NEW YORK (TheStreet -- Verastem (VSTM) - Get Report hasn't tried its cancer drugs on any humans yet, but the company is hoping that won't stop investors from buying its stock.

The Cambridge, Mass.-based biopharma company is developing small molecule drugs targeted at cancer stem cells using intellectual property licensed from Harvard and MIT. It filed to go public in early November, and is seeking to raise $50 million through the sale of 4.5 million shares at $9 to $11 each. Pricing is expected this week.

There are some reasons for retail investors to sit this one out. Verastem has only been around since August of 2010, so it's very early stage, having completed preclinical mouse testing on two compounds. The company expects to file an investigational new drug application with the Food and Drug Administration in early 2013 to begin a Phase 1 clinical trial on one of the compounds -- whichever has the best outcome.

Of the proceeds from the IPO, Verastem has earmarked $25 million to $30 million to be used to complete the preclinical development of the compounds and the advancement to human testing, with the balance going to working capital and other general corporate purposes.

One of the red flags on this IPO is competition. Cancer stem cells are being targeted by other larger, more established drug companies like


(GSK) - Get Report



(PFE) - Get Report

, as well as a host of other smaller companies like

OncoMed Pharmaceuticals


Boston Biomedical


Stemline Therapeutics


Investors should also be warned that cancer stem cells have been at the heart of lots of controversy as to whether they are just are theory or real. Studies in 2009 questioned whether cancer stem cells even existed.

Verastem's co-founders Robert Weinberg, Eric Lander and Piyush Gupta believe they have made discoveries that unlock the transformation of a typical cancer sell to a more aggressive and drug-resistant cancer stem cell.

But investors also need to be aware that Verastem's CEO is Christoph Westphal, who sold a previous biotech company Sirtris to GlaxoSmithKline in 2008 for $720 million. The research from Sirtris has been into question following the acquisition with claims surfacing that Glaxo was bamboozled and sold worthless research.

This is a high-risk offering that gives new investors little hard proof, a tarnished executive with unproven science. In the company's own words, "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."

Verastem goes on to say, "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. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis."

However, you look at it, the company is still a long ways and a lot of money away from being anything but a gamble.


Written by Debra Borchardt in New York.

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Debra Borchardt


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