates from third parties that we identify using our proprietary EMT technology or otherwise. The licensing and acquisition of proprietary compounds is a competitive area,
and a number of more established companies are also pursuing strategies to
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Risk factors
license
or acquire compounds and product candidates that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater
clinical development and commercialization capabilities.
For
example, although the Broad Institute has granted us a right of first negotiation for specified compounds and other intellectual property owned by the Broad Institute, we may be unable to
negotiate a license within the specified time frame. If we are unable to do so, the Broad Institute may offer the intellectual property to other parties. In addition, the Whitehead Institute has
retained the right to use the EMT technology that we license from it for research, teaching and educational purposes and could seek to license to third parties any intellectual property rights that it
discovers using the EMT technology while pursuing these purposes. Pursuant to our license agreement with the Whitehead Institute, we will have an opportunity, subject to the Whitehead Institute's
obligations under any third-party research funding agreements, to negotiate a license to any such intellectual property that is developed or conceived on or prior to a specified date in Robert
Weinberg's laboratory at the Whitehead Institute. Our failure to reach an agreement with either the Broad Institute or the Whitehead Institute for any applicable intellectual property could result in
a third party acquiring the related rights.
In
addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire the relevant compound or product candidate on
terms that would allow us to make an appropriate return on our investment.
In
addition, we expect competition for acquisition and in-licensing product candidates that are attractive to us may increase in the future, especially if our approach of targeting CSCs
gains greater scientific acceptance, which may mean fewer suitable opportunities for us as well as higher acquisition or licensing prices. If we are unable to successfully obtain rights to suitable
compounds or product candidates, our business, financial condition and prospects for growth could suffer.
All of our product candidates are still in preclinical development. Preclinical testing and clinical trials of our product candidates may not be successful. If we are unable
to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.
We have invested a significant portion of our efforts and financial resources in the identification and preclinical development of drugs that target
CSCs. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our
product candidates. The success of our product candidates will depend on several factors, including the following:
–>
successful
completion of preclinical studies and clinical trials;
–>
receipt
of marketing approvals from applicable regulatory authorities;
–>
establishing
commercial manufacturing capabilities or making arrangements with third-party manufacturers;
–>
obtaining
and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
–>
launching
commercial sales of the products, if and when approved, whether alone or in collaboration with others;
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–>
acceptance
of the products, if and when approved, by patients, the medical community and third-party payors;
–>
effectively
competing with other therapies; and
–>
a
continued acceptable safety profile of the products following approval.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product
candidates, which would materially harm our business.
If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive
results, we may incur additional costs or experience delays in completing, 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 must complete preclinical development and
then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing 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 early clinical trials may not be
predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to
varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to
obtain marketing approval of their products. For example, standard measures of clinical activity with respect to solid tumors, such as Response Criteria in Solid Tumors, or RECIST, measurement
guidelines, which are based on gross changes in the size of tumor lesions, may not be sufficient to detect the targeting of CSCs by our product candidates.
We
may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent 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 trial or conduct a clinical trial at a prospective trial
site;
–>
we
may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
–>
clinical
trials of our product candidates may produce negative or inconclusive results, and we may decide, or 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 these clinical trials at a higher rate than we anticipate;
–>
our
third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
–>
we
might have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to
unacceptable health risks;
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Risk factors
–>
regulators
or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including
noncompliance with
regulatory requirements or a finding that the participants 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 our product candidates may be insufficient or inadequate;
and
–>
our
product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, 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 those that we currently contemplate, if we are unable to successfully complete clinical
trials of our product candidates or other testing, 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 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.
Our
product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether 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 to commercialize our product
candidates or allow our competitors to bring products to market before we do and impair our ability 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 necessary regulatory 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 locate and enroll a sufficient number of
eligible patients to participate in these trials as required by the U.S. Food and Drug Administration, or FDA, or similar regulatory authorities outside the United States. In addition, many of our
competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may
instead enroll in clinical trials of our competitors' product candidates.
Patient
enrollment is affected by other factors including:
–>
severity
of the disease under investigation;
–>
eligibility
criteria for the study in question;
–>
perceived
risks and benefits of the product candidate under study;
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Risk factors
–>
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.
Our
inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment
delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional
financing.
If serious adverse or inappropriate side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of
our product candidates.
All of our product candidates are still in preclinical development and their risk of failure is high. It is impossible to predict when or if any of
our product candidates will prove effective or safe in humans or will receive marketing approval. If our product candidates are associated with undesirable side effects or have characteristics that
are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less
severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in early stage
testing for treating cancer have later been found to cause side effects that prevented further development of the compound.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product 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 product candidates that we identify for specific
indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource
allocation 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 indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product
candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to
retain sole development and commercialization rights to such product candidate.
If we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may not realize the
full commercial potential of our therapeutics.
We plan to develop companion diagnostics for our therapeutic product candidates. There has been limited success to date industry wide in developing
these types of companion diagnostics. To be successful, we would need to address a number of scientific, technical and logistical challenges. We have only recently initiated development of companion
diagnostics. We have limited experience in the development of diagnostics and may not be successful in developing appropriate diagnostics to pair with any of our therapeutic product candidates that
receive marketing approval. Companion
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Risk factors
diagnostics
are subject to regulation by the FDA and similar regulatory authorities outside the United States as medical devices and require separate regulatory approval prior to commercialization.
Given our limited experience in developing diagnostics, we expect to rely in part on third parties for their design and manufacture. If we, or any third parties that we engage to assist us, are unable
to
successfully develop companion diagnostics for our therapeutic product candidates, or experience delays in doing so:
–>
the
development of our therapeutic product candidates may be adversely affected if we are unable to appropriately select patients for enrollment in our clinical
trials;
–>
our
therapeutic product candidates may not receive marketing approval if safe and effective use of a therapeutic product candidate depends on an
in vitro
diagnostic; and
–>
we
may not realize the full commercial potential of any therapeutics that receive marketing approval if, among other reasons, we are unable to appropriately select
patients who are likely to benefit from therapy with our drugs.
As
a result, our business would be harmed, possibly materially.
Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and
others in the medical community necessary for commercial success.
If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients,
healthcare payors and others in the medical community. For example, current cancer treatments like chemotherapy and radiation therapy are well established in the medical community, and doctors may
continue to rely on these treatments. If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The
degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
–>
efficacy
and potential advantages compared to alternative treatments;
–>
the
ability to offer our products for sale at competitive prices;
–>
convenience
and ease of administration compared to alternative treatments;
–>
the
willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
–>
the
strength of marketing and distribution support;
–>
sufficient
third-party coverage or reimbursement; and
–>
the
prevalence and severity of any side effects.
If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, 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 no experience in the sale, marketing or distribution of pharmaceutical products. To
achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. In
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the
future, we may choose to build a focused sales and marketing infrastructure to market or co-promote some of our product candidates if and when they are approved.
There
are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and
training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing
capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, 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 to prescribe any future products;
–>
the
lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product
lines; and
–>
unforeseen
costs and expenses associated with creating an independent sales and marketing organization.
If
we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues to us are likely to be lower
than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product
candidates or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and
attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be
successful in commercializing our product candidates.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates,
and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and
biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the
treatment of the disease indications for which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as or
similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.
We
are developing our product candidates for the treatment of cancer. There are a variety of available therapies marketed for cancer. In many cases, these drugs are administered in combination to
enhance efficacy. Some of these drugs are branded and subject to patent protection, and others are available on
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a
generic basis. Many of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also
encourage the use of generic products. We expect that if our product candidates are approved, they will be priced at a significant premium over competitive generic products. This may make it difficult
for us to achieve our business strategy of using our product candidates in combination with existing therapies or replacing existing therapies with our product candidates.
There
are also a number of products in clinical development by third parties to treat cancer by targeting CSCs. These companies include divisions of large pharmaceutical companies, including Astellas
Pharma US, Inc., Sanofi-Aventis US LLC, GlaxoSmithKline plc and others. There are also biotechnology companies of various size that are developing therapies against CSCs,
including OncoMed Pharmaceuticals, Inc., Boston Biomedical, Inc. and Stemline Therapeutics, Inc. Our competitors may develop products that are more effective, safer, more
convenient or less costly than any that we are developing or that would render our product candidates obsolete or non-competitive. In addition, our competitors may discover biomarkers that
more efficiently measure CSCs than our methods, which may give them a competitive advantage in developing potential products. Our competitors may also obtain marketing approval from the FDA or other
regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the
market.
Many
of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory
approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller
number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies complementary to, or necessary for, our programs.
Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations, third-party reimbursement practices or
healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. In the United
States, recently passed legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require
approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets,
prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a
particular country, but then 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 pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates
obtain marketing approval.
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Our ability to commercialize any products successfully also will depend in part on the extent to which reimbursement for these products and related treatments will be available
from government health 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 they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that
drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any
product that we commercialize and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain
marketing approval. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician.
If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.
There
may be significant delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory
authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for 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 be made permanent. Reimbursement
rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into
existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of
laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment
limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products
that we develop could have a material adverse effect on our operating results, our ability to raise capital 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 of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an
even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will
incur substantial 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;
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Risk factors
–>
loss
of revenue; and
–>
the
inability to commercialize any products that we may develop.
We
currently hold $3.0 million in product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage when
we begin clinical trials or the commercialization of our product candidates, if ever. Insurance coverage is increasingly expensive. We may not be able to 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 or penalties 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 governing laboratory procedures and the handling,
use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our
operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from
these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.
We also could incur significant costs associated with civil or criminal fines and penalties.
Although
we maintain workers' compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may
not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may 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 and safety laws and regulations. These current or future laws and regulations may impair our
research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES
We expect to depend on collaborations with third parties for the development and commercialization of our product candidates. If those collaborations are not successful, we
may not be able to capitalize on the market potential of these product candidates.
We may seek third-party collaborators for the development and commercialization of our product candidates. Our likely collaborators for any
collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any such
arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product
candidates. Our ability to generate revenues from these arrangements will depend on our collaborators' abilities to successfully perform the functions assigned to them in these arrangements.
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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 these collaborations;
–>
collaborators
may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization
programs based on clinical trial results, changes in the collaborator's strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing
priorities;
–>
collaborators
may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or
conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
–>
collaborators
could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the
collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
–>
a
collaborator with marketing and distribution rights to one or more products may not commit sufficient resources 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 proprietary information in such a way as to invite litigation that
could jeopardize or invalidate our proprietary information or 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 or arbitration that diverts management attention and resources; and
–>
collaborations
may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable
product candidates.
Collaboration
agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator of ours were to be involved
in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.
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 require substantial additional cash to fund
expenses. For some of our
product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.
We
face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for 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 of factors. Those factors may include the design
or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and
complexities 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
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Risk factors
challenge
to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or
technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. We may also be
restricted under existing license agreements from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to negotiate and
document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future
collaborators.
We
may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of such product candidate, reduce or
delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our
expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we
may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates
or bring them to market and generate product revenue.
We expect to rely on third parties to conduct our clinical trials and some aspects of our compound formulation research and preclinical testing, and those third parties may
not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.
We do not plan to independently conduct clinical trials of our product candidates. In addition, we do not expect to independently conduct all aspects
of our compound formulation research or preclinical testing of our product candidates. We expect to rely on third
parties, such as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to conduct our clinical trials. We currently rely and expect
to continue to rely on third parties to conduct some aspects of our compound formulation research and preclinical testing. For example, we currently rely on third parties in the development of various
formulations of VS-507. We cannot finish preclinical testing and initiate clinical trials of VS-507 until the development of a formulation is complete. Any of these third
parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product development activities.
Our
reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain
responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with
standards, commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate
and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a
government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties,
meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing
approvals
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Risk factors
for
our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.
We
also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or
marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.
We contract with third parties for the manufacture of our product candidates for preclinical testing and expect to continue to do so for clinical trials and for
commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which
could delay, prevent or impair our development or commercialization efforts.
We do not have any manufacturing facilities or personnel. We currently rely, and expect to continue to rely, on third-party manufacturers for the
manufacture of our product candidates for preclinical testing, other than small amounts of compounds that we may synthesize ourselves for such purpose. To date, we have obtained starting materials for
our supply of the cGMP bulk drug substance for our product candidates from one third-party manufacturer. We do not have a long term supply agreement with this third-party manufacturer, and we purchase
our required drug supply on a purchase order basis.
We
expect to rely on third-party manufacturers or third-party collaborators for the manufacture of our product candidates for clinical trials and for commercial supply of any of these product
candidates for which we or our collaborators obtain marketing approval. We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able
to establish agreements 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; and
–>
the
possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
Third-party
manufacturers may not be able to comply with current good manufacturing practices, or cGMP, regulations or similar regulatory requirements outside the United States. Our failure, or the
failure of our third-party manufacturers, 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 of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely
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 to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP
regulations and that might be capable of manufacturing for us.
Any
performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply
or a second source for bulk drug substance. If our current contract manufacturer cannot perform as agreed, we may be required to replace that manufacturer. Although we believe that there
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Risk factors
are
several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement.
Our
current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any
products that receive marketing approval on a timely and competitive basis.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
If we fail to comply with our obligations under our intellectual property licenses with third parties, we could lose license rights that are important to our business.
We are a party to a number of intellectual property license agreements with third parties, including the Whitehead Institute, and expect to enter
into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty,
insurance and other obligations on us. For example, under our license agreement with the Whitehead Institute, we are required to use commercially reasonable efforts to develop and commercialize
licensed products under the agreement and to satisfy other specified obligations. If we fail to comply with our obligations under these licenses, our licensors may have the right to terminate these
license agreements, in which event we might not be able to market any product that is covered by these agreements, or to convert the license
to a non-exclusive license, which could materially adversely affect the value of the product candidate being developed under the license agreement. Termination of these license agreements
or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms. If the Whitehead Institute were to terminate its license
agreement with us for any reason, we would lose access to the EMT technology and the ability to use the stable population of CSCs for high-throughput screening.
If we are unable to obtain and maintain patent protection for our technology and products, or if our licensors are unable to obtain and maintain patent protection for the
technology or products that we license from them, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products
similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
Our success depends in large part on our and our licensors' ability to obtain and maintain patent protection in the United States and other countries
with respect to our proprietary technology and products. We and our licensors seek to protect our proprietary position by filing patent applications in the United States and abroad related to our
novel technologies and products that are important to our business. To date, no patents have issued that cover any of our proprietary technology or product candidates, and we cannot be certain that
any patents will issue with claims that cover any of our proprietary technology or product candidates.
The
patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a
timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some
circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology or products that we license from
third parties and are reliant on our licensors. For example, we do not control the prosecution of the patent applications licensed to us under our agreement with the Whitehead Institute. Therefore, we
cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. If such licensors fail to maintain such patents,
or lose rights to those patents, the rights we have licensed may be reduced or eliminated.
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Risk factors
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex 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 and our licensors' pending
and future patent applications may not result in patents being issued which protect our technology or products or which effectively prevent others from commercializing competitive technologies and
products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the 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 in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore we cannot be
certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for
patent protection of such inventions.
Assuming
the other requirements for patentability are met, currently, in the United States, the first to make the claimed invention is entitled to the patent, while outside the United States, the
first to file a patent application is entitled to the patent. In March 2013, the United States will transition to a first inventor to file system in which, assuming the other requirements for
patentability are met, the first inventor to file a patent application will be entitled to the patent. We may be subject to a third party preissuance 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 of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties
to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party
patent rights.
Even
if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or
otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a
non-infringing manner. For example, although we expect to file patent applications with respect to our product candidate VS-507 with claims directed to its formulation and
method of use, patent protection is not available for composition of matter claims directed to its active pharmaceutical ingredient. Because VS-507 lacks composition of matter protection
for its active pharmaceutical ingredient, competitors will be able to offer and sell products with the same active pharmaceutical ingredient so long as these competitors do not infringe any other
patents that we may obtain covering this drug.
The
issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United
States
and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others
from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and 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 or shortly after such candidates are commercialized. As a result, our owned
and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
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Risk factors
We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be
expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the
technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation 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 of litigation. 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, the outcome 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
and use our proprietary technologies without infringing the proprietary rights of third parties. We have yet to conduct comprehensive freedom-to-operate searches to determine
whether certain of the patent rights licensed to us by the Whitehead Institute would infringe patents issued to third parties. We may become party to, or threatened with, future adversarial
proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference proceedings before the U.S. Patent and Trademark Office. Third
parties may assert
infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party's intellectual property rights, we could be required to
obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or
at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by
court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing
our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or 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 former employers.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or
potential competitors. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we
or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. Litigation may be necessary to defend
against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in
defending against such claims, litigation could result in substantial costs and be a distraction to management.
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Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant
expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other
interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such
litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any
future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to
sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent
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 be harmed.
In addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented know-how,
technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality
agreements with parties who have access to them, 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 assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and
disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing
or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that
technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
RISKS RELATED TO REGULATORY APPROVAL OF OUR PRODUCT CANDIDATES AND OTHER LEGAL COMPLIANCE MATTERS
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our
ability to generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,
safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the
United States and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not
received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain
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
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preclinical
and clinical data and supporting information to the FDA for each therapeutic indication to establish the product candidate's safety and efficacy. Securing FDA approval also requires the
submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA. Our product candidates may not be effective, may be only moderately
effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The
process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and
can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development
period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an
application. The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional
preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product
candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
If
we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate
revenues will be materially impaired.
Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.
In order to market and sell our products in the European Union and many other jurisdictions, we or our third-party collaborators must obtain separate
marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval
may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA
approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We or
these third parties may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities
in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the
FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.
Any product candidate for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to penalties if we fail to
comply with regulatory requirements or if we experience unanticipated 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, post-approval clinical data,
labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include
submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance
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and
corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is
granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure
drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers' communications
regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing.
In
addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing 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;
–>
refusal
to permit the import or export of our products;
–>
product
seizure; or
–>
injunctions
or the imposition of civil or criminal penalties.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations,
which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription 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 and regulations that may
constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable
federal and state healthcare laws and regulations, include the following:
–>
the
federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or
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Risk factors
recommendation
of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;
–>
the
federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or
qui tam
actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid,
decrease or conceal an obligation to pay money to the federal government;
–>
the
federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act,
imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding
the privacy, security and transmission of individually identifiable health information;
–>
the
federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement
in connection with the delivery of or payment for healthcare benefits, items or services;
–>
the
federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and medical supplies to report to the
Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests; and
–>
analogous
state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims
involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with
the pharmaceutical industry's voluntary compliance guidelines and the relevant
compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures.
Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental
authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations 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 or restructuring of our operations. If any of the
physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusions from government funded healthcare programs.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the
prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding
the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any
product candidates for which we obtain marketing approval.
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Risk factors
In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, changed the way Medicare covers and pays for
pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician
administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of
this legislation could decrease the coverage and price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private
payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization
Act may result in a similar reduction in payments from private payors.
More
recently, in March 2010, President Obama signed into law the Health Care Reform Law, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare
spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose
additional health policy reforms. Effective October 1, 2010, the Health Care Reform Law revises the definition of "average manufacturer price" for reporting purposes, which could increase the
amount of Medicaid drug rebates to states. Further, the new law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions
affecting compliance have also been enacted, which may affect our business practices with health care practitioners. We will not know the full effects of the Health Care Reform Law until applicable
federal and state agencies issue regulations or guidance under the new law. Although it is too early to determine the effect of the Health Care Reform Law, the new law appears likely to continue the
pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.
Legislative
and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure
whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of
our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA's approval process may significantly delay or prevent marketing approval, as well as subject us
to more stringent product labeling and post-marketing testing and other requirements.
RISKS RELATED TO EMPLOYEE MATTERS AND MANAGING GROWTH
Our 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 Christoph Westphal, our Chief Executive Officer, Robert Forrester, our Chief Operating Officer, and Jonathan Pachter, our
Vice President, Head of Research, as well as the other principal members of our management and scientific teams, including our scientific co-founders, Robert Weinberg, Eric Lander and
Piyush Gupta. Although we have formal employment agreements with Robert Forrester and Jonathan Pachter, these agreements do not prevent them from terminating their employment with us at any time. We
do not have an employment agreement with Christoph Westphal. We do not maintain "key person" insurance for any of our executives or other employees. The loss of the services of any of these persons
could impede the achievement of our research, development and commercialization objectives.
In
addition to his role as Chairman of the board of directors and Chief Executive Officer of our company, Dr. Westphal also serves as a general partner of Longwood Founders Fund, LP, a
venture
33
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Risk factors
capital
investment fund and one of our principal stockholders. We and Dr. Westphal anticipate that he will transition to an executive Chairman role at our company in the future based on our having
meaningfully advanced our discovery, research and development efforts, the overall growth of our company and our identifying and hiring a suitable successor. In connection with Dr. Westphal's
transition to this role, we will need to recruit and hire a new principal executive officer. Our inability to hire a suitable executive to assume this position in a timely fashion could delay the
execution of our business plans or disrupt our operations.
Recruiting
and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel
on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical
personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and
development and commercialization strategy. Our consultants and advisors, including our scientific co-founders, may be employed by employers other than us and may have commitments under
consulting or advisory contracts with other entities that may limit their availability to us.
We expect to expand our development, regulatory and future sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which
could disrupt our operations.
We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug
development, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand
our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with
such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead
to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
RISKS RELATED TO OUR COMMON STOCK AND THIS OFFERING
After this offering, our executive officers, directors and principal stockholders will maintain the ability to control all matters submitted to stockholders for approval.
Upon the closing of this offering, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock before
this offering will, in the aggregate, beneficially own shares representing approximately         % of our capital stock. As a result, if these stockholders were to choose to act together, they
would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control the
election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our
company on terms that other stockholders may desire.
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Risk factors
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may
prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a
merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions
could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board
of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by
making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
–>
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 meetings and nominations to our board of directors;
–>
require
that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our 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 to institute 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 to cast to amend or repeal certain provisions of our
charter or bylaws.
Moreover,
because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15%
of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting
stock, unless the merger or combination is approved in a prescribed manner.
If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.
The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock.
Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the
extent outstanding options are exercised, you will incur further dilution. Based on an assumed initial public offering price of $             per share, which is the midpoint of the
price range set
forth on the cover page of this prospectus, you will experience immediate dilution of $             per share, representing the difference between our pro forma net tangible book value
per
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Risk factors
share
after giving effect to this offering and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately         %
of the aggregate price paid by all purchasers of our stock but will own only approximately         % of our common stock outstanding after this offering.
An active trading market for our common stock may not develop.
Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be
determined through negotiations with the underwriters. Although we are applying to have our common stock listed on The NASDAQ Global Market, an active trading market for our shares may never develop
or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the
market price for the shares or at all.
If our stock price is volatile, purchasers of our common stock could incur substantial losses.
Our stock price is likely to be volatile. The stock market in general and the market for biopharmaceutical companies in particular have experienced
extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this
volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced 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 by securities 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.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not
improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could
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Risk factors
result
in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their
use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the
growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will
be your sole source of gain for the foreseeable future.
A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future, which could cause the market
price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the
market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have
outstanding             shares of
common stock based on the number of shares outstanding as of September 30, 2011. This includes the shares that we are selling in this offering, which may be resold in the public market
immediately without restriction, unless purchased by our affiliates. Of the remaining shares,             shares are currently restricted as a result of securities laws or lock-up
agreements but will be able to be sold after the offering as described in the "Shares eligible for future sale" section of this prospectus. Moreover, after this offering, holders of an aggregate of
             shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in
registration
statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these
shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Underwriting"
section of this prospectus.
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Special note regarding forward-looking statements
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than
statements of historical facts, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects,
plans and objectives of management, are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential,"
"will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying
words.
The
forward-looking statements in this prospectus include, among other things, statements about:
–>
our
ongoing and planned discovery and development of drugs targeting cancer stem cells;
–>
our
expectations regarding the role of cancer stem cells in tumor recurrence and metastasis;
–>
the
potential advantages of our EMT technology;
–>
our
ability to acquire or in-license any compounds or product candidates from third parties that we identify using our proprietary technology or
otherwise;
–>
our
plans to develop and commercialize our product candidates and companion diagnostics;
–>
our
ability to establish and maintain collaborations;
–>
the
timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
–>
the
rate and degree of market acceptance and clinical utility of our products;
–>
our
intellectual property position;
–>
our
expectations regarding the use of proceeds from this offering; and
–>
our
estimates regarding expenses, future revenues, capital requirements and needs for additional financing.
We
may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results
or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements
included in this prospectus, particularly in the "Risk factors" section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our
forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
You
should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with
the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this prospectus are made as of the date of this
prospectus,
and we do not assume any obligation to update any forward-looking statements except as required by applicable law.
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Use of proceeds
We estimate that the net proceeds from our issuance and sale of                      shares of our common stock in this
offering will be
approximately $              million, assuming an initial public offering price of
$                  per share, which is the midpoint of the price range listed on the cover page of this
prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in
full, we estimate that the net proceeds from this offering will be approximately $              million.
A
$1.00 increase (decrease) in the assumed initial public offering price of $                      per share would increase (decrease) the net
proceeds from this offering by approximately
$              million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated
underwriting
discounts and commissions.
We
currently estimate that we will use the net proceeds from this offering as follows:
–>
approximately
$             to complete preclinical and Phase 1 clinical development of VS-507;
–>
approximately
$             for preclinical studies of our other proprietary product candidates and companion diagnostics;
–>
approximately
$             for discovery, research and preclinical studies of additional compounds; and
–>
the
balance, if any, to fund working capital, capital expenditures and other general corporate purposes, which may include the acquisition or in-license
of additional compounds, product candidates or technology.
This
expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary
significantly depending on numerous factors, including the progress of our development efforts, the status of and results from clinical trials, as well as any collaborations that we may enter into
with third parties for our product candidates, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We
have no current understandings, agreements or commitments for any material acquisitions or licenses of any compounds, product candidates or technology.
Based
on our planned use of the net proceeds from this offering, we expect that such funds, together with our existing cash and cash equivalents, will be sufficient to enable us to complete
preclinical and Phase 1 clinical development of VS-507 and, subject to successfully completing Phase 1 clinical development, initiate Phase 2 clinical development of VS-507.
However, it is possible that we will not achieve the progress that we expect because the actual costs and timing of research and development are difficult to predict, subject to substantial risks and
delays and often vary depending on the particular indication and development strategy. We do not expect that the net proceeds from this offering and our existing cash and cash equivalents will be
sufficient to enable us to fund the completion of development of any of our product candidates.
Pending
our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade,
interest bearing instruments and U.S. government securities.
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Dividend policy
We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any,
to finance the growth and development of our business. We do not intend to pay cash dividends to holders of our common stock in the foreseeable future.
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Capitalization
The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2011:
–>
on
an actual basis;
–>
on
a pro forma basis to give effect to:
–>
our
issuance and sale in November 2011 of an aggregate of 8,934,493 shares of our series C preferred stock at a price per share of $2.25 for an aggregate
purchase price of $20.1 million; and
–>
the
automatic conversion of all outstanding shares of our preferred stock, including shares of our series C preferred stock that we issued and sold in
November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering.
–>
on
a pro forma as adjusted basis to give further effect to our issuance and sale of             shares of our common stock in this offering at an assumed initial
public offering price of $             per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts
and
commissions and estimated offering expenses payable by us.
Our
capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read
this table
together with "Selected financial data," our financial statements and the related notes appearing at the end of this prospectus and the "Management's discussion and analysis of financial condition and
results of operations" section of this prospectus.
As of September 30, 2011
Actual
Pro forma
Pro forma as
adjusted
(in thousands, except per share data)
Cash and cash equivalents
$
41,421
$
61,524
Series A redeemable convertible preferred stock, $0.0001 par value, 16,000 shares authorized, issued and outstanding, actual; and no shares authorized,
 issued and outstanding, pro forma and pro forma as adjusted
15,935
—
Series B redeemable convertible preferred stock, $0.0001 par value, 16,025 shares authorized, issued and outstanding, actual; and no shares authorized,
 issued and outstanding, pro forma and pro forma as adjusted
31,943
—
Series C redeemable convertible preferred stock, $0.0001 par value, no shares authorized, issued and outstanding, actual, pro forma and pro forma as
adjusted
—
—
Common stock, $0.0001 par value, 45,000 shares authorized and 4,986 shares issued and outstanding
(1)
, actual; and 52,961 shares authorized
and 51,436 shares issued and outstanding, pro forma;          shares authorized and          shares issued and outstanding, pro forma as
adjusted
1
5
Additional paid-in capital
822
68,799
Deficit accumulated during the development stage
(8,462
)
(8,462
)
Total stockholders' (deficit) equity
(7,639
)
60,342
Total capitalization
$
40,239
$
60,342
(1)
Common stock issued and outstanding does not include 5,490 shares of unvested restricted stock.
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Capitalization
A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, which is the midpoint of the price range listed on the
cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders' equity (deficit) and total capitalization on a
pro forma as adjusted basis by approximately $              million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains
the same and
after deducting estimated underwriting discounts and commissions.
The
table above does not include:
–>
1,418,000
shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2011 at a weighted-average exercise price of
$0.21 per share;
–>
105,348
additional shares of our common stock available for future issuance as of September 30, 2011 under our 2010 equity incentive plan; and
–>
additional
shares of our common stock available for future issuance, as of the closing of this offering, under our 2012 stock incentive plan.
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Dilution
If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the
difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering.
Our
historical net tangible book value as of September 30, 2011 was $(7.7) million, or $(0.73) per share of our common stock. Historical net tangible book value per share represents the
amount of our total tangible assets less total liabilities, divided by the number of shares of our common stock outstanding.
Our
pro forma net tangible book value as of September 30, 2011 was $60.3 million, or $1.18 per share of our common stock. Pro forma net tangible book value per share represents the
amount of our total tangible assets less our total liabilities, divided by the pro forma number of shares of our common stock outstanding after giving effect to our issuance and sale in November 2011
of an aggregate of 8,934,493 shares of our series C preferred stock at a price per share of $2.25 for an aggregate purchase price of $20.1 million and the automatic conversion of all
outstanding shares of our preferred stock, including shares of our series C preferred stock that we issued and sold in November 2011, into an aggregate of 40,959,493 shares of our common stock
upon the closing of this offering.
After
giving effect to our issuance and sale of             shares of our common stock in this offering at an assumed initial public offering price of
$             per share, which is the
midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma
net tangible book value as of September 30, 2011 would have been $              million, or $             per
share. This represents an immediate increase in pro forma net tangible
book value per share of $             to existing stockholders and immediate dilution of $             in pro forma net
tangible book value per share to new investors purchasing common stock in
this offering.
Dilution
per share to new investors is determined by subtracting pro forma net tangible book value per share after this offering from the initial public offering price per share paid by new investors.
The following table illustrates this dilution on a per share basis.
Assumed initial public offering price per share
$
Historical net tangible book value per share as of September 30, 2011
$
(0.73
)
Increase attributable to the conversion of outstanding preferred stock
1.91
Pro forma net tangible book value per share as of September 30, 2011
1.18
Increase in net tangible book value per share attributable to new investors
Pro forma net tangible book value per share after this offering
Dilution per share to new investors
$
A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, which is the midpoint of the price range listed on the
cover page of this prospectus, would increase (decrease) our pro forma net tangible book value by approximately $             , our pro forma net tangible book value per share by
approximately
$             and dilution per share to new investors by approximately
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Dilution
$             ,
assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and
commissions.
If
the underwriters exercise their over-allotment option or if any additional shares are issued in connection with outstanding options, you will experience further dilution.
The
following table summarizes, on a pro forma basis as of September 30, 2011, the total number of shares purchased from us, the total consideration paid, or to be paid, and the average price
per share paid, or to be paid, by existing stockholders and by new investors in this offering at an assumed initial public offering price of $             per share, which is the
midpoint of the
price range listed on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new
investors purchasing shares in this offering will pay an average price per share substantially higher than our existing stockholders paid.
Shares purchased
Total consideration
Average price
per share
Number
Percentage
Amount
Percentage
Existing stockholders
%
$
%
$
New investors
Total
100
%
$
100
%
A $1.00 increase (decrease) in the assumed initial public offering price of $             per share, which is the midpoint of the price range listed on the
cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $              million and increase (decrease) the percentage of total
consideration
paid by new investors by approximately             %, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.
The
table above is based on actual shares of our common stock outstanding as of September 30, 2011 and 40,959,493 additional shares of our common stock issuable upon the automatic conversion of
all outstanding shares of our preferred stock, including shares of our series C preferred stock that we issued and sold in November 2011, upon the closing of this offering.
The
table above excludes:
–>
1,418,000
shares of our common stock issuable upon the exercise of stock options outstanding as of September 30, 2011 at a weighted-average exercise price of
$0.21 per share;
–>
105,348
additional shares of our common stock available for future issuance as of September 30, 2011 under our 2010 equity incentive plan; and
–>
additional
 shares of our common stock available for future issuance, as of the closing of this offering, under our 2012 stock incentive plan.
If
the underwriters exercise their over-allotment option in full, the following will occur:
–>
the
percentage of shares of our common stock held by existing stockholders will decrease to approximately             % of the total number of shares of our
common stock outstanding after this offering; and
–>
the
number of shares of our common stock held by new investors will increase to             , or approximately             %
of the total number of shares of
our common stock outstanding after this offering.
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Selected financial data
You should read the following selected financial data together with our financial statements and the related notes appearing at the
end of this prospectus and the "Management's discussion and analysis of financial condition and results of operations" section of this prospectus. We have derived the statements of operations data for
the period from August 4, 2010 (inception) to December 31, 2010 and the balance sheet data as of December 31, 2010 from our audited financial statements included in this
prospectus. We have derived the statements of operations data for the nine months ended September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011 and
the balance sheet data as of September 30, 2011 from our unaudited financial statements included in this prospectus. The unaudited financial data include, in the opinion of our management, all
adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Our historical results
for any prior period are not necessarily indicative of results to be expected in any future period, and our results for any interim period are not necessarily indicative of results to be expected for
a full fiscal year.
