Epizyme's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.27.14 | About: Epizyme (EPZM)

Epizyme Inc. (NASDAQ:EPZM)

Q4 2013 Earnings Conference Call

February 27, 2014 04:30 PM ET

Executives

Stephanie Ascher – Investor Relations

Robert Gould – Chief Executive Officer

Jason Rhodes – Treasurer, President and Chief Financial Officer

Eric Hedrick – Chief Medical Officer

Analysts

Simos Simeonidis – Cowen and Company

Michael G. King – JMP Securities

Jonathan M. Eckard – Citigroup Global Markets Inc.

Gena Wang – Leerink Partners LLC

Gregory R. Wade – Wedbush PacGrow Lifesciences

Operator

Good afternoon and welcome to Epizyme’s Fourth Quarter and Year End 2013 Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end. Please be advised, that this call is being recorded at Epizyme’s request.

I would now like to turn the call over to Epizyme’s team. Please proceed.

Stephanie Ascher

Good afternoon. This is Stephanie Ascher with Stern Investor Relations. And welcome to Epizyme’s fourth quarter and year end 2013 conference call. The news release with our fourth quarter and full year financial results and company update became available at 4 PM today. And can be found on our website at epizyme.com. You can listen to a live webcast including a set of slides or a replay of today’s call by going to the Investor Center section of the website.

The agenda for today’s call is, Robert Gould, CEO will discuss highlights of the quarter and the year and will provide an update on the company’s clinical progress and plans including expansion indication plans for 2014. Jason Rhodes, President and CFO will review the company’s financial position and collaboration. He will then make closing remarks and open the call for Q&A. Eric Hedrick, our Chief Medical Officer will after available for Q&A at the end.

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 provision 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 factor section of our S-1 filed with the SEC on January 28, 2014.

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.

Now, I will turn the call over to Epizyme’s CEO, Robert Gould.

Robert Gould

Thanks, Stephanie. Good afternoon everyone, and thank you for joining us today. 2013 was truly a transformative year for Epizyme with significant accomplishments across the entire company.

As a result, we’re in an excellent position to continue to advance our strategy of creating innovative personalized therapeutics for patients with genetically-defined cancers. This year, we planned to have clinical studies ongoing that are intended to access proof-of-concept in our EPZ-5676 and EPZ-6438 clinical programs in five genetically-defined cancers, the important data readouts from these two lead programs in the second half of 2014.

In January, we announced that we had achieved $25 million proof-of-concept milestone with our partner, Celgene in the 5676 DOT1L inhibitor program. Milestone was triggered by objective responses in MLL-r patients in the Phase 1 dose escalation study. They completed enrollment in December 2013. To our knowledge, 5676 was the first histone methyltransferase inhibitor to enter human clinical development.

We are very pleased with 5676 emerging clinical profile and progress as a potential personalized therapeutic for patients with genetically-defined acute leukemia. There have been no dose-limiting toxicities to-date and we are highly encouraged by the tolerability thus far.

We believe the POC milestone achievement represents a significant step forward for this first in class epigenetics therapeutic program as well as for Epizyme in the entire field of histone methyltransferase inhibitors.

The 5676 Phase 1 study expansion stage is currently enrolling adult patients with two types of genetically-defined acute leukemia, MLL-r and MLL-PTD. This expansion stage is designed to assess therapeutic effect in MLL-r and MLL-PTD patients who have a particularly poor prognosis using current standard of care treatment. In 2013, 5676 was granted orphan drug designation by the European Commission in Europe and by the Food and Drug Administration in the U.S.

We are actively working with our partner Abbott on the development of a companion diagnostics for this program. We plan to report data from a Phase 1 study, dose escalation and expansion stages at a medical conference in the second half of this year. We are also planning to expand the development of 5676 to MLL-r pediatric patients with the initiation of a Phase 1b clinical study in the first half of this year. Altogether, these studies constitute three proof-of-concept assessments of 5676.

For 6438, our EZH2 inhibitor along with our partner Eisai, we initiated a Phase 1 dose escalation study last June. This is an all-comers study, it is enrolling patients with the number of different types of cancer including non-Hodgkin lymphoma. It allows for, but does not require that non-Hodgkin lymphoma patients have an EZH2 point mutation. Enrollment and dose escalation are ongoing and no dose-limiting toxicities observed to-date.

