Epizyme, Inc.
Q2 2015 Earnings Call Transcript

Published: 6 Aug 2015

[Operator:]

Good day ladies and gentlemen, and welcome to the Epizyme Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference may be recorded. I would now like to turn the call over to the Epizyme team. You may begin your conference.

[Aidan Finley:]

Good morning. This is Aidan Finley of Epizyme Corporate Communications, and welcome to Epizyme's second quarter 2015 conference call. The news release with our second quarter financial results and corporate update became available today at 7

[Robert Gould:]

Thanks Aidan. Good morning and thank you for joining our call today. This is a particularly important call for Epizyme and for me personally, after a thorough succession planning process, we announced yesterday that Rob Bazemore will be succeeding me as President and Chief Executive Officer of Epizyme, effective September 10, 2015. Rob will also join the Epizyme Board of Directors. Epizyme is defined for this transition, as we stand on the brink of our next stage of growth. In my 5.5 years as CEO, we have transformed from an early stage venture-backed startup, into a publicly traded development stage company with a broad research platform. We have a strong balance sheet and an experienced and capable organization, and most significantly, we have successfully advanced two compounds into clinical development, including tazemetostat, which I believe has the potential to be an important new cancer therapy. I am pleased with the progress we have made, and we are well positioned for our next stage of growth. The other members of the Board and I have worked to identify the next leader to capitalize on the opportunities in front of us. We have found that person in Rob Bazemore. Rob has tremendous experience at the intersection of drug development and commercialization, and in scaling the organization, with particular expertise in oncology, from his time leading Janssen Biotech, a global oncology and immunology business, with more than $7 billion in revenues. At Janssen, Rob led the integration of the OrthoBiotech and Centocor businesses. He also led the commercial partnership with Pharmacyclics, which successfully launched the novel hematological malignancy product IMBRUVICA, and he was instrumental in the integration of Cougar Biotechnology, leading the most successful launch of another novel oncology product, Zytiga. Most recently, Rob served as Chief Operations Officer of Synageva, through its acquisition in July 2015 by Alexion for $8.4 billion. I have been a part of that design since inception seven years ago, the last 5.5 as CDO. My commitment to our success remains as strong as ever. I believe, we are making significant and important advances, that have the potential to change the lives of people living with cancer. I will continue to serve on our Board of Directors, and I am looking forward to working with Rob and the team to guide Epizyme's success into the future. I will now turn the call over to Rob Bazemore.

[Rob Bazemore:]

Thank you, Robert. I appreciate your words and I appreciate the Board's confidence in me, and I couldn't be more excited to be here. When I was approached about this opportunity, I was intrigued by the potential to be a part of a company with such strong foundation, and at such an important inflexion point in the evolution from being a development stage organization to a fully integrated research, development and commercial oncology company. My decision to join Epizyme was driven by my strong belief in the potential of the company's lead asset, tazemetostat, and a range of hematological malignancies and solid tumors. It was also driven by the strength of Epizyme's leading scientific platform and epigenetics, and the ability to build on that platform with a talented executive team, to create the company that we all envision; a vertically integrated, multi-product business, delivering life-changing therapies to patients. As Robert described, Epizyme has made remarkable progress over the past several years, and I believe the company is in a strong position as we go forward. As the metastatic clinical development is progressing quite well, with encouraging signals emerging from our Phase-I study. We look forward to further expanding our clinical program to fully characterize the potential of this compound, to defining a registrational path, to bring tazemetostat to patients, and to executing our clinical program as quickly as possible. We are well resourced, having raised sufficient funds earlier this year, to enable the execution of our broad research and clinical development plans; and we have a strong team, with deep expertise at the executive ranks and throughout the organization to execute these plans. I look forward to working with Robert during this transition period and to working closely with our Board, our management team and our staff to deliver on our goal of bringing novel, life-changing agents to the treatment of cancer. And now, I will turn the call back to Robert, to provide an update on our progress in the second quarter.

[Robert Gould:]

Thank you, Rob. In the second quarter of 2015, Epizyme made significant progress advancing tazemetostat. Importantly, we initiated the 150 patient five-arm Phase-2 NHL monotherapy study. We completed the transition of tazemetostat development and related activities from Eisai, and expanded our clinical development plans. We also presented clinical data from the ongoing Phase-1 study of tazemetostat at the ICML conference, where it demonstrated durable objective clinical responses as a monotherapy in heavily pre-treated patients with NHL, and a safety and tolerability profile, that may lend itself well to both monotherapy and combination regimens. We look forward to presenting updated data on solid tumor patients at ESMO's European Cancer Congress in September. Subsequent to the second quarter, we were pleased to announce that Epizyme entered into an amended collaboration and license agreement with Celgene. This revised agreement focuses on three pre-defined HMT targets. These three specific targets of interest emerged from our Celgene collaboration. We are excited to continue our work with Celgene, to see these three programs mature, and thereby, seek to bring much needed new medicines to cancer patients. Our continued progress with tazemetostat and our revised collaboration with Celgene, are both evidence of our growth and leadership in the epigenetic space, and represent significant milestones in our ongoing work, to deliver life-changing therapies to cancer patients. Let me now turn the call over to Peter, to discuss our clinical programs.

