Epizyme, Inc.
Q3 2015 Earnings Call Transcript

Published: 9 Nov 2015

[Operator:]

Good morning, and welcome to Epizyme’s Third Quarter 2015 Conference Call. At this time, all participants are in a listen-only mode. There we will be a question-and-answer session after the prepared remarks. Please be advised that this call is being recorded at Epizyme’s requisition. I would now like to turn the call over to Aidan Finley. You may begin.

[Aidan Finley:]

Thank you, operator. Good morning everyone and thank you for joining the Epizyme third quarter 2015 results conference call. With me here today are Rob Bazemore, President and CEO; Andrew Singer, Executive Vice President and CFO; Dr. Peter Ho, Executive Vice President and Chief Medical Officer; and Dr. Bob Copeland, President of Research and Chief Scientific Officer. Earlier today, we issued a press release summarizing our third quarter financial results and recent business highlights. The press release can be accessed in the Investor Center section of our website at epizyme.com. Before we begin, I would like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in the risk factors section of our Form 10-Q filed with the SEC on November 9, 2015, and in our other filings from time to time with the SEC. In addition, any forward-looking statements represent our views only as of today, and should not be relied upon, as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Let me now hand the call over to our CEO Rob Bazemore. Rob?

[Rob Bazemore:]

Thanks Aidan, and good morning, everyone. Thank you for taking part in today’s call. This is Epizyme’s first quarterly results conference call, since I was appointed as President and CEO. I am excited to be in this role. It’s our intention for Epizyme to become a multi-product company delivering break-through medicines for people with cancer. To get there, we have several important goals over the coming months, those are

[Andrew Singer:]

Thanks Rob, earlier this morning we issued a press release containing our financial results for the third quarter of 2015 and we field our Form 10-Q with the SEC. We encourage you to review these materials for the detailed results, which I will now summarize. Epizyme ended the third quarter with $229.9 million in cash and cash equivalents. This position reflects the $10 million payment received from Celgene in July for the extension of our collaboration agreement. As part of this agreement, Celgene has an option to individually license global rights for two pre-specified targets and ex-US rights for a third target. As a reminder, this partnership provides for up to $610 million in total potential milestone payments, including up to $75 million in development based milestones, up to $365 million in regulatory milestones, up to $170 million in sales based milestones and royalties to below double digits. Moving back to our results, we recognized $0.4 million of Celgene revenues in the third quarter of 2015. Research and development expense was $16.8 million for the third quarter. As Rob discussed a bit ago, the development of tazemetostat is the company's primary focus and we have directed the bulk of our external R&D spend towards that program. General and administrative expense in the third quarter was $6.7 million. Loss from operations was $23.1 million for the third quarter or $0.56 per share, based on a approximately 41.5 million outstanding shares of common stock. Wrapping up our results, Epizyme is in a strong position today. We reiterate our guidance that we expect our cash position to be sufficient to fund operations through at least the end of the second quarter of 2017 based on our current operating plans, which include a number of important clinical catalysts. Let me now hand the call back over to Rob to discuss those events.

[Rob Bazemore:]

Thanks Andy. This is such an exciting time for Epizyme with a lot coming up in the next 6 to 8 months. At next month's ASH Annual Meeting, we will report an update on the phase 1 data for tazemetostat and NHL. At the time of the initial data cut in June, six patients remained on treatment. At ASH, we will present an update on those patients as well as a small number of additional patients with NHL who were enrolled in the clinical pharmacology studies after the June cut-off. All new patients with NHL are being enrolled in our 5-arm registration supporting trial. That study is on track and we expect to present interim data at a medical conference by mid-2016. Between now and year-end we will initiate the registration supporting phase 2 study of tazemetostat in adult patients with genetically defined solid tumors. We’ll also initiate the phase 1 study in children with genetically defined solid tumors. In the first half of next year, we expect to start combination studies with tazemetostat. We are proud of what we've accomplished so far in 2015 and we look forward to achieving even more in the months ahead. Let me wrap up just by thanking all of the patient their caregivers and the medical teams who are participating in our clinical trials. These are the people who are all aiming to serve and we thank them for their support in that effort. And now we’ll open up the call for Q&A.

[Operator:]

[Operator Instructions] Our first question comes from the line of Simos Simeonidis from RBC Capital. Your line is open.