Statement of operations data:
Period from
August 4, 2010
(inception) to
December 31, 2010
Nine months ended
September 30, 2011
Period from
August 4, 2010
(inception) to
September 30, 2011
(in thousands, except per share data)
Operating expenses:
Research and development
$
400
$
5,483
$
5,883
General and administrative
384
2,195
2,579
Total operating expenses
784
7,678
8,462
Operating loss
(784
)
(7,678
)
(8,462
)
Net loss
$
(784
)
$
(7,678
)
$
(8,462
)
Accretion of preferred stock
(2
)
(18
)
(20
)
Net loss applicable to common stockholders
$
(786
)
$
(7,696
)
$
(8,482
)
Net loss per share applicable to common stockholders—basic and diluted
$
(0.26
)
$
(1.79
)
$
(2.20
)
Weighted-average number of common shares used in net loss per share applicable to common stockholders—basic and diluted
2,976
4,291
3,841
Pro forma net loss per share applicable to common stockholders—basic and diluted
$
(0.17
)
$
(0.38
)
Weighted-average number of common shares used in pro forma net loss per share applicable to common stockholders—basic and diluted
4,638
20,474
Pro forma basic and diluted net loss per common share is calculated assuming the automatic conversion of all outstanding shares of our preferred stock,
including shares of our series C preferred
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Selected financial data
stock
that we issued and sold in November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering.
The
pro forma balance sheet data set forth below gives effect to:
–>
our
issuance and sale in November 2011 of an aggregate of 8,934,493 shares of our series C preferred stock at a price per share of $2.25 for an aggregate
purchase price of $20.1 million; and
–>
the
automatic conversion of all outstanding shares of our preferred stock, including shares of our series C preferred stock that we issued and sold in
November 2011, into an aggregate of 40,959,493 shares of our common stock upon the closing of this offering.
The
pro forma as adjusted balance sheet data set forth below give further effect to our issuance and sale
of                           shares of our common stock in this offering at an assumed initial public
offering price of $             per share, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and
commissions and
estimated offering expenses payable by us.
As of September 30, 2011
Balance sheet data:
Actual
Pro forma
Pro forma
as adjusted
(in thousands)
Cash and cash equivalents
$
41,421
$
61,524
Working capital
39,419
59,522
Total assets
42,364
62,467
Redeemable convertible preferred stock
47,878
—
Deficit accumulated during the development stage
(8,462
)
(8,462
)
Total stockholders' (deficit) equity
(7,639
)
60,342
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Management's discussion and analysis of financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of operations
together with our financial statements and related notes appearing at the end of this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this
prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should
read the "Risk factors" section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
OVERVIEW
We are a biopharmaceutical company focused on discovering and developing proprietary small molecule drugs targeting cancer stem cells in breast and
other cancers along with proprietary companion diagnostics. A cancer stem cell is a particularly aggressive type of tumor cell, resistant to conventional cancer therapy, that we believe is an
underlying cause of tumor recurrence and metastasis. Our scientific co-founders, Robert Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., have made discoveries that link the
epithelial-to-mesenchymal transition, or EMT, to the emergence of cancer stem cells. This transition involves the transformation of one type of cancer cell into a more
aggressive and drug resistant type of cancer cell. Building on these discoveries, our scientific co-founders developed proprietary technology to create a stable population of cancer stem
cells that we use to screen for and identify small molecule compounds that target cancer stem cells. We expect to file an investigational new drug application, or IND, with the U.S. Food and Drug
Administration, or FDA, in late 2012 to initiate a Phase 1 clinical trial of our most advanced drug candidate, VS-507.
We
commenced active operations in the second half of 2010. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, acquiring and developing
our technology, identifying potential product candidates and undertaking preclinical studies of our most advanced product candidates. To date, we have not generated any revenues and have financed our
operations with net proceeds from the private placement of our preferred stock.
As
of September 30, 2011, we had a deficit accumulated during the development stage of $8.5 million. Our net loss was $7.7 million for the nine months ended September 30,
2011, $784,000 for the period from August 4, 2010 (inception) to December 31, 2010 and $8.5 million for the period from August 4, 2010 (inception) to September 30,
2011. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as
we continue the research and development and later initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our
product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, upon the closing of this offering, we
expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.
Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or
eliminate our research and development programs or any future commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so.
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Management's discussion and analysis of financial condition and results of operations
FINANCIAL OPERATIONS OVERVIEW
Revenue
To date, we have not generated any revenues. Our ability to generate product revenues, which we do not expect will occur for many years, if ever,
will depend heavily on the successful development and eventual commercialization of our product candidates.
Research and development expenses
Research and development expenses consist of costs associated with our research activities, including our drug discovery efforts, and the development
of our therapeutic product candidates and companion diagnostics. 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 as contract research organizations, or CROs, manufacturing
organizations and consultants, including our scientific advisory board;
–>
license
fees; and
–>
facilities,
depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold
improvements and equipment, and laboratory and other supplies.
We
expense research and development cost to operations as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities
as expenses when the service has been performed or when the goods have been received, rather than when the payment is made.
We
use our employee and infrastructure resources across multiple research and development projects. We do not allocate employee-related expenses or depreciation to any particular project. Because all
of our development projects are in preclinical development, we do not track research and development costs by project. The components of our research and development costs are described in more detail
in "—Results of operations." We expect to track specific project costs when product candidates enter toxicology studies to enable the filing of an IND with the FDA.
We
anticipate that our research and development expenses will increase significantly in future periods as we increase the scope and rate of our drug discovery efforts and begin costlier development
activities, including clinical trials for our current and additional product candidates in the future.
Our
most advanced product candidate is the small molecule VS-507. We are currently evaluating VS-507 in preclinical studies as a potential therapy for breast cancer. We expect
to initiate IND-enabling toxicology studies for VS-507 in late 2011. Assuming successful completion of preclinical studies, including IND-enabling toxicology
studies, we expect to file an IND with the FDA in late 2012 to initiate a Phase 1 clinical trial of VS-507.
The
successful development of our product candidates is highly uncertain. As this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be
necessary to complete development of our product candidates or the period, if any, in which material net cash
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Management's discussion and analysis of financial condition and results of operations
inflows
from our product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
–>
the
scope, rate of progress and expense of our drug discovery efforts and other research and development activities;
–>
the
potential benefits of our product candidates over other therapies;
–>
our
ability to market, commercialize and achieve market acceptance for any of our product candidates that we are developing or may develop in the future;
–>
clinical
trial results;
–>
the
terms and timing of regulatory approvals; and
–>
the
expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights.
A
change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that
product candidate. For example, if the FDA or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of
clinical development of a product candidate or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and
time on the completion of clinical development.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation expense, in our
executive, finance and business development functions. Other general and administrative expenses include allocated facility costs and professional fees for legal, patent, investor and public
relations, consulting and accounting services.
We
anticipate that our general and administrative expenses will increase in future periods to support increases in our research and development activities and as a result of increased headcount,
expanded infrastructure, increased legal, compliance, accounting and investor and public relations expenses associated with being a public company and increased insurance premiums, among other
factors.
Interest income
Prior to September 30, 2011, our cash and cash equivalents were invested in non-interest-bearing accounts. As a result, we have
not earned any interest through September 30, 2011. We expect interest income to increase in future periods as we invest the proceeds from our series B and series C preferred
stock financings.
Accretion of preferred stock
Our preferred stock is redeemable beginning in 2016 at its original issue price plus any declared but unpaid dividends upon a specified vote of the
preferred stockholders. Accretion of preferred stock reflects the periodic accretion of issuance costs on our preferred stock to its redemption value.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have
prepared in accordance with U.S. generally accepted
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Management's discussion and analysis of financial condition and results of operations
accounting
principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure
of contingent assets 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 base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Our
significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this prospectus. However, we believe that the following accounting
policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.
Accrued research and development expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing
quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not
yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make
estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our
estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include fees paid to CROs in connection with research
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 pursuant to quotes and contracts with CROs that conduct research and development on our behalf. The
financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will
exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed
and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid
accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual
status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period.
Stock-based compensation
As we continue to expand our headcount, we expect to make additional stock option and restricted stock grants, which will result in additional
stock-based compensation expense. Accordingly, we describe below the methodology we have employed to date in measuring such expenses. Following the consummation of this offering, stock option values
will be determined based on the market price of our common stock.
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Management's discussion and analysis of financial condition and results of operations
Since
our inception in August 2010, we have applied the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718,
Compensation-Stock Compensation
,
which we refer to as ASC 718. Determining the amount of stock-based compensation to be recorded requires us to develop
estimates of the fair value of stock options as of their grant date. Stock-based compensation expense is recognized ratably over the requisite service period, which in most cases is the vesting period
of the award. Calculating the fair value of stock-based awards requires that we make highly subjective assumptions. We use the Black-Scholes option pricing model to value our stock option awards. Use
of this valuation methodology requires that we make assumptions as to the volatility of our common stock, the expected term of our stock options, the risk free interest rate for a period that
approximates the expected term of our stock options and our expected dividend yield. Because we are a privately-held company with a limited operating history, we utilize data from a
representative group of companies to estimate expected stock price volatility. We selected companies from the biopharmaceutical industry with similar characteristics to us, including early stage of
product development and therapeutic focus. We use the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107,
Share-Based Payment
, to calculate
the expected term of stock option grants to employees as we do not have sufficient historical exercise data to provide
a reasonable basis upon which to estimate the expected term of stock options granted to employees. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have
no current intention to pay cash dividends. The risk-free interest rate used for each grant is based on the U.S. Treasury yield curve in effect at the time of grant for instruments with a
similar expected life.
Stock-based
compensation expense associated with stock options granted to employees was insignificant for the period August 4, 2010 (inception) to December 31, 2010, and totaled $7,000
for the nine months ended September 30, 2011. As of September 30, 2011, we had $169,000 of total unrecognized compensation expense, net of related forfeiture estimates, which we expect
to recognize over a weighted-average remaining vesting period of approximately 3.8 years. While our stock-based compensation for stock options granted to employees to date has not been material
to our financial results, we expect the impact to grow in future periods due to the potential increases in the value of our common stock and headcount.
Under
ASC 718, we are required to estimate the level of forfeitures expected to occur and record compensation expense only for those awards that we ultimately expect will vest. Due to the lack of
historical forfeiture activity of our plan, we estimated our forfeiture rate based on data from a representative group of companies with similar characteristics to us. Through September 30,
2011, forfeitures have not been material.
The
following table sets forth information with respect to stock options granted to employees since August 4, 2010 (inception).
Number of shares
underlying options
granted
Exercise price per
share
Common stock fair
value per share on
grant date
December 3, 2010
235,000
$
0.08
$
0.08
March 3, 2011
75,000
$
0.08
$
0.08
June 8, 2011
280,000
$
0.08
$
0.08
September 6, 2011
403,000
$
0.55
$
0.55
September 20, 2011
20,000
$
0.55
$
0.55
We have granted stock options at exercise prices not less than the estimated fair market value of our common stock. As there was no public market for our common
stock, our board of directors
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Management's discussion and analysis of financial condition and results of operations
determined
the estimated fair value of our common stock, taking into consideration various objective and subjective factors, including:
–>
external
market conditions affecting the biopharmaceutical industry;
–>
prices
at which we sold shares of preferred stock to third-party investors;
–>
the
superior rights and preferences of securities senior to our common stock at the time of each grant;
–>
our
historical operating and financial performance;
–>
the
status of our research and development efforts;
–>
the
likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or sale of our company; and
–>
estimates
and analysis provided by management and contemporaneous valuations.
For
the period from November 30, 2010 through June 30, 2011, our board of directors determined the fair value of our common stock to be $0.08 per share. Because of the minimal value of
non-cash assets owned during this period, including the early stage of our research and development efforts under our licensed rights, the superior preferences associated with our
series A preferred stock in relation to our common stock and our focus on start-up activities, we attributed a nominal fair value to our common stock during this time.
We
performed contemporaneous valuations of our common stock as of November 30, 2010, July 31, 2011 and September 30, 2011 in accordance with the framework of the 2004 American
Institute of Certified Public Accountants Technical Practice Aid,
Valuation of Privately-Held-Company Equity Securities Issued as
Compensation
, or the Practice Aid. Based on the valuation methodology selection criteria set forth in the Practice Aid, with a focus on the early stage of our development as a
company, including the early stage status of our development efforts, very limited operations and the fact that we had an incomplete management team, as of November 30, 2010, we determined that
an asset-based approach was the most appropriate method to use to determine the enterprise value of our company. We then allocated the enterprise value using the current value method. We concluded
that this was the most appropriate method since we did not have any projections as of the valuation date due to the early stage of our research and development. As such, an income approach would not
have provided a reliable fair value determination. In addition, as a result of the lack of comparative information available for publicly-traded or privately-held start-up enterprises, and
because any investments in shares of stock are unlikely to be a reliable indicator of fair value at such an early stage, we concluded that the market approach would also not provide a reliable fair
value determination as of this date. The results of this valuation methodology were consistent with our expectations, as we would not have expected any significant value to have been created for the
common stockholders. We concluded that there were no significant transactions affecting our capital structure or significant developments in our research and development which would have indicated
that an update to our valuation was required at dates until after June 30, 2011.
In
July 2011, we completed our series B preferred stock financing for total net proceeds of $31.9 million and hired our Vice President, Head of Research. Based on the significance of
these transactions, we deemed it appropriate to update the valuation of our common stock as of July 31, 2011. For the period from July 31, 2011 to September 20, 2011, our board of
directors determined the fair value of our common stock to be $0.55 per share. We performed a contemporaneous valuation of our common stock as of July 31, 2011 in accordance with the framework
of the Practice Aid. Based on the valuation methodology selection criteria set forth in the Practice Aid and the stage of our
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development
as a company as of July 31, 2011, we determined that the option pricing method was the most appropriate valuation methodology to estimate the fair value of our common stock. Key
variables in the option pricing method were as follows:
–>
Underlying
equity value—To estimate the value of our total equity, including both common and preferred equity, we utilized the marketable equity value
based on the most recent round of preferred stock financing, our series B preferred stock financing with a price
of $2.00 per share, which we believed to be the most indicative of our value. This valuation technique used to estimate the enterprise value of our company is referred to as the reverse
backsolve method.
–>
Volatility—We
estimated volatility based on guideline publicly-traded companies over a 2.0-year period.
–>
Time
to liquidity—We estimated time to a liquidity event based on the projected time to significant clinical development events for our product
candidates that we believed could lead to an IPO or sale. The estimated time to a liquidity event of 2.0 years assumed a weighted average timeline of either an IPO or sale. The IPO timeline was
1.0 year and the sale timeline was 2.25 years. The probability of an IPO was 25% and the probability of a sale was 75%.
–>
Risk-free
interest rate—We determined the risk-free interest rate based on the yield of a U.S. Treasury bill with a maturity date
closest to the estimated time to a liquidity event for our stockholders.
–>
Discounts
for lack of marketability—Because we are a privately-held company, shares of our common stock are highly illiquid and, as such,
warrant a discount in value from their estimated "marketable" price. We estimated the discount factor of 30% for illiquidity using legal guidelines from U.S. Tax Court cases regarding
privately-held business valuations, fundamental business factors and empirical studies on the discount for lack of marketability. We corroborated the discount factor based on the value of
a put option compared to the value of common stock using a Black-Scholes option pricing model. We also considered that our preferred stock has rights that our common stock does not have, including
anti-dilution protection, redemption rights, protective provisions in our certificate of incorporation and rights to participate in future rounds of financing. Our preferred stockholders
have control and influence over the enterprise, which provides them with the optionality over future liquidity, financing and other decisions that the common stock optionholders do not control.
For
our valuation as of July 31, 2011, we assumed a weighted-average two-year time to a liquidity event based on a probability-weighted analysis of the time to a liquidity event under an IPO
scenario and several sale scenarios. Our estimates were supported by our belief that we would have multiple product candidates in clinical trials in mid-2013. At that time, we believed
that an IPO or other liquidity event could occur in anticipation of the availability of those data.
We
updated the valuation of our common stock again on September 30, 2011, which resulted in a fair value of $1.52 per share. As of September 30, 2011, we concluded that a liquidity event
was possible
within six months due to the fact that we had selected investment bankers and initiated the initial process of preparing to file a registration statement for an IPO. We also believed that a
sale was equally likely to occur after the availability of the clinical data from our initial clinical trial, which was still expected within two years of the valuation date. We calculated valuations
using both liquidity event assumptions and equally weighted the results to estimate the fair value of our common stock. We believed that an equal weight applied to both scenarios was appropriate based
upon our assessment of the probability of each scenario occurring, acknowledging market risks and other factors that might impact our ability to complete an IPO.
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In the IPO scenario, we assumed all of our preferred shares would convert into common stock and the present value of the future projected enterprise value was based on the
value of the anticipated series C preferred stock financing at $2.25 per share, which was contemplated as of the valuation date. There was no discount for lack of marketability applied to the
IPO scenario. The estimated time to complete an IPO was six months.
For
the sale scenario, we utilized the option pricing method and key assumptions were as follows:
–>
Underlying
equity value—To estimate the value of our total equity, including both common and preferred equity, we utilized the marketable equity value
based on the anticipated closing of the series C preferred stock financing, which we believed to be the most indicative of our value. This financing closed in November 2011 and was led by
previously unrelated investors.
–>
Volatility—We
estimated volatility based on guideline publicly-traded companies over a 2.25-year period.
–>
Time
to liquidity—We estimated a weighted-average time to a sale event of 2.25 years based on the projected time to significant clinical
development events for our product candidates.
–>
Risk-free
interest rate—We determined the risk-free interest rate based on the yield of a U.S. Treasury bill with a maturity date
closest to the estimated time to a sale event for our stockholders.
–>
Discounts
for lack of marketability—Because we are a privately-held company, shares of our common stock are highly illiquid and, as such,
warrant a discount in value from their estimated "marketable" price. We estimated the discount factor of 15% for illiquidity using legal guidelines from U.S. Tax Court cases regarding
privately-held business valuations, fundamental business factors, and empirical studies on the discount for lack of marketability. We corroborated the discount factor based on the value of
a put option compared to the value of common stock using a Black-Scholes option pricing model.
The
primary reason for the lower fair value per share of our common stock in comparison to the fair value per share of our preferred stock on each valuation date was the value of the superior rights
and preferences associated with the preferred stock, the most significant of which are the liquidation rights held by the preferred stockholders.
There
are significant judgments and estimates inherent in the determination of these valuations. These judgments and estimates include assumptions regarding our future performance, including the
successful completion of our preclinical studies and clinical trials and the time to completing an IPO or sale, as well as the determination of the appropriate valuation methods at each valuation
date. If we had made different assumptions, our stock-based compensation expense could have been different. The foregoing valuation methodologies are not the only methodologies available and they will
not be used to value our common stock once this offering is complete. Accordingly, investors are cautioned not to place undue reliance on the foregoing valuation methodologies as an indicator of our
future stock price.
RESULTS OF OPERATIONS
We were incorporated on August 4, 2010. As a result, our results of operations reflect the period from August 4, 2010 (inception) to
December 31, 2010 and the nine month period ended September 30, 2011. There is no comparable period for 2010.
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Discussion of the nine month period ended September 30, 2011
Research and development expenses.
Research and development expenses were $5.5 million for the nine month period ended September 30, 2011. Expenses
during the period included:
–>
Contract
research organization expenses of $2.2 million, representing 40% of total research and development expenses during the period, comprised of expenses
for outsourced biology, chemistry and development services.
–>
Consulting
fees of $898,000, representing 16% of total research and development expenses during the period, including $352,000 for our scientific advisory board,
$232,000 for recruitment consultants and $106,000 for database consultants.
–>
Payroll
expense of $820,000, representing 15% of total research and development expenses during the period, including salaries, payroll taxes and benefits for our
employees in research and development. We had 11 employees in research and development at September 30, 2011. Payroll expense also included stock-based compensation expense for employees
of $19,000.
–>
Laboratory
supply expense of $687,000, representing 13% of total research and development expenses during the period.
–>
Non-employee
stock-based compensation expense of $417,000, representing 8% of total research and development expenses during the period, related to stock
options and restricted stock awarded to members of our scientific advisory board.
–>
Occupancy
expense of $327,000, representing 6% of total research and development expenses during the period, which is an allocated portion of rent and other
occupancy costs.
General and administrative expenses.
General and administrative expenses were $2.2 million for the nine month period ended September 30, 2011.
Expenses during the period included:
–>
Payroll
expense of $908,000, representing 42% of total general and administrative expenses during the period, including salaries, payroll taxes and benefits for our
general and administrative employees. Payroll expense included stock-based compensation expense for employees of $3,000.
–>
Consulting
fees of $365,000, representing 17% of total general and administrative expenses during the period, including business development, public relations and
finance consultants.
–>
Professional
fee expense of $302,000, representing 14% of total general and administrative expenses during the period, comprised of fees for audit, tax and legal
services, including the reimbursement to the Whitehead Institute of patent costs related to our licenses with the Whitehead Institute.
–>
Non-employee
stock-based compensation expense of $302,000, representing 14% of total general and administrative expenses during the period, related to
restricted stock awarded to our co-founders.
–>
Occupancy
expense of $164,000, representing 7% of total general and administrative expenses during the period, which is an allocated portion of rent and other
occupancy costs.
–>
Travel
expense of $135,000, representing 6% of total general and administrative expenses during the period, including travel, meals, entertainment and conferences.
Accretion of preferred stock.
We recorded $18,000 of accretion in the nine month period ended September 30, 2011 reflecting the periodic accretion of
issuance costs associated with our series A and series B preferred stock.
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Management's discussion and analysis of financial condition and results of operations
Discussion of the period from August 4, 2010 (inception) to December 31, 2010
Research and development expenses.
Research and development expenses were $400,000 for the period from August 4, 2010 (inception) to December 31,
2010. Expenses during the period included:
–>
License
fee expense of $182,000, representing 46% of total research and development expenses during the period, comprised of fees for our exclusive and
non-exclusive licenses, as well as the fair value of common stock that we issued to the Whitehead Institute in connection with our exclusive license.
–>
Consulting
fees of $137,000, representing 34% of total research and development expenses during the period, primarily for our scientific advisory board.
–>
Contract
research organization expenses of $42,000, representing 11% of total research and development expenses during the period, including expenses for outsourced
biology and chemistry.
–>
Non-employee
stock-based compensation expense of $24,000, representing 6% of total research and development expenses during the period, related to stock
options and restricted stock awarded to members of our scientific advisory board.
–>
Laboratory
supply expense of $13,000, representing 3% of total research and development expenses during the period.
General and administrative expenses.
General and administrative expenses were $384,000 for the period from August 4, 2010 (inception) to December 31,
2010. Expenses during the period included:
–>
Professional
fee expense of $182,000, representing 47% of total general and administrative expenses during the period, comprised of fees for audit, tax and legal
services, including the reimbursement to the Whitehead Institute of patent costs related to our exclusive license with the Whitehead Institute.
–>
Payroll
expense of $96,000, representing 25% of total general and administrative expenses during the period, including salaries, payroll taxes and benefits for our
general and administrative employees. Stock-based compensation expense was not material to the financial statements.
–>
Occupancy
expense of $36,000, representing 9% of total general and administrative expenses during the period, which is an allocated portion of rent and other
occupancy costs.
–>
Non-employee
stock-based compensation expense of $28,000, representing 7% of total general and administrative expenses during the period, related to
restricted stock awarded to our co-founders.
–>
Consulting
fees of $26,000, representing 7% of total general and administrative expenses during the period, including business development, public relations and
information technology consultants.
–>
Travel
expense of $16,000, representing 4% of total general and administrative expenses during the period, including travel, meals, entertainment and conferences.
Accretion of preferred stock.
We recorded $2,000 of accretion in the period from August 4, 2010 (inception) to December 31, 2010 reflecting the periodic
accretion of issuance costs associated with our series A and series B preferred stock.
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LIQUIDITY AND CAPITAL RESOURCES
Sources of liquidity
To date, we have not generated any revenues. We have financed our operations to date through private placements of our preferred stock. As of
September 30, 2011, we had received $47.9 million in net proceeds from the issuance of preferred stock. As of September 30, 2011, we had cash and cash equivalents totaling
$41.4 million. In November 2011, we received proceeds of $20.1 million from the issuance of our series C preferred stock. We primarily invest our cash and cash equivalents in a
U.S. Treasury money market fund.
Cash flows
The following table sets forth the primary sources and uses of cash for each of the periods set forth below.
(in thousands)
Period from
August 4, 2010
(inception) to
December 31, 2010
Nine months ended
September 30, 2011
Net cash used in operating activities
$
(330
)
$
(5,298
)
Net cash used in investing activities
(8
)
(840
)
Net cash provided by financing activities
3,922
43,975
Net increase in cash and cash equivalents
$
3,584
$
37,837
Operating activities.
The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and favorable changes in the
components of working capital. The significant increase in cash used in operating activities for the nine month period ended September 30, 2011 compared to the period from August 4, 2010
(inception) to December 31, 2010 is due to an increase in research and development expenses as we increased our research and development headcount, increased spending on external research and
development costs and increases in the balance of accounts payable, accrued expenses and deferred rent. In addition, we commenced operations in August 2010 and, as such, the period ended
December 31, 2010 reflects only five months of activity. We expect cash used in operating activities to continue to increase for the foreseeable future as we fund our increased research and
development activities.
Investing activities.
The cash used in investing activities for all periods reflects the purchases of property and equipment. The majority of such purchases in the
nine month period ended September 30, 2011 were for laboratory equipment. In addition, during the nine month period ended September 30, 2011, investing activities included an $86,000
increase in restricted cash related to a standby letter of credit issued as a security deposit for our facility lease.
Financing activities.
The cash provided by financing activities in the nine month period ended September 30, 2011 is the result of the sale and issuance of
12,000,000 shares of our series A preferred stock for net proceeds of $12.0 million, the sale and issuance of 16,025,000 shares of our series B preferred stock for net proceeds of
$31.9 million and $38,000 of net proceeds from the sale of restricted stock to employees. The cash provided by financing activities in the period from August 4, 2010 (inception) to
December 31, 2010 is primarily the result of the sale and issuance of 4,000,000 shares of our series A preferred stock for net proceeds of $3.9 million.
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Management's discussion and analysis of financial condition and results of operations
Funding requirements
All of our product candidates are still in preclinical development. We expect to continue to incur significant expenses and increasing operating
losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:
–>
continue
our research and preclinical development of our product candidates;
–>
seek
to identify additional product candidates that target cancer stem cells;
–>
acquire
or in-license other products and technologies;
–>
initiate
clinical trials for our product candidates;
–>
seek
marketing approvals for our product candidates that successfully complete clinical trials;
–>
ultimately
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
–>
maintain,
expand and protect our intellectual property portfolio;
–>
hire
additional clinical, quality control and scientific personnel; and
–>
add
operational, financial and management information systems and personnel, including personnel to support our product development and planned future
commercialization efforts.
We
expect that the net proceeds from this offering, together with our existing cash and cash equivalents, including the $20.1 million in proceeds from the issuance and sale of our
series C preferred stock in November 2011, will enable us to fund our operating expenses and capital expenditure requirements for at
least                           . We have based this estimate on
assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the
development and commercialization of our product candidates, and the extent to which we may enter into collaborations with third parties for development and commercialization of our product
candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates. Our future capital
requirements will depend on many factors, including:
–>
the
scope, progress, results and costs of compound discovery, preclinical development, laboratory testing and clinical trials for our product candidates;
–>
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;
–>
the
costs of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we
receive marketing approval;
–>
revenue,
if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;
–>
the
costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual
property-related claims; and
–>
our
ability to establish collaborations on favorable terms, if at all.
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Until
such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic
alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional 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 our
technologies, future revenue streams, research
programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required
to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and
market ourselves.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes our contractual obligations at September 30, 2011.
(in thousands)
Total
Remainder
of 2011
2012-2013
2014-2015
Beyond
2015
Operating lease obligations
$
1,104
$
86
$
710
$
308
—
License agreements
(1)
—
—
—
—
—
(1)
As discussed in Note 10 to the financial statements appearing at the end of this prospectus, we have executed several agreements to license intellectual property. The license
agreements require us to pay upfront license fees and ongoing annual license maintenance fees, totaling a minimum of $95,000 per year beginning in 2012 up to a maximum amount of $170,000 per
year beginning in 2015, as well as reimburse certain patent costs previously incurred by the licensors. We have not included maintenance fees beyond the remainder of 2011 in the table above since the
minimum annual payments are perpetual and the agreements are cancelable by us at any time upon 90 days' prior written notice to the licensor. Amounts for 2011 were paid prior to September 30,
2011.
Under our exclusive license agreement with the Whitehead Institute, we also have agreed to make milestone payments to the Whitehead Institute upon achieving
various development, regulatory and commercialization milestones. For each licensed product, we agreed to make milestone payments of up to an aggregate of $1,560,000 plus an additional amount for each
subsequent approval of additional indications for a maximum number of licensed products. For each identified product that is not a licensed product, we agreed to make milestone payments of up to an
aggregate of $815,000 plus an additional amount for each subsequent approval of additional indications for a maximum number of identified products. Each type of specified milestone payment is payable
only for each of the maximum number of licensed products and the maximum number of identified products, as the case may be, to achieve the applicable milestone. In addition, a separate milestone
payment is due upon the first commercial sale of each licensed product or identified product that is a diagnostic or prognostic test. A single additional milestone payment is due for the first
issuance of licensed patent rights in the United States, the United Kingdom, France, Germany, Spain or Italy. In addition, we have agreed to pay the Whitehead Institute royalties as a
percentage of net sales of licensed products. The royalty rate is in the low single digits as a percentage of net sales for licensed products that are therapeutics, the mid single digits for licensed
products that are diagnostics or prognostics and less than one percent for identified products.
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OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under
Securities and Exchange Commission rules.
TAX LOSS CARRYFORWARDS
As of December 31, 2010, we had federal net operating loss carryforwards of $570,000 and state net operating loss carryforwards of $578,000,
which are available to reduce future taxable income. We also had federal tax credits of $15,000 and state tax credits of $5,000, which may be used to offset future tax liabilities. The net operating
loss and tax credit carryforwards will expire at various dates through 2030. Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue
Service and state tax authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a
three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax
attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of our company immediately prior to
the ownership change. Subsequent ownership changes may further affect the limitation in future years. At December 31, 2010, we recorded a 100% valuation allowance against our net operating loss
and tax credit carryforwards of approximately $320,000, as we believe it is more likely than not that the tax benefits will not be fully realized. In the future, if we determine that a portion or all
of the tax benefits associated with our tax carryforwards will be realized, net income would increase in the period of determination.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to market risk related to changes in interest rates. We had cash and cash equivalents of $3.6 million as of December 31,
2010 and $41.4 million as of September 30, 2011, consisting of cash and money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes
in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available for sale securities are subject to interest rate risk and will
fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change
in interest rates would not have a material effect on the fair market value of our portfolio.
We
contract with CROs and contract manufacturers globally. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactions denominated in currencies other
than the functional currency are recorded based on exchange rates at the time such transactions arise. As of September 30, 2011, approximately $36,000 of our total liabilities were denominated
in currencies other than the functional currency. As of December 31, 2010, all of our liabilities were denominated in our functional currency.
RECENTLY ADOPTED ACCOUNTING STANDARDS
We have not recently adopted any new accounting standards. There are no recently issued accounting standards that have a material impact on us.
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OVERVIEW
We are a biopharmaceutical company focused on discovering and developing proprietary small molecule drugs targeting cancer stem cells in breast and
other cancers along with proprietary companion diagnostics. A cancer stem cell is a particularly aggressive type of tumor cell, resistant to conventional cancer therapy, that we believe is an
underlying cause of tumor recurrence and metastasis. Our scientific co-founders, Robert Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., have made discoveries that link the
epithelial-to-mesenchymal transition, or EMT, to the emergence of cancer stem cells. This transition involves the transformation of one type of cancer cell into a more
aggressive and drug resistant type of cancer cell. Building on these discoveries, our scientific co-founders developed proprietary technology to create a stable population of cancer stem
cells that we use to screen for and identify small molecule compounds that target cancer stem cells. We expect to file an investigational new drug application, or IND, with the U.S. Food and Drug
Administration, or FDA, in late 2012 to initiate a Phase 1 clinical trial of our most advanced drug candidate, VS-507.
Cancer
is a group of diseases characterized by uncontrolled growth and spread of abnormal cells. The American Cancer Society estimates that in the United States in 2011, approximately
1.6 million new cases of cancer will be diagnosed and nearly 600,000 people will die from the disease. Current treatments for cancer include surgery, radiation therapy, chemotherapy, hormone
therapy and targeted therapy. According to estimates by the National Institutes of Health, in the United States in 2010, the direct medical costs of cancer of all types exceeded $100 billion.
IMS Health estimates that in the United States in 2010, approximately $22 billion was spent on drugs to treat cancer, representing the largest class of drug spending in the United States.
Despite years of intensive research and clinical use, current treatments often fail to cure cancer.
We
believe that a key reason for the ultimate failure of many current therapies to achieve a durable clinical response may be the presence of cancer stem cells, or CSCs, which are also sometimes
referred to as tumor-initiating cancer cells, within tumors. CSCs have been identified in many types of cancer,
including breast, pancreatic, colon, brain, lung and leukemia. Following many cancer treatments, the tumor can remain with a high percentage of CSCs and become more aggressive and resistant to further
treatment. In addition, patients who relapse often develop metastatic disease in which the cancer spreads to other sites in the body. Tumor metastasis to critical organs is the cause of more than 90%
of cancer deaths. We believe that it is the drug resistance and ability of CSCs to spread to other sites in the body that may be the root causes of these failed therapies. Accordingly, our mission is
to develop drugs targeting CSCs that either in combination with other cancer treatments or alone can kill all of the cells comprising a tumor and, thus, create a durable clinical response.
We
license our EMT technology from the Whitehead Institute for Biomedical Research, an affiliate of the Massachusetts Institute of Technology, or MIT. We also have a first right to negotiate a license
for additional related intellectual property from the Broad Institute, an affiliate of MIT and Harvard University. Using our proprietary technology, we can create a stable population of CSCs in the
laboratory for use in rapid and automated assays, referred to as high-throughput screening, to enable discovery of novel drugs targeting these CSCs. We are using our discovery approach to
identify a pipeline of small molecule compounds with the potential to target CSCs.
