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Actionable news in EPZM: Epizyme, Inc.,

Epizyme: First In Class Risk Remains Among Improving Odds

Tazemetostat (EPZ-6438) continues to demonstrate significant efficacy in Phase I clinical trials.

Pinometostat (EPZ-5676) adult study in MLL-r suspended by Epizyme.

Epizyme reacquires rights to Tazemetostat for significant upfront payment, milestones, and royalties.

Celgene downsizes collaboration to three preclinical assets and Pinometostat.

Removing adult MLL-r and MLL-PTD revenues related to Pinometostat from models to arrive at a Price Target of $22.77/share for Epizyme. Reiterate Buy rating.

Investment Conclusion. Over the past year, there have been significant changes to the Epizyme (NASDAQ:EPZM) story. Updated Phase I data continued to show that Tazemetostat is highly active in relapsed or refractory non-Hodgkin's lymphoma and solid tumors. In particular, patients with solid tumors of the INI1 and SMARCA4 negative variety responded well to the drug, with 3/8 and 3/6 and 1/3 and 2/3 achieving objective response (OR) and stable disease [SD]. Tazemetostat, in NHL was similarly effective with data presented in June showing an overall response rate of 60% (9/15). Nevertheless, with responses appearing to have deepened over time with PR and SD possibly having converted to CR and PR, the agent seemed more effective in follicular lymphoma [FL] and marginal zone lymphoma (MZL) than in diffused large B-cell lymphoma (DLBCL). Given the Phase I FL data, Epizyme has included two cohorts of FL patients with wild type (WT) and mutant disease in the Phase II study of Tazemetostat in NHL. Tazemetostat monotherapy outcomes in FL will be key even if the drug is used ultimately in combination with R-CHOP and not as a single agent. In that regards, I expect the clinical pathway for the drug in NHL to include an open label study in combination with R-CHOP and a subsequent randomized trial with the combination regimen against standard of care R-CHOP. Given the substantial trial activity supposedly ahead in NHL, Tazemetostat's regulatory approval is not less than a few years away (unless the open label combination data are outstanding). Importantly, as the drug is being developed in NHL as a treatment for a niche population of patients with tumors that test positive for the EZH2 mutation, the commercial opportunity is somewhat protected from the crowded drug development landscape in the disease. In context of the 2nd developmental stage asset Pinometostat, Epizyme has suspended the Phase I study that was investigating the drug as a monotherapy in adult rearranged mixed lineage leukemia (MLL-r). Although disappointing, the development is hardly unexpected given that the drug was lacking even a direct dose response relationship. The company along with its partner Celgene (NASDAQ:CELG) might initiate combination therapy of Pinometostat with standard of care in the indication at a later time. The Phase I study enrolling pediatric MLL-r patients is still ongoing. In regards to business direction, the company renegotiated its agreement with Eisai to recover global rights (ex-Japan) for Tazemetostat. It appears likely that Eisai did not concur with Epizyme's plans to first begin Phase II development of Tazemetostat in international territories. It's possible that Eisai which under the prior agreement was entrusted with funding development of the drug for foreign markets preferred that the middle stage clinical process begin in the U.S. not in Europe. Discussions to the effect likely resulted in Epizyme changing its business strategy midway. The company's partnership with Celgene was also renegotiated with Celgene opting for a considerably downsized agreement focusing on three epigenetic assets as compared with prior rights of first refusal to all of Epizyme's independent developmental pipeline. However, no change on the Pinometostat collaboration, with decisions on the future of the agent to be negative financial implications for Epizyme. In addition...