[Simos Simeonidis:]

And thanks you for taking the questions. You had 11 posters at the Triple Meeting this past weekend and the week. And I was wondering while you are continuing to expand your understanding of how tazemetostat and this class of compounds works, do you think your closer to understanding how or which patients that are wild type EZH2 may be more likely to respond to the drug and potentially prospectively excluding them?

[Rob Bazemore:]

Thanks for the question. I will ask Bob Copeland to speak in general about the posters that were presented at the meeting this weekend and in specifically at your question around mechanism.

[Bob Copeland:]

Yes, thanks very much for the questions. So, we were really delighted to have a total of 11 presentations at the Molecular Targets meeting this weekend and they covered a number of major themes of Epizyme, one was deepening our understanding of the role of EZH2 in general center biology and particularly in both wild type and mutant lymphoma, greater understanding of mechanisms for pharmacodynamic assessments for HMT inhibitors in the clinic. Additional presentation on novel small molecule inhibitors of new HMTs that we had not presented before. And then finally, some novel methodology for the identification and credentialing of new target within the chromatin remodeling space. So we're really excited by all of that preclinical science and the ability to present that publicly. To be more specific in addressing your question, the data that we are generating really point to EZH2 as a critical gatekeeper for the transition from the hypermutational germinal center state to more differentiated state of the B cell and what we are seeing is that EZH2 inhibitor has monotherapy in both wild type and mutant EZH2 pushes these cells further down the differentiation pathway, they fail to fully differentiate and then they – that person die. This also strengthens our hypothesis on how EZH2 inhibitors like tazemetostat synergize with inhibitors of B-cell signaling.

[Simos Simeonidis:]

Okay, that’s helpful. Thanks. In terms of the rat lymphoma issue that was identified when you got the drug back -- you bought the drug back from Eisai, can you tell us how close you are to addressing that with SPA and potentially when you may be able to dose patients or starting NHL patients in the US?

[Rob Bazemore:]

Yes, so Peter has responsible for our clinical development program, so I will ask Peter to address that question.

[Peter Ho:]

Sure. As we’ve discussed before, we are very pleased and excited by the progress that we’ve made in the lymphoma space certainly from Phase 1 and then with the startup of our Phase 2 study in Europe, across multiple countries where the study is enrolling very well. And it certainly is a priority for us to expand the study into the US. So we are in discussions with regulators. We don’t want to get into details regarding that, but we are certainly have as a priority to expand the NHL program to the US. If I could just follow-up on your prior question as well, the preclinical that Epizyme has generated and then presented at the EORTC-NCI-AACR meeting also ducktails very well with our clinical strategy and of course we still are very much in favor of the hypothesis that patients who have an EZH2 mutation in the context of lymphoma will be much more responsive than will wild type patients be. However, as we’ve all seen, we have very clear activity in patients with wild type EZH2 and so that’s why it’s important for us to evaluate both populations as we are in the NHL program and then from there we will make appropriate decisions in terms of further development, but we are quite excited by both populations and the potential to be treating both wild type and EZH2 mutant populations.

[Simos Simeonidis:]

And then if I can follow-up on the lymphoma safety issue, would you say you were in the process of conducting additional studies or are you now just in the discussion phase with the agency?

[Bob Copeland:]

Yeah, this is Bob. Thanks. The answer is both. We are in discussions with the agency. We have continued to investigate the mechanism and we have narrowed down the hypothesis and we have a hypothesis that we are strongly favoring, but there are hypotheses that we have to continue to evaluate.

[Simos Simeonidis:]

So would you expect the NHL study to remain for the next year or so a non-US study?

[Peter Ho:]

Right. Hi, this is Peter again. So I really don't want to speak into timing at this point, but clearly we feel that there's many ways to go forward in NHL and we do want to have as a priority to include patients in the US in our NHL program.

[Simos Simeonidis:]

Okay, great. Thank you very much for taking the questions.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from the line of Phil Nadeau from Cowen and Company. Your line is open.

[Phil Nadeau:]

Good morning. Thanks for taking my question. First on the NHL Phase 2 study, can you remind us what the futility hurdle is for the arms in that trial?

[Peter Ho:]

Sure, Phil. Hi, this is Peter. So we haven't disclosed the precise hurdles, but certainly as you probably know for a Phase 2 study, we want to ensure that there's adequate activity to give confidence both to us as the sponsor and to the investigators who are putting patients on the study that there is sufficient activity to go forward. So the appropriate criteria have been set and we will look forward to seeing how that plays out in the clinic.