We expect to be able to report data from this study in the second half of 2014. Once we complete enrollment in the Phase 1, we plan to move into the Phase 2, enrolling only non-Hodgkin lymphoma patients with EZH2 mutations.

Similar to the expansion stage of the 5676 study, this study is designed to assess therapeutic effect in EZH2 mutated NHL patients. This study is currently being conducted at two sites in Europe and we are actively identifying additional sites in Europe and U.S. in anticipation of the Phase 2 initiation later this year. We are also actively working with our partner, Roche on the development of companion diagnostics for this program.

We also plan to initiate a Phase 2 study in synovial sarcoma patients later this year, expanding the potential use of 6438. These studies constitute two POC assessments for 6438 in EZH2 mutated NHL patients and in synovial sarcoma patients.

We continue to have a robust pre-clinical development effort with our product platform as well where we have an outstanding track record, identifying one novel candidate each year over the past four years.

Last year, we received a $4 million development candidate milestone from GSK. Today we announced that we achieved a $2 million lead candidate milestone with GSK for another collaboration target. We are continuing to generate innovative histone methyltransferase as therapeutic candidates from our product platform.

On the business side, we raised capital with our 2013 IPO and 2014 follow-on offerings and earned milestones with respect to the fund the company through at least mid-2016. Jason will go into more details on our financial position and partnerships in a moment.

We also advanced our intellectual property position with three U.S. patents issued in 2013. These included significant composition of matter claims for 5676 and 6438 with expirations in 2032. One year ago, Epizyme was a private company, initiating its first growth escalations study. Today we are a well capitalized public company with two therapeutic candidates in clinical developments and achievement of proof of concept milestone in our most advanced clinical program.

This year, we expect to have clinical proof of concept assessments ongoing in five genetically defined cancers with important data readouts from our two lead programs, 5676 and 6438 in the second half of the year. We are moving ahead and executing on our accelerated product development strategy. With that, I will turn the call over to Jason.

Jason Rhodes

Thanks, Robert. Epizyme is in a stronger financial position today than ever before. As Robert noted, we are well funded to advance our ongoing plan, proof of concept programs and our product platforms to continue to create value for patients and shareholders and build a leading a biopharmaceutical company.

We began 2013 with $99.8 million in cash and receivables and ended the year with $157 million. During 2013, we raised $18 million in net proceeds from IPO along with $48 million in non-equity funding from our partners. This month, we raised an additional $101 million net proceeds in a successful follow-on offering and also announced a $2 million lead candidate milestone with GSK.

I will now turn to our 2013 financial results and 2014 guidance. We expect to end 2014 with approximately $170 million in cash and cash equivalents and expect that our cash position should fund the company to at least mid-2016 not including any future collaboration milestones we may earn.

Collaboration revenue was $68.5 million for the year ended December 31, 2013 compared to $45.2 million in 2012; this includes deferred revenue from payments received in previous periods as well as payments earned during the year and reflects the significant milestones in our collaborations with Celgene, Eisai and GSK.

Today we have earned more than $171 million in non-equity funding from our therapeutic collaborations. Our next potential major milestones include $35 million for 5676 pivotal study initiation with Celgene and $10 million for the 6438 Phase 2 initiation with Eisai.

As a reminder, in our Celgene collaboration for the 5676 program, we retain 100% of the United States rights and are currently working together on joint global development. In our Eisai collaboration for the 6438 program, we have the right to opt into a 50-50 co-development, co-commercialization and profit share arrangement in the United States and are currently working jointly with Eisai on global clinical development.

Research and development expenses were $57.6 million for the year compared to $38.5 million in 2012; this increase was largely driven by clinical study cost with 5676, the advancement of programs under the GSK collaboration and the expansions of our product platform. We expect R&D expenses in 2014 to be approximately $75 million. We expect our full year 2014 net cash used in operating activities to be approximately $50 million, including $34 million in accounts receivable recorded in 2013 but collected in 2014. Excluding these accounts receivable, adjusted net cash used in operating activities in 2014 is expected to be approximately $80 million.

We are excited by Epizyme’s progress so far entering an entirely new therapeutics target class, building a productive product platform with significant intellectual property, advancing two first-in-class therapeutic programs into clinical development and achieving the POC milestone in the 5676 dose escalation study. We continue to execute on our strategy of developing personalized therapeutics for the treatment patients with genetically-defined cancers. 2014 will be another important year for Epizyme with a number of important clinical milestones including Phase 1 data disclosure for the 5676 and 6438 programs in the second half of this year.

We have grateful for all of the support that Epizyme has received from patients and the medical and investor communities in 2013, and look forward to keeping you an updated on our progress throughout the year.

We’ll now open the call up for Q&A. Operator?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session (Operator Instructions) Our first question comes from Simos Simeonidis of Cowen and Co. Your line is open.

Simos Simeonidis – Cowen and Company

Hi, thank you for taking the question, I was wondering if you can provide us any color or any update on patients on the 5676 either on the fifth cohort taking the 80 migs per meter square on the old schedule and how enrollment is going in the expansion cohort where patients are treated with continuous effusion?

Jason Rhodes

We are not providing any clinical update the most until the study is complete, and we are going to share that data at the medical conference in the second half of this year once those studies are complete and we had a chance to analyze that data. Environment is ongoing and proceeding in the expansion stage.

Simos Simeonidis - Cowen and Company

Okay, and then I’ll ask second one and jump back in the queue. You mentioned the potential of increasing the sites in Europe for 6438, any thoughts of doing something similar on 5676 to get the data sooner and get enough patients?

Eric Hedrick

Simos, this is Eric. Thanks for the question. Yes, for 5676 we’ve stated previously that we will be initiating our sites in Europe over the course of 2014 and that’s still the plan well so by policy we’d post additional participating sites on clinicaltrials.gov. So that would be a guide for you in terms of the new side initiation. So that’s certainly part of the plan for both programs.

Simos Simeonidis - Cowen and Company

Okay.

Operator

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

Michael G. King – JMP Securities

Thanks for taking the question, and congrats on all the progress. Just wanted to ask about actually the biomarker, just wondering if you are going to provide any update for us throughout the course of the year about your biomarker relationships if you are in fact incorporating the biomarker approaches that you are developing which your collaborators.

Jason Rhodes

Thanks Mike. We’ll be providing the update as we complete the study. During the dose escalation stage of the ongoing study we’ve been able to consistently demonstrate in addition of H3K79 methylation has to above the doses of 36 milligrams per meter squared and we are going to continue to access the effect of the continuous uninterrupted administration of drug on that methyl mark inhibition.

As we’ve discussed previously, we also of course are continuing to monitor the objective responses that we’ve seen in the patients continuing of course to monitor biomarkers like the important alterations and improvements that we may see in n blast counts and white cell counts. In terms of biomarkers for identification of the relevant patient populations, again I just remind you that we are continuing to develop the companion diagnostics in the case of the 5676 program with Abbott for patients that have the MLL rearrangement and with Roche Molecular to identify patients to that point.

Michael G. King – JMP Securities

Okay, thanks for that. And then a quick follow-up question regarding the relationship with GSK, I don’t know how much you can elaborate on – kind of the metrics by which the milestones are gauged and maybe you can talk a little bit about the development timelines Epizyme's input into the programs et cetera.

Robert Gould

So thanks for that question Mike. This is Robert again. And just to remind you, GSK has three targets with Epizyme, those targets were selected in discussions between GSK and Epizyme. In each case there are objective criteria that were established in advance of the collaboration to define development candidates so a listed criteria were established and they are needed to be met in order to satisfy the development candidate nomination and likewise a list of objective criteria were established to determine the lead candidate, lead candidate precedes development candidate, development candidate is [Indiscernible] is the identification of the compounds moving in the R&D or CGA registration studies. In the two of those three programs and we’ve achieved in once case development candidate by the objective criteria in the other case announced earlier today, lead candidate against facilities two of the three targets.

Operator

(Operator Instructions ) Our next question comes from the line of Jonathan Eckard from Citi. You line is open.

Jonathan M. Eckard – Citigroup Global Markets Inc.

Good afternoon. I just have a quick question about some of the potential milestones Jason that you outlined. So for the $10 million Phase 2 start from Eisai, is the Phase 2 trial that you listed in the potential on these studies for the year in the synovial sarcoma, is that a potential registrational trial and could that qualify arguably for that $10 million with the absence of Phase 2 trial for the DOT1L in 2014. Is that something that considerably is not on there and it still could potentially start this year just on terms and timing on that one. And then I do have a question on the pipeline after this.

Robert Gould

Sure, so thanks for the question. So with Eisai it’s $10 million for Phase 2 start as distinct from the registration study if possible I suppose, but Phase 2 could become a registration study, but the milestone is simply geared to the Phase 2 started independently whether it might or might not be a registration study. And with Celgene that’s correct, the next clinical milestone is for pivotal initiation start.

Jonathan M. Eckard – Citigroup Global Markets Inc.

And that one, it’s not on the list of potential trials starting this year, but is a feasibility that it could start in 2014 if things go right.

Robert Gould

The next disclosure around 56, 76 which is the program that’s partnering with Celgene is around full set of Phase 1 study results for dose escalation in the expansion stage and we haven’t provided guidance on the clinical program beyond that at this point.

Jonathan M. Eckard – Citigroup Global Markets Inc.

Okay, so on the pipeline, obviously you guys, I not trying to say, we don’t have [indiscernible] and you have been – the announcement today for the GSK candidate clearly you are identifying working on candidates through some of the partnerships. Do you guys have I mean, they have the financing do you have the bandwidth to start working, start bringing forward candidates that currently, I mean I know that still Celgene has optionality into candidates, but you have bandwidth to bring candidates for that could be additional ones of your pipeline.

Robert Gould

Yes, thanks for the question. And we actually do you have that bandwidth. We just haven’t given guidance on that. Just to remind you, we’re primarily responsible for advancing each target program for the development candidate stage and of course one of the GSK programs achieve that development candidate stage just announced this past January. So certainly, we have the bandwidth to continue to bring own programs forward and we continue to focus on four key drivers of the business, the two primary indications, expansion indications as well as the platform.

And as we make progress in the GSK program development candidate stage, lead candidate stage that freeze up those resources to cycle back onto those programs that our own programs and we are aggressively preceding those, we just haven’t given further guidance on them.

Operator

Thank you. Our next question comes from the line of Howard Liang of Leerink Partners. Your line is open.

Gena Wang – Leerink Partners LLC

Hi this is Gena Wang dialing for Howard. Thank you for taking my questions. So may be follow John’s questions a little bit on the Eisai $10 million milestone payments for 6438. Just want to make sure I understand correctly, so you will have a two Phase 2 trial initiation. So will the $10 million apply to each of the Phase 2 trial or will be the combination.

Jason Rhodes

Hi, Gena. This is Jason. That’s a good question and a subtle reading of the collaboration and I think an important one. So the milestones are earned once for each compound and so while they are considerably could be multiple products over time in the Eisai partnership today as we’re only advancing 6438 in the clinical, we would only be eligible for the first Phase 2 initiation for our milestone.

Gena Wang – Leerink Partners LLC

I see. Okay, thank you and then another question on 5676, I’m wondering, how the enrolment will be for MLL-PTD since it’s only represent among 5% to 7% of AML patients. Would that be slower compared to the MLL-r of your arrangement of patients?

Eric Hedrick

Yes, hi [indiscernible], this is Eric, thanks for the question. And so, we do have planning in place for we believe we’ll be planning an enrolment of both PTD patients and MLL-r patients and both patients for both abnormalities repeat either abnormality or actually eligible in enrolling currently in the expanded cohort phases of study. And so, we were – enrolments going well and we anticipate that will continue to be the case.

Operator

(Operator Instructions) And our next question comes from the line of Greg Wade of Wedbush. Your line is open.

Gregory R. Wade – Wedbush PacGrow Lifesciences

Thanks, but my questions were asked and answered.

Operator

Thank you. And I’m showing no further questions at this time, I’d like to turn it back over to management.

Jason Rhodes

Thank you, everyone. I appreciate your interest in Epizyme, and just want to thank you for taking time to join us on the call this afternoon. Good bye.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone, have a great day.

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