Our
most advanced product candidate is the small molecule VS-507. We are currently evaluating VS-507 in preclinical studies as a potential therapy for breast cancer. We believe
that VS-507 may be especially beneficial as a therapeutic in aggressive cancers with a high percentage of CSCs, such as triple negative breast cancer, or TNBC. TNBC is a type of breast
cancer in which a high percentage of CSCs have been identified and that has a poorer prognosis and lower overall survival rate than other
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types
of breast cancer. Using our EMT technology, our scientific co-founders identified VS-507 as a drug candidate for killing breast CSCs. Their research on
VS-507, which included an analysis of the effect of VS-507 on cell lines derived from TNBC, was published in the peer reviewed scientific journal
Cell
in 2009. Recently published third-party research
has reported that VS-507's activity may be mediated through the blockade of the
Wnt/beta-catenin cell signaling pathway, a network of proteins that Dr. Weinberg described in 2011 in
Cell
as critical for the
development and maintenance of CSCs. In mouse models of breast cancer, VS-507 treatment decreased biophysical or biochemical markers, referred to as biomarkers, of CSCs. In contrast,
treatment in the same model with a standard chemotherapeutic agent, paclitaxel, increased biomarkers of CSCs.
An
important element of our business strategy is the development and use of proprietary, companion diagnostics in connection with the development of our therapeutic drug candidates. We plan to use
these diagnostics as part of a personalized medicine approach to identify patients with aggressive cancers that have a high percentage of CSCs, which is the group that we believe will benefit most
from our therapies. We also believe that these diagnostics may be used to monitor patients' progress on therapy and aid physicians' ongoing treatment decisions.
OUR MANAGEMENT TEAM AND SCIENTIFIC CO-FOUNDERS AND ADVISORS
Our experienced management team includes our Chief Executive Officer, Chairman and co-founder Christoph Westphal, M.D., Ph.D., our Chief
Operating Officer, Robert Forrester, and our Vice President, Head of Research, Jonathan Pachter, Ph.D. Dr. Westphal has been involved in founding a number of biotechnology companies as chief
executive officer, including Sirtris Pharmaceuticals, Inc., which was acquired by GlaxoSmithKline plc in 2008, as well as Alnylam Pharmaceuticals, Inc. and Momenta
Pharmaceuticals, Inc. Dr. Westphal also co-founded Alnara Pharmaceuticals, Inc., which was acquired by Eli Lilly and Co. in 2010. Mr. Forrester has been
the chief executive officer, chief operating officer and chief financial officer of both private and public life science companies, including Forma Therapeutics, Inc., CombinatoRx, Inc.,
now Zalicus Inc., and Coley Pharmaceutical Group, Inc., which was acquired by Pfizer Inc. in 2007. Dr. Pachter has over 20 years of experience in leading the
discovery of small molecule and monoclonal antibody therapeutics for the treatment of cancer, most recently as the Senior Director of Cancer Biology at OSI Pharmaceuticals Inc., which was
acquired by Astellas Pharma Inc. in 2010.
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 the genetic basis of cancer. Dr. Weinberg discovered the first tumor oncogene, the first tumor suppressor gene, the role of a protein related to the cell
surface receptor HER2 in preclinical studies and the mechanisms underlying the formation of CSCs. Eric Lander, Ph.D., Founding Director of the Broad Institute, Professor of Biology at MIT and
Professor of Systems Biology at Harvard Medical School, played a central role in the Human Genome Project. Piyush Gupta, Ph.D., Member of the Whitehead Institute and Assistant Professor of Biology at
MIT, co-developed with Dr. Lander and Dr. Weinberg our proprietary EMT technology for use in the identification of drugs targeting CSCs and a genetic expression signature,
useful as a biomarker, to monitor the effect of treatment.
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Our
management team is supported by our scientific advisory board comprised of leading academic and industry scientists. Our scientific advisory board consists of:
Scientific advisory board
Robert Weinberg, Ph.D.
Scientific co-founder
Founding Member of the Whitehead Institute for Biomedical Research, Professor of Biology at the Massachusetts Institute of Technology and recipient of the 1997 National Medal of Science
Eric Lander, Ph.D.
Scientific co-founder
Founding Director of the Broad Institute, Professor of Biology at the Massachusetts Institute of Technology and Professor of Systems Biology at Harvard Medical School
Piyush Gupta, Ph.D.
Scientific co-founder
Member of the Whitehead Institute for Biomedical Research and Assistant Professor of Biology at the Massachusetts Institute of Technology
Julian Adams, Ph.D.
President of Research and Development of Infinity Pharmaceuticals, Inc., former Senior Vice President of Drug Discovery and Development of Millennium Pharmaceuticals, Inc. and co-inventor and co-developer of
Velcade
José Baselga, M.D., Ph.D.
Chief of Hematology and Oncology at Massachusetts General Hospital, Associate Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School
George Daley, M.D., Ph.D.
Professor of Hematology and Oncology and Director of the Stem Cell Transplantation Program at Children's Hospital and Professor of Biological Chemistry and Molecular Pharmacology at Harvard Medical School
Peter Elliott, Ph.D.
Former Senior Vice President and Head of Research and Development of Sirtris Pharmaceuticals, Inc., former Vice President of Phamacology and Drug Development of Millennium Pharmaceuticals, Inc. and
co-developer of Velcade
Daniel Haber, M.D., Ph.D.
Director of the Massachusetts General Hospital Cancer Center and Professor of Medicine at Harvard Medical School
Joseph (Yossi) Schlessinger, Ph.D.
Chairman and Professor in the Department of Pharmacology at Yale School of Medicine
Phillip A. Sharp, Ph.D.
Institute Professor at the David H. Koch Institute for Integrative Cancer Research at the Massachusetts Institute of Technology and recipient of the 1993 Nobel Prize in Medicine and Physiology
Roger Tung, Ph.D.
President and Chief Executive Officer of Concert Pharmaceuticals, Inc., former Vice President of Drug Discovery of Vertex Pharmaceuticals, Inc. and co-inventor of Lexiva and Agenerase
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Scientific advisory board
Christopher Walsh, Ph.D.
Hamilton Kuhn Professor in the Department of Biological Chemistry and Molecular Pharmacology at Harvard Medical School
Eric Winer, M.D.
Director of the Breast Oncology Center at the Dana Farber Cancer Institute and Professor of Medicine at Harvard Medical School
THE PROBLEM
The cancer death rate in the United States has only decreased modestly since the early 1990s. Cancer remains one of the world's most serious health
problems and is the second most common cause of death in the United States after heart disease. The American Cancer Society estimates that in the United States in 2011, approximately
1.6 million new cases of cancer will be diagnosed and nearly 600,000 people will die from the disease. According to estimates by the National Institutes of Health, in the United States in 2010,
the direct medical cost of cancer of all types exceeded $100 billion and the cancer type responsible for the highest individual disease costs was breast cancer at $16.5 billion. The
following table sets forth the U.S. annual incidence, based on 2011 estimates from the American Cancer Society, and the prevalence, or the number of people in the United States who have been
previously diagnosed with cancer, based on 2010 estimates from the National Cancer Institute, for select cancers in which CSCs have been implicated.
Cancer type
U.S. annual incidence
U.S. prevalence
Breast
230,480
2,645,621
Lung and bronchus
221,130
373,489
Colorectal
141,210
1,110,077
Leukemia
44,600
253,350
Pancreatic
44,030
34,657
Brain and other nervous system cancers
22,340
128,193
For tumors that have not yet metastasized and remain localized to the site of original tumor formation, current treatments for cancer can be effective in
initially reducing tumor burden. However, for many forms of cancer, current treatments lack sufficient efficacy to achieve a durable clinical response. Following initial treatment, the tumor may recur
at the same site or metastasize and spread to other sites in the body. The vast majority of patients who succumb to cancer are killed by tumors that have metastasized. This is illustrated by the
information in the following table, which shows, according to the National Cancer Institute's
SEER Cancer Statistics Review, 2001-2007
, the
reduction in five-year survival rate for breast cancer patients based on the stage of the disease at the
time at which the disease is diagnosed. The percentage of patients diagnosed at each stage of disease, referred to as stage distribution, is included below for comparative purposes.
Breast cancer stage at diagnosis
Stage distribution
(1)
Five-year relative
survival rate
Localized (confined to primary site)
60
%
98.6
%
Regional (spread to regional lymph nodes)
33
%
83.8
%
Distant (cancer has metastasized)
5
%
23.4
%
(1)
2% of breast cancer cases were designated as unknown stage.
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With the application of new technologies and key discoveries, we believe that we are now entering an era of cancer research characterized by a more
sophisticated understanding of the biology of cancer. We believe that the discovery of CSCs and the role that they play in cancer development are important new insights that present the opportunity to
develop more effective treatments.
Epithelial-to-mesenchymal transition
In most solid tumors, the cells that make up the tissue mass have a characteristic epithelial appearance. Epithelial cells generally have a
multi-sided, uniform shape. Epithelial cells also have well-defined contact points with neighboring cells and a strong attachment to the underlying connective tissue that creates a
framework for solid tumors in the body. Epithelial cells generally lack the ability to separate from these connection points to move, invade or metastasize into surrounding tissue or other sites in
the body.
Epithelial
cells can undergo a transformation to a different cell type, called mesenchymal cells, through a process called epithelial-to-mesenchymal transition, or EMT. In
contrast with epithelial cells, mesenchymal cells have an elongated spindle shape, lack orderly contacts with neighboring cells and can survive without contact with a surface or connective tissue. The
EMT process is a series of reprogramming events that normally operates during the development of tissues and organs prior to birth. However, the EMT process also can be appropriated by epithelial
cancer cells that are referred to as carcinoma cells. When epithelial carcinoma cells residing in a solid tumor undergo the EMT process, the resulting mesenchymal cancer cells have the capability to
invade through local barriers and metastasize to other sites in the body.
Another
consequence of epithelial carcinoma cells undergoing the EMT process is that the resulting mesenchymal cancer cells have significantly increased resistance to current cancer treatments.
Retrospective analyses of data from two Phase 3 clinical trials in lung cancer, one published in
Clinical Cancer Research
in 2005 and the other
presented at the 2009 World Conference on Lung Cancer, revealed that patients with high expression of epithelial biomarkers responded better to the anti-cancer drug Tarceva in terms of
both progression-free survival and overall survival than patients in the same two trials with low levels of epithelial biomarkers in their tumors. These results suggest that the
mesenchymal cancer cell population, which lacks epithelial biomarkers, is resistant to these therapies. These clinical observations are consistent with preclinical studies published in
Cancer Research
in 2005 reporting that lung cancer cells expressing mesenchymal biomarkers appeared to be resistant to Tarceva and other targeted
anti-cancer agents when transplanted into mice.
Cancer stem cells
We believe that CSCs, which are sometimes referred to as tumor-initiating cancer cells, are responsible for the initiation, metastasis and recurrence
of many cancers. CSCs have the ability to:
–>
move
freely and proliferate without attachment to other cells or surfaces;
–>
initiate
a tumor;
–>
self-renew;
–>
produce
other cancer cell types; and
–>
resist
many current cancer treatments.
CSCs
are often characterized by a distinctive set of biomarkers, which we believe may be a key to identifying patients with tumors that are likely to respond to therapies targeting CSCs.
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CSCs
may be more resistant to current cancer treatments than other types of cancer cells. Thus, as illustrated in the figure below, while current treatments may succeed at initially decreasing tumor
burden, they may leave behind a population of CSCs that can regenerate tumors. Therefore, the presence of a mixture of CSCs and other types of cancer cells within a tumor may necessitate a therapeutic
approach combining drugs that can kill both cell populations.
The
need to target CSCs may apply across the treatment of a broad range of cancers. CSCs have been isolated and characterized from many types of cancer, including breast, pancreatic, colon, brain,
lung and leukemia. The CSCs isolated from each of these tumor types have been found to confer greater tumor-forming capability when transplanted into mice than other types of cancer cells from the
same tumor.
Several
specific signaling pathways have been implicated in CSC biology. The combined action
in vitro
of the TGF-beta and Wnt signaling
pathways in the formation of CSCs was described by Dr. Weinberg in
Cell
in 2011. Separately, Focal Adhesion Kinase, a protein which is involved
in cell adhesion and motility, has been found to increase the metastatic capability of breast cancer cells following the EMT process.
CSCs
from breast cancer have been characterized in several studies. For example, in a study conducted at the Baylor College of Medicine, breast cancer biopsies were taken from patients at the time of
initial diagnosis and again following 12 weeks of treatment with docetaxel, a standard cancer chemotherapy widely used to treat breast cancer. The biopsies taken after 12 weeks of
treatment showed increased expression of biomarkers for CSCs and an increased number of chemoresistant cells as compared to biopsies taken at the time of initial diagnosis. This result indicates that
the CSC component of the tumor was relatively resistant to the chemotherapy. Moreover, it supports our belief that either a
combination of treatments or a single therapy that can effectively target both CSCs and other types of cancer cells is critical to create a durable clinical response.
OUR SOLUTION
Our solution is to discover and develop a next generation of oncology therapeutics targeting cancer stem cells along with companion diagnostics. We
believe that by developing therapeutics that target CSCs we can address the problem of cancer recurrence and metastasis and create a durable clinical response.
Our
scientific co-founders at the Whitehead Institute and the Broad Institute made discoveries linking the activation of the EMT process in epithelial cancer cells to the emergence of
CSCs. Their studies demonstrated that the EMT process can be activated
in vitro
by forcing a higher level of expression of genes that direct the EMT
process or by eliminating key epithelial proteins. The mesenchymal cancer cells that emerge from this induced EMT process have the hallmarks of CSCs, including tumor-forming
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ability
and increased resistance to chemotherapeutic drugs. Our solution utilizes proprietary technology based on the discovery linking the EMT process to the emergence of CSCs. We use this technology
along with high-throughput screening methods to identify drugs targeting CSCs and develop companion diagnostics. To achieve a durable clinical response, we believe that it may be necessary
to kill both CSCs and other types of cancer cells in a tumor, as illustrated in the figure below, either with a combination of current cancer treatments and CSC-targeted drugs or a single
therapeutic found to target both cancer cell populations.
Our proprietary technology
A persistent problem in the discovery of drugs targeting CSCs is the difficulty of isolating large numbers of CSCs. Without such large numbers, the
discovery of drugs targeting CSCs using high-throughput screening is extremely difficult. Moreover, when CSCs are isolated, they typically do not remain stable in culture. Instead, over a
short period of time, CSCs convert into other types of cancer cells. To address this problem, our scientific co-founders developed proprietary technology based on the EMT process to create
a stable population of CSCs that are suitable for use in high-throughput screening of small molecule compounds. These stable CSCs are similar to natural CSCs in that they are drug
resistant and capable of forming new tumors.
We
license our EMT technology from the Whitehead Institute. Through September 30, 2011, we and scientists at the Whitehead Institute and the Broad Institute had used our technology and
high-throughput screening methods to evaluate the ability of over 300,000 compounds to kill CSCs. We hold exclusive license rights to compounds and uses identified under our agreement with the
Whitehead Institute and a right of first negotiation to compounds identified under our agreement with the Broad Institute.
To
identify compounds that are selective for CSCs, we grow cancer non-stem cells in the laboratory and then induce the EMT process to create a stable population of CSCs. As illustrated in
the figure below, we then screen compounds to assess their ability to kill the CSCs. Because these CSCs are stable in culture, the screening process can be conducted using high-throughput
technology on a large number and wide variety of small molecule compound libraries. These compound libraries include new chemical entities, or NCEs, approved drugs and compounds that are in
preclinical and clinical development. We then profile the compounds that are identified as selective for CSCs using additional assays to identify suitable clinical candidates.
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Biomarkers and diagnostics
Because of the high level of toxicity of traditional chemotherapies and the variability in response of tumors to these treatments, it is critically
important to get the right cancer drug to the right patient. As a result, the oncology field has been at the forefront of developing diagnostics to select patients who may benefit from specific
therapies, which is sometimes referred to as personalized medicine. We plan to build on the methods incorporated in our EMT technology to develop diagnostics designed to enhance our ability to deliver
the right drug to the right patient.
In
particular, we are identifying specific protein and gene biomarkers that are either present or conspicuously absent in CSCs. We are also developing panels of multiple biomarkers, which we believe
may be more effective at identifying CSCs than individual biomarkers alone. We believe that our diagnostics will enable us to identify patients with aggressive cancers that have a high percentage of
CSCs. We further believe that these patients are the most likely to benefit from our drug candidates. By screening to identify these patients, we expect to be able to select appropriate patients for
enrollment in our clinical trials and ultimately, if we obtain marketing approval, patients who are likely to respond to our therapies. We also plan to use these diagnostics to measure the selective
killing of CSCs by our drug candidates as one of the ways of determining their efficacy.
We
expect that our use of proprietary diagnostics may accelerate the clinical development process for our drug candidates by enabling smaller, targeted trials. We believe that use of these diagnostics
may provide early, objective signals of drug activity to guide us to optimal dosing and the sequencing of agents more quickly. We also believe that this approach may ultimately enable physicians to
identify patients who are likely to benefit most from these therapies and make better clinical decisions during therapy.
We
are working on companion diagnostics for our therapeutic programs based on both in-licensed and internally developed technology and science. We believe that augmenting our internal
capabilities with external collaborations with experienced third parties can reduce development risk and accelerate our progress in this field.
OUR STRATEGY
We believe that a key reason for the failure of many current cancer treatments is that they fail to kill CSCs, which we believe are responsible for
the initiation, metastasis and recurrence of many cancers. Our goal is to build a leading biopharmaceutical company focused on
the discovery, development and, ultimately, commercialization of novel drugs and companion diagnostics targeting CSCs. Key elements of our strategy to achieve this goal are:
–>
Continue to screen and identify small molecules that target CSCs.
We plan to use our proprietary EMT technology and
high-throughput screening methods to identify additional compounds that target CSCs. We also plan to further optimize these agents through medicinal chemistry as necessary to create drug
candidates.
–>
In-license rights to additional compounds to expand our pipeline of candidates that target CSCs.
We plan
to pursue the acquisition or in-license from third parties of rights to additional compounds that target CSCs, including compounds that are in preclinical and clinical development. We
believe that our approach of identifying drug candidates from external sources at various stages of development to supplement our internal programs may allow us to initiate clinical development of a
diverse pipeline of compounds more quickly than if we were to focus solely on internally developed NCEs.
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–>
Rapidly advance our drug candidates into clinical development.
We expect to file an IND with the FDA in late 2012 to
initiate a Phase 1 clinical trial of our most advanced drug candidate, VS-507. Our goal is to initiate clinical development of a number of additional therapeutic candidates over the
next several years.
–>
Develop diagnostics for therapeutic products targeting CSCs.
We plan to develop companion diagnostic products to
support our therapeutic product candidates. We believe that use of these diagnostics may aid in the selection of patients for enrollment in our clinical trials and, if we obtain marketing approval,
patients who are most likely to benefit from therapy with our drugs. We also believe that these diagnostics may be used to monitor patients' progress on therapy and aid physicians' ongoing treatment
decisions.
–>
Collaborate selectively to augment and accelerate development and commercialization.
We may seek third-party
collaborators for the development and commercialization of our product candidates. In particular, we may enter into third-party arrangements for target oncology indications in which our potential
collaborator has particular expertise or for which we need access to additional research, development or commercialization resources.
–>
Maintain scientific leadership in the CSC field.
We plan to continue to conduct research in the field of EMT and CSCs
to further our understanding of the underlying biology of cancer progression and metastasis. We also plan to continue fostering relationships with top scientific advisors, researchers and physicians.
We believe that investing in the recruitment of exceptional advisors, employees and management is critical to leadership in the CSC field.
OUR PRODUCT CANDIDATES
Using our proprietary technology and high-throughput screening methods, we are evaluating compounds for their activity in CSCs in a way
that we believe has not been previously possible. We are focused on the discovery and development of small molecules to expedite the path to human clinical trials and to allow flexibility in the
design of molecules for optimized efficacy and safety regardless of the route of administration.
VS-507
Overview
Our most advanced product candidate is the small molecule VS-507. We are currently evaluating VS-507 in preclinical studies
as a potential therapy for breast cancer. Because we believe that VS-507 may be especially beneficial as a therapeutic in triple negative breast cancer, or TNBC, we are pursuing TNBC as
our first clinical indication. We believe that VS-507 targets the CSCs that have been implicated in aggressive cancer, metastases and chemotherapeutic resistance. Our scientific
co-founders identified VS-507 using the proprietary technology that we license from the Whitehead Institute and published the results in the peer reviewed scientific journal
Cell
in 2009. We hold an
exclusive license from the Whitehead Institute for use of VS-507 in treating cancer. We expect to file an IND with
the FDA in late 2012 to initiate a Phase 1 clinical trial of VS-507.
We
believe VS-507 targets CSCs by disrupting signaling inside these cells. A group of scientific researchers recently reported in the
Proceedings of the National
Academy of Sciences of the United States of America
, or
PNAS
, that VS-507's activity may be mediated through the
blockade of the Wnt/beta-catenin cell signaling pathway. Numerous research reports, including a 2011 paper published in
Cell
by our
scientific co-founder Robert Weinberg, describe a critical role of the Wnt/beta-catenin signaling pathway in the development and maintenance of CSCs.
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Wnts
are a family of proteins that bind to receptor proteins, called Frizzled receptors, on the tumor cell surface. We believe that blocking Wnt function could dramatically impair survival and growth
of CSCs. However, Wnt signaling is extremely complex, involving 19 different Wnt proteins stimulating through 10 different Frizzled receptors. While it may be possible to develop a small molecule or
antibody that can block binding of one or perhaps a few Wnts to their receptors, such a drug likely would not effectively eliminate CSCs because other Wnt and Frizzled proteins that remain unblocked
would be sufficient to maintain CSC function.
A
potential breakthrough solution to this problem has come through the identification of the LRP6 protein, which interacts with multiple Wnt proteins and appears to be necessary for the development
and maintenance of CSCs. LRP6 may represent a single common point of the Wnt system that can be targeted to kill CSCs. In the
PNAS
study referenced
above, VS-507 decreased the levels of LRP6 protein
in vitro
and blocked the ability of Wnt proteins to stimulate beta-catenin, a
signaling protein that regulates genes responsible for CSC function. We believe this disruption of the Wnt/beta-catenin signaling pathway is responsible for the inhibitory effects of
VS-507 on CSCs that we have observed in preclinical studies.
Breast cancer
The National Cancer Institute estimated that in January 2008 there were approximately 2.6 million women in the United States with a history of
breast cancer. Breast cancer is currently the second most frequently diagnosed and the second most deadly cancer among women in the United States. The American Cancer Society estimates that in the
United States in 2011, approximately 230,500 new cases of invasive breast cancer will be diagnosed in women and approximately 39,500 women will die from the disease.
Breast
cancers can be segregated into subtypes based upon the positive presence of three protein receptors:
–>
estrogen
receptor, or ER;
–>
progesterone
receptor, or PR; and
–>
human
epidermal growth factor receptor 2, or HER2.
TNBC
is a type of breast cancer that does not express any of these three receptors. According to results from a population-based study of the California Cancer Registry published by the American
Cancer Society in 2007, approximately 15% of all breast cancers were classified as TNBC. In comparison with other breast cancers, TNBC tends to grow faster and has a higher rate of metastases.
Furthermore, TNBC tends to recur more often than other subtypes of breast cancer. Patients with TNBC generally have a poorer prognosis and lower overall survival rate than patients with breast cancers
that are positive for the hormone receptors ER and PR.
We
believe that the natural disease progression of TNBC exhibits the key hallmarks of CSCs. Specifically, we believe that:
–>
TNBC
is initially responsive to chemotherapy because chemotherapy kills the majority of cancer cells, but not the CSCs.
–>
TNBC
returns more often than other types of breast cancer in part because there are CSCs that are not killed by current cancer treatments.
–>
The
site of recurrence is often at another place in the body than the original tumor because the CSCs not killed are able to metastasize.
–>
The
recurring tumor may be resistant to therapy because it contains a high percentage of CSCs.
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We believe that VS-507 may be especially beneficial as a therapeutic for the treatment of TNBC, in particular for the subset of TNBC patients whose tumors are
classified as claudin-low. Claudin-low TNBC patients have tumors containing a low level of protein biomarkers called claudins. Claudin-low tumors are highly
aggressive, are resistant to treatment and have a high percentage of CSCs relative to other breast cancer types. The prognosis for patients with claudin-low TNBC is poor.
Current treatment of breast cancer
Surgery, radiation therapy, targeted therapy, hormone therapy and combinations of conventional chemotherapy are often used to treat breast cancer.
However, these therapies carry significant side effects and frequently do not result in a durable clinical response, especially for patients with TNBC.
The
choice of cancer drugs used to treat breast cancer is guided by clinical classification of the tumor as ER positive or negative, PR positive or negative and HER2 positive or negative. The
presence, absence or combination of these biomarkers in patient tumors informs the selection of prescribed drugs, which include the anti-estrogen therapies Tamoxifen and aromatase
inhibitors, as well as agents that directly target HER2, such as Herceptin and Tykerb. These treatments may slow or stop cancer growth and are currently considered the most successful treatments for
breast cancer. However, because TNBC patients are negative for ER, PR and HER2, the treatment options for these patients are limited. In particular, the targeted therapies, including Herceptin, Tykerb
and anti-estrogen treatments, are not effective for these patients.
Combinations
of conventional chemotherapy work 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, they kill cancer cells because cancer cells generally grow more rapidly than normal cells and, as a result, are relatively more affected by the chemotherapy than
normal cells. Because CSCs exhibit mechanisms of resistance, including a slower rate of growth than other cancer cells, they are often not susceptible to conventional chemotherapy. As a result, the
treatments may succeed at initially decreasing tumor burden but ultimately fail to kill the CSCs. For example, in a study conducted at Baylor College of Medicine, in which biopsies were taken from
breast cancer patients both before and after conventional chemotherapy treatment, the percentage of CSCs increased over the 12-week treatment period, indicating the survival of these
cells.
If
tumors recur, which happens more often in TNBC than other breast cancers, further therapy with conventional chemotherapy is generally palliative, not curative, as the CSCs are able to metastasize
and spread to other sites in the body.
Preclinical development
We are conducting a comprehensive preclinical program to study VS-507 as a potential treatment for breast cancer. Key results of this
program to date, based on experiments conducted by our scientific co-founders, are summarized below.
Laboratory studies.
The effect of VS-507 on CSCs as compared to other cancer cells was evaluated
in
vitro
. We believe that a biomarker useful for identifying breast CSCs is the expression ratio of the cell surface proteins CD44 to CD24, which can be measured for each
individual cell using a method known as flow cytometry. Using this method, the amount of each protein is measured on the cell surface and the number of CSCs in a cell culture is determined by
quantifying cell populations based on their expression of CD44 and CD24. As originally reported in
PNAS
in 2003, breast CSCs express high levels of CD44
and low levels of CD24 relative to other types of breast cancer cells. This differential expression is represented in the figure below as an increase in the shading in the top left portion of the flow
cytometry plot. Treatment of a breast cancer cell line containing CSCs with VS-507 resulted in a decrease in the population of CSCs compared to the placebo control. In contrast,
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treatment
with paclitaxel resulted in an increase in the population of CSCs compared to the placebo control. We believe that the opposing actions of VS-507 and paclitaxel are due to a
selective effect of VS-507 on the killing of CSCs not observed with paclitaxel treatment.
Gene expression analysis.
Opposing effects of VS-507 and paclitaxel also were shown by gene expression analysis. Human breast cancer cells were treated
in culture with either VS-507 or paclitaxel for one week and then incubated in the absence of drug for three weeks prior to analysis. The two populations were subjected to comparative
global gene expression analysis, which can identify the genes that have the greatest differential change in expression in response to treatment. The panel of genes exhibiting the greatest differential
change in this analysis comprise a gene expression signature that may be used for the identification of CSCs. In this
experiment, VS-507 and paclitaxel had opposing actions on biomarkers of CSCs and genes known to be commonly expressed in epithelial tissue types. Unlike treatment with paclitaxel,
treatment with VS-507 resulted in the loss of expression of CSC-associated genes. Expression of these genes is correlated with poor-prognosis tumors.
Mouse models of breast cancer.
The functional presence of CSCs was assessed by evaluating
in vivo
tumor-initiating,
or tumor-forming, ability after chemical compound treatment. In these experiments, a human breast cancer cell line containing a mixture of CSCs and other cancer cells was treated with
VS-507, paclitaxel or a placebo control
in vitro
for seven days and expanded in culture for at least 14 days in the absence of
treatment. The cells were then injected into mice. As shown in the figure below, treatment of these cells with VS-507 resulted in the formation of tumors in fewer mice than treatment with
paclitaxel. These findings suggest that CSCs within breast cancer cell populations may be resistant to paclitaxel but sensitive to treatment with VS-507.
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Mouse model of metastatic breast cancer.
To specifically evaluate the effects of a therapeutic compound on the metastatic potential of cells following treatment,
murine breast cancer cells treated
in vitro
with VS-507, paclitaxel or a placebo control were injected into the tail vein of mice and the
number of metastases that subsequently appeared in the lungs was measured. After three weeks of growth of these cells
in vivo
, mice injected with cells
that had been treated with VS-507 displayed a four-fold reduction in metastatic burden compared to the placebo control while, in contrast, mice injected with cells that had
been treated with paclitaxel displayed a two-fold increase in metastatic burden compared to the placebo control.
VS-507 clinical development plan
We are developing VS-507 as an anti-cancer drug for the treatment of breast cancer, initially TNBC, and other cancers. To
enhance the therapeutic benefit, we may also use VS-507 in combination with existing therapies in an effort to target both the CSCs and other types of cancer cells. We are developing novel
formulations of VS-507, which we may use in our clinical development program.
Assuming
successful completion of preclinical studies, we anticipate filing an IND with the FDA to initiate clinical trials of VS-507. If this application is accepted, we anticipate
initiating a dose escalation portion of a Phase 1 clinical trial in patients with advanced solid tumors. The dose escalation portion of the Phase 1 clinical trial would be designed to
determine the maximum tolerated dose of VS-507. We also plan to assess safety and tolerability of VS-507 in this portion of the trial.
Upon
identification of the maximum tolerated dose, we plan to enroll an expanded cohort of breast cancer patients to further assess the safety of VS-507 and evaluate efficacy on a
preliminary basis in accordance with Response Criteria in Solid Tumors, or RECIST, measurement guidelines, and based on the presence of CSC-specific biomarkers. RECIST has traditionally
been used as a standard measure of activity in clinical trials. However, because RECIST is based on gross changes in the size of tumor lesions of more than 30%, it is possible that changes in the
tumor burden following selective targeting of CSCs in a single-agent, maximum-tolerated-dose study will not be detected using RECIST. As a result, we believe that sensitive
CSC-specific biomarkers may be useful in conjunction with RECIST to quantify the effect of VS-507 on CSCs.
VS-507 companion diagnostic
We intend to incorporate CSC-specific biomarkers into a VS-507 companion diagnostic for use in identifying patients whose
tumors have a high percentage of CSCs and are likely to benefit from
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treatment
with VS-507. We may use this information to aid in the selection of patients for late stage clinical trials. We also plan to utilize this diagnostic to measure the effect that
VS-507 has on CSCs in a tumor.
NEW CHEMICAL ENTITIES (NCEs)
We have initiated NCE programs on more than 10 series of chemical compounds identified using our proprietary EMT technology along with
high-throughput screening methods. In addition, we have synthesized several drug candidates that are chemically similar to VS-507 and are currently optimizing their activity in
blocking the Wnt/beta-catenin signaling pathway and CSC survival.
We
evaluate the activity of chemical compounds
in vitro
by measuring their potency and selectivity against CSCs. In general, the more potent a drug is,
the lower the dose required for a therapeutic effect. In an
in vitro
assessment of cell proliferation, one of the series of NCE compounds that we have
identified has exhibited potent activity and greater than 10-fold preferential effect, or selectivity, for CSCs as compared to other types of cancer cells. A second series of compounds has
shown potent activity and greater than 50-fold selectivity for killing of CSCs compared to its effects on other types of cancer cells. Compounds from our NCE programs also have
demonstrated preclinical activity in a broad range of cancer cells, including breast cancer cell lines derived from TNBC tumors in which a high percentage of CSCs have been identified. We are
currently evaluating additional proprietary product candidates from our NCE programs in preclinical studies for their use in breast and other cancers.
INTELLECTUAL PROPERTY
We aggressively strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining patents
intended to cover our products and compositions, their methods of use and processes for their manufacture, as well as our diagnostic, biomarker, patient selection and drug discovery technologies and
any other inventions that are commercially important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not
consider appropriate for, patent protection.
Our
success will depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our
business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We
also rely on know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
We
seek to obtain domestic and international patent protection, and endeavor to promptly file patent applications for new commercially valuable inventions. We license a portfolio of patent
applications owned by MIT and the Whitehead Institute. As of September 30, 2011, we hold licenses to three pending U.S. patent applications, as well as foreign counterparts to these patent
applications. Of these licensed patent applications, we license one on an exclusive basis and two on a non-exclusive basis.
The
patent application that we license on an exclusive basis includes claims covering: methods of identifying compounds that inhibit the growth or survival of CSCs, methods of identifying CSCs and
methods of treating cancer, including methods of selecting courses of treatment for cancer therapy based, for example, on the presence of a biomarker. The application also includes claims to methods
of using certain compounds, identified for example by the claimed screening technology, in the treatment of cancer. Any U.S. or EU patents that may issue from this application would have a statutory
expiration date in 2029.
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The
two patent applications that we license on a non-exclusive basis include claims covering: additional methods of identifying CSCs,
in
vitro
methods of creating CSCs, for example through activation of the EMT process, progenitor cells and uses for those cells, methods of determining the metastatic potential of
a tumor and methods of diagnosing, preventing and treating cancer metastasis. Any U.S. patents that may issue from this application would have a statutory expiration date in 2026.
We
have an agreement with the Broad Institute, which grants us under certain circumstances the first right to negotiate a license for intellectual property. This intellectual property includes patent
applications and patents covering the use of biomarkers related to the EMT process. This intellectual property also includes compounds that can be used for treatment of cancer. An example is a
compound that is identified by screening the effects of compounds on CSCs, notably CSCs created through the EMT process.
We
may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in
part, by confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by
maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems,
agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by
competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in
their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
LICENSES
Whitehead Institute for Biomedical Research
Exclusive license agreement
In October 2010, we entered into an exclusive license agreement with the Whitehead Institute, both on its own behalf and as sole and exclusive agent
of MIT. Under the license agreement, we acquired an exclusive, royalty-bearing, worldwide license under patent rights owned by the Whitehead Institute and MIT to develop, make, use and sell products
covered by the licensed patent rights, including VS-507 for use in treating cancer, and to develop and perform licensed processes, in each case, for all human therapeutic, prognostic and
diagnostic uses. These exclusive licensed patent rights are described in more detail above under "Intellectual Property."