[Phil Nadeau:]

Okay. And then based on your early enrollment, do you have sense of which arms we could see by midyear next year and which ones we’re maybe likely to see?

[Peter Ho:]

Sure, absolutely. And we're monitoring that closely and I think as we've discussed before, we do expect the enrollment to differ amongst the arms. We are treating each arm separately and so we will assess the data as they come in for each arm. Now, as we’ve discussed before, the incidence of EZH2 mutations in the follicular and DLBCL -- GCB populations is roughly 20%. So there is going to approximately a 4 to 1 ratio between wild type patients who are more common in the population than our patients with EZH2. So as such we expect the wild type arms to accrue faster than the H2 mutant arms and also of course the non-GCB population of DLBCL represents a very large population of the DLBCL, so we expect that arm to accrue more quickly as well.

[Rob Bazemore:]

So the question about timing for next year, as far as the question about what we will report, as I said in the call, we will be updating in the middle of the year next year at a medical meeting. We will update on all five of the arms despite where they are in enrollment for all of those arms that have past the futility analysis. So we will be providing an update on all five arms.

[Phil Nadeau:]

Okay. And maybe just to follow up on that, I’m not asking about the futility hurdles again, but what triggers the futility announcement?

[Rob Bazemore:]

So what’s common for many Phase 2 studies where response rate is the primary endpoint for the study and so response rate criteria within the sub-population of the first set of patients who are enrolled will be the trigger.

[Phil Nadeau:]

Okay, got it. Then last question for me, the pharmacokinetic analysis that we're going to get at ASH or the patients who are enrolled in there, can you remind us how many patients were put into that steady and what the purposes of that trial was again?

[Rob Bazemore:]

Of the Phase 1 study, sorry?

[Phil Nadeau:]

Yeah, the new patients that we are going to see at ASH that were enrolled into the pharmacokinetic portion, can you remind us how many were enrolled in it and what was the purpose of that?

[Rob Bazemore:]

I’m sorry, okay, right. Thank you. So there are two clinical pharmacology sub studies as part of the Phase 1. The first is a food effect study by looking at the effect of food on the absorption and the pharmacokinetics of the drug and the study called for 12 patients in that sub study. The second sub study relates to drug-drug interactions and again there are a total of 12 planned patients, but I think it's also important to note that remember we started the Phase 2 NHL study at both the same size as the Phase 1 as well as additional new sites back in June. And so certainly investigators who have NHL patients would preferentially place those patients on to the Phase 2 portion of this trial instead of the Phase 1. So I think it's important that folks know that really there has been an appropriate shift of patients from the Phase 1 portion of the study to Phase 2 as we're going forward.

[Phil Nadeau:]

Great. That’s very helpful. Thanks for taking my questions.

[Operator:]

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

[Eric Criscuolo:]

Hi, good morning, guys. Thank you. Bob, I know you’ve been on the CEO role just for a little while now, but I was wondering if you can talk about what has surprised you the most, I guess positively as you kind of ramp up your knowledge of Epizyme and then maybe where you think the most work has to be done to get to your expectations?

[Rob Bazemore:]

Eric, thanks for the question. So in terms of the observations, some of the things that I've seen coming in, first of all, we’re a company that has changed a great deal in many positive ways in the last year with the reacquisition of tazemetostat from Eisai, with a renegotiation of our platform agreement with Celgene, which now gives us worldwide rights to our platform, except for those compounds that we have partnered with them. We now have positive proof-of-concept data for tazemetostat. So in terms of what I see there, we just really have the need to clarify our path forward as a company, which we are doing with our five-year strategy and simplify the investment story with Epizyme, which we've also done. My other observation is, this is an outstanding group of scientists and leaders, they’ve done a remarkable job in the decisions that have brought Epizyme to this point, and now we just need to continue to expand on that expertise with new supporting function leadership as we move into a late stage development and commercial company. I think if I look at where we are now compared to when I was doing the diligence to come here, I'm even more excited about tazemetostat than when I joined. I did a great deal of diligence on the company, but the solid tumor data wasn't yet available when I was making my decision to join Epizyme. And then also, we've seen new preclinical evidence suggesting new directions that we can take tazemetostat in clinical development. So, in sum, I guess I couldn't be happier to be the CEO, leading Epizyme through this important transition.

