Epizyme (EPZM) Q2 Loss Lower Than Expected, Costs To Rise

Epizyme, Inc. (NASDAQ:EPZM) reported a loss of 49 cents per share in the second quarter of 2016, narrower than both the Zacks Consensus Estimate of a loss of 50 cents and the year-ago loss of 63 cents.

Quarter in Detail

The company earned collaboration revenues of $0.5 million in the quarter, significantly lower than the year-ago tally of $0.9 million and missed the Zacks Consensus Estimate of $0.6 million. Revenues declined due to lower deferred contributions from upfront payments, and research and development revenues related to the GlaxoSmithKline (NYSE:GSK) collaboration.

Research and development expenses were $21.5 million, up 69% primarily due to costs associated with the expansion of the tazemetostat program. Likewise, general and administrative expenses were up 23.3% to $7.4 million primarily due to the addition of new members to the senior management team in the second quarter.

Pipeline Update

Epizyme’s lead pipeline candidate, tazemetostat, is currently being evaluated in a phase II study in adults with relapsed or refractory non-Hodgkin lymphoma (NHL), a phase II study in adults and a phase I study in children with certain genetically-defined solid tumors, including INI1-negative or SMARCA4-negative rhabdoid tumors, renal medullary carcinoma, epithelioid sarcoma, other INI1-negative tumors and synovial sarcoma.

Efficacy and safety data from the phase II studies on NHL and solid tumor are expected in the first half of 2017.

The company anticipates meeting with the FDA to review data from all cohorts of the phase II study on solid tumor and discuss registration strategies in mid 2017. It also expects to review phase II data on NHL and discuss registration strategies with the agency in 2017.

Moreover, Epizyme initiated a phase II study on tazemetostat to evaluate the candidate as monotherapy for the treatment of patients with mesothelioma characterized by BAP1 loss-of-function.

In the reported quarter, the company entered into a collaboration agreement with Roche Holding (SIX:ROG) AG’s (OTC:RHHBY) Genentech to evaluate tazemetostat, in combination with Tecentriq (atezolizumab), for the treatment of patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL). The combination study is slated to begin in the second half of 2016.

2016 Guidance

Epizyme continues to expect a significant increase in R&D expenses in 2016 due to the ongoing and planned studies on tazemetostat. The company has expanded both the studies on NHL and genetically-defined solid tumor, and has modestly increased its investment in discovery activities.

Moreover, discovery and preclinical research costs are expected to increase as the company advances its wholly owned small molecule programs against multiple novel epigenetic targets.

It expects current cash balance, cash equivalents and marketable securities of $289 million to be sufficient to fund operations through at least the second quarter of 2018.

EPIZYME INC Price and EPS Surprise

EPIZYME INC Price and EPS Surprise | EPIZYME INC Quote

Our Take

Epizyme’s narrower-than-expected loss in the second quarter of 2016 was encouraging. With no approved products in its kitty as of yet, the company relies heavily on its collaborators for revenue. We are encouraged by the company’s efforts to develop its lead candidate tazemetostat for a number of indications. Epizyme expects 2016 to be a critical year given several data readouts lined up from its studies on tazemetostat in NHL and solid tumors.

Moreover, the company targets to launch tazemetostat globally for both NHL and genetically defined solid tumors by 2020. The company also expects to move at least three new oncology programs into clinical development by 2020. In addition, it will expand the utility of tazemetostat into new tumor types and treatment settings as both monotherapy and in combinations.

Epizyme currently carries a Zacks Rank #4 (Sell). Geron Corporation (NASDAQ:GERN) is a better-ranked stock in the health care sector with a Zacks Rank #1 (Strong Buy).

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