We
are required to use commercially reasonable efforts to develop and commercialize licensed products under the agreement. In particular, we are required to fulfill specific development and regulatory
milestones by particular dates and, during each calendar year, either spend a specified amount for research and development, actively conduct one or more clinical trials for a licensed product or a
product identified using a licensed process that does not constitute a licensed product, which we refer to as an identified product, prepare, file or pursue a filed application for regulatory approval
of a licensed product or an identified product, or launch or sell a licensed product or identified product.
Under
the agreement, we paid the Whitehead Institute an upfront license fee, reimbursed patent related fees and costs incurred by the Whitehead Institute and MIT and issued 583,333 shares of our
common stock to the Whitehead Institute and entities and individuals affiliated with the Whitehead Institute.
We
also agreed to pay the Whitehead Institute annual license maintenance fees, milestone payments, royalties as a percentage of net sales and a percentage of sublicense income that we receive. Annual
license maintenance fees are creditable against royalties, which are described below, earned during the
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same
calendar year. Milestone payments are triggered upon the achievement of specified development, regulatory and commercialization milestones and are not creditable against the royalties described
below. For each licensed product, we agreed to make milestone payments of up to an aggregate of $1,560,000 plus an additional amount for each subsequent approval of additional indications for a
maximum number of licensed products. For each identified product that is not a licensed product, we agreed to make milestone payments of up to an aggregate of $815,000 plus an additional amount for
each subsequent approval of additional indications for a maximum number of identified products. Each type of specified milestone payment is payable only for each of the maximum number of licensed
products and the maximum number of identified products, as the case may be, to achieve the applicable milestone. In addition, a separate milestone payment is due upon the first commercial sale of each
licensed product or identified product that is a diagnostic or prognostic test. A single additional milestone payment is due for the first issuance of licensed patent rights in the United States, the
United Kingdom, France, Germany, Spain or Italy. The royalty rate is in the low single digits as a percentage of net sales for licensed products that are therapeutics, the mid single digits for
licensed products that are diagnostics or prognostics and less than one percent for identified products.
The
Whitehead Institute and MIT retain the right to, and may grant licenses to other academic and non-profit institutions for the right to, practice the licensed patent rights for
research, teaching and educational purposes. The Whitehead Institute, MIT or any such other institution could seek to license to third parties any intellectual property rights that it discovers using
the licensed patent rights while pursuing these purposes. Under the agreement, we have a right, subject to the Whitehead Institute's obligations under third party research funding agreements, to
negotiate a license for any compounds identified prior to a specified date in the Whitehead Institute's laboratory run by Dr. Weinberg that selectively target CSCs generated by induction
through the EMT process.
After
a specified period of time, if a third party requests to sublicense the patent rights for a product or process that is not directly competitive with our products or processes, we must enter into
good-faith negotiations to grant a sublicense for such proposed product or process. If we do not grant a sublicense within a specified period of time after receiving a written request, the
Whitehead Institute may grant a license to the third party and our rights in the field of use of such sublicense will terminate. Additionally, after a specified period of time, if we are not actively
conducting high-throughput screening using the licensed patent rights to identify product candidates, then, except for any rights directed to uses that we are actively developing, the
Whitehead Institute may convert our license to the licensed patent rights from exclusive to nonexclusive.
We
have the right to terminate the agreement for any reason upon at least 90 days' prior written notice. The Whitehead Institute has the right to terminate the agreement if we and all of our
sublicensees cease to carry on business related to the agreement for a specified period of time, we fail
to pay any amounts due and payable under the agreement to the Whitehead Institute, subject to a grace period, we materially breach the agreement and fail to cure such breach within a specified grace
period or we or a sublicensee challenge the licensed patent rights in a legal or administrative proceeding. The agreement otherwise terminates upon the expiration or abandonment of all licensed
patents and patent applications.
Non-exclusive license agreement
In October 2010, we entered into a separate non-exclusive license agreement with the Whitehead Institute under which we acquired a
non-exclusive, worldwide license to patent rights owned by the Whitehead Institute for our internal research purposes, including research as part of a program to develop and commercialize
small molecules or biologic molecules as pharmaceutical products. These non-exclusive licensed patent rights are described in more detail above under "Intellectual Property."
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Under
the agreement, we paid the Whitehead Institute upfront license fees. We also are obligated to pay the Whitehead Institute an annual license maintenance fee beginning in 2012. We have the right
to terminate the agreement for any reason upon at least 90 days' prior written notice. The Whitehead Institute has the right to terminate the agreement if we cease to carry on business related
to the agreement for a period in excess of six months, we fail to pay any amounts due and payable under the agreement to the Whitehead Institute, subject to a grace period, we materially breach the
agreement and fail to cure such breach within a specified grace period or we challenge the licensed patent rights in a legal or administrative proceeding.
Broad Institute of MIT and Harvard
In October 2010, the Broad Institute granted to us the first right to negotiate a license in good faith for specified intellectual property owned by
the Broad Institute if we have not breached the terms of the exclusive license agreement with the Whitehead Institute described above. Following written notice of the availability of such intellectual
property for licensing by the Broad Institute to us, the Broad Institute has agreed not to negotiate with any other party during our right of first negotiation period. If we and the Broad Institute
are unable to negotiate a license within such period, the Broad Institute may then offer the intellectual property for licensing to other parties.
The intellectual property subject to this right of first negotiation is described in more detail above under "Intellectual Property."
COMPETITION
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different
sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product
candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
There
are other companies working to develop therapies that target CSCs. These companies include divisions of large pharmaceutical companies including Astellas Pharma Inc., Sanofi-Aventis
U.S. LLC, GlaxoSmithKline plc and others. There are also biotechnology companies of various sizes that are developing therapies against CSCs, including OncoMed
Pharmaceuticals, Inc., Boston Biomedical Inc. and Stemline Therapeutics, Inc.
Many
of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining
regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic 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 and establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies.
The
key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics
in guiding the use of related therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors.
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Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more
convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for
ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers
or other third-party payors seeking to encourage the use of generic products. There are many generic products currently on the market for the indications that we are pursuing, and additional products
are expected to become available on a generic basis over the coming years. If our therapeutic product candidates are approved, we expect 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, including chemotherapy, hormone therapy and targeted drug therapy. There are a variety of available
drug therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. While our product candidates may compete with many existing drug and other
therapies, to the extent they are ultimately used in combination with or as an adjunct to these therapies, our product candidates will not be competitive with them. Some of the currently approved drug
therapies are branded and subject to patent protection, and others are available on a generic basis. Many of these approved drugs are well established therapies and are widely accepted by physicians,
patients and third-party payors. In general, although there has been considerable progress over the past few decades in the treatment of cancer and the currently marketed therapies provide benefits to
many patients, these therapies all are limited to some extent in their efficacy and frequency of adverse events, and none of them are successful in treating all patients. As a result, the level of
morbidity and mortality from cancer remains high.
In
addition to currently marketed therapies, there are also a number of products in late stage clinical development to treat cancer. These products in development may provide efficacy, safety,
convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain market
approval.
MANUFACTURING
We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to rely,
on third parties for the manufacture of our product candidates and any products that we may develop, other than small amounts of compounds that we may synthesize ourselves for preclinical testing. To
date, we have obtained starting materials for our supply of the bulk drug substance for our product candidates from one third-party manufacturer. We obtain our supplies from this manufacturer on a
purchase order basis and do not have a long-term supply arrangement in place. We do not currently have arrangements in place for redundant supply or a second source for bulk drug
substance. If our current third-party manufacturer should become unavailable to us for any reason, we believe that there
are several potential replacements, although we might incur 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 and reasonable cost of their starting materials. We expect to continue to develop drug candidates that can be produced cost-effectively at third-party
manufacturing facilities.
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GOVERNMENT REGULATION
Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things,
the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing,
post-approval monitoring and reporting, import and export of pharmaceutical products, such as those we are developing.
United States drug approval process
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health Service Act and implementing
regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of
substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may
subject an applicant to a variety of administrative or judicial sanctions, such as the FDA's refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance
of warning letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement of
profits or civil or criminal penalties.
The
process required by the FDA before a drug may be marketed in the United States generally involves the following:
–>
completion
of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA's good laboratory practice, or GLP, regulations;
–>
submission
to the FDA of an IND, which must become effective before human clinical trials may begin;
–>
approval
by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
–>
performance
of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and
efficacy of the proposed drug for each indication;
–>
submission
to the FDA of a new drug application, or 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 the product is produced to assess compliance with current good
manufacturing practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity; and
–>
FDA
review and approval of the NDA.
Preclinical studies
Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as
in
vitro
and animal 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 for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing
information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as
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part
of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may 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 places the trial on clinical
hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing
clinical trials to commence.
Clinical trials
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in
accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical
trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness
criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution
participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review. The IRB must review and
approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain
clinical trials must be submitted within specific timeframes 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 target
disease 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
effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
–>
Phase 3:
The drug is administered to an expanded patient population in adequate and
well-controlled clinical trials to generate sufficient data to statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit
profile of the product and to provide adequate information for the labeling of the product.
Progress
reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and
Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on
various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its
institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients.
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Marketing approval
Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed
information relating to the product's chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product
for one or more indications. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, currently exceeding $1.8 million, and the sponsor of
an approved NDA is also subject to annual product and establishment user fees, currently exceeding $98,000 per product and $520,000 per establishment. These fees are typically increased annually.
The
FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit
substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted
application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to
specified performance goals in the review of NDAs. Under these goals, the FDA has committed to review most such applications for non-priority products within 10 months, and most
applications for priority review products, that is, drugs that the FDA determines represent a significant improvement over existing therapy, within six months. These performance goals likely will be
extended by several months when the Prescription Drug User Fee Act is reauthorized in 2012. The review process may be extended by the FDA for three additional months to consider certain information or
clarification regarding information already provided in the submission. The FDA may also refer applications for novel drugs or products that present difficult questions of safety or efficacy to an
advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by
the recommendations 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 is manufactured. The FDA will not approve an application unless it determines that the
manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before
approving an NDA, the FDA will typically inspect one or more clinical sites to 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 take many years to complete. Data obtained from clinical activities are not always conclusive
and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties
or
unanticipated costs in our efforts to develop our product candidates and secure necessary governmental approvals, which could delay or preclude us from marketing our products.
After
the FDA's evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial
marketing of the drug with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial
additional testing or information in order for the FDA to reconsider the application. 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 months depending on the type of information included. Even with submission of this additional
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information,
the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve the NDA.
Even
if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, 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 and surveillance programs to monitor
the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, which can materially affect the potential market and
profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, some types
of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Fast track designation
The FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or
life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the fast track program, the
sponsor of a new drug candidate may request the FDA to designate the product for a specific indication as a fast track product concurrent with or after the filing of the IND for the product candidate.
The FDA must determine if the product candidate qualifies for 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 with the FDA, the FDA may initiate review of sections of a fast track product's NDA before
the application is complete. This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays
applicable user fees. However, the FDA's time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation
may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Priority review
Under FDA policies, a product candidate may be eligible for priority review, or review within a six-month time frame from the time a
complete application is received. Products regulated by the FDA's Center for Drug Evaluation and Research, or CDER, are eligible for priority review if they provide a significant improvement compared
to marketed products in the treatment, diagnosis or prevention of a disease. A fast track designated product candidate would ordinarily meet the FDA's criteria for priority review.
Accelerated approval
Under the FDA's accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides
meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. In clinical trials, a surrogate endpoint is a
measurement of laboratory 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. A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the
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completion
of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a
clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under
accelerated regulations are subject to prior review by the FDA.
Orphan drugs
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally
defined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug
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 and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to
a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other
applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity in that it
is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition,
or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.
Pediatric information
Under the Pediatric Research Equity Act of 2003, as amended and reauthorized by the Food and Drug Administration Amendments Act of 2007, or the
FDAAA, an NDA or supplement to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and
to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant
deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Unless otherwise required
by regulation, the pediatric data requirements do not apply to products with orphan drug designation.
The Hatch-Waxman act
Abbreviated new drug applications
In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant's
product or a method of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA's Approved Drug Products with Therapeutic
Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug
application, or ANDA. Generally, an ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths, dosage form and route of administration as the listed drug
and has been shown to be bioequivalent through
in vitro
or
in vivo
testing or otherwise to the listed
drug. ANDA applicants are not required to conduct or submit results of preclinical or clinical tests to prove the safety or effectiveness of their drug product,
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other
than the requirement for bioequivalence testing. Drugs approved in this way are commonly referred to as "generic equivalents" to the listed drug, and can often be substituted by 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 in the FDA's Orange Book, except for patents covering methods of use for which the ANDA
applicant is not seeking approval. 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 patent expiration; 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 such patents are invalid or unenforceable is called a Paragraph IV certification. If
the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved 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 send notice of the Paragraph IV certification to the NDA and patent holders once the
ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing
of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of
30 months, expiration of the patent, settlement of the lawsuit or a decision in 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 exclusivity for obtaining approval of a new chemical entity, for the referenced product has
expired. Federal law provides a period of five years following approval of a drug containing no previously approved active moiety during which ANDAs for generic versions of those drugs cannot be
submitted unless the submission contains a Paragraph IV challenge to a listed patent, in which case the submission may be made four years following the original product approval. Federal law
provides for a period of three years of exclusivity during which the FDA cannot grant effective approval of an ANDA if a listed drug contains a previously approved active moiety, but FDA requires as a
condition of approval new clinical trials conducted by or for the sponsor. This three-year exclusivity period often protects 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 of patent and non-patent marketing
exclusivity listed in the Orange Book for a drug may be extended by six months if the NDA sponsor conducts pediatric studies identified by the FDA in a written request. For written requests issued by
the FDA after September 27, 2007, the date of enactment of the FDAAA, the FDA must grant pediatric exclusivity no later than nine months prior to the date of expiration of patent or
non-patent exclusivity in order for the six-month pediatric extension to apply to that exclusivity period.
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Section 505(b)(2) new drug applications
Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is a special type of NDA, commonly referred to as
a Section 505(b)(2) NDA, which enables the applicant to rely, in part, on the FDA's previous approval of a similar product, or published literature, in support of its application.
505(b)(2)
NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Section 505(b)(2) permits the filing of an NDA where
at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. If the 505(b)(2)
applicant can establish that reliance on the FDA's previous approval is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product. The
FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the
label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
To
the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed
for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approval of a 505(b)(2) NDA can be stalled until all the listed patents claiming the
referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product
has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the
infringement case that is favorable to the Section 505(b)(2) applicant.
Combination products
The FDA regulates combinations of products that cross FDA centers, such as drug, biologic or medical device components that are physically,
chemically or otherwise combined into a single entity, as a combination product. The FDA center with primary jurisdiction for the combination product will take the lead in the premarket review of the
product, with the other center consulting or collaborating with the lead center.
The
FDA's Office of Combination Products, or OCP, determines which center will have primary jurisdiction for the combination product based on the combination product's "primary mode of
action." A mode of action is the means by which a product achieves an intended therapeutic effect or action. The primary mode of action is the mode of action that provides the most important
therapeutic action of the combination product, or the mode of action expected to make the 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 of the combination product. In those difficult cases, the OCP will consider consistency
with other combination products raising similar types of safety and effectiveness questions, or which center has the most expertise to evaluate the most significant 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 product classification is unclear or in dispute, to obtain a binding decision as to which center will
regulate the
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combination
product. If the sponsor objects to that decision, it may request that the agency reconsider that decision.
Overview of FDA regulation of companion diagnostics
We are developing
in vitro
and
in vivo
companion
diagnostics for use in selecting the patients that we believe will respond to our cancer therapeutics.
FDA
officials have issued draft guidance that, when finalized, would address issues critical to developing
in vitro
companion diagnostics, such as
biomarker qualification, establishing clinical validity, the use of retrospective data, the appropriate patient population and when the FDA will require that the device and the drug be approved
simultaneously. The draft guidance issued in July 2011 states that if safe and effective use of a therapeutic product depends on an
in vitro
diagnostic,
then the FDA generally will require approval or clearance of the diagnostic at the same time that the FDA approves the therapeutic product. The FDA has yet to issue further guidance, and it is unclear
whether it will do so, or what the scope would be.
The
FDA previously has required
in vitro
companion diagnostics intended to select the patients who will respond to the cancer treatment to obtain
Pre-Market Approval, or PMA, simultaneously with approval of the drug. Based on the draft guidance, and the FDA's past treatment of companion diagnostics, we believe that the FDA will
require one or more of our
in vitro
companion
diagnostics to obtain PMA for our companion diagnostics to identify patient populations suitable for our cancer therapies, such as the
in vitro
companion diagnostic for VS-507. The review of these
in vitro
companion diagnostics in conjunction with the review of our cancer treatments
involves coordination of review by CDER and by the FDA's Center for Devices and Radiological Health Office of In Vitro Diagnostics Device Evaluation and Safety.
PMA approval pathway
A medical device, including an
in vitro
diagnostic, or IVD, to be commercially distributed in the
United States must receive either 510(k) clearance or PMA approval from the FDA prior to marketing. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life
supporting or implantable devices, or devices deemed not substantially equivalent to a previously 510(k) cleared device or a preamendment class III device for which PMA applications have not
been called, are placed in Class III requiring PMA approval. The PMA approval pathway requires proof of the safety and effectiveness of the device to the FDA's satisfaction.
The
PMA approval pathway generally takes from one to three years or even longer from submission of the application.
A
PMA application for an IVD must provide extensive preclinical and clinical trial data. Preclinical data for an IVD includes many different tests, including how reproducible the results are when the
same sample is tested multiple times by multiple users at multiple laboratories. The clinical data need to establish that the test is sufficiently safe, effective and reliable in the intended use
population. In addition, the FDA must be convinced that a device has clinical utility, meaning that an IVD provides information that is clinically meaningful. A biomarker's clinical significance may
be obvious, or the applicant may be able to rely upon published literature or submit data to show clinical utility.
A
PMA application also must provide information about the device and its components regarding, among other things, device design, manufacturing and labeling. The sponsor must pay an application fee.
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As part of the PMA review, the FDA will typically inspect the manufacturer's facilities for compliance with Quality System Regulation, or QSR, requirements, which impose
elaborate testing, control, documentation and other quality assurance procedures.
Upon
submission, the FDA determines if the PMA application is sufficiently complete to permit a substantive review, and, if so, the FDA accepts the application for filing. The FDA then commences an
in-depth review of the PMA application. The entire process typically takes one to three years, but may take longer. The review time is often significantly extended as a result of the FDA
asking for more information or clarification of information already provided. The FDA also may respond with a not approvable determination based on deficiencies in the application and require
additional clinical trials that are often expensive and time-consuming and can substantially delay approval.
During
the review period, an FDA advisory committee, typically a panel of clinicians, may be convened to review the application and recommend to the FDA whether, or upon what conditions, the device
should be approved. Although the FDA is not bound by the advisory panel decision, the panel's recommendation is important to the FDA's overall decision making process.
If
the FDA's evaluation of the PMA application is favorable, the FDA typically issues an approvable letter requiring the applicant's agreement to specific conditions, such as changes in labeling, or
specific additional information, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA concludes that the applicable criteria have been met, the FDA will issue
a PMA for the approved indications, which can be more limited than those originally sought by the manufacturer. The PMA can include post-approval conditions that the FDA believes necessary
to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution. Failure to comply with the conditions of approval can
result in material adverse enforcement action, including the loss or withdrawal of the approval.
Even
after approval of a PMA, a new PMA or PMA supplement may be required in the event of a modification to the device, its labeling or its manufacturing process. Supplements to a PMA often require
the submission of the same type of information required for an original PMA, except that the supplement is generally limited to the information needed to support the proposed change from the product
covered by the original PMA.
Clinical trials
A clinical trial is almost always required to support a PMA application. In some cases, one or more smaller Investigational Device Exemption, or IDE,
studies may precede a pivotal clinical trial intended to demonstrate the safety and efficacy of the investigational device.
All
clinical studies of investigational devices must be conducted in compliance with the FDA's requirements. If an investigational device could pose a significant risk to patients pursuant to FDA
regulations, the FDA must approve an IDE application prior to initiation of investigational use. IVD trials usually do not require an IDE, as the FDA does not judge them to be a significant risk
because the results do not affect the patients in the study. However, for a trial where the IVD result directs the therapeutic care of patients with cancer, we believe that the FDA would consider the
investigation to present significant risk.
An
IDE application must be supported by appropriate data, such as laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.
The FDA typically grants IDE approval for a specified number of patients. A nonsignificant risk device does not require FDA approval of an IDE. Both significant risk and nonsignificant risk
investigational devices require approval from IRBs at the study centers where the device will be used.
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During
the trial, the sponsor must comply with the FDA's IDE requirements for investigator selection, trial monitoring, reporting and record keeping. The investigators must obtain patient informed
consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices and comply with all reporting and record keeping requirements. Prior to
granting PMA approval, the FDA typically inspects the records relating to the conduct of the study and the clinical data supporting the PMA application for compliance with applicable requirements.
Although
the QSR does not fully apply to investigational devices, the requirement for controls on design and development does apply. The sponsor also must manufacture the investigational device in
conformity with the quality controls described in the IDE application and any conditions of IDE approval that the FDA may impose with respect to manufacturing.
Post-market
After a device is on the market, numerous regulatory requirements apply. These requirements include: the QSR, labeling regulations, the FDA's general
prohibition against promoting products for unapproved or "off label" uses, the Medical Device Reporting regulation, which requires that manufacturers report to the FDA if their device may have caused
or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur, and the Reports of Corrections and
Removals regulation, which requires manufacturers to report recalls and field actions to the FDA if initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA.
The
FDA enforces these requirements by inspection and market surveillance. If the FDA finds a violation, it can institute a wide variety of enforcement actions, ranging from a public warning letter to
more severe sanctions such as: fines, injunctions and civil penalties; recall or seizure of products; operating restrictions, partial suspension or total shutdown of production; refusing requests for
PMA approval of new products; withdrawing PMA approvals already granted; and criminal prosecution.
Other regulatory requirements
Any drug manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among
other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After
approval, most changes to the approved product, such as adding new indications or other labeling claims are 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. For example, the FDA may require post-marketing testing, including
Phase 4 clinical trials, and surveillance to further assess and monitor the product's safety and effectiveness after commercialization. Regulatory approval of oncology products often requires
that patients in clinical trials be followed for long periods to determine the overall survival benefit of the drug.
In
addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are
subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require
prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any
third-party manufacturers that we may decide to use. Accordingly, manufacturers must
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continue
to expend time, money and effort in the areas of production and quality control to maintain cGMP compliance.
Once
an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical trials to assess new safety risks or imposition
of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy program. Other potential consequences include, among other things:
–>
restrictions
on the marketing or manufacturing of the product, complete withdrawal of the product from 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, or suspension 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 the market. Drugs may be promoted only for the approved indications and in accordance with the
provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly
promoted off label uses may be subject to significant liability.
Additional provisions
Anti-kickback and false claims laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict
certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program
anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering
or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted
to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback statute are
punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory
safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended
to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.
Federal
false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a
false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to
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pricing
services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the
customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states
also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or,
in several states, apply regardless of the payor.
Physician drug samples
As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The Prescription
Drug Marketing Act, or the PDMA, imposes requirements and limitations upon the provision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugs
unless the state licensing program meets certain federal guidelines that include minimum standards for storage, handling and record keeping. In addition, the PDMA sets forth civil and criminal
penalties for violations.
Foreign regulation
In order to market any product outside of the United States, we would need to comply with numerous and varying 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 obtain FDA
approval for a product, we would need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product
in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval in
other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in
obtaining regulatory approval in one country may negatively impact the regulatory process in others.
To
date, we have not initiated any discussions with the European Medicines Agency or any other foreign regulatory authorities with respect to seeking regulatory approval for any of our products in
Europe or in any other country outside the United States.
New legislation and regulations
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the
testing, approval, manufacturing and marketing of products regulated by the FDA. For example, the FDAAA discussed above was enacted in 2007. In addition to new legislation, FDA regulations and
policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether further legislative changes will be
enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect of such changes, if any, may be.
Pharmaceutical coverage, pricing and reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory approval. Sales of any
of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as
Medicare and Medicaid, commercial health insurers and
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managed
care organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the
payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the
approved drugs for a particular indication.
In
order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity
and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. Our product candidates may not be considered medically
necessary or cost-effective. A payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Third-party
reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development.
The
containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort. Third-party payors are increasingly
challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety
and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a
benefit under their 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 cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and
requirements for substitution of generic products for branded prescription drugs. Adoption of such controls and measures, and tightening of restrictive policies in jurisdictions with existing controls
and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and could adversely affect our net revenue and results.
Pricing
and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may
require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the European Union
provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products
for human use. European Union member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the
drug product on the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure on health care costs in
general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border
imports from low-priced markets exert competitive pressure that may reduce pricing within a country. There can be no assurance that any country that has price controls or reimbursement
limitations for drug products will allow favorable reimbursement and pricing arrangements for any of our products.
The
marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement.
In addition, an increasing emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on drug pricing. Coverage policies, third-party
reimbursement rates and drug pricing regulation may change at any time. In particular, the Patient Protection and
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Affordable
Care Act was enacted in the United States in March 2010 and contain provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs sold
to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory
discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies' share of sales to federal health care programs. Even if favorable coverage and
reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
EMPLOYEES
As of September 30, 2011, we had 18 full-time employees, including a total of nine employees with M.D. or Ph.D. degrees. Of these
full-time employees, 11 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 consider our relationship with our employees to be good.
FACILITIES
We occupy approximately 7,484 square feet of office and laboratory space in Cambridge, Massachusetts under a lease that expires in October 2014. We
believe that our facility is sufficient to meet our current needs and that suitable additional space will be available as and when needed.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
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Management
The following table sets forth the name, age and position of each of our executive officers and directors.
Name
Age
Position
Christoph Westphal, M.D., Ph.D.
43
Chief Executive Officer and Director
Robert Forrester
48
Chief Operating Officer
Jonathan Pachter, Ph.D.
54
Vice President, Head of Research
Richard Aldrich
57
Director
John K. Clarke
58
Director
Ansbert Gadicke, M.D.
53
Director
Stephen Kraus
35
Director
Henri Termeer
65
Director
(1)
Member of the audit committee.
(2)
Member of the nominating and corporate governance committee.
(3)
Member of the compensation committee.
Christoph Westphal, M.D., Ph.D.
has served as our Chief Executive Officer since September 2011. He has served on
our board of directors since August 2010 and as the Chairman of our board of directors since March 2011. Dr. Westphal has served as a partner of Longwood Founders Fund, LP, a venture
capital investment fund, since 2010. He served as the President of SR One, the corporate venture capital arm of GlaxoSmithKline, from 2010 until 2011. Dr. Westphal has previously been involved in
founding a number of biotechnology companies as chief executive officer. Dr. Westphal co-founded Sirtris Pharmaceuticals, Inc., which was acquired by GlaxoSmithKline plc in
2008, and served as its Chief Executive Officer from 2004 to 2010. He also co-founded Alnara Pharmaceuticals, Inc., Acceleron Pharma, Inc., Alnylam
Pharmaceuticals, Inc., serving as its Chief Executive Officer in 2002, and Momenta Pharmaceuticals, Inc., serving as its Chief Executive Officer in 2001. Dr. Westphal serves on
the Board of Fellows of Harvard Medical School and the Board of Overseers for the Boston Symphony Orchestra and is a member of the Research Advisory Council at the Massachusetts General Hospital. He
earned his M.D. from Harvard Medical School, his Ph.D. in genetics from Harvard University and his B.A. from Columbia University. We believe that Dr. Westphal is qualified to serve on our board
of directors due to his experience in the life sciences industry as an entrepreneur and venture capitalist and his service on the boards of directors of other life sciences companies.
Robert Forrester
has served as our Chief Operating Officer since March 2011. Mr. Forrester has previously held executive level positions at both
private and public life sciences companies. Prior to joining us, Mr. Forrester served as Chief Operating Officer of Forma Therapeutics, Inc. from 2010 until 2011. Previously he served as
Interim President and Chief Executive Officer of CombinatoRx, Inc., now Zalicus Inc., from 2009 until 2010 and as its Executive Vice President and Chief Financial Officer from 2004 to 2009.
Mr. Forrester served as Senior Vice President, Finance and Corporate Development at Coley Pharmaceuticals Group, Inc. from 2000 to 2003. He earned his LL.B. from Bristol University in England.
Jonathan Pachter, Ph.D.
has served as our Vice President, Head of Research since July 2011. Prior to joining us, Dr. Pachter served as the Senior
Director of Cancer Biology at OSI Pharmaceuticals, Inc., which was acquired by Astellas Pharma Inc. in 2010, from 2005 to 2011. He earned his Ph.D. in Neuroscience and his M.S. in Pharmacology
from Baylor College of Medicine.
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Richard Aldrich
has served as a member of our board of directors since August 2010. Mr. Aldrich has served as a partner of Longwood Founders
Fund, LP, a venture capital investment fund, since 2010. He founded RA Capital Management LLC, a hedge fund, in 2004 and served as a Managing Member from 2004 to 2008 and as a
Co-Founding Member from 2008 until 2011. He co-founded Sirtris Pharmaceuticals, Inc., which was acquired by GlaxoSmithKline plc in 2008, and served on its board of directors from
2004 to 2008; co-founded Concert Pharmaceuticals, Inc. and has served as chairman of its board of directors since 2009; and co-founded Alnara
Pharmaceuticals, Inc. and served on its board of directors from 2008 to 2010. Mr. Aldrich also joined Vertex Pharmaceuticals, Inc. at its founding in 1989 and served as its Senior
Vice President and Chief Business Officer until 2001. He earned his M.B.A from the Amos Tuck School at Dartmouth College and his B.S. from Boston College. We believe that Mr. Aldrich is
qualified to serve on our board of directors due to his experience in the life sciences industry as an entrepreneur and venture capitalist and his service on the boards of directors of other life
sciences companies.
John K. Clarke
has served as a member of our board of directors since November 2010. Mr. Clarke co-founded Cardinal Partners, a venture capital
firm, and has served as its Managing General Partner since 1997. Mr. Clarke co-founded Alnylam Pharmaceuticals, Inc. and has served on its board of directors since 2002. He also
serves on the board of directors of Momenta Pharmaceuticals, Inc. Mr. Clarke also co-founded and has served as chief executive officer for a number of other companies, including
Alkermes, Inc., Arris Pharmaceuticals, Inc., Cubist Pharmaceuticals, Inc. and the DNX Corporation. He earned his M.B.A. from the Wharton School of the University of Pennsylvania
and his B.A. in Biology and Economics from Harvard College. We believe that Mr. Clarke is qualified to serve on our board of directors due to his financial expertise, years of experience
providing advisory services to organizations in the life sciences industry and his service on the boards of directors of other life sciences companies.
Ansbert Gadicke, M.D.
has served as a member of our board of directors since November 2010. Dr. Gadicke co-founded MPM Group, a
venture capital firm, and has served as the managing director of MPM Asset Management LLC since 1996. He serves on the board of directors of Radius Health, Inc. and a number of
privately-held life sciences companies. Dr. Gadicke previously served as a member of the board of directors of Pharmasset, Inc. from 1999 until 2007 and as a member of the board of
directors of PharmAthene, Inc. from 2004 until 2007. Dr. Gadicke also serves on the Board of Fellows of Harvard Medical School. He earned his M.D. from J.W. Goethe University in Frankfurt. We
believe that Dr. Gadicke is qualified to serve on our board of directors due
to his experience in the life sciences industry as a venture capitalist, his training as a physician and his service on the boards of directors of other life sciences companies.
Stephen Kraus
has served as a member of our board of directors since November 2010. Mr. Kraus has served as an investment professional at
Bessemer Venture Partners, a venture capital firm, since 2004 and has been employed as a Partner since 2010. He serves on the board of directors of a number of privately-held life sciences
companies. He previously served as a member of the board of directors of Sirtris Pharmaceuticals, Inc. from 2005 until 2007 and as a member of the board of directors of Restore Medical, Inc. from 2005
until 2008. He earned his M.B.A. from Harvard Business School and his B.A. from Yale University. We believe that Mr. Kraus is qualified to serve on our board of directors due to his experience
in the life sciences industry as a venture capitalist and his service on the boards of directors of other life sciences companies.
Henri Termeer
has served as a member of our board of directors since June 2011. Mr. Termeer served as President and a member of the board of
directors of Genzyme Corporation from 1983 until its acquisition by sanofi-aventis U.S., LLC in 2011, its Chief Executive Officer from 1985 to 2011 and the chairman of its board of directors
from 1988 to 2011. He serves on the Council of Economic
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Advisors
to Massachusetts Governor Deval Patrick and as co-chair of the Leadership Counsel of the Massachusetts Life Sciences Collaborative. Mr. Termeer is also chairman emeritus of
the New England Healthcare Institute and a trustee for the Boston Museum of Science. Mr. Termeer serves on the board of directors of ABIOMED Inc., AVEO Pharmaceuticals, Inc.,
Massachusetts General Hospital, the Massachusetts Institute of Technology Corporation and Partners HealthCare, and as chairman of the board of directors of the Federal Reserve Bank of Boston.
Mr. Termeer also serves on the Board of Fellows of Harvard Medical School. He earned his M.B.A. from the Darden School at the University of Virginia. We believe Mr. Termeer is qualified
to serve on our board of directors due to his senior executive experience in developing and managing Genzyme Corporation over the course of many years, his service on the boards of directors of
Genzyme Corporation and other life sciences companies and his deep life sciences industry experience and knowledge.
BOARD COMPOSITION AND ELECTION OF DIRECTORS
Our board of directors is currently authorized to have seven members. In accordance with the terms of our certificate of incorporation and bylaws
that will become effective upon the closing of this offering, our board of directors will be divided into three classes, class I, class II and class III, with members of each
class serving staggered three-year terms. Upon the closing of this offering, the members of the classes will be divided as follows:
–>
the
class I directors will
be                                        , and
their term will expire at the annual meeting of stockholders to be held in 2013;
–>
the
class II directors will
be                                        , and
their term will expire at the annual meeting of stockholders to be held in 2014; and
–>
the
class III directors will
be                                        , and
their term will expire at the annual meeting of stockholders to be held in 2015.
Upon
the expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year
in which their term expires. Our directors may be removed only for cause by the affirmative vote of the holders of 75% or more of our voting stock.
Our
board of directors has determined that             of our directors,
                                         
       , are independent directors, as defined by the applicable NASDAQ Marketplace Rules. In making such
determination, the board of directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances that the board of
directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
There
are no family relationships among any of our directors or executive officers.