[Peter Ho:]

Thank you, Robert. As Robert mentioned, we have had a busy quarter for tazemetostat, our first in class oral EZH2 inhibitor. Since our acquisition of worldwide rights, ex-Japan, [indiscernible] from Eisai in March 2015, we've completed the transfer of the ongoing clinical development and related activities to Epizyme. Patients are continuing on-study from the dose escalation, dose expansion, and clinical pharmacology portions from the ongoing [indiscernible] file. Initial data on patients, with non-Hodgkin lymphoma presented at ICML in June, demonstrated an impressive breadth, depth and duration of responses. We will be presenting updated data from patients with solid tumors, treated in this ongoing Phase-1 trial at ESMO, in September. In addition, we plan to present additional data from patients with NHL at a medical meeting before the end of 2015. We will also dose the first patients in the five-arm Phase-2 NHL clinical trial. We expect to enroll approximately 150 relapse or refractory patients with diffuse large B cell lymphoma or DLBCL, or with follicular lymphoma, prospectively stratified by cell of origin and EZH2 mutational status. We expect initial data from this study in mid-2016. We also plan to commence a Phase-2 trial in adult patients with INI1-negative tumors or synovial sarcoma, and a Phase-1 file in pediatric patients with INI1 negative tumors or synovial sarcoma in the second half of 2015. We are very excited about the progress we are making in the clinic with tazemetostat, and we look forward to continuing that advancement. For our other clinical program, the DOT1L inhibitor, pinometostat; in the third quarter of 2015, Epizyme will cease patient enrollment into the Phase-1 study in adults with MLL-rearranged acute leukemia. The decision is based on insufficient efficacy as the monotherapy observed to-date in this population. We expect to present final study results, after all patients, complete treatment and data analysis are complete. Except with dose escalation study of pinometostat and pediatric patients is ongoing, and enrollment is expected to be completed in the second half of 2015. Epizyme and Celgene plan to explore pinometostat, in combination with other agents, based on encouraging pre-clinical data. I will now turn the discussion over to Bob, for an update on our pre-clinical pipeline.

[Bob Copeland:]

Thanks Peter. Our systematic approach to target identification and drug discovery has anchored out physician as the leaders in translating the science of epigenetics, into first in class precision therapeutics for cancer patients, and this continues to deliver value today. Beginning with our comprehensive survey of the human genome to identify 96 histone methyltransferase enzymes, we have continuously refined and evolved our approach to target identification and validation. Epizyme scientists have married [ph] genetic ablation approaches, including proprietary advances in the application of crisper technology, with unique chemical biology approaches to unveil deep, novel understandings of the pathobiological roles of HMTs in cancer, and the impact of small molecule enzyme inhibitors on this pathogenesis. Over the past seven years, our molecular discovery organization has developed a proprietary collection of small molecule HMT inhibitors, which has led to a our strong understanding of the medicinal chemistry of HMT inhibitor design. This has been facilitated by our deep understanding of HMT enzymology and structural biology. We are pleased to have been able to successfully complete our collaboration with GSK, having delivered high quality chemical matter for all three alliance targets. As mentioned before, we have also renewed our alliance with Celgene, focused on three specific HMTs; because of the success of our platform activities, we enter this renewed relationship with Celgene, with chemical matter in hand against all there alliance targets. In addition, we are in the process of more fully exploring a number of other internal epigenetic targets, within and related to the HMT target class. I am very pleased with the innovation and scientific rigor that Epizyme continues to bring to all its research activities, and we look forward to sharing further progress with you. Let me now turn the call over to Andy, for the financial section of this call. Andy?

