It was just over a month ago that I featured Epizyme (EPZM) in an article about a company that had recently conducted an IPO and had a terrific pipeline. At the time Epizyme stock, which went public at $15 per share, was at an already impressive $27.99. In the last month the stock has continued impressive gains and now sits at $42.50. Epizyme is pushing on the door of a triple when compared to its IPO price, and is up an impressive 50% in the last month.
The Epizyme story is much better than a simple stock that is doing well. It is a story of a company that is executing on a well laid out plan. It is a story of a company that is at the forefront of patient specific treatments for cancer. Consider all that has happened in the last month.
- On June 13th Epizyme demonstrated that going public was just the beginning. The company announced the first patient enrollment in a clinical trial for EPZ-6438, a treatment for non Hodgkins Lymphoma.
- On June 25th Research analyst firm Cowen initiated coverage on Epizyme and rated the company outperform.
- On June 25th Citigroup initiated coverage with a buy rating and a price target of $32. That price is now long gone.
- On June 25th JMP Securities initiated coverage with an outperform rating and a price target of $40. Like the Citi target, the JMP target has been eclipsed.
- On June 26th Epizyme, on the heels of analysts initiating coverage, announced study results that its drug EPZ-5676, a treatment for Leukemia, was showing good progress. The study revealed detailed characterization of the correlation between DOT1L inhibition, methylation of the DOT1L target (H3K79), reversal of leukemogenic gene expression and anti-proliferative effects specific to MLL-r leukemia, sustained tumor growth inhibition in animal models of MLL-r leukemia, including durable effects after drug dosing is discontinued, development of a quantitative PK/PD relationship, and development of an assay to assess methylation of H3K79 status in non-invasive, surrogate tissues such as bone marrow and peripheral blood mononuclear cells.
- On July 3rd Epizyme announced the highly accomplished Jason P. Rhodes as President.
Clearly Epizyme is one of the few companies that seems to create a symbiotic relationship between the science of pharma and medicine with the financial savvy it takes to run a public company. All too often companies look at one aspect of that dynamic as more important and because of that fall into mediocrity. Epizyme seems to have grasped the finance end of this business very early on.
Partnerships with big players that fuel the pipeline are already in place. Names like Eisai (OTCPK:ESALY), Glaxo Smith Kline, Roche, Abbott and Celgene (CELG) all appear on the resume of Epizyme. These partnerships represent power combined with diversification.
Epizyme is now approaching a critical point in its life as an equity. It has sprinted from an IPO price to an impressive high. Nothing can sprint like that without taking a break. Investors need to remember that while the Epizyme story carries a lot of potential, there is still a long road ahead. Individualized treatments can be a challenge in a world where we tend to try to be in a one-size-fits-all dynamic. Monitoring, approving and selecting the exact treatment that works for a candidate is not a mass market proposition. It is a story about quantity vs. quality. On Wall Street quantity sometimes rules the day.
Speculative investments often enjoy more lofty valuations. Investors tend to see only the great things that are certainly due to happen with a company that has a compelling product. Epizyme seems to have passed the first test by impressing the street initially. Now each passing month will be about progress, results, cash flow and cash burn. To keep this company on its current course the milestone payments and successful trials are the keys to watch.
In contrast, as Epizyme continues to reach new highs, it may appear that it is too late. That thinking may cost you. When a company is doing so many things right, there is no bad time to get in. As long as Epizyme executes on its plan and gets the results it anticipates, all will be well. There will be hurdles, but keeping them manageable is key. Of course, each investor has its own strategy. One thing here is certain. If you are not already paying attention to Epizyme you need to be. Stay tuned.