BOARD COMMITTEES
Our board of directors has established an audit committee, a nominating and corporate governance committee and a compensation committee, each of
which will operate, upon the closing of this offering, under a charter that has been approved by our board. The composition of each committee will be effective upon the closing of this offering.
Our
board of directors has determined that all of the members of the audit committee, the compensation committee and the nominating and corporate governance committee, other than            ,
are
independent as defined under The NASDAQ Marketplace Rules, including, in the case of all the
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members
of our audit committee, the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934.
Audit committee
The members of our audit committee
are                           .              
    chairs the audit committee. Upon the closing of this offering, our audit
committee's responsibilities will include:
–>
appointing,
approving the compensation of and assessing the independence of our registered public accounting firm;
–>
overseeing
the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm;
–>
reviewing
and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures;
–>
monitoring
our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
–>
overseeing
our internal audit function;
–>
overseeing
our risk assessment and risk management policies;
–>
establishing
policies regarding hiring employees from the registered public accounting firm and procedures for the receipt and retention of accounting related
complaints and concerns;
–>
meeting
independently with our internal auditing staff, registered public accounting firm and management;
–>
reviewing
and approving or ratifying any related person transactions; and
–>
preparing
the audit committee report required by Securities and Exchange Commission, or SEC, rules.
All
audit and non-audit services, other than
de minimis
non-audit services, to be provided to us by our independent registered
public accounting firm must be approved in advance by our audit committee.
Our
board of directors has determined that                  is an "audit committee financial expert" as defined in applicable SEC rules.
Nominating and corporate governance committee
The members of our nominating and corporate governance committee
are                  .                  chairs the nominating and
corporate governance
committee. Upon the closing of this offering, our nominating and corporate governance committee's responsibilities will include:
–>
identifying
individuals qualified to become members of our board;
–>
recommending
to our board the persons to be nominated for election as directors and to each of our board's committees;
–>
reviewing
and making recommendations to our board with respect to our board leadership structure;
–>
reviewing
and making recommendations to our board with respect to management succession planning;
–>
developing
and recommending to our board corporate governance principles; and
–>
overseeing
an annual evaluation of our board.
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Compensation committee
The members of our compensation committee
are                           .             chairs
the compensation committee. Upon the closing of this offering,
our compensation committee's responsibilities will include:
–>
annually
reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer;
–>
determining
our chief executive officer's compensation;
–>
reviewing
and approving, or making recommendations to our board with respect to, the compensation of our other executive officers;
–>
overseeing
an evaluation of our senior executives;
–>
overseeing
and administering our cash and equity incentive plans;
–>
reviewing
and making recommendations to our board with respect to director compensation;
–>
reviewing
and discussing annually with management our "Compensation discussion and analysis" disclosure required by SEC rules; and
–>
preparing
the compensation committee report required by SEC rules.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent
function, of any other
entity that has one or more of its executive officers serving as a member of our board of directors or our compensation committee. During 2011, the members of our compensation committee were
John K. Clarke, Stephen Kraus and Christoph Westphal, M.D., Ph.D. Neither Mr. Clarke nor Mr. Kraus is or has been an officer or employee of our company. Dr. Westphal has
served as our Chief Executive Officer since September 2011. For a description of transactions between us and members of our compensation committee and affiliates of such members, please see
"Transactions with related persons."
OUR CHIEF EXECUTIVE OFFICER
In addition to his role as Chairman of the board of directors and Chief Executive Officer of our company, Dr. Westphal also serves as a
general partner of Longwood Founders Fund, LP, a venture capital investment fund and one of our principal stockholders. Dr. Westphal currently devotes a majority of his business time to
our company with responsibility for all aspects of our business and operations. We and Dr. Westphal anticipate that he will transition to an executive Chairman role at our company in the future
based on our having meaningfully advanced our discovery, research and development efforts, the overall growth of our company and our identifying and hiring a suitable successor. As executive Chairman,
we expect that Dr. Westphal will continue to devote significant time to our company. In such role, we and Dr. Westphal expect that he will particularly focus on our company's strategic
initiatives and key business, financial and scientific decisions. Dr. Westphal owns 2,200,000 shares of our common stock as a founder of our company, including shares currently held in a family
trust. As of September 30, 2011, 1,237,500 of these shares remain subject to vesting on a quarterly basis through August 2014. In addition, Longwood Founders Fund has invested approximately
$12.0 million in our company and, upon completion of this offering, will own 7,944,444 shares of our common stock. Dr. Westphal does not receive any cash compensation from us for his
services.
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COMPENSATION DISCUSSION AND ANALYSIS
Overview
This section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers and what we
believe are the most important factors relevant to an analysis of these policies and decisions. This section also describes the material elements of compensation awarded to, earned by or paid to each
of our named executive officers for 2011. Our "named executive officers" for 2011 consist of our three current executive officers, Christoph Westphal, M.D., Ph.D., our Chief Executive Officer, Robert
Forrester, our Chief Operating Officer who also serves as our principal financial officer, and Jonathan Pachter, Ph.D., our Vice President, Head of Research; and three individuals who previously
served as executives officers with us, Paul Brannelly, our current Vice President of Finance who served as our principal financial officer prior to the arrival of Mr. Forrester, Satish Jindal,
Ph.D., our former President and Chief Operating Officer who remains with us as a non-executive employee, and Peter Elliott, Ph.D., our former Head of Research and Development. In addition,
this section provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our executive officers and is intended to provide context for the data
presented in the tables and narrative that follow.
We
commenced operations in November 2010 and hired each of our current executive officers in 2011. Dr. Westphal, our Chief Executive Officer, does not currently receive, and has not
historically received, any compensation from us for his service as Chief Executive Officer because of his service as a general partner of Longwood Founders Fund, LP, a venture capital
investment fund and one of our
principal stockholders. The compensation of each of our other current executive officers is based on individual terms approved by our board of directors at the time of hire. Our board of directors is
in the process of developing and implementing the executive compensation program that will be in place following this offering. This section highlights key aspects of this program that we expect to
implement in 2012. Following this offering, our compensation committee will oversee these compensation policies and, together with our board of directors, will periodically evaluate the need for
revisions to ensure our compensation program is competitive with the companies with which we compete for executive talent.
Objectives and philosophy of our executive compensation program
The primary objectives of the board of directors in designing our executive compensation program are to:
–>
attract,
retain and motivate experienced and talented executives;
–>
ensure
executive compensation is aligned with our corporate strategies, research and development programs and business goals;
–>
recognize
the individual contributions of executives while fostering a shared commitment among executives by aligning their individual goals with our corporate
goals;
–>
promote
the achievement of key strategic, development and operational performance measures by linking compensation to the achievement of measurable corporate and
individual performance goals; and
–>
align
the interests of our executives with our stockholders by rewarding performance that leads to the creation of stockholder value.
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Each
of our named executive officers was hired by us before our board of directors established a formal executive compensation program. To achieve these objectives in the future, we expect that our
board of directors and compensation committee will evaluate our executive compensation program for 2012 with the goal of setting and maintaining compensation at levels that are justifiable based on
each executive's level of experience, performance and responsibility and that the board believes are competitive with those of other companies in our industry and our region that compete with us for
executive talent. In addition, beginning in 2012, we expect that our executive compensation program will tie a substantial portion of each executive's overall compensation to key strategic, financial
and operational goals. We have provided, and expect to continue to provide, a portion of our executive compensation in the form of stock options and restricted stock grants that vest over time, which
we believe helps to retain our executives and aligns their interests with those of our stockholders by allowing them to participate in the longer term success of our company as reflected in stock
price appreciation.
Use of compensation consultants and market benchmarking
For purposes of determining total compensation and the primary components of compensation for our executive officers in 2011, we did not retain the
services of a compensation consultant or use survey information or compensation data to engage in benchmarking. Beginning with 2012 compensation, we expect that our compensation committee will
consider publicly available compensation data for national and regional companies in the biotechnology industry to help guide its executive compensation decisions at the time of hiring and for
subsequent adjustments in compensation. In connection with designing our compensation program for future periods, our board of directors recently retained the services of Pearl Meyer &
Partners, or Pearl Meyer, an independent compensation consultant, to provide additional comparative data on executive compensation practices in our industry and to advise on our executive compensation
program generally. Although we expect that our board of directors and compensation committee will consider Pearl Meyer's advice and recommendations about our executive compensation program, the board
of directors and compensation committee will ultimately make their own decisions about these matters.
We
anticipate that Pearl Meyer will provide our board of directors and compensation committee with comparative data showing where our total compensation and each element of our compensation rate among
both public and private companies in the biotechnology and life sciences industry generally and a peer group of publicly-traded companies in the life science industry at a stage of development, market
capitalization and size comparable to ours with which the board of directors and compensation committee believe we compete for executive talent. We currently expect that the companies to be included
in this peer group will be:
Aegerion Pharmaceuticals, Inc.
Alnylam Pharmaceuticals, Inc.
Amicus Therapeutics, Inc.
Anacor Pharmaceuticals, Inc.
Anthera Pharmaceuticals, Inc.
ARIAD Pharmaceuticals, Inc.
Aveo Pharmaceuticals, Inc.
Curis Inc.
Cytokinetics, Inc.
Endocyte, Inc.
Infinity Pharmaceuticals, Inc.
Ironwood Pharmaceuticals, Inc.
Myrexis, Inc.
Osiris Therapeutics, Inc.
Synta Pharmaceuticals Corp.
Zalicus Inc.
This peer group is subject to change, and we anticipate that our board of directors and compensation committee will periodically review and update the list. The
peer group will be used for purposes of gathering data to help develop our executive compensation practices and guide our compensation
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decisions.
We also expect that our compensation consultant will make suggestions about our executive compensation practices based on the data it provides to us as well as compensation trends in our
industry. However, although we expect that the board of directors and compensation committee will consider peer group and other industry compensation data and the recommendations of our compensation
consultant when making decisions related to executive compensation, we do not expect that they will make adjustments to overall executive compensation or any element thereof solely or primarily to
target a specified threshold level of compensation or market benchmark within the peer group, our larger industry or some other group of comparable companies or to act on the recommendations of our
compensation consultant.
Annual compensation review process
We expect to conduct annual compensation reviews beginning in 2012. As part of the reviews we conduct in 2012, we expect to address bonus awards for
2011, our first full year of operations, and for all aspects of compensation for 2012. During the first quarter of 2012 and each subsequent year, we expect to evaluate each executive officer's
performance during the prior year. We expect that our chief executive officer will evaluate each executive other than himself from his own perspective and based on input from others within our
company. This process will lead to a recommendation by the chief executive officer to the compensation committee with respect to each executive officer, other than himself, as to:
–>
the
level of contributions made to the general management and guidance of the company;
–>
the
need for salary increases;
–>
the
amount of bonuses to be paid, including the achievement of stated corporate and individual performance goals with respect to the annual review for performance in
2012 and future years; and
–>
whether
or not equity incentive awards should be made.
These
recommendations will be reviewed by our compensation committee and taken into account when it makes a final determination on all such matters.
Components of our executive compensation program
The primary elements of our executive compensation program are:
–>
base
salary;
–>
annual
performance-based cash bonuses;
–>
stock-based
awards;
–>
broad-based
health and welfare benefits; and
–>
severance
and change in control benefits.
We
do not, and do not expect in the future to, have a formal or informal policy for allocating between long-term and short-term compensation, between cash and
non-cash compensation or among the different forms of non-cash compensation. Instead, our board of directors, after reviewing data it considers relevant, has determined
subjectively what it believes to be the appropriate level and mix of the various compensation components. Beginning with 2012, we expect that our compensation committee also will consider information
provided to it by our compensation consultant in making this determination. Ultimately, the objective in allocating between long-term and currently paid
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compensation
is to ensure adequate base compensation to attract and retain personnel, while providing incentives to maximize long-term value for our company and our stockholders.
Therefore, we provide cash compensation in the form of base salary to meet competitive salary norms and in the form of bonus compensation to incentivize and reward superior performance on an annual
basis. To further focus our executives on longer-term performance and the creation of stockholder value, we rely upon equity-based awards that vest over a meaningful period of time. In
addition, we provide our executives with benefits that are generally available to all our employees, including health and dental insurance, life and disability insurance and a 401(k) plan. Finally, we
offer our executives severance benefits to incentivize them to continue to achieve stockholder value in connection with change in control situations.
We
have employment agreements with two of our named executive officers, Mr. Forrester and Dr. Pachter. These employment agreements provide for specific base salaries, target annual
bonuses and severance and change in control arrangements for these executive officers. Dr. Pachter also received a signing bonus and reimbursement of certain relocation expenses in connection
with the commencement of his employment. Details of these employment agreements are provided below under the heading "—Employment agreements."
Base salary
We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our executive officers. Base
salaries for our named executive officers were established through arm's-length negotiation at the time the executive was hired, taking into account the position for which the executive was considered
and the executive's qualifications, prior experience and prior salary. None of our named executive officers is currently party to an employment agreement that provides for automatic or scheduled
increases in base salary. However, we expect that our compensation committee will annually review and evaluate, with input from our chief executive officer, the need for adjustment of the base
salaries of our executives based on changes and expected changes in the scope of an executive's responsibilities, including promotions, the individual contributions made by and performance of the
executive during the prior year, the executive's performance over a period of years, overall labor market conditions, the relative ease or difficulty of replacing the executive with a
well-qualified person, our overall growth and development as a company, general salary trends in our industry and among our peer group and where the executive's salary falls in the salary
range presented by that data. In making decisions regarding salary increases, we may also draw upon the experience of members of our board of directors with other companies. We do not expect that our
executive officers will receive any formulaic base salary increase, and we do not expect to target the base salaries of our named executive officers at a specified compensation level within our peer
group.
Dr. Westphal
does not currently receive, and has not historically received, a base salary from us. Mr. Forrester's 2011 annual base salary is $310,000 pursuant to the terms of the
employment agreement that we entered into with him upon the commencement of his employment in March 2011. Dr. Pachter's 2011 annual base salary is $280,000 pursuant to the terms of the
employment agreement that we entered into with him upon the commencement of his employment in July 2011. Our board of directors approved the base salaries of Mr. Forrester and
Dr. Pachter based on the recommendations of Dr. Westphal. In making his recommendations, Dr. Westphal considered the factors discussed above, including the qualifications, prior
experience and prior salary of each of Mr. Forrester and Dr. Pachter.
Mr. Brannelly's
2011 base salary was $125,000 for the first 8 months when he was serving as our part-time employee and was increased to $250,000 in September 2011 when he
began serving as our full-time employee. Dr. Jindal was paid $300,000 in total salary for 2011 as our former President and Chief Operating Officer and in his current capacity as our
non-executive employee pursuant to the
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terms
of a transition services agreement we entered into with him in February 2011, which provides a current 2011 annual base salary of $300,000 through mid-April 2012. Prior to his
departure in August 2011, Dr. Elliott was paid $108,000 in total salary for 2011. As with our current executive officers, the base salary for each of these individuals was determined at the
time of hire based on the factors set forth above.
Our
board of directors has not increased the base salaries for our current named executive officers for 2012. We believe that the base salaries established for our named executive officers for 2012
are aligned with our executive compensation objectives stated above and are competitive with those of similarly-situated companies. Our compensation committee may reevaluate this assessment as part of
its annual review process.
Annual performance-based cash bonus
Because we only commenced operations in November 2010, none of our named executive offices received an annual cash bonus for 2010. Our board of
directors has not yet determined the amount of any annual cash bonuses for our current executive officers for 2011. We expect that our compensation committee will subjectively determine the amount of
any annual cash bonus for each executive officer other than Dr. Westphal based on the annual compensation review process discussed above. We did not establish specific corporate or individual
performance goals for our executive officers for 2011.
We
are in the process of designing an annual cash bonus program to reward our named executive officers in the future. Beginning with 2012, we expect that our annual cash bonus program will be based
upon the achievement of specified annual corporate and individual goals that will be established in advance by our compensation committee. We expect that our annual cash bonus program will emphasize
pay-for-performance and will be intended to closely align executive compensation with achievement of specified operating results as the amount will be calculated on the basis
of percentage of corporate goals achieved. The performance goals established by our compensation committee beginning with the 2012 fiscal year will be based on the business strategy of the company and
the objective of building shareholder value. We expect that there will be three steps to determine if and the extent to which an annual cash bonus is payable to a named executive officer. First, at
the beginning of the year, our compensation committee will determine the target annual cash incentive award for the named executive officer based on a percentage of the
officer's annual base salary for that year. Second, the compensation committee will establish the specific performance goals, including both corporate and individual objectives, that must be met for
the officer to receive the award. Third, shortly after the end of the year, the compensation committee will determine the extent to which these performance goals were met and the amount of the award.
We expect that, beginning in 2012, our compensation committee will work with our chief executive officer to develop corporate and individual goals that they believe can be reasonably achieved with
hard work over the course of the year.
We
do not expect to pay Dr. Westphal an annual cash bonus for 2011. In accordance with the terms of their employment agreements with us, Mr. Forrester and Dr. Pachter each are
eligible to receive an annual bonus for 2011 based on a percentage of their base salary. Mr. Forrester is eligible to receive an annual bonus of up to 35% of his base salary, and
Dr. Pachter is eligible to receive an annual bonus of up to 30% of his base salary. We expect that the bonus payable to each of Mr. Forrester and Dr. Pachter will be pro rated to
reflect the date of commencement of employment with us. We expect that our board of directors will make a determination in the first quarter of 2012 about an annual bonus for 2011 for
Mr. Brannelly. In accordance with the terms of his transition services agreement with us, Dr. Jindal is eligible to receive an annual bonus for 2011 of up to 20% of his base salary.
Dr. Elliott has not received nor is he eligible to receive an annual cash bonus from us for 2011.
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Stock-based awards
Our equity award program is the primary vehicle for offering long-term incentives to our executives. While we do not have any equity
ownership guidelines for our executives, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align
the interests of our executives and our stockholders. In addition, the vesting feature of our equity awards contributes to executive retention by providing an incentive for our executives to remain in
our employ during the vesting period. Prior to this offering, our executives were eligible to participate in our 2010 equity incentive plan, and all equity awards granted in 2011 were pursuant to the
2010 equity incentive plan. Following the closing of this offering, our employees and executives will be eligible to receive stock-based awards pursuant to our 2012 stock incentive plan. Under our
2012 stock incentive plan, executives will be eligible to receive grants of stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock-based equity
awards at the discretion of our board of directors.
Our
equity awards have typically been in the form of stock options. Because our executives profit from stock options only if our stock price increases relative to the stock option's exercise price, we
believe stock options provide meaningful incentives for our executives to achieve increases in the value of our stock over time. While we currently expect to continue to use stock options as the
primary form of equity awards that we grant, we have used and may in the future continue to use alternative forms of equity awards, such as restricted stock. To date, we have used equity awards to
compensate our executive officers in the form of initial grants in connection with the commencement of employment. In the future, we also generally plan to grant equity awards on an annual basis to
our executive officers. We may also make additional discretionary grants, typically in connection with the promotion of an employee, to reward an employee, for retention purposes or in other
circumstances recommended by management. In general, the equity awards that we have granted to our executives vest with respect to 25% of the shares on the first anniversary of the grant date and with
respect to the remaining shares in approximately equal quarterly installments through the fourth anniversary of the grant date. Vesting ceases upon termination of employment and exercise rights cease
shortly after termination of employment. Prior to the exercise of a stock option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights
or the right to receive dividends or dividend equivalents.
We
have granted stock options with exercise prices that are set at no less than the fair value of shares of our common stock on the date of grant as determined by our board of directors. The exercise
price of all stock options granted after the closing of this offering will be equal to the fair value of shares of our common stock on the date of grant, which generally will be determined by
reference to the closing market price of our common stock on the date of grant.
We
have not granted any equity awards to Dr. Westphal in connection with his service as our Chief Executive Officer. As one of our co-founders, we issued and sold to
Dr. Westphal 2,200,000 shares of our common stock in August 2010 in connection with our formation. These shares are subject to repurchase by us pursuant to the terms of a restricted stock
agreement, as further described under the heading "Transactions with related persons—Restricted stock grants to co-founders."
In
April 2011, in recognition of the commencement of Mr. Forrester's employment with us, we issued and sold to Mr. Forrester 448,000 shares of our common stock pursuant to his employment
agreement. These shares are subject to repurchase by us pursuant to the terms of a restricted stock agreement. These shares vest with respect to 25% of the shares on the first anniversary of his date
of hire and with respect to the remaining shares in approximately equal monthly installments through the
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fourth
anniversary of his date of hire. The purchase price of the restricted stock was $0.08 per share, the fair value of our common stock on the date of grant as determined by our board of directors.
In
September 2011, in recognition of the commencement of Dr. Pachter's employment with us, we granted Dr. Pachter an option to purchase 240,000 shares of our common stock pursuant to his
employment agreement. This option vests with respect to 25% of the shares on the first anniversary of his date of hire and with respect to the remaining shares in approximately equal quarterly
installments through the fourth anniversary of his date of hire. The exercise price of this option is $0.55 per share, the fair value of our common stock on the date of grant as determined by our
board of directors.
We
did not grant any equity awards to Mr. Brannelly in 2011. In December 2010, in recognition of the commencement of Mr. Brannelly's employment with us, we granted Mr. Brannelly
an option to purchase 210,000 shares of our common stock. This option vests with respect to 25% of the shares on the first anniversary of his date of hire and with respect to the remaining shares in
approximately equal quarterly installments through the fourth anniversary of his date of hire. The exercise price of this option is $0.08 per share, the fair value of our common stock on the date of
grant as determined by our board of directors.
We
did not grant any equity grants to Dr. Jindal in 2011. As one of our co-founders, we issued and sold to Dr. Jindal 1,250,000 shares of our common stock in August 2010 in
connection with our formation. Pursuant to a restricted stock agreement with Dr. Jindal, as amended, we repurchased 582,681 shares from him, as further described under the heading "Transactions
with related persons—Restricted stock grants to co-founders."
In
April 2011, in recognition of the commencement of Dr. Elliott's employment with us, we issued and sold to Dr. Elliott 448,000 shares of our common stock pursuant to his employment
agreement at a price of $0.08 per share, the fair value of our common stock on the date of grant as determined by
our board of directors. Pursuant to a restricted stock agreement with Dr. Elliott, we repurchased 420,000 shares in connection with Dr. Elliott's transition from our employee to a member
of our scientific advisory board.
Benefits and other compensation
We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified
personnel. We maintain broad-based benefits that are provided to all employees, including health and dental insurance, life and disability insurance and a 401(k) plan. All of our executives are
eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. Under our 401(k) plan, we match 100% of employee contributions up to an amount equal to
3% of the employee's salary and then match 50% of employee contributions up to an amount equal to an additional 2% of the employee's salary. The match vests immediately. Consistent with our
compensation philosophy, we intend to continue to maintain our current benefits for our named executive officers.
In
certain circumstances, we may award cash signing bonuses or may reimburse relocation expenses when executives first join us. Whether a signing bonus is paid or relocation expenses are reimbursed,
and the amount of either such benefit, is determined by our board of directors on a case-by-case basis based on the specific hiring circumstances and the recommendation of our
chief executive officer.
Dr. Pachter,
who joined us in June 2011, received a signing bonus of $50,000 payable upon commencement of employment. We also reimbursed Dr. Pachter for $30,000 of relocation expenses in
connection with his move to our area to commence employment with us.
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Severance and change in control benefits
Pursuant to employment agreements we have entered into with certain of our executives, these executives are entitled to specified benefits in the
event of the termination of their employment under specified circumstances, including termination following a change in control of our
company. Please refer to "—Employment agreements" for a more detailed discussion of these benefits. We have provided estimates of the value of the severance payments made and other
benefits provided to executives under various termination circumstances, under the heading "—Potential payments upon termination or change in control" below.
We
believe providing these benefits helps us compete for executive talent. After reviewing the practices of companies represented in the compensation peer group, we believe that our severance and
change in control benefits are generally in line with severance packages offered to executives of the companies in our peer group. Based on the substantial business experience of the members of our
board of directors, we believe that our severance and change in control benefits are generally in line with severance packages offered to executives by companies at comparable stages of development in
our industry and related industries.
Risk considerations in our compensation program
Our board of directors is evaluating the philosophy and standards on which our compensation plans will be implemented across our company. It is our
belief that our compensation programs do not, and in the future will not, encourage inappropriate actions or risk taking by our executive officers. We do not believe that any risks arising from our
employee compensation policies and practices are reasonably likely to have a material adverse effect on our company. In addition, we do not believe that the mix and design of the components of our
executive compensation program will encourage management to assume excessive risks. We believe that our current business process and planning cycle fosters the behaviors and controls that would
mitigate the potential for adverse risk caused by the action of our executives. We believe that the following aspects of our executive compensation program that we plan to implement will mitigate the
potential for adverse risk caused by the action of our executives:
–>
annual
establishment of corporate and individual objectives for our performance-based cash bonus programs for our executive officers, which we expect to be
consistent with our annual operating and strategic plans, designed to achieve the proper risk/reward balance and not require excessive risk taking to achieve;
–>
the
mix between fixed and variable, annual and long-term and cash and equity compensation, which we expect to be designed to encourage strategies and
actions that balance the company's short-term and long-term best interests; and
–>
equity
incentive awards that vest over a period of time, which we believe will encourage executives to take a long-term view of our business.
Tax and accounting considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, which will become applicable to us upon the closing of this offering,
generally disallows a tax deduction for compensation in excess of $1.00 million paid to our chief executive officer and our three other most highly paid officers (other than the chief executive
officer and the chief financial officer). Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. We will periodically review the
potential consequences of Section 162(m) and we generally intend to structure
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the
performance-based portion of our executive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation will remain tax deductible to us. However, the
board of directors may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract
and retain executive talent and are in the best interests of our stockholders.
We
account for equity compensation paid to our employees in accordance with Financial Accounting Standards Board, or FASB, Accounting Standard Codification Topic 718,
Compensation-Stock Compensation
, or
ASC 718, which requires us to measure and recognize compensation expense in our financial statements for all
share-based payments based on an estimate of their fair value over the service period of the award. We record cash compensation as an expense at the time the obligation is accrued.
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation awarded to, earned by or paid to our named executive officers during 2011.
Name and principal position
Year
Salary
($)
Bonus
($)
(1)
Stock
awards
($)
(2)
Option
awards
($)
(3)
All other
compensation
($)
(4)
Total
($)
Christoph Westphal, M.D., Ph.D.
(5)
2011
—
—
—
—
—
—
Chief Executive Officer
Robert Forrester
2011
252,769
—
35,840
—
288,609
Chief Operating Officer
Jonathan Pachter, Ph.D.
2011
129,231
50,000
(6)
—
81,336
30,000
290,567
Vice President, Head of Research
Paul Brannelly
2011
164,423
—
—
—
164,423
Vice President of Finance, Former principal financial officer
Satish Jindal, Ph.D.
(7)
2011
300,000
—
—
—
300,000
Former President and Chief Operating Officer
Peter Elliott, Ph.D.
(8)
2011
108,500
—
35,840
—
144,340
Former Head of Research and Development
(1)
Our compensation committee has not yet determined the amounts of discretionary annual cash bonuses payable to our executive officers for 2011. We expect that our compensation
committee will determine the amounts of these bonuses during the first quarter of 2012, at which time we will disclose such amounts in a filing under Item 5.02(f) of
Form 8-K.
(2)
The amounts in the "Stock awards" column reflect the aggregate grant date fair value of restricted stock granted during the year computed in accordance with the
provisions of
ASC 718, excluding the impact of estimated repurchases by us related to service-based vesting conditions. The assumptions that we used to calculate these amounts are discussed in Note 6 to our
financial statements appearing at the end of this prospectus.
(3)
The amounts in the "Option awards" column reflect the aggregate grant date fair value of stock options granted during the year computed in accordance with the
provisions of
ASC 718, excluding the impact of estimated forfeitures related to
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service-based vesting conditions (which in our case were none). The assumptions that we used to calculate these amounts are discussed in Note 6 to our financial statements appearing at the end of this
prospectus.
(4)
The amounts in the "All other compensation" column reflect the value of perquisites and other personal benefits, which are further detailed below.
Name
401(k) match
($)
Group life
insurance
premium
($)
Relocation
expense
reimbursement
($)
Total
($)
Christoph Westphal, M.D., Ph.D.
Robert Forrester
Jonathan Pachter, Ph.D.
30,000
Paul Brannelly
Satish Jindal, Ph.D.
Peter Elliott, Ph.D.
(5)
Dr. Westphal does not receive any compensation from us for his service.
(6)
The bonus amount for Dr. Pachter represents a signing bonus of $50,000 paid upon the commencement of his employment with us.
(7)
In February 2011, Dr. Jindal transitioned from his former role as our President and Chief Operating Officer to his current capacity as our non-executive
employee
pursuant to the terms of a transition services agreement.
(8)
Dr. Elliott's employment with us ended in August 2011.
GRANTS OF PLAN-BASED AWARDS IN 2011
The following table sets forth information regarding grants of plan-based awards to our named executive officers during 2011.
Name
Grant date
All other stock
awards: number
of shares of stock
(#)
All other option awards:
number of securities
underlying options
(#)
Exercise price
of option
awards
($/share)
(1)
Grant date fair
value of stock
and option
awards
($)
(2)
Christoph Westphal, M.D., Ph.D.
—
—
—
—
—
Robert Forrester
3/3/2011
448,000
(3)
—
—
35,840
Jonathan Pachter, Ph.D.
9/6/2011
—
240,000
(4)
0.55
81,336
Paul Brannelly
—
—
—
—
—
Satish Jindal, Ph.D.
—
—
—
—
—
Peter Elliott, Ph.D.
3/3/2011
448,000
(5)
—
—
35,840
(1)
Option awards have been granted with exercise prices equal to the fair value of our common stock on the date of grant. For a discussion of our methodology for determining the fair
value of our common stock, see "Management's discussion and analysis of financial condition and results of operations—Critical accounting policies and significant estimates."
(2)
The amounts in the "Grant date fair value of stock and option awards" column reflect the grant date fair value of stock and option awards granted in 2011 calculated
in accordance with
ASC 718.
(3)
Mr. Forrester paid $0.08 per share for the stock award. Stock award vests with respect to 25% of the shares on the first anniversary of Mr. Forrester's
date of hire,
which was in March 2011, and with respect to the remaining shares in approximately equal quarterly installments through the first anniversary of his date of hire.
(4)
Option award vests with respect to 25% of the shares on the first anniversary of Dr. Pachter's date of hire, which was in July 2011, and with respect to
the remaining
shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
(5)
Dr. Elliott paid $0.08 per share for the stock award. Pursuant to a restricted stock agreement with Dr. Elliott, we repurchased 420,000 shares in
connection with
Dr. Elliott's transition from our employee to a member of our scientific advisory board. The remaining shares of stock are fully vested.
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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2011
The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2011.
Option awards
Number of
securities
underlying
unexercised
options
(#)
exercisable
Number of
securities
underlying
unexercised
options
(#)
unexercisable
Stock awards
Name
Option
exercise
price
($)
Option
expiration
date
Number of
shares that
have not
vested
(#)
Market value
of shares that
have not
vested
($)
Christoph Westphal, M.D., Ph.D.
—
—
—
—
1,134,375
(1)
(2)
Robert Forrester
—
—
—
—
448,000
(3)
(2)
Jonathan Pachter, Ph.D.
0
240,000
(4)
0.55
9/6/2021
—
—
Paul Brannelly
0
210,000
(5)
0.08
12/3/2020
—
—
Satish Jindal, Ph.D.
—
—
—
—
61,851
(6)
(2)
Peter Elliott, Ph.D.
—
—
—
—
—
—
(1)
Stock award vested with respect to 25% of the shares on the grant date, which was in August 2010, and vests with respect to the remaining shares in approximately equal
quarterly installments through the fourth anniversary of the grant date.
(2)
The market value of the stock award is based on the fair value of $             per share as of
December 31, 2011. For a discussion of our methodology for determining the
fair value of our common stock, see "Management's discussion and analysis of financial condition and results of operations—Critical accounting policies and significant estimates."
(3)
Stock award vests with respect to 25% of the shares on the first anniversary of Mr. Forrester's date of hire, which was in March 2011, and with respect to
the remaining
shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
(4)
Option award vests with respect to 25% of the shares on the first anniversary of Dr. Pachter's date of hire, which was in July 2011, and with respect to
the remaining
shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
(5)
Option award vests with respect to 25% of the shares on the first anniversary of Mr. Brannelly's date of hire, which was in November 2010, and with respect
to the
remaining shares in approximately equal quarterly installments through the fourth anniversary of his date of hire.
(6)
Stock award vests in installments specified in a restricted stock agreement with Dr. Jindal, as amended, and will be fully vested in February 2012.
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OPTIONS EXERCISED AND STOCK VESTED
None of our named executive officers exercised any options during 2011. The following table sets forth information regarding the vesting of stock
during 2011 for each of our named executive officers.
Stock awards
Name
Number of
shares acquired
on vesting
(#)
Value realized on
vesting
($)
(1)
Christoph Westphal, M.D., Ph.D.
412,500
(2)
229,969
Robert Forrester
0
—
Jonathan Pachter, Ph.D.
—
—
Paul Brannelly
—
—
Satish Jindal, Ph.D.
234,375
(3)
130,663
Peter Elliott, Ph.D.
28,000
(4)
15,400
(1)
The value realized upon vesting is equal to the fair value of our common stock on the vesting date multiplied by number of shares acquired on vesting.
(2)
Stock award vested with respect to 25% of the shares on the grant date, which was in August 2010, and vests with respect to the remaining shares in
approximately equal
quarterly installments through the fourth anniversary of the grant date.
(3)
Stock award vests in installments specified in a restricted stock agreement with Dr. Jindal, as amended, and will be fully vested in February 2012.
(4)
Pursuant to a restricted stock agreement with Dr. Elliott, we repurchased 420,000 shares in connection with Dr. Elliott's transition from our employee to a
member of our
scientific advisory board. The remaining shares of stock are fully vested.
PENSION BENEFITS
We do not maintain any defined benefit pension plans.
NONQUALIFIED DEFERRED COMPENSATION
We do not maintain any nonqualified deferred compensation plans.
STOCK OPTION AND OTHER EMPLOYEE BENEFIT PLANS
The two equity incentive plans described in this section are the 2010 equity incentive plan and the 2012 stock incentive plan. Prior to this
offering, we granted awards to eligible participants under the 2010 equity incentive plan. Following the closing of this offering, we expect to grant awards to eligible participants under the 2012
stock incentive plan, which we expect to adopt prior to the closing of this offering.