[Andrew Singer:]

Thanks Bob. Epizyme is in a strong financial position, due to steps we have taken over the course of the year. Epizyme's cash and cash equivalents as of June 30, 2015, were $236.7 million. This excludes the $10 million upfront payment associated with the new Celgene agreement. We expect that our cash and cash equivalents, including the Celgene payment, will be sufficient to fund our operating expenses and capital expenditure requirements, through at least the end of the second quarter of 2017, prior to including any potential license fees or future milestones. I will now review the second quarter results. Collaboration revenue was $0.7 million, as compared to $9.5 million in the comparable period in 2014. Due to the completion of our research obligations under the Eisai and GSK agreements. Research and development expenses for the second quarter of this year were $20.6 million, as compared to $17.5 million in the second quarter last year. We anticipate the development expenses will increase, as we are now responsible for funding tazemetostat clinical trials, and related global development outside of Japan. General and administrative expenses were $6 million for the second quarter of this year, compared with $5.3 million for the same quarter last year. We expect G&A expenses to increase slightly for the remainder of 2015. Turning to the future, we will keep you updated on our progress through the second half of the year. We will present updated Phase-1 tazemetostat solid tumor guidelines at ESMO in September. We also plan to present data from the Phase-1 NHL expansion cohort before the end of the year, and we plan to initiate the Phase-2 adult and Phase-1 pediatric studies, in patients with INI1 negative tumors or with synovial sarcoma in the second half of 2015. In summary, we continue to invest in the programs we believe have the greatest potential to drive for patients and for shareholders. We are excited about the promise tazemetostat is showing in the clinic, and we look forward to its continued development, as well as the rest of our pipeline. We will now open the call for Q&A. Operator?

[Operator:]

[Operator Instructions]. Thank you. And our first question comes from the line of Simos Simeonidis from RBC Capital Markets.

[Simos Simeonidis:]

Good morning. Thank you very much for taking the questions. I was wondering if you can give us some of your thinking behind the rationale for the change at the CEO level? Rob's very-very impressive background, notwithstanding. It seems that it may be more appropriate for Epizyme, perhaps a year or two down the line, once you have perhaps figured more clearly, the mechanics of action of tazemetostat. The drug has some very impressive efficacy, but its clear that we still are not sure exactly how it acts, and Robert Gould's 20 years as an R&D person, I though it would be very valuable at this point. Again, I am not trying to, in any way, slight Rob's background, but I am surprised to see Robert go at a point where his expertise would be more closely needed?

[Robert Gould:]

Thanks for that question Simos, and let me expand a little bit on the rationale for why we decided to make a change at this time. And to begin with, we are just making the point that Epizyme is in great shape. We have made a number of strategic moves this year as you know, acquiring tazemetostat, will [indiscernible] financing, encouraging data in tazemetostat in both NHL patients as well as in the malignant rhabdoid tumor patients, and we will be providing an update on those patients in -- coming up at ESMO in September. As we look forward over the next couple of years, we are very excited about the opportunity that tazemetostat represents, and wanted to ensure that we had in place the appropriate management structure to lead Epizyme into that next opportunity phase, and fully exploit tazemetostat in all of its potential. Before I turn it over to Rob, so he can give you a little bit of his background as to why we think he was such a great choice, I will underscore something that was in the press release yesterday, which is, I am going to be remaining on the board at Epizyme, and I will also be remaining as a consultant to Epizyme, because we agree with you, that there are a lot of exciting scientific observations that have come up, as we have taken tazemetostat into patients, and are making novel discoveries. And so in role as a consultant, I will continue to work closely with Rob and the team here, to be sure that we are exploiting those advantages to the fullest extent possible. But Rob, maybe a little explanation to your background would be useful as well.

[Rob Bazemore:]

Sure. Although as Robert said in the introduction, if you look at the most recent part of my experience, it's having been a Chief Operating Officer at Synageva, having been the President of the Janssen Biotech Organization, at Johnson & Johnson. I have also spent an extensive amount of time, leading portfolio and pipeline strategy, providing into product development. I am actually a biochemist by training, so my background is scientific before getting into the more commercial side of running businesses. The other thing that I feel very confident about, is the team that Robert has built here. We have a solid team on the scientific side, on the clinical side, with Bob and Peter, who are integrally [ph] involved in building and running the programs that will be responsible for making tazemetostat as well as the broad range of our pipeline projects successful as well. So I feel confident in having a team of people like that around me, as well as my background, that is going to be a great transition point for Epizyme and I am happy that the board and Robert has chosen to put their confidence to me, to lead that next chapter of the company's growth.

[Simos Simeonidis:]

Okay, thank you for taking the question.

[Operator:]

Thank you. And our next question comes from Kennen MacKay from Citi. Your line is open.

[Kennen MacKay:]

Thank you for taking the question. So actually, just one more question on the CEO transition period. This is obviously unexpected. On the Wall Street, I wanted to see, if this was something that had been sort of planned and discussed with the Board for some time or if this was more sort of a strategic decision to [indiscernible] out of the Synageva transition?