[Eric Criscuolo:]

And then on the lymphoma kind of issue or data that you are working through, has the European agency expressed any concern about that?

[Rob Bazemore:]

Sure. Thanks for the question. We've shared all of the data with the regulators across all the different countries, the study had been ongoing in Europe when we had the data available, and so the answer is no, we haven't had any particular issues brought to us by the European regulators.

[Eric Criscuolo:]

Okay. And then lastly, any thoughts on when we might get to more definitive updates about the GSK candidates and programs that are still early stage right now?

[Rob Bazemore:]

So, the partnership that we had with GSK called for Epizyme to take the lead in the discovery and the preclinical development of those compounds and then those compounds transition into GSK for further clinical development and really it is GSK’s call on when we would speak publicly about those programs. We are very excited about all three of those programs, GSK shares our enthusiasm, but really it's up to GSK when they would talk publicly?

[Eric Criscuolo:]

So they have all three candidates in house now?

[Rob Bazemore:]

That's right.

[Eric Criscuolo:]

Okay, great. Thank you.

[Operator:]

Thank you. And our next question comes from the line of Seamus Fernandez from Leerink. Your line is open.

[Seamus Fernandez:]

Thanks very much for the question. So just a couple of quick ones. I think you mentioned that there is a possibility of some novel combinations that you might be considering to initiate in the next year, can you maybe discuss a little bit of the rationale behind the combinations that you might be considering and perhaps when those might be initiated separately as we kind of look at the data coming out of the EORTC, you mentioned some other compounds, other clinical data. Amongst these, can you just talk a little bit about which targets you’re most intrigued or excited about? Thanks.

[Bob Copeland:]

So, I'll take the last question, and -- this is Bob Copeland and then I will pass it over to Peter Ho to tell you about our plans for clinical combinations. We love all our children. We are finding intriguing data on a broad spectrum of histone methyltransferases and other chromosomal modeling proteins as well. What we presented in terms of new targets at the AACR, NCI, EORTC meeting was a potent, selective and early bio-available inhibitor of SMYD3. SMYD3 is a lysine methyltransferase and it has been implicated in a number of solid tumor indications. In addition, we presented data using some novel approaches to using crisper technology to identify new targets in the chromatin remodeling space and we've identified quite a number of interesting programs through that, I’m sorry, interesting targets through that technology and have used our chemical biology platform to validate some of those targets.

[Peter Ho:]

And so with respect to our combination studies, we’re very excited to get going in that arena, look, as you can imagine, we want to make sure that we prioritize our clinical activities to get to registration quickly and so our monotherapy studies are all directed at being registration enabling as we've discussed in the past and we want to make sure that they are up and running and going smoothly. Now, that we are in that position, we are turning our attention to combinations, which of course, new drugs in oncology eventually go into combination regimens for the most part and so we do see that as important part of the development strategy. But as an initial strategy for development, we think that's suboptimal to registering as a monotherapy. And so in that regard, we have talked about our data that shows synergy between tazemetostat and the components of CHOP, which of course represents first-line therapy with Rituxan for NHL patients and so we are going to be very excited to move forward into that arena, especially given the synergies that we see between tazemetostat and the steroid components of CHOP, which of course then leave us with a different potential avenues on how to combine that with some or all of the elements of our CHOP. We also have a preclinical synergy data with the B cell signaling agents as well as the BCL family of inhibitors that we are very interested in pursuing and then lastly the immune oncology space of course hasn't escaped our attention and we have some intriguing initial data from our clinical trials that suggest that it would be particularly interesting to have the combination of tazemetostat with some of the current immune oncology agents. We look forward to presenting some of that clinical and translational data in the future, but certainly those are the areas where we’re focusing our attention for the initial round of combination studies, which will be starting next year.

[Seamus Fernandez:]

Excellent.

[Operator:]

Thank you. And I'm showing no further questions at this time. I would now like to return the call over to President and CEO, Rob Bazemore. Your line is open.

[Rob Bazemore:]

Well, thanks everyone again for joining. We look forward to keeping everyone updated as we execute on the remaining milestones this year and we lay out our long-term vision for the future of Epizyme. Thanks for joining us today and thanks for your continued support. Bye everyone.

[Operator:]

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