2012 stock incentive plan
We expect our board of directors to adopt and our stockholders to approve the 2012 stock incentive plan, which will become effective immediately
prior to the closing of this offering. The 2012 stock incentive plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted
stock awards, restricted stock units and other stock-based awards. Upon effectiveness of the plan, the number of shares of our common stock that will be reserved for issuance under the 2012 stock
incentive plan will be the sum of             shares plus the number of shares (up to             ) equal to the sum of
the number of shares of our common stock then available for issuance
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under
the 2010 equity incentive plan described below and the number of shares of our common stock subject to outstanding awards under the 2010 equity incentive plan, described below, that expire,
terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right.
Our
employees, officers, directors, consultants and advisors are eligible to receive awards under the 2012 stock incentive plan. However, incentive stock options may only be granted to our employees.
The maximum number of shares of our common stock with respect to which awards may be granted to any participant under the 2012 stock incentive plan is             per calendar year. For
purposes
of this limit on the maximum number of shares that may be awarded to any participant, the combination of an option in tandem with a stock appreciation right will be treated as a single award.
Pursuant
to the terms of the 2012 stock incentive plan, our board of directors administers the plan and, subject to any limitations in the plan, selects the recipients of awards and determines:
–>
the
number of shares of our common stock covered by options and the dates upon which the options become exercisable;
–>
the
type of options to be granted;
–>
the
duration of options, which may not be in excess of ten years;
–>
the
exercise price of options, which must be at least equal to the fair market value of our common stock on the date of grant; and
–>
the
number of shares of our common stock subject to and the terms of any stock appreciation rights, restricted stock awards, restricted stock units or other
stock-based awards and the terms and conditions of such awards, including conditions for repurchase, issue price and repurchase price.
If
our board of directors delegates authority to an executive officer to grant awards under the 2012 stock incentive plan, the executive officer has the power to make awards to all of our employees,
except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards, and the maximum number of
shares subject to awards that such executive officer may make.
Upon
a merger or other reorganization event, our board of directors may, in its sole discretion, take any one or more of the following actions pursuant to the 2012 stock incentive plan as to some or
all outstanding awards other than restricted stock:
–>
provide
that all outstanding awards shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring or successor corporation (or an
affiliate thereof);
–>
upon
written notice to a participant, provide that all of the participant's unexercised awards will terminate immediately prior to the consummation of such
reorganization event unless exercised by the participant;
–>
provide
that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to an award shall lapse, in whole or in part, prior
to or upon such reorganization event;
–>
in
the event of a reorganization event pursuant to which holders of shares of our common stock will receive a cash payment for each share surrendered in the
reorganization event, make or provide for a cash payment to the participants with respect to each award held by a participant equal to (1) the number of shares of common stock subject to the
vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such
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reorganization
event) multiplied by (2) the excess, if any, of the cash payment for each share surrendered in the reorganization event over the exercise, measurement or purchase price of such
award and any applicable tax withholdings, in exchange for the termination of such award;
–>
provide
that, in connection with a liquidation or dissolution, awards shall convert into the right to receive liquidation proceeds.
Our
board of directors does not need to take the same action with respect to all awards and may take different actions with respect to portions of the same award.
In
the case of certain restricted stock units, no assumption or substitution is permitted, and the restricted stock units will instead be settled in accordance with the terms of the applicable
restricted stock unit agreement.
Upon
the occurrence of a reorganization event other than a liquidation or dissolution, the repurchase and other rights with respect to outstanding restricted stock awards will continue for the benefit
of the successor company and will, unless the board of directors may otherwise determine, apply to the cash, securities or other property into which shares of our common stock are converted or
exchanged
pursuant to the reorganization event. Upon the occurrence of a reorganization event involving a liquidation or dissolution, all restrictions and conditions on each outstanding restricted stock award
will automatically be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award.
At
any time, our board of directors may, in its sole discretion, provide that any award under the 2012 stock incentive plan will become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part.
No
award may be granted under the 2012 stock incentive plan on or after                    , 2022. Our board of directors may amend, suspend or terminate
the 2012 stock incentive plan at any time, except
that stockholder approval may be required to comply with applicable law or stock market requirements.
2010 equity incentive plan
Our 2010 equity incentive plan was adopted by our board of directors and approved by our stockholders in November 2010. Upon the closing of this
offering and the approval of the 2012 stock incentive plan, we do not expect to grant any additional awards under the 2010 equity incentive plan.
The
2010 equity incentive plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units and stock appreciation
rights. The number of shares of our common stock that are reserved for issuance under the 2010 equity incentive plan is 1,999,348.
Our
employees, directors, consultants and advisors are eligible to receive awards under the 2010 equity incentive plan. However, incentive stock options may only be granted to our employees.
Upon
a merger or other reorganization event, our board of directors may, in its sole discretion, take any one or more of the following actions pursuant to the 2010 equity incentive plan as to some or
all outstanding awards:
–>
arrange
for all outstanding awards to be assumed, or equivalent awards shall be substituted, by the surviving or acquiring corporation (or the surviving or acquiring
corporation's parent company);
–>
arrange
for the assignment of any reacquisition or repurchase rights to the surviving corporation or acquiring corporation (or the surviving or acquiring
corporation's parent company);
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–>
accelerate
the vesting of any outstanding award to a date on or prior to the effective time of such merger or other reorganization event;
–>
arrange
for the lapse of any of our reacquisition or repurchase rights;
–>
cancel
or arrange for the cancellation of the award, to the extent not vested or not exercised prior to the effective time of such merger or other reorganization
event; and/or
–>
make
a payment, in such form as may be determined by our board of directors, equal to the excess, if any, of (A) the value of the property the holder of the
award would have received upon the exercise of the award, over (B) any exercise price payable by such holder in connection with such exercise.
Our
board of directors does not need to take the same action with respect to all awards and may take different actions with respect to portions of the same award.
At
any time, our board of directors may, in its sole discretion, provide that any award under the 2010 equity incentive plan will become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part.
As
of September 30, 2011, there were options to purchase an aggregate of 1,418,000 shares of common stock outstanding under the 2010 equity incentive plan at a weighted-average exercise price
of $0.21 per share and no shares of common stock issued upon the exercise of options granted under
the 2010 equity incentive plan. If the 2012 stock incentive plan is approved by our stockholders, we will grant no further stock options or other awards under the 2010 equity incentive plan. However,
any shares of common stock reserved for issuance under the 2010 equity incentive plan that remain available for issuance and any shares of common stock subject to awards under the 2010 equity
incentive plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at the original issuance price pursuant to a contractual repurchase right will be
available for issuance under the 2012 stock incentive plan up to a specified number of shares.
401(K) RETIREMENT PLAN
We maintain a defined contribution employee retirement plan for our employees. Our 401(k) plan is intended to qualify as a tax-qualified
plan under Section 401 of the Internal Revenue Code so that contributions to our 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or
distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute up to 100% of his or her pre-tax compensation, up to a statutory limit, which is $17,000 for
2012. Participants who are at least 50 years old can also make "catch-up" contributions, which in 2012 may be up to an additional $5,500 above the statutory limit. Under our 401(k)
plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan's trustee. Our 401(k) plan also permits us to make
discretionary contributions and matching contributions, subject to established limits and a vesting schedule. Beginning in July 2011, we made an employer matching contribution equal to (1) 100%
of employee deferral contributions up to a deferral rate of 3% of compensation plus (2) 50% of employee deferral contributions up to an deferral rate of an additional 2% of compensation.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our certificate of incorporation, which will become effective upon the closing of this offering, limits the personal liability of directors for
breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law and provides that no director will have personal liability to us or
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to
our stockholders for monetary damages for breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors:
–>
for
any breach of the director's duty of loyalty to us or our stockholders;
–>
for
acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
–>
for
voting for or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
–>
for
any transaction from which the director derived an improper personal benefit.
Any
amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such amendment or
repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will
be further limited to the greatest extent permitted by the Delaware General Corporation Law.
In
addition, our certificate of incorporation, which will become effective upon the closing of this offering, provides that we must indemnify our directors and officers and we must advance expenses,
including attorneys' fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
We
maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or
officers. In addition, we have entered into indemnification agreements with our directors. These indemnification agreements may require us, among other things, to indemnify each such director for some
expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by him in any action or proceeding arising out of his service as one of our directors.
Certain
of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members
of our board of directors.
RULE 10B5-1 SALES PLANS
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a
broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or
officer when entering into the plan, without further direction from the director or officer. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive
officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.
DIRECTOR COMPENSATION
During 2011, we did not pay cash compensation to any director for his service as a director, except Henri Termeer. Mr. Termeer receives an
annual retainer fee of $25,000 for his service on our board of directors. We have historically reimbursed our non-employee directors for reasonable travel and other expenses incurred in
connection with attending board of director and committee meetings.
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As
discussed in the "Executive compensation" section of this prospectus, our chief executive officer, Christoph Westphal, M.D., Ph.D., who is also chairman of our board of directors, does not receive,
and has not historically received, any compensation in connection with his service.
During
2011, we did not grant equity awards as compensation to any of our directors, except Henri Termeer. In June 2011, in recognition of the commencement of his service on our board of directors, we
granted Mr. Termeer an option to purchase 125,000 shares of our common stock. This option vests with respect to 25% of the shares on the first anniversary of the grant date and with respect to
the remaining shares in approximately equal quarterly installments through the fourth anniversary of the grant date. The exercise price of this option is $0.08 per share, the fair value of our common
stock on the date of grant as determined by our board of directors.
Effective
upon the closing of this offering, our non-employee directors will be compensated as follows:
In
addition, we will continue to reimburse our non-employee directors for reasonable travel and other expenses incurred in connection with attending board of director and committee
meetings.
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Transactions with related persons
Since our incorporation in August 2010, we have engaged in the following transactions with our directors, executive officers, holders
of more than 5% of our voting securities, and affiliates or immediately family members of our directors, executive officers and holders of more than 5% of our voting securities, and our
co-founders. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.
SERIES C PREFERRED STOCK FINANCING
In November 2011, we issued and sold an aggregate of 8,934,493 shares of our series C preferred stock at a price per share of $2.25 for an
aggregate purchase price of $20.1 million. The following table sets forth the number of shares of our series C preferred stock that we issued to our 5% stockholders and their affiliates.
Name
(1)
Shares of series C
preferred stock
Advanced Technology Ventures VIII, L.P.
100,000
Entities affiliated with Bessemer Venture Partners
(2)
133,333
(3)
CHP III, L.P.
(4)
444,444
Eastern Capital Limited
4,000,000
Longwood Founders Fund, LP
(5)
444,444
MPM Bioventures V, LP
(6)
266,666
(1)
See "Principal stockholders" for more information about shares held by these entities.
(2)
Stephen Kraus, a member of our board of directors, is employed by Bessemer Venture Partners and has no voting or dispositive power with respect to the shares held by
entities
affiliated with Bessemer Venture Partners.
(3)
Consists of (a) 18,667 shares purchased by Bessemer Venture Partners VII Institutional L.P., (b) 42,667 shares purchased by Bessemer Venture Partners
VII L.P. and (c) 71,999 shares purchased by BVP VII Special Opportunity Fund L.P.
(4)
John K. Clarke, a member of our board of directors, is a managing member of CHP III Management, LLC, the general partner of CHP III, L.P.
(5)
Christoph Westphal, M.D., Ph.D. and Richard Aldrich, members of our board of directors, are partners of Longwood Founders Fund, LP.
(6)
Ansbert Gadicke, M.D., a member of our board of directors, is the managing director of MPM Capital and a member of MPM Bioventures V LLC, the general partner of
MPM Bioventures
V GP, LLC, which is the general partner of MPM Bioventures V, LP.
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SERIES B PREFERRED STOCK FINANCING
In July 2011, we issued and sold an aggregate of 16,025,000 shares of our series B preferred stock at a price per share of $2.00 for an
aggregate purchase price of $32,050,000. The following table sets forth the number of shares of our series B preferred stock that we issued to our 5% stockholders and their affiliates.
Name
(1)
Shares of series B
preferred stock
Advanced Technology Ventures VIII, L.P.
2,500,000
Entities affiliated with Bessemer Venture Partners
(2)
2,500,000
(3)
CHP III, L.P.
(4)
2,500,000
Longwood Founders Fund, LP
(5)
3,500,000
MPM Bioventures V, LP
(6)
2,500,000
(1)
See "Principal stockholders" for more information about shares held by these entities.
(2)
Stephen Kraus, a member of our board of directors, is employed by Bessemer Venture Partners and has no voting or dispositive power with respect to the shares held by
entities
affiliated with Bessemer Venture Partners.
(3)
Consists of (a) 350,000 shares purchased by Bessemer Venture Partners VII Institutional L.P., (b) 800,000 shares purchased by Bessemer Venture
Partners
VII L.P. and (c) 1,350,000 shares purchased by BVP VII Special Opportunity Fund L.P.
(4)
John K. Clarke, a member of our board of directors, is a managing member of CHP III Management, LLC, the general partner of CHP III, L.P.
(5)
Christoph Westphal, M.D., Ph.D. and Richard Aldrich, members of our board of directors, are partners of Longwood Founders Fund, LP.
(6)
Ansbert Gadicke, M.D., a member of our board of directors, is the managing director of MPM Capital and a member of MPM Bioventures V LLC, the general partner of
MPM Bioventures
V GP, LLC, which is the general partner of MPM Bioventures V, LP.
SERIES A PREFERRED STOCK FINANCING
In November 2010 and April 2011, we issued and sold an aggregate of 16,000,000 shares of our series A preferred stock at a price per share of
$1.00 for an aggregate purchase price of $16,000,000. The following table sets forth the number of shares of our series A preferred stock that we issued to our 5% stockholders and their
affiliates.
Name
(1)
Shares of series A
preferred stock
Entities affiliated with Bessemer Venture Partners
(2)
4,000,000
(3)
CHP III, L.P.
(4)
4,000,000
Longwood Founders Fund, LP
(5)
4,000,000
MPM Bioventures V, LP
(6)
4,000,000
(1)
See "Principal stockholders" for more information about shares held by these entities.
(2)
Stephen Kraus, a member of our board of directors, is employed by Bessemer Venture Partners and has no voting or dispositive power with respect to the shares held by
entities
affiliated with Bessemer Venture Partners.
(3)
Consists of (a) 560,000 shares purchased by Bessemer Venture Partners VII Institutional L.P., (b) 1,280,000 shares purchased by Bessemer Venture
Partners
VII L.P. and (c) 2,160,000 shares purchased by BVP VII Special Opportunity Fund L.P.
(4)
John K. Clarke, a member of our board of directors, is a managing member of CHP III Management, LLC, the general partner of CHP III, L.P.
(5)
Christoph Westphal, M.D., Ph.D. and Richard Aldrich, members of our board of directors, are partners of Longwood Founders Fund, LP.
(6)
Ansbert Gadicke, M.D., a member of our board of directors, is the managing director of MPM Capital and a member of MPM Bioventures V LLC, the general partner of
MPM Bioventures
V GP, LLC, which is the general partner of MPM Bioventures V, LP.
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RESTRICTED STOCK GRANTS TO CO-FOUNDERS
In August 2010, in connection with our formation, we issued and sold an aggregate of 10,000,000 shares of our common stock at a price per share of
$0.0001 for an aggregate purchase price of $1,000 to our co-founders. These shares are subject to repurchase by us pursuant to restricted stock agreements with each of our
co-founders. These shares vest with respect to 25% of the shares on the grant date and with respect to the remaining shares in approximately equal quarterly installments through the fourth
anniversary of the grant date. The following table sets forth the number of shares of common stock that we issued to our co-founders.
Name
Shares of
common stock
Richard Aldrich
(1)
1,900,000
(2)
Michelle Dipp
600,000
Piyush Gupta, Ph.D.
(1)
1,550,000
(3)
Eric Lander, Ph.D.
1,250,000
Satish Jindal
1,250,000
(4)
Robert Weinberg, Ph.D.
1,250,000
Christoph Westphal, M.D., Ph.D.
(1)
2,200,000
(5)
(1)
Richard Aldrich and Christoph Westphal, M.D., Ph.D. are members of our board of directors. Piyush Gupta, Ph.D. is a former member of our board of directors.
(2)
475,000 of these shares were subsequently transferred to the Richard H. Aldrich Irrevocable Trust of 2011.
(3)
300,000 of these shares were issued to Dr. Gupta in connection with his role as a former member of our board of directors.
(4)
In connection with the transition of Dr. Jindal from our President and Chief Operating Officer to our non-executive employee in February 2011, we repurchased
582,681 shares from him. Accordingly, Dr. Jindal owns 667,319 shares of our common stock as of September 30, 2011.
(5)
440,000 of these shares were subsequently transferred to The Foundation Irrevocable Trust of 2010.
SCIENTIFIC ADVISORY BOARD AGREEMENTS WITH CO-FOUNDERS
Three of our co-founders, Robert Weinberg, Ph.D., Eric Lander, Ph.D., and Piyush Gupta, Ph.D., are also members of our scientific
advisory board and receive compensation for their participation pursuant to our scientific advisory board agreements with them. The following table sets forth the amount of cash compensation paid to
each of these co-founders for their membership on our scientific advisory board since our formation.
Name
Amount
Piyush Gupta, Ph.D.
(1)
$
100,000
Eric Lander, Ph.D.
$
75,000
Robert Weinberg, Ph.D.
$
75,000
(1)
Piyush Gupta, Ph.D. is a former member of our board of directors.
AGREEMENTS WITH ENTITIES AFFILIATED WITH CO-FOUNDERS
From our formation in August 2010 through May 2011, we rented office space from Longwood Founders Fund, LP, an entity affiliated with three of
our co-founders, Richard Aldrich, Michelle Dipp and Christoph Westphal, M.D., Ph.D. We paid Longwood Founders Fund, LP an aggregate of $46,000 for our office space.
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Transactions with related persons
In
October 2010, we entered into agreements regarding the licensing of intellectual property with the Whitehead Institute, an entity affiliated with two of our co-founders, Robert
Weinberg, Ph.D. and Piyush Gupta, Ph.D., and the Broad Institute, an entity affiliated with one of our co-founders, Eric Lander, Ph.D. See "Business—Licenses" for additional
information regarding these agreements. Pursuant to one of the agreements, we issued 583,333 shares of our common stock to the Whitehead Institute and entities and individuals affiliated with the
Whitehead Institute, including three of our co-founders. The following table sets forth the number of shares of common stock that we issued to our co-founders in connection
with our agreement with the Whitehead Institute.
Name
Shares of
common stock
Piyush Gupta, Ph.D.
(1)
27,609
Eric Lander, Ph.D.
22,088
Robert Weinberg, Ph.D.
22,088
(1)
Piyush Gupta, Ph.D. is a former member of our board of directors.
REGISTRATION RIGHTS
We are a party to an investor rights agreement with certain holders of our common stock and holders of our series A preferred stock,
series B preferred stock and series C preferred stock, including some of our directors, executive officers and 5% stockholders and their affiliates and entities affiliated with our
directors. The investor rights agreement provides these holders the right, following the completion of this offering, to demand that we file a registration statement or request that their
shares be covered by a registration statement that we are otherwise filing. See "Description of capital stock—Registration rights" for additional information regarding these registration
rights.
INDEMNIFICATION AGREEMENTS
Our certificate of incorporation in effect upon the closing of this offering provides that we will indemnify our directors and officers to the
fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with our directors. See "Executive compensation—Limitation of liability and
indemnification" for additional information regarding these agreements.
POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONS
Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Verastem
is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we refer to
as a "related person," has a direct or indirect material interest.
If
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 chief operating 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 entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion,
may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that arise between
committee meetings,
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subject
to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A
related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full disclosure of the related person's interest in the
transaction. As appropriate for the circumstances, the committee will review and consider:
–>
the
related person's interest in the related person transaction;
–>
the
approximate dollar value of the amount involved in the related person transaction;
–>
the
approximate dollar value of the amount of the related person's interest in the transaction without regard to 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 reached with 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 the proposed transaction that would be material to investors
in light of the circumstances of the particular transaction.
The
committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in Verastem's best interests. The committee may impose any
conditions on the related person transaction that it deems appropriate.
In
addition to the transactions that are excluded by the instructions to the SEC's related person transaction disclosure rule, our board of directors has determined that the following transactions do
not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
–>
interests
arising solely from the related person's position as an executive officer of another entity (whether or not the person is also a director of such entity)
that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related
person and his or her immediate family members are not involved in the negotiation of 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 gross revenues 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 and approved by the compensation committee in the manner specified in its charter.
We
did not have a written policy regarding the review and approval of related person transactions prior to this offering. Nevertheless, with respect to such transactions, it was our policy for our
board of directors to consider the nature of and business reason for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and
whether such transactions were otherwise fair to and in the best interests of, or not contrary to, our best interests. In addition, all related person transactions required prior approval, or later
ratification, by our board of directors.
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Principal stockholders
The following table sets forth information with respect to the beneficial ownership of our common stock as of September 30,
2011 by:
–>
each
of our directors;
–>
each
of our named executive officers;
–>
all
of our directors and executive officers as a group; and
–>
each
person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock.
The
column entitled "Percentage of shares beneficially owned—Before offering" is based on a total of 51,436,145 shares of our common stock outstanding as of September 30, 2011,
updated to reflect our issuance and sale of an aggregate of 8,934,493 shares of our series C preferred stock in November 2011 and assuming the conversion of all outstanding shares of our
preferred stock into an aggregate of 40,959,493 shares of our common stock, including shares of our series C preferred stock that we issued and sold in November 2011, upon the closing of this
offering.
The
column entitled "Percentage of shares beneficially owned—After offering" is based on                  shares of our common stock to be outstanding after
this offering, including the
                  shares of our common stock that we are selling in this offering, but not including any additional shares issuable upon exercise of outstanding
options.
Beneficial
ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock. Shares of our common stock subject
to options that are currently exercisable or exercisable within 60 days of September 30, 2011 are considered outstanding and beneficially owned by the person holding the options for the
purpose of calculating the percentage ownership of that person but not for the purpose of calculating the percentage ownership of any other person. Except as otherwise noted, we believe the persons
and entities in this table have sole voting and investing power with respect to all of the shares of our common stock beneficially owned by them, subject to community property laws, where applicable.
Except as otherwise set forth below, the address of the beneficial owner is c/o Verastem, Inc., 215 First Street, Suite 440, Cambridge, Massachusetts 02142.
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Principal stockholders
Percentage of shares
beneficially owned
Name and address of beneficial owner
Number of shares
beneficially owned
Before
offering
After
offering
5% stockholders:
Advanced Technology Ventures VIII, L.P.
(1)
2,600,000
5.1
%
%
1000 Winter Street
Waltham, MA 02451
Entities affiliated with Bessemer Venture Partners
(2)
6,633,333
12.9
%
%
196 Broadway, 2nd Floor
Cambridge, MA 02139
CHP III, L.P.
(3)
6,944,444
13.5
%
%
230 Nassau Street
Princeton, NJ 08542
Eastern Capital Limited
(4)
4,000,000
7.8
%
%
c/o Foreshore Corporate Services Ltd.
4th Floor, Queensgate House
113 South Church Street
George Town, Grand Cayman KY1-1104
Cayman Islands
Longwood Founders Fund, LP
(5)
7,944,444
15.5
%
%
800 Boylston Street, Suite 1555
Boston, MA 02199
MPM Bioventures V, LP
(6)
6,766,666
13.2
%
%
c/o MPM Asset Management
200 Clarendon Street, 54th Floor
Boston, MA 02116
Directors and Executive Officers
Christoph Westphal, M.D., Ph.D.
(7)
10,144,444
19.7
%
%
Robert Forrester
448,000
*
%
Jonathan Pachter, Ph.D.
—
—
%
Satish Jindal, Ph.D.
667,319
1.3
%
%
Paul Brannelly
—
—
%
Peter Elliot, Ph.D.
28,000
*
%
Richard Aldrich
(8)
9,844,444
19.1
%
%
John K. Clarke
(9)
6,944,444
13.5
%
%
Ansbert Gadicke, M.D.
(10)
6,766,666
13.2
%
%
Stephen Kraus
(11)
—
—
%
Henri Termeer
—
—
%
All executive officers and directors as a group (8 persons)
(12)
26,203,554
50.9
%
%
*
Represents beneficial ownership of less than one percent of our outstanding common stock.
(1)
Consists of (a) 2,500,000 shares of common stock underlying shares of series B preferred stock, and (b) 100,000 shares of common stock underlying
shares of
series C preferred stock. No natural person holds voting or dispositive power for the shares of our common stock held by Advanced Technologies Ventures VIII, L.P ("ATV VIII"). ATV Associates
VIII, LLC ("ATV VIII LLC") is the general partner of ATV VIII and controls its investment and voting decisions. Decisions of ATV VIII LLC are made by a board of six managing
directors (the "ATV Managing Directors"). The ATV Managing Directors
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Principal stockholders
are Steve Baloff, Michael Carusi, Wes Raffel, Jean George, Bob Hower and William Wiberg. Each of the ATV Managing Directors disclaims beneficial ownership of the shares held by ATV VIII.
(2)
Consists of (a) 560,000 shares of common stock underlying shares of series A preferred stock held by Bessemer Venture Partners VII Institutional L.P. ("BVP
Institutional"), (b) 1,280,000 shares of common stock underlying shares of series A preferred stock held by Bessemer Venture Partners VII L.P. ("BVP VII"),
(c) 2,160,000 shares of common stock underlying shares of series A preferred stock held by BVP VII Special Opportunity Fund L.P. ("BVP Special Opportunity" and together
with BVP Institutional and BVP VII, "Bessemer Venture Partner Entities"), (d) 350,000 shares of common stock underlying shares of series B preferred stock held by Bessemer Venture
Partners VII Institutional L.P., (e) 800,000 shares of common stock underlying shares of series B preferred stock held by Bessemer Venture Partners VII L.P.,
(f) 1,350,000 shares of common stock underlying shares of series B preferred stock held by BVP VII Special Opportunity Fund L.P., (g) 18,667 shares of common
stock underlying shares of series C preferred stock held by Bessemer Venture Partners VII Institutional L.P., (h) 42,667 shares of common stock underlying shares of
series C preferred stock held by Bessemer Venture Partners VII L.P., and (i) 71,999 shares of common stock underlying shares of series C preferred stock held by
BVP VII Special Opportunity Fund L.P. Deer VII & Co. L.P. ("Deer L.P.") is the general partner of the Bessemer Venture Partner Entities. Deer VII & Co. Ltd. is the general
partner of Deer L.P. J. Edmund Colloton, Robin S. Chandra, David J. Cowan, Robert P. Goodman, Jeremy S. Levine and Robert M. Stavis are the directors of Deer
VII & Co. Ltd. and share voting and dispositive power over the shares of stock held by the Bessemer Venture Partner Entities. Each of Mr. Colloton, Ms. Chandra, Mr. Cowan,
Mr. Goodman, Mr. Levine and Mr. Stavis disclaims beneficial ownership of the shares identified in this footnote except as to his or her respective proportionate pecuniary interest
in such shares.
(3)
Consists of (a) 4,000,000 shares of common stock underlying shares of series A preferred stock, (b) 2,500,000 shares of common stock underlying shares
of
series B preferred stock, and (c) 444,444 shares of common stock underlying shares of series C preferred stock. John K. Clarke, Brandon H. Hull, Charles G.
Hadley and John J. Park are the managing members of CHP III Management, LLC, the General Partner of CHP III, L.P., and exercise shared voting, investment, and dispositive rights
with respect to the shares of stock held by CHP III, L.P. Each of Messrs. Clarke, Hull, Hadley and Park disclaims beneficial ownership of the shares identified in this footnote except as
to his respective proportionate pecuniary interest in such shares.
(4)
Consists of 4,000,000 shares of common stock underlying shares of series C preferred stock. Eastern Capital Limited is a direct wholly owned subsidiary of
Portfolio Services
Ltd., a Cayman Islands company. Kenneth Dart is the beneficial owner of all of the outstanding shares of Portfolio Services Ltd., which in turn owns all the outstanding shares of Eastern Capital
Limited. Eastern Capital Limited and Mr. Dart have shared voting and dispositive power with respect to the shares held.
(5)
Consists of (a) 4,000,000 shares of common stock underlying shares of series A preferred stock, (b) 3,500,000 shares of common stock underlying shares
of
series B preferred stock and (c) 444,444 shares of common stock underlying shares of series C preferred stock. Longwood Founder GP, LLC (the "General Partner") is
the general partner of Longwood Founders Fund, LP and exercises voting and investment power with respect to securities owned directly by Longwood Founders Fund, LP. Richard Aldrich,
Michelle Dipp and Christoph Westphal are the managers of the General Partner and share voting and dispositive power with respect to the securities held by Longwood Founders Fund, LP. The
General Partner disclaims beneficial ownership of the securities owned directly by Longwood Founders Fund, LP and this report shall not be deemed an admission that the General Partner is the
beneficial owner of such securities, except to the extent of its pecuniary interest therein.
(6)
Consists of (a) 4,000,000 shares of common stock underlying shares of series A preferred stock, (b) 2,500,000 shares of common stock underlying shares
of
series B preferred stock and (c) 266,666 shares of common stock underlying shares of series C preferred stock. MPM Bioventures V GP, LLC ("MPM V GP") is the
general partner of MPM Bioventures V, LP and MPM Bioventures V LLC ("MPM V LLC") is the managing member of MPM V GP. Luke Evnin, Todd Foley, Ansbert Gadicke, Vaughn Kalian,
James Scopa, Steven St. Peter and John Vander Vort are the members of MPM V LLC and have shared power to vote, hold and dispose of the shares held by MPM Bioventures V, LP.
Each disclaims beneficial ownership of the securities reported herein except to the extent of his respective pecuniary interest therein.
(7)
Consists of (a) 1,760,000 shares of common stock held by Dr. Westphal, (b) 440,000 shares of common stock held by The Foundation Irrevocable Trust of
2010 and
(c) 7,944,444 shares held by Longwood Founders Fund, LP. The trustee of The Foundation Irrevocable Trust of 2010 is James Kittler and he exercises sole voting and investment power of the
shares of record held by the trust. The ultimate general partner of Longwood Founders Fund, LP is Longwood Founder GP, LLC. Voting and investment power with respect to the shares held by
Longwood Founders Fund, LP. are vested in Richard Aldrich, Michelle Dipp and Dr. Westphal, the managers of Longwood Founder GP, LLC.
(8)
Consists of (a) 1,425,000 shares of common stock held by Mr. Aldrich, (b) 475,000 shares of common stock held by Richard H. Aldrich Irrevocable
Trust of
2011 and (c) 7,944,444 shares held by Longwood Founders Fund, LP. The trustee
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Principal stockholders
of the Richard H. Aldrich Irrevocable Trust of 2011 is Nicole Aldrich and she exercises sole voting and investment power over the shares of record held by the trust. The ultimate general
partner of Longwood Founders Fund, LP is Longwood Founder GP, LLC. Voting and investment power with respect to the shares held by Longwood Founders Fund, LP. are vested in
Mr. Aldrich, Michelle Dipp and Christoph Westphal, the managers of Longwood Founder GP, LLC.
(9)
Consists of 6,944,444 shares held by CHP III, L.P. John K. Clarke, Brandon H. Hull, Charles G. Hadley and John J. Park are the managing members of
CHP III Management, LLC, the General Partner of CHP III, L.P., and exercise shared voting, investment, and dispositive rights with respect to the shares of stock held by CHP
III, L.P. Each of Messrs. Clarke, Hull, Hadley and Park disclaims beneficial ownership of the shares identified in this footnote except as to his respective proportionate pecuniary
interest in such shares.
(10)
Consists of 6,766,666 shares held by MPM Bioventures V, LP. MPM V GP is the general partner of MPM Bioventures V, LP and MPM V LLC is the
managing member
of MPM V GP. Luke Evnin, Todd Foley, Ansbert Gadicke, Vaughn Kalian, James Scopa, Steven St. Peter and John Vander Vort are the members of MPM V LLC and have shared power to vote,
hold and dispose of the shares held by MPM Bioventures V, LP. Each disclaims beneficial ownership of the securities reported herein except to the extent of his respective pecuniary
interest therein.
(11)
Mr. Kraus serves as an employee of Bessemer Venture Partners, the management company affiliate of the Bessemer Venture Partner Entities that hold an aggregate of
6,333,333 shares of
our common stock underlying shares of preferred stock as described above. Mr. Kraus has no voting or dispositive power with respect to the shares held by the Bessemer Venture Partner Entities
and disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
(12)
Consists of an aggregate of 26,203,554 shares of common stock.
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Description of capital stock
GENERAL
The following description of our capital stock and provisions of our certificate of incorporation and bylaws are summaries and are qualified by
reference to the certificate of incorporation and the bylaws that will be in effect upon the closing of this offering. We have filed copies of these documents with the SEC as exhibits to our
registration statement of which this prospectus forms a part. The description of the capital stock reflects changes to our capital structure that will occur upon the closing of this offering.
Upon
the closing of this offering, our authorized capital stock will consist of                  shares of our common stock, par value $0.0001 per share,
and                  shares of our preferred
stock, par value $0.0001 per share, all of which preferred stock will be undesignated.
As
of September 30, 2011, we had issued and outstanding:
–>
10,476,652
shares of our common stock outstanding held by 11 stockholders of record;
–>
16,000,000
shares of our series A preferred stock that will automatically convert into 16,000,000 shares of our common stock upon the closing of this
offering;
–>
16,025,000
shares of our series B preferred stock that will automatically convert into 16,025,000 shares of our common stock upon the closing of this
offering; and
–>
8,934,493
shares of our series C preferred stock that will automatically convert into 8,934,493 shares of our common stock upon the closing of this offering.
As
of September 30, 2011, we also had outstanding options to purchase 1,418,000 shares of our common stock at a weighted-average exercise price of $0.21 per share.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common
stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock.
In
the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts
and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and
issue in the future.
PREFERRED STOCK
Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one or more series
without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, of each series of preferred stock.
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Description of capital stock
The
purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The
issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Upon the closing of this offering, there will be no shares of preferred
stock outstanding, and we have no present plans to issue any shares of preferred stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAWS PROVISIONS
Delaware law
We are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a
publicly-traded Delaware corporation from engaging in a "business combination" with any "interested stockholder" for three years following the date that the person became an interested
stockholder, unless either the interested stockholder attained such status with the approval of our board of directors, the business combination is approved by our board of directors and stockholders
in a prescribed manner or the interested stockholder acquired at least 85% of our outstanding voting stock in the transaction in which it became an interested stockholder. A "business combination"
includes, among other things, a merger or consolidation involving us and the "interested stockholder" and the sale of more than 10% of our assets. In general, an "interested stockholder" is any entity
or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person. The restrictions contained in
Section 203 are not applicable to any of our existing stockholders that will own 15% or more of our outstanding voting stock upon the closing of this offering.