[Robert Gould:]

Thanks Kennen. The search for the new CEO was initiated by the Board of Directors and I was intimately involved with that. We had looked at a broad list of candidates through our CEO selection committee. The final candidates were then interviewed, not only by me, but all the members of the Board of Directors. It was actually almost coincidental during that process that Rob became available to us because of the acquisition of Synageva, and once he became available and once we were able to attract his interest, his background, his experience, and his leadership skills were such that we felt like he was the logical choice for us.

[Kennen MacKay:]

Got it. Terrific. Thank you for that color. And perhaps a follow-up to Rob; I was wondering if you could perhaps discuss a little bit of what your sort of strategic initiatives would be, once you sort of take the helm in September?

[Rob Bazemore:]

Well, as we iterated on the call, I am very excited about where Epizyme is today. I was attracted here because of the leading science they have in the area of epigenetics. They have a platform that's capable of delivering multiple new product targets. I am very excited about the clinical progress on tazemetostat, the excitement of the Phase-1 data that we have seen so far. I chose to come here, because we have a vision to build a vertically integrated multi-product company, that can deliver a number of life-changing therapies for patients, alone and group partnerships that we do with others. And I think the company is well poised to do just that. We have an outstanding team of leaders to help us accomplish that vision. So that's the direction that we plan to go.

[Kennen MacKay:]

Terrific. Thank you. And then perhaps just one last follow-up question; I was wondering, when perhaps we could see additional data or given potentially some of the other methyltransferase inhibitors entering the clinic, when we might have additional data there? Thank you.

[Bob Copeland:]

Thanks for the question. This is Bob Copeland. We are not commenting on ongoing pipeline programs. We have only commented on previously disclosed clinical programs. There will be additional scientific presentations throughout 2015 and beyond.

[Kennen MacKay:]

Got it. Terrific. Thanks so much for taking the questions.

[Operator:]

Thank you. And our next question comes from the line of Yatin Suneja from Cowen and Company. Your line is open.

[Yatin Suneja:]

Thank you very much. Hi guys. First question is on tazemetostat. Could you give us a sense how many more patients you have enrolled and what number of patients do we expect at ESMO? I think in the last update, you said, you have enrolled 26 solid tumor patients? And then have you enrolled more INI deficient patients, and then what about the two patients that you enrolled, can you give us any update on those patients?

[Robert Gould:]

Yeah hi, thanks for the question. We are very excited about the continued enrollment into the ongoing Phase-1 study, we are in the clinical pharmacology sections of that study now, and enrolling. But as you know, the patients from the dose escalation, dose expansion portion, continue on study and we are very excited about following them. For the Phase-2 study, we initiated enrollment and are very pleased with how that's going in. We are continuing to expand the number of sites. For the upcoming presentation at ESMO, we will be focusing on the solid tumor patients within the Phase-1 portion of the study, and as you know, we did not focus on those patients at [indiscernible]. So we will be presenting the breadth of the solid tumor patients from the Phase-1 study there.

[Operator:]

Thank you. And our next question comes from the line of Mike King. Your line is open.

[Mike King:]

Good morning guys, thanks for taking the question. And just wanted to wish Robert well. You will be missed. I think you built a great company and welcome to the new Robert. I just wonder, is Robert part of the job description for the new CEO slot? I'd like to see consistency there?

[Robert Gould:]

Its part of the C-level suite, so it would be Robert Copeland, Robert Bazemore, we are replacing Robert Gould. We are trying to convince Andy to change his name to Robert.

[Mike King:]

That's like the same as Monty Python skit. But anyway Robert Bazemore, I look forward to meeting you. I just had a question about the upcoming data at ESMO. I don't know if Peter is still on the line, but I am just wondering how we should think about the data for INI deficient tumors versus lymphomas just in general. Is there any guidelines that we can look at from preclinical studies, as far as response rates and INI deficient tumors compared to lymphomas in the preclinical models?

[Robert Gould:]

Peter, why don't you take that question?

[Peter Ho:]

Mike, hi, this is Peter. Thanks for the question. So as you know, we entered the clinic with tazemetostat on the basis of very encouraging pre-clinical data. We also had a similar data in that vein, in the INI1 subject, and that's how we embarked on the clinical study in the Phase-1. At Lugano, we presented that for the solid tumor patients. We have already had 10 patients at that time, with INI1 deficient tumors enrolled. And so, we are looking forward to being able to present that in the context of the solid tumor experience. So we are very excited to be moving forward in that direction.

[Mike King:]

Okay. All right. I think everything else was pretty self-evident, so thanks for taking the questions.

[Operator:]

Thank you. And our next question comes from the line of Peter Lawson from Mizuho Securities. Your line is open.

