Epizyme, Inc. (NASDAQ:EPZM)
Q1 2014 Earnings Conference Call
May 13, 2014 4:30 PM ET
Manisha Pai - Senior Director of Corporate Communications
Robert Gould - CEO
Jason Rhodes - President and CFO
Eric Hedrick - Chief Medical Officer
Howard Liang - Leerink Swann
Eric Joseph - JMP Securities
Good day ladies and gentlemen and welcome to Epizyme Incorporated First Quarter 2014 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference, Senior Director of Corporate Communications, Manisha Pai, you may begin.
Thank you. Good afternoon. This is Manisha Pai with Epizyme Corporate Communications, and welcome to Epizyme's first quarter 2014 conference call. The news release with our first quarter 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 web cast including a set of slides or a replay of today's call by going to the Investor Center section of the web site.
The agenda for today is, Robert Gould, CEO will discuss highlights of the quarter and will provide an update on the company's clinical progress and plans and 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, CMO, will also be available for Q&A at the end. Robert Copeland, CSO, is attending the Cancer Advance Conference in New York this week, and will not be able to participate in today's call.
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 Annual Report on Form 10-K filed the SEC on February 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 Robert Gould.
Thanks Manisha and welcome to Epizyme. Manisha joined us this month as our Senior Director of Corporate Communications. She was most recently with Pharmacyclics, and previously was with Millennium TK [ph]. We are very glad to have her onboard, and good afternoon and thank you all for joining us on this call.
The first quarter of 2014 was another highly productive period for Epizyme. We continue to make significant progress across the entire company, as we work to create innovative personalized therapeutics for patients with genetically defined cancers, by targeting a class of epigenetic enzymes called histone methyltransferase or HMT.
I will begin with EPZ-5676, our clinical program for the treatment of genetically defined acute leukemia. 5676 is a first in class inhibitor with a DOT1L HMT. We are developing it with our collaborator Celgene for the treatment of adults in pediatric patients with one of two genetically defined acute leukemia, MLL-r or MLL-PTD.
In the Celgene collaboration, Epizyme retains a 100% of U.S. commercial rights for 5676 and we are currently developing the program on a global basis together. 5676 clinical development began in September 2012 and we are currently enrolling patients at sites in U.S., the Netherlands and Germany. We now have proof-of-concept studies ongoing for 5676 in three genetically defined acute leukemias, adult MLL-r, adult MLL-PTD, and pediatric MLL-r.
In January, we announced that we had completed enrolment in the dose escalation stage of the adult Phase 1 study, achieving objective responses in two MLL-r patients through the fourth dose cohort in that study and earning a $25 million proof-of-concept milestone payment from Celgene.
The expansion stage of the Phase 1 study is ongoing and enrolling adult patients with MLL-r and MLL-PTD for being treated with 90 milligrams per meter squared per day with uninterrupted administration. We are pleased with continued safety of 5676 and there have been no drug related treatment discontinuations in the study to-date. We are on track to report data from a dose escalation and expansion stage of the adult Phase 1 study in the second half of this year and look forward to sharing this update with you.
We are very pleased to have announced the initiation of the Phase 1b study in pediatric patients with MLL-r leukemia earlier this month. MLL-r comprises approximately 15% pediatric acute leukemia and is considered to be the last remaining subtype of pediatric acute leukemia for which current treatment is inadequate. This pediatric Phase 1b is designed to evaluate the safety pharmacokinetics and pharmacodynamics of escalating doses of 5676 in patients between the ages of three months and 18 years, and to also provide a preliminary assessment of efficacy. Doses are starting at 45 milligrams per meter squared for patients less than 12 months of age and at 70 milligrams per meter squared for patients older than 12 months.
These starting doses were selected based on the adult dose and safety experience to-date as well as pharmacokinetic considerations in pediatric patients. Initiation of this pediatric Phase 1b study in parallel with our ongoing adult study, reflects the safety today of this program, and the significant unmet need in pediatric patients. This study is now enrolling patients at the Memorial Sloan-Kettering Cancer Center in New York, and e plan to have as many as 20 sites in the U.S. and Europe, participating in this study. We expect to enroll 30 to 40 patients in total and to complete enrolment in 2015 with date of disclosure soon afterwards.
I'd like to mention that our partnership with the Leukemia and Lymphoma Society for the preclinical development of 5676 was crucial in getting up to this point, and we are grateful to them for their support.
Let me now turn to EPZ-6438, our first in class inhibitor of the EZH2 HMT. 6438 is being developed with our collaborator Eisai, for the treatment of a genetically defined subtype of non-Hodgkin lymphoma with EZH2 point mutations and INI1 deficient solid tumors, such as synovial sarcoma and malignant rhabdoid tumor.