Staggered board
Our certificate of incorporation and our bylaws divide our board of directors into three classes with staggered three-year terms. In
addition, our certificate of incorporation and our bylaws provide that directors may be removed only for cause and only by the affirmative vote of the holders of 75% of our shares of capital stock
present in person or by proxy and entitled to vote. Under our certificate of incorporation and bylaws, any vacancy on our board of directors, including a vacancy resulting from an enlargement of our
board of directors, may be filled only by vote of a majority of our directors then in office. Furthermore, our certificate of incorporation provides that the authorized number of directors may be
changed only by the resolution of our board of directors. The classification of our board of directors and the limitations on the ability of our stockholders to remove directors, change the authorized
number of directors and fill vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.
Stockholder action; special meeting of stockholders; advance notice requirements for stockholder proposals and director nominations
Our certificate of incorporation and our bylaws provide that any action required or permitted to be taken by our stockholders at an annual meeting or
special meeting of stockholders may only be taken if it is properly brought before such meeting and may not be taken by written action in lieu of a meeting. Our certificate of incorporation and our
bylaws also provide that, except as otherwise required by law, special meetings of the stockholders can only be called by our chairman of the board, our president or chief executive officer or our
board of directors. In addition, our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of
candidates for election to our board of directors.
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Description of capital stock
Stockholders
at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors, or by a
stockholder of record on the record date for the meeting who is entitled to vote at the meeting and who has delivered timely written notice in proper form to our secretary of the stockholder's
intention to bring such business before the meeting. These provisions could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a
majority of our outstanding voting securities. These provisions also could discourage a third party from making a tender offer for our common stock, because even if it acquired a majority of our
outstanding voting stock, it would be able to take action as a stockholder, such as electing new directors or approving a merger, only at a duly called stockholders meeting and not by written consent.
Super-majority voting
The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless a corporation's certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws
may be amended or repealed by a majority vote of our board of directors or the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in any
annual election of directors. In addition, the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in any election of directors is required
to amend or repeal or to adopt any provisions inconsistent with any of the provisions of our certificate of incorporation described above.
Registration rights
We have entered into a second amended and restated investor rights agreement, dated November 1, 2011, which we refer to as the investor rights
agreement, with certain holders of shares of our common stock, series A preferred stock, series B preferred stock and series C preferred stock. Upon the completion of this
offering, holders of a total of 40,959,493 shares of our common stock as of September 30, 2011, including shares issuable upon conversion of our preferred stock, will have the right to require
us to register these shares under the Securities Act of 1933, as amended, or Securities Act, and to participate in future registrations of securities by us, under the circumstances described below.
The holders of an additional 9,865,319 shares of our common stock as of September 30, 2011 will have the right to participate in future registrations of securities by us, under the
circumstances described below. After registration pursuant to these rights, these shares will become freely tradable without restriction under the the Securities Act. If not otherwise exercised, the
rights described below will expire five years after the closing of this offering.
Demand registration rights
Beginning 180 days after the effective date of the registration statement of which this prospectus forms a part, subject to specified
limitations set forth in the investor rights agreement, at any time, the holders of a majority of the then outstanding shares having rights under the investor rights agreement, which we refer to as
registrable shares, may at any time demand in writing that we register all or a portion of the registrable shares under the Securities Act if the total amount of registrable shares registered have an
aggregate offering price of at least $5.00 million (based on the then current market price or fair value). We are not obligated to file a registration statement pursuant to this
provision on more than two occasions, and we are not obligated to file a registration
statement pursuant to this provision within 180 days of the effective date of any other registration statement that we may file.
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Description of capital stock
Form S-3 registration rights
In addition, at any time after we become eligible to file a registration statement on Form S-3, subject to specified
limitations set forth in the investor rights agreement, the holders of at least 30% of the registrable shares may demand in writing that we register on Form S-3 all or a portion of
the registrable shares so long as the total amount of registrable shares being registered have an aggregate offering price of at least $1.00 million (based on the then current market price). We
are not obligated to file a Form S-3 pursuant to this provision on more than two occasions in any 12-month period.
Incidental registration rights
If, at any time after the closing of this offering, we propose to file a registration statement under the Securities Act, other than pursuant
to the demand registration rights described above, the holders of registrable shares will be entitled to notice of the registration and, subject to specified exceptions, have the right to require us
to register all or a portion of the registrable shares then held by them.
In
the event that any registration in which the holders of registrable shares participate pursuant to our investor rights agreement is an underwritten public offering, we agree to enter into an
underwriting agreement containing customary representation and warranties and covenants, including without limitation customary provisions with respect to indemnification of the underwriters of such
offering.
In
the event that any registration in which the holders of registrable shares participate pursuant to our investor rights agreement is an underwritten public offering, we will use our best efforts to
include the requested registrable shares to be included, but may be limited by market conditions.
Expenses
Pursuant to the investor rights agreement, we are required to pay all registration expenses, including registration and filing fees, exchange listing
fees, printing expenses and accounting fees and the fees and expenses of one counsel to represent the selling stockholders, other than any underwriting discounts and commissions, related to any demand
or incidental registration. The registration rights agreement contains customary cross-indemnification provisions, pursuant to which we are obligated to indemnify the selling stockholders in the event
of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions in the registration statement
attributable to them.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock will
be                                        .
NASDAQ GLOBAL MARKET
We are applying to have our common stock listed on The NASDAQ Global Market under the symbol "VSTM."
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Shares eligible for future sale
Prior to this offering, there has been no public market for our common stock, and a liquid trading market for our common stock may
not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of outstanding options, or the
anticipation of these sales, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through sales of equity securities.
Upon
the closing of this offering, we will have outstanding an aggregate of                  shares of our common stock, assuming the underwriters do not exercise
their over-allotment
option and no options outstanding as of September 30, 2011 are exercised.
Of
the shares to be outstanding immediately after the closing of this offering, we expect that the                  shares to be sold in this offering will be
freely tradable without restriction under
the Securities Act unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The
remaining                  shares of our common stock outstanding after
this offering will be "restricted securities" under Rule 144, and we expect that substantially all of these restricted securities will be subject to either the 180-day or
360-day lock-up period under the lock-up agreements as described below. These restricted securities may be sold in the public market only if registered or pursuant
to an exemption from registration, such as Rule 144 or Rule 701 under the Securities Act.
RULE 144
In general, under Rule 144, beginning 90 days after the date of this prospectus, any person who is not our affiliate and has held their
shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, subject to the availability of current public
information about us. In addition, under Rule 144, any person who is not our affiliate and has not been our affiliate at any time during the preceding three months and has held their shares for
at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of
shares immediately upon the closing of this offering without regard to whether current public information about us is available.
Beginning
90 days after the date of this prospectus, a person who is our affiliate or who was our affiliate at any time during the preceding three months and who has beneficially owned
restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of shares within any three-month period
that does not exceed the greater of:
–>
1%
of the number of shares of our common stock then outstanding, which will equal approximately             shares immediately after this offering; and
–>
the
average weekly trading volume of our common stock on The NASDAQ Global Market during the four calendar weeks preceding the filing of a notice of proposed sale of
securities pursuant to Rule 144 with respect to the sale.
Sales
under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
Upon
expiration of the 180-day lock-up period described below, approximately                  shares of our common stock will be eligible for sale under
Rule 144,
including shares eligible for resale immediately upon the closing of this offering as described above. We cannot estimate the number of shares of our common stock that our existing stockholders will
elect to sell under Rule 144.
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Shares eligible for future sale
RULE 701
In general, under Rule 701 of the Securities Act, any of our employees, consultants or advisors, other than our affiliates, who purchased
shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell these shares 90 days after the date of this prospectus in reliance on
Rule 144, but without compliance with the holding period requirements of Rule 144 and without regard to the volume of such sales or the availability of public information about us.
Subject to the 180-day and 360-day lock-up periods described below, approximately                  shares of our common stock will be eligible for sale in
accordance
with Rule 701.
LOCK-UP AGREEMENTS
We, each of our directors and executive officers and holders of substantially all of our outstanding shares of common stock have agreed that, without
the prior written consent of UBS Securities LLC and Leerink Swann LLC on behalf of the underwriters, we and they will not, subject to limited exceptions, during the period ending
180 days after the date of this prospectus, in the case of us and holders of our common stock issued upon conversion of our preferred stock, or 360 days after the date of this
prospectus, in the case of our directors, executive officers and other current holders of our common stock, subject to extension in specified circumstances:
–>
sell,
offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or
indirectly, any shares of our common stock or any securities convertible into or exchangeable or exercisable for shares of our common stock, or publicly announce an intention to do the same;
–>
establish
or increase a put equivalent position or liquidate or decrease a call equivalent position with respect to any shares of our common stock or any securities
convertible into or exchangeable or exercisable for shares of our common stock, or publicly announce an intention to do the same;
–>
enter
into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock or any
securities convertible into or exchangeable or exercisable for shares of our common stock, whether such
transaction is to be settled by delivery of shares of our common stock or such other securities, in cash or otherwise, or publicly announce an intention to do the same; or
–>
make
any demand for or exercise any right with respect to the registration of any shares of our common stock or any securities convertible into or exchangeable or
exercisable for shares of our common stock.
The
lock-up restrictions, specified exceptions and the circumstances under which either the 180-day or 360-day lock-up period may be extended are
described in more detail under "Underwriting."
REGISTRATION RIGHTS
Subject to the lock-up agreements described above, upon the closing of this offering, the holders of an aggregate of                  
shares of our common stock will have the right to require us to register these shares under the Securities Act under specified circumstances. After registration pursuant to these rights, these shares
will become freely tradable without restriction under the Securities Act. See "Description of capital stock—Registration rights" for additional information regarding these registration
rights.
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Shares eligible for future sale
STOCK OPTIONS
As of September 30, 2011, we had outstanding options to purchase 1,418,000 shares of our common stock, of which options to purchase 2,500
shares were vested. Following this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register all of the shares of our common
stock subject to outstanding options and options and other awards issuable pursuant to our 2012 stock incentive plan and shares of our common stock subject to outstanding options issued pursuant to
our 2010 equity incentive plan. See "Executive compensation—Stock option and other
employee benefit plans" for additional information regarding these plans. Accordingly, shares of our common stock registered under the registration statements will be available for sale in the open
market, subject to Rule 144 volume limitations applicable to affiliates, and subject to any vesting restrictions and lock-up agreements applicable to these shares.
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Underwriting
We are offering the shares of our common stock described in this prospectus through the underwriters named below. UBS
Securities LLC and Leerink Swann LLC are acting as joint book-running managers of this offering and the representatives of the underwriters. We have entered into an
underwriting agreement with the representatives on behalf of the underwriters named below. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally
agreed to purchase the number of shares of common stock listed next to its name in the following table:
Underwriters
Number of shares
UBS Securities LLC
Leerink Swann LLC
Lazard Capital Markets LLC
Oppenheimer & Co. Inc
Rodman & Renshaw, LLC
The underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take
or pay for the shares covered by the underwriters' over-allotment option described below.
Our
common stock is offered subject to a number of conditions, including:
–>
receipt
and acceptance of our common stock by the underwriters, and
–>
the
underwriters' right to reject orders in whole or in part.
In
connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.
OVER-ALLOTMENT OPTION
We have granted the underwriters an option to buy up to an aggregate
of                           additional shares of our common stock. The underwriters may
exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30 days from the date of this
prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above.
COMMISSIONS AND DISCOUNTS
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $             per share from the public offering price. Sales of shares made
outside the
United States may be made by affiliates of the underwriters. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other
selling terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein.
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Underwriting
The
following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of our common stock.
No exercise
Full exercise
Per share
$
$
Total
We estimate that the total expenses of this offering payable by us, not including the underwriting discounts and commissions, will be approximately
$             .
NO SALES OF SIMILAR SECURITIES
We, each of our directors and executive officers and holders of substantially all of our common stock have entered into lock-up
agreements with the underwriters. Under these agreements, subject to certain exceptions, we and each of these persons may not offer, sell, contract or agree to sell, hypothecate, pledge, grant any
option to purchase or otherwise dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, or publicly disclose
the intention to do the same. These restrictions will be in effect for a period of 180 days after the date of this prospectus, in the case of holders of our common stock issued upon conversion
of our preferred stock, or 360 days after the date of this prospectus, in the case of our directors, executive officers and other current holders of our common stock, subject in each case to
extension in the circumstances described in the paragraph below. At any time and without public notice, UBS Securities LLC and Leerink Swann LLC, may, in their sole discretion, release
some or all of the securities held by our executive officers, directors and the holders of all of our common stock from these lock-up agreements.
Notwithstanding
the foregoing, if (1) during the last 15 calendar days plus three business days of the 180-day or 360-day restricted period, we issue an earnings release
or
material news or a material event relating to us occurs or (2) prior to the expiration of the 180-day or 360-day restricted period, we announce that we will release
earnings results during the 16-day period beginning on the last day of the 180-day or 360-day period, the restrictions described above shall continue to apply until
the date that is 15 calendar days plus three business days after the date of the issuance of the earnings release or the occurrence of the material news or material event.
INDEMNIFICATION
We agreed to indemnify the underwriters against certain liabilities, including certain liabilities under the Securities Act. If we are unable to
provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities.
NASDAQ GLOBAL MARKET LISTING
We are applying to list our common stock on The NASDAQ Global Market under the symbol "VSTM."
PRICE STABILIZATION, SHORT POSITIONS
In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common
stock, including:
–>
stabilizing
transactions;
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Underwriting
–>
short
sales;
–>
purchases
to cover positions created by short sales;
–>
imposition
of penalty bids; and
–>
syndicate
covering transactions.
Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in progress. These
transactions may also include making short sales of our common stock, which involve the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in
this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered short sales," which are short positions in an amount not
greater than the underwriters' over-allotment option referred to above, or may be "naked short sales," which are short positions in excess of that amount.
The
underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the
over-allotment option.
Naked
short sales are short sales made in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked
short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect
investors who purchased in this offering.
The
underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives
have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
As
a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued
by the underwriters at any time. The underwriters may carry out these transactions on The NASDAQ Global Market, in the over-the-counter market or otherwise.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there was no public market for our common stock. The initial public offering price will be determined by negotiation by us
and the representative of the underwriters. The principal factors to be considered in determining the initial public offering price include:
–>
the
information set forth in this prospectus and otherwise available to the representatives;
–>
our
history and prospects and the history of, and prospects for, the industry in which we compete;
–>
our
past and present financial performance and an assessment of our management;
–>
our
prospects for future earnings and the present state of our development;
–>
the
general condition of the securities markets at the time of this offering;
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–>
the
recent market prices of, and the demand for, publicly-traded common stock of generally comparable companies; and
–>
other
factors deemed relevant by the underwriters and us.
AFFILIATIONS
Certain of the underwriters and their affiliates may in the future from time to time provide investment banking and other financing, trading,
banking, research, transfer agent and trustee services to us or our subsidiaries, for which they may in the future receive customary fees and expenses.
Lazard
Frères & Co. LLC referred this transaction to Lazard Capital Markets LLC and will receive a referral fee from Lazard Capital Markets LLC in connection therewith.
NOTICE TO INVESTORS
Notice to prospective investors in the European Economic Area
In relation to each member state of the European Economic Area (EEA) that has implemented the Prospectus Directive (each, a relevant member state),
other than Germany, with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of securities
described in this prospectus may not be made to the public in that relevant member state other than:
–>
to
any legal entity which is a qualified investor as defined in the Prospectus Directive;
–>
by
the Managers to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal
persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the Bookrunners for any such
offer; or
–>
in
any other circumstances falling within Article 3(2) of the Prospectus Directive.
provided
that no such offer of securities shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.
For
purposes of this provision, the expression an "offer of securities to the public" in any relevant member state means the communication in any form and by any means of sufficient information on the
terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the expression may be varied in that member state by any
measure implementing the Prospectus Directive in that member state, and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and includes any relevant implementing measure in each
relevant member state. The expression 2010 PD Amending Directive means Directive 2010/73/EU.
We
have not authorized and do not authorize the making of any offer of securities through any financial intermediary on its behalf, other than offers made by the underwriters with a view to the final
placement of the securities as contemplated in this prospectus. Accordingly, no purchaser of the securities, other than the underwriters, is authorized to make any further offer of the securities on
behalf of us or the underwriters.
The
EEA selling restriction is in addition to any other selling restrictions set out in this prospectus.
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Underwriting
Notice to prospective investors in Australia
This offering memorandum is not a formal disclosure document and has not been, nor will be, lodged with the Australian Securities and Investments
Commission. It does not purport to contain all information that an investor or its professional advisers would expect to find in a prospectus or other disclosure document (as defined in the
Corporations Act 2001 (Australia)) for the purposes of Part 6D.2 of the Corporations Act 2001 (Australia) or in a product disclosure statement for the purposes of Part 7.9 of the
Corporations Act 2001 (Australia), in either case, in relation to the securities.
The
securities are not being offered in Australia to "retail clients" as defined in sections 761G and 761GA of the Corporations Act 2001 (Australia). This offering is being made in Australia
solely to "wholesale clients" for the purposes of section 761G of the Corporations Act 2001 (Australia) and, as such, no prospectus, product disclosure statement or other disclosure document in
relation to the securities has been, or will be, prepared.
This
offering memorandum does not constitute an offer in Australia other than to wholesale clients. By submitting an application for our securities, you represent and warrant to us that you are a
wholesale client for the purposes of section 761G of the Corporations Act 2001 (Australia). If any recipient of this offering memorandum is not a wholesale client, no offer of, or invitation to
apply for, our securities shall be deemed to be made to such recipient and no applications for our securities will be accepted from such recipient. Any offer to a recipient in Australia, and any
agreement arising from acceptance of such offer, is personal and may only be accepted by the recipient. In addition, by applying for our securities you undertake to us that, for a period of
12 months from the date of issue of the securities, you will not transfer any interest in the securities to any person in Australia other than to a wholesale client.
Notice to prospective investors in Hong Kong
Our securities may not be offered or sold in Hong Kong, by means of this prospectus or any document other than (1) to "professional investors"
within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or
(2) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (3) in other circumstances which do not
result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong). No advertisement, invitation or document relating to our securities may be issued
or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by,
the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the securities which are or are intended to be disposed of only to persons
outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to prospective investors in Japan
Our securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and
Exchange Law) and our securities will not be offered or sold, directly or indirectly, in Japan, or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident
in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan, or to a resident of Japan,
except pursuant to an exemption from the registration requirements of, and
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Underwriting
otherwise
in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
Notice to prospective investors in Singapore
This document has not been registered as a prospectus with the Monetary Authority of Singapore and in Singapore, the offer and sale of our securities
is made pursuant to exemptions provided in sections 274 and 275 of the Securities and Futures Act, Chapter 289 of Singapore (SFA). Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered or
sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor as defined in
Section 4A of the SFA pursuant to Section 274 of the SFA, (2) to a relevant person as defined in section 275(2) of the SFA pursuant to Section 275(1) of the SFA, or
any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with
the conditions of, any other applicable provision of the SFA, in each case subject to compliance with the conditions
(if any) set forth in the SFA. Moreover, this document is not a prospectus as defined in the SFA. Accordingly, statutory liability under the SFA in relation to the content of prospectuses would not
apply. Prospective investors in Singapore should consider carefully whether an investment in our securities is suitable for them.
Where
our securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
–>
by
a corporation (which is not an accredited investor as defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire
share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
–>
for
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an
accredited investor,
shares
of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferable for six months after that corporation or that trust has acquired the
shares under Section 275 of the SFA, except:
–>
to
an institutional investor (for corporations under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or any
person pursuant to an offer that is made on terms that such shares of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its
equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the
conditions, specified in Section 275 of the SFA;
–>
where
no consideration is given for the transfer; or
–>
where
the transfer is by operation of law.
In
addition, investors in Singapore should note that the securities acquired by them are subject to resale and transfer restrictions specified under Section 276 of the SFA, and they, therefore,
should seek their own legal advice before effecting any resale or transfer of their securities.
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Underwriting
Notice to prospective investors in Switzerland
The Prospectus does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations (CO)
and the shares will not be listed on the SIX Swiss Exchange. Therefore, the Prospectus may not comply with the disclosure standards of the CO and/or the listing rules (including any prospectus
schemes) of the SIX Swiss Exchange. Accordingly, the shares may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors, which do not subscribe to
the shares with a view to distribution.
Notice to prospective investors in United Kingdom
This prospectus is only being distributed to and is only directed at: (1) persons who are outside the United Kingdom; (2) investment
professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (3) high net worth companies, and other persons
to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons falling within (1)-(3) together being referred to as "relevant persons").
The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this prospectus or any of its contents.
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Legal matters
The validity of the shares of common stock offered hereby is being passed upon for us by Wilmer Cutler Pickering Hale and
Dorr LLP. Ropes & Gray LLP is acting as counsel for the underwriters in connection with this offering.
Experts
Ernst & Young LLP, independent registered public accounting firm, has audited our financial statements as of
December 31, 2010 and for the period from August 4, 2010 (inception) to December 31, 2010, as set forth in their report included in this prospectus. We have included our financial
statements in this prospectus and elsewhere in this registration statement in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing.
Where you can find more information
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the
shares of common stock we are offering to sell. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement
and the exhibits, schedules and amendments to the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and to the
exhibits and schedules to the registration statement. Statements contained in this prospectus about the contents of any contract, agreement or other document are not necessarily complete, and, in each
instance, we refer you to the copy of the contract, agreement or other document filed as an exhibit to the registration statement. Each of theses statements is qualified in all respects by this
reference.
You
may read and copy the registration statement of which this prospectus is a part at the SEC's public reference room, which is located at 100 F Street, N.E., Room 1580, Washington, DC
20549. You can request copies of the registration statement by writing to the Securities and Exchange Commission and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the SEC's public reference room. In addition, the SEC maintains an Internet website, which is located at
http://www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of
which this prospectus is a part at the SEC's Internet website. Upon completion of this offering, we will be subject to the information reporting requirements of the Securities Exchange Act of 1934,
and we will file reports, proxy statements and other information with the SEC.
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Verastem, Inc.
(A development stage company)
FINANCIAL STATEMENTS
Period from August 4, 2010 (inception) to December 31, 2010 and unaudited information for the nine months ended September 30, 2011 and the period
    from  August 4, 2010 (inception) to September 30, 2011
CONTENTS
Report of Independent Registered Public Accounting Firm
F-2
Financial Statements
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity
F-5
Statements of Cash Flows
F-6
Notes to Financial Statements
F-7
F-1
Table of Contents
Verastem, Inc.
(A development stage company)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Verastem, Inc.
We
have audited the accompanying balance sheet of Verastem, Inc. (a development stage company) (the Company) as of December 31, 2010, and the related statements of operations, redeemable
convertible preferred stock and stockholders' deficit and cash flows for the period from August 4, 2010 (inception) to December 31, 2010. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Verastem, Inc. as of December 31, 2010 and the results of
its operations and its cash flows for the period from August 4, 2010 (inception) to December 31, 2010, in conformity with U.S. generally accounting principles.
Boston,
Massachusetts
November 2, 2011
F-2
Table of Contents
Verastem, Inc.
(A development stage company)
BALANCE SHEETS
September 30, 2011
December 31,
2010
Actual
Pro forma
(Unaudited)
(Unaudited)
(In thousands except per share data)
Assets
Current assets:
Cash and cash equivalents
$
3,584
$
41,421
$
41,421
Prepaid expenses and other current assets
12
6
6
Total current assets
3,596
41,427
41,427
Property and equipment, net
8
719
719
Other assets
—
132
132
Restricted cash
—
86
86
Total assets
$
3,604
$
42,364
$
42,364
Liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity
Current liabilities:
Accounts payable
$
279
$
1,246
$
1,246
Accrued expenses
89
762
762
Total current liabilities
368
2,008
2,008
Deferred rent
—
81
81
Liability for shares subject to repurchase
—
36
36
Commitments and contingencies (
Note 8
)
Series A redeemable convertible preferred stock, $0.0001 par value; 16,000 shares authorized, 4,000 and 16,000 (unaudited) shares
issued and outstanding (actual) at December 31, 2010 and September 30, 2011, respectively and no shares issued and outstanding pro forma (Liquidation preference of $4,000 and $16,000 (unaudited) as of December 31, 2010 and
September 30, 2011, respectively)
3,923
15,935
—
Series B redeemable convertible preferred stock, $0.0001 par value; 16,025 shares authorized, issued and outstanding (actual) at September 30,
2011(unaudited) and no shares issued and outstanding pro forma (Liquidation preference of $32,050 as of September 30, 2011(unaudited))
—
31,943
—
Common stock, $0.0001 par value; 30,000 and 45,000 shares authorized at December 31, 2010 and September 30, 2011 (actual and
pro forma, unaudited), 3,552 shares issued and outstanding at December 31, 2010, 4,986 shares issued and outstanding at September 30, 2011 (actual, unaudited) and 37,011 shares issued and outstanding at September 30, 2011
(pro forma, unaudited)
1
1
4
Additional paid-in capital
96
822
48,697
Deficit accumulated during the development stage
(784
)
(8,462
)
(8,462
)
Total stockholders' (deficit) equity
(687
)
(7,639
)
40,239
Total liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity
$
3,604
$
42,364
$
42,364
See accompanying notes.
F-3
Table of Contents
Verastem, Inc.
(A development stage company)
STATEMENTS OF OPERATIONS
Period from
August 4,
2010
(inception) to
December 31,
2010
Nine months
ended
September 30,
2011
Period from
August 4,
2010
(inception) to
September 30,
2011
(Unaudited)
(Unaudited)
(In thousands except per share data)
Operating expenses:
Research and development
$
400
$
5,483
$
5,883
General and administrative
384
2,195
2,579
Total operating expenses
784
7,678
8,462
Loss from operations
(784
)
(7,678
)
(8,462
)
Net loss
(784
)
(7,678
)
(8,462
)
Accretion of preferred stock
(2
)
(18
)
(20
)
Net loss applicable to common stockholders
$
(786
)
$
(7,696
)
$
(8,482
)
Net loss per share applicable to common stockholders—basic and diluted
$
(0.26
)
$
(1.79
)
$
(2.20
)
Weighted-average number of common shares used in net loss per share applicable to common stockholders—basic and diluted
2,976
4,291
3,841
Pro forma net loss per share applicable to common stockholders—basic and diluted (unaudited)
$
(0.17
)
$
(0.38
)
Weighted-average number of common shares used in pro forma net loss per share applicable to common stockholders—basic and diluted (unaudited)
4,638
20,474
See accompanying notes.
F-4
Table of Contents
Verastem, Inc.
(A development stage company)
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Series A
redeemable convertible
preferred stock
Series B
redeemable convertible
preferred stock
Deficit
accumulated
during the
development
stage
Common stock
Additional
paid-in
capital
Totals
stockholder's
(deficit) equity
Shares
Amount
Share
Amount
Shares
Amount
(In thousands except for per share data)
Balance at August 4, 2010 (inception)
—
$
—
—
$
—
—
$
—
$
—
$
—
$
—
Sale of common stock to founders
—
—
—
—
2,500,000
1
—
—
1
Vesting of restricted stock
—
—
—
—
468,747
—
—
—
—
Issuance of common stock in exchange for license
—
—
—
—
583,333
—
46
—
46
Issuance of Series A redeemable convertible preferred stock, net of offering costs of $79
4,000,000
3,921
—
—
—
—
—
—
—
Accretion of redeemable convertible preferred stock to redemption value
—
2
—
—
—
—
(2
)
—
(2
)
Stock-based compensation expense
—
—
—
—
—
—
52
—
52
Net loss
—
—
—
—
—
—
—
(784
)
(784
)
Balance at December 31, 2010
4,000,000
3,923
—
—
3,552,080
1
96
(784
)
(687
)
Issuance of Series A redeemable convertible preferred stock(unaudited)
12,000,000
12,000
—
—
—
—
—
—
—
Issuance of Series B redeemable convertible preferred stock, net of offering costs of $113 (unaudited)
—
—
16,025,000
31,937
—
—
—
—
—
Accretion of redeemable convertible preferred stock to redemption value (unaudited)
—
12
—
6
—
—
(18
)
—
(18
)
Vesting of restricted stock (unaudited)
—
—
—
—
1,434,253
—
2
—
2
Stock-based compensation expense (unaudited)
—
—
—
—
—
—
742
—
742
Net loss (unaudited)
—
—
—
—
—
—
—
(7,678
)
(7,678
)
Balance at September 30, 2011 (unaudited)
16,000,000
15,935
16,025,000
31,943
4,986,333
1
822
(8,462
)
(7,639
)
Conversion of redeemable convertible preferred stock into common stock (unaudited)
(16,000,000
)
(15,935
)
(16,025,000
)
(31,943
)
32,025,000
3
47,875
—
47,878
Pro forma, September 30, 2011 (unaudited)
—
$
—
—
$
—
37,011,333
$
4
$
48,697
$
(8,462
)
$
40,239
See accompanying notes.
F-5
Table of Contents
Verastem, Inc.
(A development stage company)
STATEMENTS OF CASH FLOWS
Period from
August 4,
2010
(inception) to
December 31,
2010
Nine months
ended
September 30,
2011
Period from
August 4,
2010
(inception) to
September 30,
2011
(Unaudited)
(Unaudited)
(In thousands)
Operating activities
Net loss
$
(784
)
$
(7,678
)
$
(8,462
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
—
43
43
Stock-based compensation expense
52
742
794
Common stock issued in exchange for license
46
—
46
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
(12
)
6
(6
)
Other assets
—
(132
)
(132
)
Accounts payable
279
967
1,246
Accrued expenses and deferred rent
89
754
843
Net cash used in operating activities
(330
)
(5,298
)
(5,628
)
Investing activities
Purchases of property and equipment
(8
)
(754
)
(762
)
Increase in restricted cash
—
(86
)
(86
)
Net cash used in investing activities
(8
)
(840
)
(848
)
Financing activities
Proceeds from issuance of redeemable convertible preferred stock
3,921
43,937
47,858
Net proceeds from the issuance of common stock
1
38
39
Net cash provided by financing activities
3,922
43,975
47,897
Increase in cash and cash equivalents
3,584
37,837
41,421
Cash and cash equivalents at beginning of period
—
3,584
—
Cash and cash equivalents at end of period
$
3,584
$
41,421
$
41,421
Supplemental disclosure of non-cash financing activity
Accretion of redeemable convertible preferred stock to redemption value
$
2
$
18
$
20
See accompanying notes.
F-6
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
1. Organization and basis of presentation
Verastem, Inc. (the "Company"), incorporated on August 4, 2010 as a Delaware corporation, is a biopharmaceutical company focused on
discovering and developing proprietary small molecule drugs targeting cancer stem cells along with proprietary companion diagnostics. The Company's operations to date have been limited to organizing
and staffing the Company, business planning, raising capital, acquiring and developing its technology, identifying potential product candidates and undertaking preclinical studies of its most advanced
product candidates. The Company has not commenced its planned principal operations. Accordingly, the Company is considered to be in the development stage as defined in Financial Accounting Standards
Board Accounting Standards Codification Topic 915,
Development Stage Entities
.
The
Company is subject to a number of risks similar to other life science companies in the development stage, including, but not limited to, the need to obtain adequate additional funding, possible
failure of preclinical testing or clinical trials, inability to obtain marketing approval of product candidates, competitors developing new technological innovations, market acceptance of the
Company's products and protection of proprietary technology. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate product revenue or achieve
profitability. As of December 31, 2010 and September 30, 2011, the Company had a deficit accumulated during the development stage of $784,000 and $8.5 million, respectively. The
Company expects that its cash balance at December 31, 2010, the $12 million of proceeds from the issuance of Series A redeemable convertible preferred stock in April 2011,
the $32.1 million of proceeds from the issuance of Series B redeemable convertible preferred stock in July 2011 and the $20.1 million of proceeds from the issuance of
Series C redeemable convertible preferred stock in November 2011 will fund its operations through at least January 1, 2012.
2. Significant accounting policies
Unaudited interim financial data
The accompanying unaudited September 30, 2011 interim balance sheet and the statements of operations, redeemable convertible preferred stock
and stockholders' deficit, and cash flows for the nine months ended September 30, 2011 and the related interim information contained within the notes to the financial statements have been
prepared in accordance with the rules
and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and the notes required by U.S. generally accepted
accounting principles for complete financial statements. In the opinion of management, the unaudited interim financial statements reflect all adjustments, consisting of normal and recurring
adjustments, necessary for the fair statement of the Company's financial position at September 30, 2011 and results of its operations and its cash flows for the nine months then ended. The
results for the nine months ended September 30, 2011 are not necessarily indicative of future results.
Unaudited pro forma presentation
On October 25, 2011, the Company's board of directors authorized management of the Company to file a registration statement with the
Securities and Exchange Commission permitting the Company to sell shares of its common stock to the public. The unaudited pro forma balance sheet as of
F-7
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
September 30,
2011 reflects the conversion of all Series A and B convertible preferred stock outstanding as of that date into 32,025,000 shares of common stock, occurring immediately
prior to the closing of the Company's proposed initial public offering.
Unaudited
pro forma net loss per share is computed using the weighted-average number of common shares outstanding after giving effect to the pro forma effect of the conversion of all redeemable
convertible preferred stock during the year ended December 31, 2010 and the nine months ended September 30, 2011 into shares of the Company's common stock as if such conversion had
occurred at the beginning of the period presented, or the date of original issuance, if later.
Use of estimates
The preparation of the Company's financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates.
The
Company utilizes significant estimates and assumptions in determining the fair value of its common stock. The Company granted stock options at exercise prices not less than the fair market
value of its common stock as determined by the board of directors, with input from management. The board of directors has determined the estimated fair value of the Company's common stock based on a
number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector and the prices at which the Company sold shares of redeemable convertible
preferred stock, the superior rights and preferences of securities senior to the Company's common stock at the time and the likelihood of achieving a liquidity event, such as an initial public
offering or sale of the Company.
The
Company utilized various valuation methodologies in accordance with the framework of the 2004 American Institute of Certified Public Accountants Technical Practice Aid,
Valuation of Privately-Held Company Equity Securities
Issued as Compensation
, to estimate the fair value of its common stock. The methodologies included
an asset-based approach and the current value method for the Company's initial common stock valuation as of November 30, 2010, the option pricing method utilizing the reverse backsolve method
to estimate the Company's underlying equity value as of July 31, 2011 and a methodology that determined an estimated value under an IPO scenario and a sale scenario based upon an assessment of
the probability of occurrence of each scenario as of September 30, 2011. Each valuation methodology includes estimates and assumptions that require the Company's judgment. These estimates
include assumptions regarding future performance, including the successful completion of preclinical studies and clinical trials and the time to completing an IPO or sale. Significant changes to the
key assumptions used in the valuations could result in different fair values of common stock at each valuation date.