[Peter Lawson:]

Congrats first of all, of course, for the transition. Anything you can say about your plans, longer term? How much time you could potentially commit, and if you are ready for the next company, and when did that search actually start, sort of this year?

[Robert Gould:]

Thanks Peter. So I have known media plans, I want to be sure that the transition to Rob goes smoothly. And as far in this transition plan -- in the next 30 days, Rob will be working closely with me, as I continue as CEO. And then our roles will reverse at that point, I will become a consultant to Rob, as he takes on the reins of the company. But I want to be sure, the transition goes as smoothly as possible. In the short term, I will be making myself available for Rob in this consultant role. The search for the CEO started earlier this year, and as you know, the search for a CEO can take some time, as was asked earlier. Once Rob became available for us, in fact, it became a very easy choice for us.

[Peter Lawson:]

Is there any time constraints for the contracts that you have as a consultant, like length of time or amount of time that you have to commit?

[Robert Gould:]

Within the contract that I have, there is a longevity cause, if you will. We will be filing an 8-K later today, or it has already been filed. So the detail of the contract will be in the 8-K. The length of the contract is for a year as a consultant, and the particular details vary during the course of that year, and I'd refer you to the 8-K for the details there.

[Peter Lawson:]

Got you. Thank you. And then on pinometostat, how are you thinking about this one, like I said the question for you, Peter or one of the many Robs. How are you thinking about the molecule moving forward and pediatrics, and what are you thinking about for the adult populations, and any data that's emerging that's kind of indicating, why you're seeing this difference between pediatric versus adult?

[Robert Gould:]

Peter, why don't you take that question?

[Peter Ho:]

Sure. Thank you, Robert. For pinometostat, we are continuing the dose escalation of trials. And as you know, that trial is further behind the adult study, so we think it's important to continue the dose escalating and gain the clinical experience from that activity. MLL-r disease is different. Our [indiscernible] typically is different between adults and children. And so, we are very interested in seeing how that progresses. With respect to adults, as we mentioned, we and Celgene both have ongoing, and specifically in the laboratory to follow-up on very intriguing findings of the drug in combination. So we look forward to seeing how that progresses, and continuing forward in that regard in adults.

[Peter Lawson:]

Got you. Thank you. And then just a quick question for Rob Bazemore, just your ideas of around your pipeline, I mean, building them internally versus acquiring? That would be great, thank you.

[Rob Bazemore:]

Well keep in mind, thank you for the question. I am sort of in a transition period between now and September the 10th, sop I am really going to get to shadow, Robert, learn more about our pipeline, learn more about our clinical development programs. As well as for my ideas about where I think we can go with that, and how broad those programs can be for the future. And so until we make those strategic decisions, its probably premature to talk about whether we would do that alone or in partnership with someone else. So I would say, stay tuned, this is a transition period for me until September 10th, and we will be able to get back pretty quickly after that, with some ideas of what changes, if any, we are taking in direction.

[Peter Lawson:]

Got you. Thank you so much. I will get back. Thank you.

[Operator:]

Thank you. [Operator Instructions]. We have a question coming from the line of David Nierengarten from Wedbush Securities. Your line is open.

[Dilip Joseph:]

This is Dilip, sitting in for David. Just a few questions; for pinometostat, could you remind me which specific agency saw the preclinical synergy with? And secondly for the upcoming studies in the INI1 deficient tumors, when do you expect data to become available?

[Robert Gould:]

Peter?

[Peter Ho:]

So for pinometostat, we surveyed a wide variety of agents preclinically. We haven't gone into details regarding which share [ph] class or classes of agents sort of had the most activity in combination. But we will be presenting that data in upcoming conferences, and again, doing additional studies to better characterize into buying back intensive thinking about clinical development plans. And I am sorry, your second question?

[Dilip Joseph:]

When we can expect data from the INI1 deficient tumor studies?

[Peter Ho:]

Right. So you're speaking to the specific studies, the Phase-2 in adult and the Phase-1 in pediatrics? We plan to start those studies in the second half of this year and once those studies get going, we will be able to have a better sense of when data come out from them.

[Dilip Joseph:]

Thank you.

[Operator:]

Thank you. [Operator Instructions]. And I am showing no questions at this time. I would now like to turn the call back over to the Epizyme team.

[Robert Gould:]

Thank you, operator. We look forward to advancing our strategy over the coming years, as we work to create value for our patients and their caregivers, our employees and our shareholders; and I want to thank you all personally for your continued support. I have enjoyed by interactions with Epizyme stakeholders over the years, and I know the company is going to be in very good hands under Rob's new leadership. So thank you again. Good bye.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.