For the EZH2 program, Epizyme retains the right to opt-in for U.S. profit share and co-commercialization agreement. We are enrolling a dose escalation Phase 1 clinical study in patients with advanced solid tumors of B-cell lymphomas. This study is currently being conducted at two sites in the EU and we are actively identifying additional sites in the EU and the U.S. in anticipation of the Phase 2 initiation later this year. To-date this phase of clinical program is progressing well and no dose limiting toxicities have been observed. We are on-track to complete enrolment and to disclose data from this Phase 1 study in the second half of 2014.
Upon completion and review of the dose escalation Phase 1 results, we plan to initiate two proof-of-concept Phase 2 studies with 6438 in 2014. We have previously reported compelling preclinical data supporting proof-of-concept clinical trial in several settings. In the setting of non-Hodgkin lymphoma, we have shown that lymphomas covering change of function mutation in EZH2 are extremely sensitive to EZH2 inhibition. These mutations comprised approximately 20% to 25% of lymphoma of germinal-center origin, including germinal-center, DLBCL and follicular lymphoma.
Initially, our published preclinical data show that 6438 in combination with a variety of agents, including the current standard of care is very active in germinal-center origin lymphomas, regardless of EZH2 mutation status. This is an important observation that suggests a broad role for EZH2 inhibitors in germinal-center non-Hodgkin lymphoma, including but not limited to patients with EZH2 point mutations. Additionally, a variety of solid tumor deficient in INI1 functions, including synovial sarcoma and malignant rhabdoid tumor are extremely sensitive to EZH2 inhibition in preclinical models.
These studies provide the basis for two planned Phase 2 proof-of-concept clinical trial, with 6438 in 2014, focusing on new cancer populations in which the EZH2 HMT plays an oncogenic role. We look forward to describing these studies further in the second half of 2014, following review of the data from the ongoing Phase 1 clinical trials.
We are proud of our track record in research and preclinical development. Altogether, in the six years since Epizyme was founded, using our proprietary product platform, we have created novel small molecule inhibitors, targeting five never-before drugged HMTs. These include DOT1L, EZH2 and the three GKS collaboration targets, and have rapidly advanced DOT1L and EZH2 in the clinical development. This is a significant accomplishment in a short period of time in a new therapeutic plans, and is representative of our platform's ability to consistently produce innovative HMT inhibitors as therapeutic candidates.
We continue to make significant investments in research for additional prioritized HMT targets, and look forward to reporting more on this progress in the future.
Intellectual property is a critical element of our overall product strategy, and we continue to build and strengthen our IT position. Composition of matter claims were issued for both 5676 and 6438 in 2013 and in April of this year, we announced that complementary claims were issued covered in the diagnosis of patients with EZH2 mutations and their subsequent treatment with an EZH2 inhibitor. These issued patents are expected to expire in 2032 and 2031 respectively, giving us a potentially long effective commercial patent life for these programs.
As you can see, we are moving forward quickly on all fronts. In 2014, we plan to have ongoing assessments; proof-of-concept in five genetically defined cancers, important data readouts for both of our lead programs and continued investment in our HMT pipeline, with prioritized new potential therapeutic programs.
With that, I will turn the call over to Jason, for a discussion of our financial and business performance.
Thanks Robert. Epizyme is in a secure financial position and the integration of our R&D, business and financial strategy continues to generate results in our operating performance and balance sheet strength.
Let me begin with our current forecasted end of year cash positions. We began 2014 with $157.2 million in cash, cash equivalents and accounts receivable and ended the first quarter of 2014 with $245.2 million. This position reflects our successful follow-on offering in February 2014, with $101 million in net proceeds and first quarter 2014 collaborative non-equity funding of $8 million. We expect to end 2014 with more than $170 million in cash and cash equivalents, which we anticipate will fund the company to at least mid-2016, prior to including any potential future milestone payments.
Turning to revenue; collaboration revenue is $13.4 million for the first quarter of 2014, compared to $8.9 million in the first quarter of 2013. Our collaborations including our attained [ph] U.S. rights are important drivers of our strategy to become a commercial oncology company. To-date, we have earned more than $178 million in non-equity funding from our therapeutic collaborations, and we expect them to continue to be important sources of non-equity funding for us.
Our next potential major milestones include $10 million for our 6438 Phase 2 initiation, an Eisai collaboration, and $35 million for a 5676 pivotal study initiation and a Celgene collaboration. Research and development expenses were $15.3 million for the first quarter of 2014, compared to $13.4 million for the first quarter of 2013. The increase was largely driven by the expansion of our product platform. We anticipate research and development expenses in 2014 to be app $75 million.
We continue to expect our full year 2014 net cash used in operating activities to be app $50 million, including $34 million of accounts receivable recorded in 2013, are collected in 2014. Excluding these accounts receivable, adjusted net cash used in operating activities in 2014 is expected to be approximately $80 million.
Epizyme continues to execute on our strategy of creating personalized therapeutics for patients with genetically defined cancers. Advancing and expanding our 5676 and 6438 programs and our productive product platform, all in entirely new therapeutic target class. We look forward to reporting on a number of important clinical milestones in the second half of this year, in both the 5676 and 6438 programs, and we are well positioned to create value for our shareholders, as we work to bring these therapeutics to adult and pediatric cancer patients with significant unmet needs.
We will now open the call up for Q&A. Operator?
Thank you. (Operator Instructions) Our first question comes from the line of Howard Liang of Leerink. Your line is now open.
Howard Liang - Leerink Swann
Great. Thanks very much. I have a question on the EZH2 program. If you can give us a sense of what type of patients are being enrolled, I think it does not have to be -- that is not to have the EZH2 mutation to enroll in the study, but if you can characterize the type of patients you are seeing. And I don't know if you can talk about how many doses you have given, different cohorts, and whether in terms of exposure, everything in line was [indiscernible] patients?
Hi Howard, it's Eric. Thanks for your question. Regarding the first part of your -- well I would say overall that, as we noted on the call, we are overall on-track to report results with dose escalation phase of the EZH2 inhibitor trial by the end of the year, and obviously upon that report, we will be detailing the types of patients that we enroll, safety pharmacokinetics activity, etcetera, as well as number of dose levels that we have gone through. Just to remind you, the dose escalation phase of that study is not limited to patients with EZH2 mutation that can certainly enroll those patients, since they should come in for the study.
In terms of the dose levels that we have explored again, we haven't released those through the details. We have an encountered dose limiting toxicity to date on study, so that part of the study is going very well; and again, when we report the results comprehensively from that study by the end of the year, it will have all the details that you're looking for.
Howard Liang - Leerink Swann
And a question on cash use; your guidance of cash contributions through mid 2016 would essentially suggest that cash use will go up next year or is that more of just you being conservative?
Yes, hi Howard, this is Jason. Thanks for the question. So it reflects two key assumptions. One is that we don't achieve any additional milestones, but at the same time, we actually continue our spend and do actually increase it, and so it’s not the most likely scenario, and its fair to characterize it as a conservative projection of our cash [indiscernible].
Howard Liang - Leerink Swann
Thank you. (Operator Instructions) One moment for questions. We have a question from the line of Mike King of JMP Securities. Your line is now open. Mike King, your line is now open.
Eric Joseph - JMP Securities
Hi, this is Eric filling in for Mike. Thanks for taking my question. Just wondering if you'd be willing to say anything about the pace in [indiscernible] enrollment in the 5676 expansion cohort, and secondly, weathered by second half 2014, data presentations we should be really be interpreting that as ASH or whether we might see any data from other program ahead of that, and one follow-up, if I might?
Thanks. So we plan to enroll 15 to 20 MLL-r patients and 15 to 20 of the MLL-PTD patients in expansion of phase of that of the 5676 program. We are going to be providing the clinical updates, when that study is complete, and we will share the data at the medical conference in the second half of this year, and we are still on track for both of those enrollment -- both the enrollment projection as well as presenting the data at the medical conference in the second half of the year.
Eric Joseph - JMP Securities
Okay, great. So are we just wondering how you might be thinking about possible combinations with 5676? 5676 [indiscernible] is kind of all towards pursuing potential combinations clinically, once we might see potential ISTs some time in the future? Thanks.
That's a great question. Our current clinical program, is focused as you know, on establishing a single agent efficacy and safety of our agents. We have done extensive assessment of the combinations and synergies in the preclinical research laboratories, and as you probably recall, we presented you combination data at the 2013 ASH meeting, of highlighting the synergistic efficacy, we have seen in those preclinical studies, actually not only for the 5676 program but also for the 6438 program. In both case programs, we have seen strong synergy, not only in standard of care, but other types of treatments that are being indicated for acute leukemia, as well as non-Hodgkin lymphoma. And certainly those data are really encouraging us and pointing us towards the potential utility of these therapeutic candidates in clinical combination treatment strategies. That's certainly part of our broader development program plans, and we'd anticipate moving into combinations, but importantly, we want to establish the single agent efficacy and safety of our agents first.
Yeah, Eric, this is Eric to answer your question, just a quick one or comment on one part of your question, which I believe was a comment around ISTs. Obviously as Robert said, we are interested in combination trials in the comprehensive development program, whether that will take those form of investigator sponsored trials or company-sponsored trials is still to be determined. So I wouldn't say necessarily that the combination trial program will be exclusively IST. Just wanted to clarify that point.
Eric Joseph - JMP Securities
Great. Thanks very much. Thanks for taking my questions.
Thank you. (Operator Instructions) And I am showing no further questions at this time. I'd like to hand the call back over to Mr. Robert Gould for any closing remarks.
Thank you very much operator. I want to thank everybody for your time this afternoon and look forward to giving you an update in the future.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day everyone.
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