Segment and geographic information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief
operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its
F-8
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
operations
and manages its business in one operating segment, which is the business of developing drugs that target cancer stem cells, and the Company operates in only one geographic segment.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive loss was equal to net loss for all periods presented.
Cash and cash equivalents
The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash
equivalents. Cash equivalents of $40.0 million as of September 30, 2011 consist of money market funds. There were no cash equivalents as of December 31, 2010.
Fair value of financial instruments
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in
determining the reported fair values. The fair value hierarchy is now established that prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies
only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation
inputs:
Level 1 inputs
Quoted prices in active markets for identical assets or liabilities
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 market participants would use in pricing the asset or liability
The
following table presents information about the Company's financial assets that have been measured at fair value at September 30, 2011 and indicates the fair value hierarchy of the valuation
inputs utilized to determine such fair value (in thousands).
Description
Total
Quoted prices in
active markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
(Unaudited)
Cash equivalents
$
40,000
$
40,000
$
—
$
—
There were no financial instruments recorded at fair value as of December 31, 2010. The carrying amounts of accounts payable and accrued expenses
approximate their fair values due to their short-term maturities.
F-9
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
Concentrations of credit risk and off-balance sheet risk
Cash and cash equivalents are financial instruments that potentially subject the Company to concentrations of credit risk. As of December 31,
2010, substantially all of the Company's cash was deposited in accounts at a single financial institution. As of September 30, 2011, the Company's cash and cash equivalents were deposited at
two financial institutions. The Company maintains its cash and cash equivalents with high quality, accredited financial institutions and, accordingly, such funds are subject to minimal credit risk.
The Company has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.
Property and equipment
Property and equipment consists of laboratory equipment, office furniture, and computer equipment. Expenditures for repairs and maintenance are
recorded to expense as incurred, whereas major betterments are capitalized as additions to property and equipment. Depreciation is calculated over the following estimated useful lives of the assets:
Laboratory equipment
5 years
Furniture
5 years
Computer equipment
3 years
Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is
recognized.
The
Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying value of assets may not be fully recoverable and
that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flow to the recorded value of the asset. If impairment is
indicated, the asset will be written down to its estimated fair value. To date, no such impairment losses have been recorded.
Organizational costs
All organizational costs have been expensed as incurred.
Research and development costs
The Company expenses research and development costs to operations as incurred. Research and development expenses consist of costs associated with
research activities, including drug discovery efforts and the development of therapeutic product candidates and companion diagnostics. The Company accounts for nonrefundable advance payments for goods
and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received rather than when the payment is made.
Research and development expenses consist of:
–>
employee-related
expenses, including salaries, benefits, travel and stock-based compensation expense;
F-10
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
–>
external
research and development expenses incurred under arrangements with third parties, such as contract research organizations, or CROs, 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 and maintenance of facilities, depreciation of leasehold
improvements and equipment, and laboratory and other supplies.
Stock-based compensation
The Company expenses the fair value of employee stock options over the requisite service period, which is the vesting period. Compensation expense is
measured using the fair value of the award at the grant date, net of estimated forfeitures, and is adjusted annually to reflect actual forfeitures. The fair value of each stock-based award is
estimated using the Black-Scholes option valuation model and is expensed on a straight-line basis over the vesting period.
Stock-based
awards issued to nonemployees, including directors for non-board related services, are accounted for based on the fair value of such services received or of the equity
instruments issued, whoever is more reliably measured. These stock-based option awards are revalued at each vesting date using the fair value method.
Redeemable convertible preferred stock
The carrying value of the Company's Series A and Series B redeemable convertible preferred stock is adjusted by periodic accretions
such that the carrying value will equal the redemption amount at the redemption date. The carrying value is also adjusted to reflect dividends when and if declared by the board of directors. No
dividends have been declared by the board of directors since inception.
Income taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the
year in which the differences are expected to affect taxable income. Tax benefits are recognized when it is more likely than not that a tax position will be sustained during an audit. Deferred tax
assets are reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized.
Net loss per share
Basic and diluted net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of
common shares outstanding during the period, without consideration for common stock equivalents. The Company's potentially dilutive shares, which include redeemable convertible preferred stock,
outstanding stock options and unvested restricted stock are considered to be common stock equivalents and are only included in the calculation of diluted net
F-11
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
loss
per share when their effect is dilutive. The following table reconciles net loss to net loss applicable to common shareholders (in thousands, except per share data):
Period from
August 4,
2010
(inception)
through
December 31,
2010
Nine months
ended
September 30,
2011
Period from
August 4,
2010
(inception) to
September 30,
2011
(Unaudited)
(Unaudited)
Net loss
$
(784
)
$
(7,678
)
$
(8,462
)
Accretion of redeemable convertible preferred stock
(2
)
(18
)
(20
)
Net loss applicable to common stockholders
$
(786
)
$
(7,696
)
$
(8,482
)
Weighted-average number of common shares used in net loss per share applicable to common stockholders—basic and diluted
2,976
4,291
3,841
Net loss per share applicable to common stockholders—basic and diluted
$
(0.26
)
$
(1.79
)
$
(2.20
)
The amounts in the table below were excluded from the calculation of diluted net loss per share, prior to the use of the treasury stock method, due to their
anti-dilutive effect (in thousands):
Period from
August 4,
2010
(inception) to
December 31,
2010
Nine months
ended
September 30,
2011
Period from
August 4,
2010
(inception) to
September 30,
2011
(Unaudited)
(Unaudited)
Preferred stock
4,000
32,025
32,025
Outstanding stock options
620
1,418
1,418
Unvested restricted stock
7,031
5,490
5,490
F-12
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
3. Property and equipment
Property and equipment and related accumulated depreciation are as follows (in thousands):
December 31,
2010
September 30,
2011
(Unaudited)
Computer equipment
$
—
$
27
Laboratory equipment
8
691
Furniture
—
44
8
762
Less: accumulated depreciation
—
(43
)
$
8
$
719
The Company did not record any depreciation expense in the period from August 4, 2010 (inception) to December 31, 2010. Depreciation expense was
$43,000 for the nine months ended September 30, 2011 and for the period from August 4, 2010 (inception) to September 30, 2011.
4. Redeemable convertible preferred stock
In November 2010, the Company sold 4 million shares of Series A redeemable convertible preferred stock (Series A
Preferred Stock) at a price of $1.00 per share for gross proceeds of $4 million. In accordance with the terms of the Series A Stock Purchase Agreement, the Company sold an additional
12 million shares at $1.00 per share in a second subsequent closing. The milestones necessary to achieve the subsequent closing were met in April 2011 and the Company sold
12 million shares of Series A Preferred Stock for gross proceeds of $12 million. The Company incurred approximately $79,000 of issuance costs as part of the first closing of the
Series A Preferred Stock. No additional issuance costs were incurred as part of the second closing. The issuance costs are being accreted through the earliest redemption date.
In
July 2011, the Company sold approximately 16 million shares of series B redeemable convertible preferred stock (Series B Preferred Stock) at a price of $2.00 per share
for gross proceeds of approximately $32 million. The Company incurred approximately $113,000 of issuance costs as part of the closing of the Series B Preferred Stock. The issuance costs
are being accreted through the earliest redemption date.
The
Company assessed the Series A Preferred Stock and B Preferred Stock (collectively, the Preferred Stock) for any beneficial conversion features or embedded derivatives that would require
bifurcation from the Preferred Stock and receive separate accounting treatment. On the date of each issuance, the value of the common stock into which the Preferred Stock is convertible had a fair
value less than the effective conversion price of the Preferred Stock and, as such, there was no intrinsic value on the respective commitment dates. No embedded derivatives were identified that would
require bifurcation.
F-13
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
The
rights, preferences, and privileges of Preferred Stock are as follows:
Conversion
Shares of Preferred Stock are convertible into common stock based on a defined conversion ratio, which is originally set at
one-for-one, adjustable
for certain dilutive events. Conversion is at the option of the holders of Preferred Stock (Preferred Stockholders) at anytime without any additional considerations, although conversion is automatic
upon the earlier of the sale of shares of common stock to the public at a price of at least $3.00 per share, for gross proceeds of at least $35 million, and where the shares are traded on
either the New York Stock Exchange or NASDAQ or upon the written consent of holders of at least 60% of the outstanding Preferred Stock.
Dividends
Prior to the payment of any dividend, except a common stock dividend, to the common stockholders, the Preferred Stockholders are entitled to receive
an amount at least equal to the amount that would have been received by the Preferred Stockholders had all shares of Preferred Stock been converted to common stock immediately prior to issuance of the
dividend.
Liquidation preference
In the event of any liquidation, dissolution or winding up of the Company, including a deemed liquidation event, such as certain mergers or a
disposition of substantially all the assets of the Company, unless holders of at least 60% of the outstanding Preferred Stock elect otherwise, the Preferred Stockholders are entitled to receive, in
preference to common stockholders, an amount equal to the Original Issue Price ($1.00 per share for Series A Preferred Stock and $2.00 per share for Series B Preferred Stock, adjustable
for certain dilutive events) plus all declared but unpaid dividends. If the Company has insufficient assets to pay the Preferred Stockholders the full amount to which they are entitled, the Preferred
Stockholders share ratably in any distribution in proportion to the respective amounts which would otherwise be payable.
After
payment of these preferential amounts, the remaining assets of the Company are distributable ratably to the holders of common stock and Preferred Stock on an as-converted to common
basis. However, the Preferred Stockholders are limited to the receipt of an aggregate amount (including through payment of the preferential amounts described above) equal to the greater
of:
(1)
1.75 times
the aggregate amount of the applicable Original Purchase Price, and
(2)
the
amount the Preferred Stockholder would have received if all Preferred Stock had been converted to common stock immediately prior to the liquidation
event.
Voting rights
Holders of the Preferred Stock are entitled to vote as a single class with the holders of common stock, and have one vote for each equivalent common
share into which the Preferred Stock is convertible. A 60% vote of the Preferred Stockholders is required in order to effect a liquidation, reclassification or recapitalization of the Company's
capital stock or a deemed liquidation event, such as certain mergers or a disposition of substantially all the assets of the Company, amend the certificate of incorporation
F-14
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
or
bylaws, create or issue shares of another class of stock that is pari passu or senior to the Preferred Stock, repurchase or redeem or pay any dividend on any capital stock, subject to limited
exceptions, issue any debt security such that the Company's aggregate indebtedness would exceed $1 million, acquire capital stock of another entity, increase or decrease the authorized number
of directors or increase the number of shares of common stock reserved under the Company's equity incentive plan. The holders of the Series A Preferred Stock are entitled to elect four
directors, the Preferred Stockholders and common stockholders, voting as one class on an as-converted basis, are entitled to elect two directors, and the common stockholders are entitled
to elect one director.
Redemption
The Preferred Stock is redeemable at the applicable Original Issue Price plus any declared but unpaid dividends. The Series B Preferred Stock
is redeemable beginning in 2016 at the demand of holders of at least two-thirds of the Series B Preferred Stock. The Series A Preferred Stock is redeemable upon the
redemption of another series of Preferred Stock at the demand of holders of at least two-thirds of the Series A Preferred Stock. The redemption for the Preferred Stock is payable in
three equal annual installments.
5. Common stock
The Company has reserved the following shares of common stock for the potential conversion of outstanding Preferred Stock and the exercise of stock
options (in thousands):
December 31,
2010
September 30,
2011
(Unaudited)
Series A Preferred Stock
16,000
16,000
Series B Preferred Stock
—
16,025
Stock options
1,417
1,971
17,417
33,996
Each share of common stock is entitled to one vote, subject to certain voting rights of the Preferred Stock as discussed in Note 4. The holders of the
common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of the Preferred Stockholders.
Common stock issued for license
The Company issued 583,333 shares of common stock in the period from August 4, 2010 (inception) to December 31, 2010 in exchange for
certain intellectual property
rights. The fair value of the common stock was determined to be $0.08 per share and the fair value was determined to be more readily determinable than the fair value of the license. As a result, the
fair value of the shares of approximately $46,000 was recorded as research and development expense.
F-15
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
6. Stock-based compensation
In November 2010, the Company adopted the Verastem, Inc. 2010 Equity Incentive Plan (the Plan) under which it may grant incentive stock
options (ISOs), nonstatutory stock options (NSOs), restricted stock awards, restricted stock unit awards and stock appreciation rights to purchase up to approximately 1.4 million shares of
common stock to eligible employees, officers, directors and consultants. In March 2011, the Company increased the number of shares of common stock available under the Plan to approximately
2.0 million shares. As of September 30, 2011, 105,348 shares are available for future issuance under the Plan. Terms of stock option agreements, including vesting requirements, are
determined by the board of directors, subject to the provisions of the Plan. Generally, options granted by the Company vest over four years, expire no later than ten years from the date of grant and
have an exercise price equal to the estimated fair value of the common stock as determined by the board of directors on the date of grant.
Restricted common stock
In August 2010, the Company issued 10 million shares of its common stock to the founders at a purchase price of $0.0001 per share,
determined to be the fair value of the common stock on the date of issuance. The shares were issued under restricted stock purchase agreements, which allow the Company, at its discretion, to
repurchase unvested shares if the founders terminate their relationship with the Company. Upon execution of the restricted stock purchase agreements, 25% of the shares vested immediately and the
remaining shares vest ratably on a quarterly basis over a four year term.
During
the nine months ended September 30, 2011, the Company issued 896,000 shares of its common stock to new employees of the Company at a purchase price of $0.08 per share, determined to be
the fair value of the common stock on the date of issuance. The shares were issued under the terms of the Plan, and allow the Company, at its discretion, to repurchase unvested shares if the employees
terminate their relationship with the Company. The shares vest over a four year term, with 25% vesting after the first year and the remainder vesting ratably on a quarterly basis for the remaining
three years. The purchase price received for the shares was not material to the financial statements. The shares are recorded in stockholders deficit as they vest.
The
Company records stock-based compensation expense for the common stock subject to repurchase based on the grant date intrinsic value for employees and the vesting date intrinsic value for
non-employees. All of the restricted shares were issued at fair value. The Company has recorded stock-based compensation expense of $51,000, $597,000 and $648,000 for the period from
August 4, 2010 (inception) to December 31, 2010, for the nine months ended September 30, 2011 and for the period from August 4, 2011 (inception) to September 30,
2011, respectively, associated with restricted common stock. The $597,000 recorded for the nine months ended September 30, 2011 includes $34,000 associated with modifications to certain
restricted stock purchase agreements.
F-16
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
A
summary of the Company's restricted stock activity and related information is as follows (in thousands, except per share data):
Shares
Weighted-
average
purchase
price per
share
Outstanding at August 4, 2010
—
$
—
Granted
10,000
0.0001
Vested
(2,969
)
0.0001
Outstanding at December 31, 2010
7,031
0.0001
Granted (unaudited)
896
0.0800
Vested (unaudited)
(1,434
)
0.0017
Forfeited (unaudited)
(1,003
)
0.0335
Outstanding at September 30, 2011 (unaudited)
5,490
0.0066
Stock options
A summary of the Company's stock option activity and related information follows (in thousands, except per share data):
Shares
Weighted-
average price
per share
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic
value
Outstanding at August 4, 2010
—
$
—
Granted
620
0.08
Outstanding at December 31, 2010
620
0.08
9.9
$
12
Granted (unaudited)
798
0.32
Outstanding at September 30, 2011 (unaudited)
1,418
0.21
9.5
176
Exercisable at December 31, 2010
—
$
0.08
9.9
$
12
Exercisable at September 30, 2011 (unaudited)
3
$
0.08
9.7
$
—
Vested and expected to vest at December 31, 2010
620
$
0.08
9.9
$
12
Vested and expected to vest at September 30, 2011 (unaudited)
1,418
$
0.21
9.7
$
176
F-17
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
The fair value of each stock-based award is estimated on the grant date using the Black-Scholes option-pricing model using the following assumptions:
December 31,
2010
Nine months
ended
September 30,
2011
(Unaudited)
Risk-free interest rate
2.0
%
1.1-2.7
%
Dividend yield
—
—
Volatility
67
%
69-70
%
Expected term (years)
6.1
6.0-6.1
The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107,
Share-Based Payment
, to calculate the expected term
as it does not have sufficient historical exercise data to provide a reasonable basis upon which to
estimate the expected term for options granted to employees and utilizes the contractual term for options granted to non-employees. The expected term is applied to the stock option grant
group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. The computation of expected volatility
is based on the historical volatility of a representative group of companies with similar characteristics to us, including early stage of product development and therapeutic focus. The
risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. Management estimates expected forfeitures based on data from
a representative group of companies with similar characteristics to us and recognizes compensation costs only for those equity awards expected to vest.
For
the period from August 4, 2011 (inception) to December 31, 2010, the Company did not recognize any stock-based compensation for employee stock option grants. The Company recognized
total stock-based compensation expense for employee stock option grants of $8,000 in the nine months ended September 30, 2011 and the period from August 4, 2010 (inception) to
September 30, 2011. The weighted-average grant date fair value of options granted in the period from August 4, 2010 (inception) to December 31, 2010, the nine months ended
September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011 was $0.05, $0.21 and $0.17 per share, respectively.
Stock-based
awards issued to nonemployees, including directors for non-board related services, are accounted for using the fair value method. These stock-based option awards are revalued
on each vesting and reporting date. The Company recognized total stock-based compensation expense of approximately $1,000, $137,000, and $138,000 in the period from August 4, 2010 (inception)
to December 31, 2010, the nine months ended September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011, respectively. Due to an
operating loss, the Company does not record tax benefits associated with stock-based compensation and option exercises. Tax benefits will be recorded when realized.
At
December 31, 2010 and September 30, 2011, there was $35,000 and $625,000 of total unrecognized compensation cost related to nonvested stock options, respectively. As of
December 31,
F-18
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
2010
and September 30, 2011, the Company expects to recognize these costs over a remaining weighted-average period of 3.8 years and 3.2 years, respectively.
7. Income taxes
As of December 31, 2010 the Company had federal net operating loss carryforwards of approximately $570,000 and state net operating loss
carryforwards of $578,000, which are available to reduce future taxable income. The Company also had federal tax credits of $15,000 and state tax credits of $5,000, which may be used to offset future
tax liabilities. The net operating loss (NOL) and tax credit carryforwards will expire at various dates through 2030. The NOL and tax credit carryforwards are subject to review and possible adjustment
by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards are subject to review and possible adjustment and may become subject to an annual limitation
in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of
the Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The
amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future
years.
A
reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows:
Period from
August 4,
2010
(inception) to
December 31,
2010
Income tax benefit using U.S. federal statutory rate
34.00
%
State income taxes, net of federal benefit
5.62
%
Research and development tax credits
1.96
%
Permanent items
(0.78
%)
Change in the valuation allowance
(40.80
%)
Other
—
—
%
F-19
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
The principal components of the Company's deferred tax assets are as follows:
December 31,
2010
Deferred tax assets:
Net operating loss carryforwards
$
225
Capitalized research and development
55
Research and development credits
18
Stock-based compensation
20
Other
2
Gross deferred tax assets
320
Valuation allowance
(320
)
Net deferred tax asset
$
—
The Company has recorded a valuation allowance against its deferred tax assets at December 31, 2010 because the Company's management believes that it is
more likely than not that these assets will not be fully realized. The increase in the valuation allowance in 2010 primarily relates to the net loss incurred by the Company.
Upon
inception, the Company adopted accounting guidance related to accounting for uncertainty in income taxes. The Company's reserves related to taxes are based on a determination of whether and how
much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax
benefit. Upon adoption, the Company recognized no material adjustment for unrecognized income tax benefits. As of the adoption date and through December 31, 2010, the Company had no
unrecognized tax benefits or related interest and penalties accrued. The Company has not, as yet, conducted a study of research and development (R&D) credit carryforwards. This study may result in an
adjustment to the Company's R&D credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation
allowance has been provided against the Company's R&D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no
impact to the balance sheet or statement of operations if an adjustment were required. The Company 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 tax authorities. Since the Company is in a loss carryforward position, the Company is
generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available.
8. Commitments and contingencies
From November 2010 through May 2011, the Company leased office space from a shareholder. There was no formal lease arrangement with the
shareholder. Rent paid to the shareholder was $12,000, $34,000 and $46,000 for the period from August 4, 2010 (inception) to December 31, 2010, the
F-20
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
nine months
ended September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011, respectively.
In
May 2011, the Company entered into a non-cancelable operating lease for office and laboratory space, which expires October 31, 2014. The lease agreement provides for free
rent for the first four months of the lease term and includes escalating rent payments. The rent expense is recorded on a straight-line basis over the lease term. The Company is also
obligated to pay for certain operating costs and a proportional share of certain common area costs. The Company has the right to extend the lease for a two-year period. The annual rent for each
additional year is determined
annually at the then fair market rate. The Company secured a letter of credit for $86,000 in connection with the lease, which is included in restricted cash on the balance sheet. The minimum aggregate
future lease commitments are as follows (in thousands):
2011
$
115
2012
351
2013
360
2014
307
$
1,133
The Company recorded rent expense of $12,000, $199,000 and $211,000 for the period from August 4, 2010 (inception) to December 31, 2010, the
nine months ended September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011, respectively.
9. Accrued expenses
Accrued expenses consist of the following (in thousands):
December 31,
2010
September 30,
2010
(Unaudited)
Professional fees
$
35
$
173
License fees
30
—
Compensation and related benefits
15
391
Deferred rent
—
25
Contract research organizations
—
103
Other expenses
9
70
$
89
$
762
10. License agreements
In October 2010, the Company entered into an exclusive license agreement with an institution for certain intellectual property. The Company
paid the licensor an upfront license fee, reimbursed patent related fees and costs incurred by the licensor and an affiliate of the licensor and issued 583,333 shares of common stock to the licensor
and entities and individuals affiliated with the licensor. Under the
F-21
Table of Contents
Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
terms
of the agreement, the Company also agreed to pay annual license maintenance fees, milestone payments, royalties as a percentage of net sales and a percentage of sublicense income the Company
receives. Annual license maintenance fees are creditable against royalties earned during the same calendar year. Milestone payments are triggered upon the achievement of specified development,
regulatory and commercialization milestones and are not creditable against royalties. Actual amounts due under the agreement will vary depending on the number of products developed, the type and
development path of the products, and other related factors. The Company may terminate the agreement at any time with 90 days' prior written notice.
In
October 2010, the Company also entered into a nonexclusive license agreement with an institution for certain intellectual property. The Company paid upfront license fees. The Company is
obligated to pay an annual license maintenance fee beginning in 2012. The Company may terminate the agreement at any time with 90 days' prior written notice.
In
December 2010, the Company entered into a research-only license agreement with an institution for certain intellectual property. The Company paid an upfront license fee and
agreed to annual maintenance fees for each cell line licensed per year. The Company may terminate the agreement at any time with 60 days' prior written notice.
The
Company recorded total research and development expense of $135,000, $25,000 and $160,000 in the period from August 4, 2010 (inception) to December 31, 2010, the nine months ended
September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011, respectively, associated with the license agreements. Annual maintenance fees on the
licenses total $95,000 beginning in 2012 up to a maximum of $170,000 through the term of the agreements and the Company could make milestone payments of up to $1.6 million under the licenses.
11. Employee benefit plan
In June 2011, the Company adopted a 401(k) retirement and savings plan (the 401(k) Plan) covering all employees. The 401(k) Plan allows
employees to make pre-tax contributions up to the maximum allowable amount set by the IRS. Under the 401(k) Plan, the Company may make discretionary contributions as approved by the board
of directors. During the nine months ended September 30, 2011 and the period from August 4, 2010 (inception) to September 30, 2011, the Company made contributions to the 401(k)
Plan of $25,000.
12. Subsequent events
The Company reviews all activity subsequent to year end but prior to the issuance of the financial statements for events that could require
disclosure or that could impact the carrying value of assets or liabilities as of the balance sheet date. All significant subsequent events have been properly disclosed in the financial statements.
In
November 2011, the Company sold approximately 8.9 million shares of Series C redeemable convertible preferred stock (Series C Preferred Stock) at a price of $2.25 per share for
gross proceeds of $20.1 million. The Original Issue Price of the Series C Preferred Stock is $2.25 per share. The rights, preferences and privileges of the Series C Preferred
Stock are substantially consistent with those described in Note 4 with respect to conversion, dividends, liquidation, voting and redemption.
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Verastem, Inc.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 (information as of September 30, 2011 and for the nine months then ended is unaudited)
However,
as a result of the issuance of the Series C Preferred Stock, the vote or consent of the Preferred Stock with respect to conversion, liquidation and the matters described in
Note 4 under "Voting" now requires the vote or consent of holders of at least 60% of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
voting as a single class in addition to the vote or consent of holders of at least 60% of the Series A Preferred Stock and Series B Preferred Stock voting as a single class. In addition,
the Series C Preferred Stock is redeemable beginning in 2016 at the demand of specified holders of the Series C Preferred Stock.
F-23
Table of Contents
Until                           , 2012
(25 days after commencement of this offering), all dealers that buy, sell, or trade shares of our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
Table of Contents
Part II—Information not required in prospectus
ITEM 13.    OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in connection with the offering described in this Registration Statement, other than
underwriting discounts and commissions, all of which will be paid by us. All amounts are estimates except the Securities and Exchange Commission registration fee and the Financial Industry Regulatory
Authority, Inc. filing fee.
Amount
Securities and Exchange Commission registration fee
$
5,730
Financial Industry Regulatory Authority, Inc. filing fee
5,500
NASDAQ listing fee
*
Accountants' fees and expenses
*
Legal fees and expenses
*
Blue Sky fees and expenses
*
Transfer Agent's fees and expenses
*
Printing and engraving expenses
*
Miscellaneous
*
Total Expenses
$
*
*
To be filed by amendment.
ITEM 14.    INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law permits a corporation to eliminate the personal liability of its directors or its
stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our
certificate of incorporation provides that no director shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any
provision of law imposing such liability, except to the extent that the Delaware General Corporation Law prohibits the elimination or limitation of liability of directors for breaches of fiduciary
duty.
Section 145
of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons
serving at the request of the corporation in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the
person in connection with an action, suit or proceeding to which he or she is party or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in
view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the Court of Chancery or such other court shall deem proper.
II-1
Table of Contents
Part II—Information not required in prospectus
Our
certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative (other than an action by or in the right of us) by
reason of the fact that he or she is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or
trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by reason of any
action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best
interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful.
Our
certificate of incorporation also provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of
the fact that the Indemnitee is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or
trustee or, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such
capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or
proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no
indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication
but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits
or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If we
don't assume the defense, expenses must be advanced to an Indemnitee under certain circumstances.
We
have entered into indemnification agreements with our directors. In general, these agreements provide that we will indemnify the director to the fullest extent permitted by law for claims arising
in his or her capacity as a director of our company or in connection with his or her service at our request for another corporation or entity. The indemnification agreements also provide for
procedures that will apply in the event that a director makes a claim for indemnification and establish certain presumptions that are favorable to the director.
We
maintain a general liability insurance policy which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or
officers.
The
underwriting agreement we will enter into in connection with the offering of common stock being registered hereby provides that the underwriters will indemnify, under certain conditions, our
directors and officers (as well as certain other persons) against certain liabilities arising in connection with such offering.
ITEM 15.    RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is information regarding shares of common stock and preferred stock issued, and options granted, by us within the past three years
that were not registered under the Securities Act of
II-2
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Part II—Information not required in prospectus
1933,
as amended, or the Securities Act. Also included is the consideration, if any, received by us for such shares and options and information relating to the section of the Securities Act, or rule
of the Securities and Exchange Commission, under which exemption from registration was claimed.
(a)
Issuances of securities
In
August 2010, we sold an aggregate of 10,000,000 shares of our common stock at a price per share of $0.0001 for an aggregate purchase price of $1,000.
In
October 2010 and November 2010, we issued an aggregate of 583,333 shares of common stock to the Whitehead Institute and entities and individuals affiliated with the Whitehead Institute pursuant to
the terms of our exclusive license agreement with the Whitehead Institute.
In
November 2010, we sold an aggregate of 4,000,000 shares of our series A preferred stock at a price per share of $1.00 for an aggregate purchase price of $4.0 million. In April 2011 we
sold an aggregate of 12,000,000 shares of our series A preferred stock at a price per share of $1.00 for an aggregate purchase price of $12 million.
In
April 2011, we sold an aggregate of 896,000 shares of our common stock at a price per share of $0.08 for an aggregate purchase price of $71,680.
In
July 2011, we sold an aggregate of 16,025,000 shares of our series B preferred stock at a price per share of $2.00 for an aggregate purchase price of $32.0 million.
In
November 2011, we sold an aggregate of 8,934,493 shares of our series C preferred stock at a price per share of $2.25 for an aggregate purchase price of $20.1 million.
No
underwriters were involved in the foregoing sales of securities. The securities described in this section (a) of Item 15 were issued to investors in reliance upon the exemption from
the registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act, including in some cases, Regulation D promulgated thereunder, relative to
transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required. All purchasers of shares of preferred stock described above represented to
us in connection with their purchase that they were accredited investors and were acquiring the shares for their own account for investment purposes only and not with a view to, or for sale in
connection with, any distribution thereof. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to
a registration statement or an available exemption from such registration.
(b)
Stock option grants
Since
inception, we have issued to certain employees, directors and consultants options to purchase an aggregate of 1,418,000 shares of common stock as of September 30, 2011, of which, as of
September 30, 2011, no options had been exercised or forfeited, and options to purchase 1,418,000 shares of common stock remained outstanding at a weighted-average exercise price of $0.21 per
share.
The
issuance of stock options and the common stock issuable upon the exercise of such options as described in this section (b) of Item 15 were issued pursuant to written compensatory
plans or arrangements with our employees, directors and consultants, in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 701 promulgated under
the Securities Act or the exemption set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder relative to transactions by an issuer not involving any
public offering. All recipients either received adequate information about us or had access, through employment or other relationships, to such information.
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Part II—Information not required in prospectus
All
of the foregoing securities are deemed restricted securities for purposes of the Securities Act. All certificates representing the issued shares of capital stock described in this Item 15
included appropriate
legends setting forth that the securities had not been registered and the applicable restrictions on transfer.
ITEM 16.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits to the Registration Statement are listed in the Exhibit Index attached hereto and incorporated by reference herein.
ITEM 17.    UNDERTAKINGS.
(a)
The
undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
(b)
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(c)
The
undersigned registrant hereby undertakes that:
(1)
For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared effective.
(2)
For
the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona
fide
offering thereof.
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Table of Contents
Signatures
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth of Massachusetts, on this 3rd day of November, 2011.
VERASTEM, INC.
By:
/s/ CHRISTOPH WESTPHAL, M.D., PH.D.
Christoph Westphal, M.D., Ph.D.
Chief Executive Officer
SIGNATURES AND POWER OF ATTORNEY
We, the undersigned officers and directors of Verastem, Inc., hereby severally constitute and appoint Christoph Westphal, M.D., Ph.D. and
Robert Forrester, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and any other registration statement for the same offering pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated.
Signature
Title
Date
/s/ CHRISTOPH WESTPHAL, M.D., PH.D.
Christoph Westphal, M.D., Ph.D.
Chief Executive Officer and Director
(Principal executive officer)
November 3, 2011
/s/ ROBERT FORRESTER
Robert Forrester
Chief Operating Officer
(Principal financial and
accounting officer)
November 3, 2011
/s/ RICHARD ALDRICH
Richard Aldrich
Director
November 3, 2011
/s/ JOHN K. CLARKE
John K. Clarke
Director
November 3, 2011
II-5
Table of Contents
Signatures
Signature
Title
Date
/s/ ANSBERT GADICKE, M.D.
Ansbert Gadicke, M.D.
Director
November 3, 2011
/s/ STEPHEN KRAUS
Stephen Kraus
Director
November 3, 2011
/s/ HENRI TERMEER
Henri Termeer
Director
November 3, 2011
II-6
Table of Contents
Exhibit index
Exhibit
number
Description of exhibit
1.1*
Underwriting Agreement
3.1
Amended and Restated Certificate of Incorporation of the Registrant
3.2
Bylaws of the Registrant
3.3*
Restated Certificate of Incorporation of the Registrant to be effective upon the closing of this offering
3.4*
Amended and Restated Bylaws of the Registrant to be effective upon the closing of this offering
4.1*
Specimen certificate evidencing shares of common stock
4.2
Second Amended and Restated Investors' Rights Agreement, dated November 1, 2011, by and among the Registrant and the other parties thereto
5.1*
Opinion of Wilmer Cutler Pickering Hale and Dorr LLP
10.1
2010 Equity Incentive Plan
10.2*
2012 Stock Incentive Plan
10.3*
Form of Incentive Stock Option Agreement under 2012 Stock Incentive Plan
10.4*
Form of Nonqualified Stock Option Agreement under 2012 Stock Incentive Plan
10.5*
Employment Agreement, dated             2012, between the Registrant and Robert Forrester
10.6*
Employment Agreement, dated             2012, between the Registrant and Jonathan Pachter
10.7*
Form of Indemnification Agreement between the Registrant and each director
10.8
Lease Agreement, dated May 2, 2011, between the Registrant and ARE-MA Region No. 38, LLC
10.9†
Exclusive Patent License Agreement and Tangible Property Agreement, dated October 13, 2010, by and among the Registrant and the Whitehead Institute for Biomedical Research
10.10*
Non-exclusive Patent License Agreement, dated October 13, 2010, by and among the Registrant and the Whitehead Institute for Biomedical Research
10.11†
Letter Agreement, dated October 1, 2010, between the Registrant and the Broad Institute
10.12
Letter Agreement, dated July 30, 2010, as amended October 18, 2010, between the Registrant and Piyush Gupta, Ph.D.
10.13
Letter Agreement, dated August 20, 2010, between the Registrant and Eric Lander, Ph.D.
10.14
Letter Agreement, dated July 30, 2010, as amended October 18, 2010, between the Registrant and Robert Weinberg, Ph.D.
23.1
Consent of Ernst & Young LLP
23.2*
Consent of Wilmer Cutler Pickering Hale and Dorr LLP (included in Exhibit 5.1)
24.1
Power of Attorney (included on signature page)
*
To be filed by amendment.
†
Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission.