Epizyme (EPZM) CEO Robert Gould on Q2 2014 Results - Earnings Call Transcript

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Epizyme (NASDAQ:EPZM) Q2 2014 Results Earnings Conference Call August 13, 2014 8:00 AM ET


Manisha Pai - Senior Director of Corporate Communications

Robert Gould - CEO

Jason Rhodes - President and CFO

Eric Hedrick - Chief Medical Officer

Robert Copeland - CSO


Mike King - JMP Securities

Howard Liang - Leerink Swann


Good day ladies and gentlemen and welcome to the Q2, 2014 Epizyme Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this meeting is being recorded.

I would now like to introduce your host Ms. Manisha Pai, Senior Director of Corporate Communications. Ms. Pai, please begin.

Manisha Pai

Thank you. Good morning. This is Manisha Pai with Epizyme Corporate Communications, and welcome to Epizyme's second quarter 2014 conference call. Yesterday we issued a news release summarizing pre clinical data and early clinical observations from the Phase 1 portion of our ongoing Phase 1/2 clinical trial of EPZ-6438 our EZH2 inhibitor.

These observations were presented by our CFO, Dr. Bob Copeland yesterday afternoon at the ASH Meeting on Lymphoma Biology in Colorado Springs. This press release as well as the slides from the ASH Meeting on Lymphoma Biology presentation can be found on our website at epizyme.com.

Earlier this morning, we issued a release with our second quarter financial results and company update. This release can also 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 as follows: Robert Gould, CEO will provide an overall update on the company's progress as well as the summary of the key findings that were presented yesterday from our ongoing clinical study of EPZ-6438. Jason Rhodes, President and CFO will review the company's financial and business performance as well as plans for the second half of 2014. He will then make closing remarks and open the call for Q&A. Bob Copeland, CSO and Eric Hedrick, CMO, will also be 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 quarterly report on Form 10-Q filed the SEC on May 14, 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.

Robert Gould

Thanks Manisha, good morning everyone and than you all for joining us on this call. We are very excited by the progress we have made to date in 2014. June marked our one year anniversary as a publicly traded company. We are proud of the advancements that we have made since our IPO, when we introduced you to Epizyme’s objective of creating personalized therapeutic for patients with genetically defined cancers. This progress includes advancing our first two clinical programs as well as expanding and progressing our product platform.

In our GSK collaboration, we have identified a development candidate for the first target and lead candidates for the second and third targets. We continue to make significant investments in research for additional prioritized HMT targets and plan to report more on our pipeline progress in late 2014.

I will now highlight our most recent news, the preclinical data and early clinical observation of EPZ-6438 also referred to as E7438 our inhibitor of the EZH2 HMT currently being studied in a Phase 1 dose escalation trial in collaboration with Eisai. Yesterday, at the ASH Meeting on Lymphoma Biology, Bob provided an overview of early clinical observations from the Phase 1 portion of our Phase 1/2 study of EPZ-6438 as well as timings characterizing the activity of the EPZ-6438 in preclinical models of non-Hodgkin lymphoma or NHL in combination with current standards of care.

Epizyme’s pre clinical data has shown significant single agent activity of EPZ-6438 in EZH2 mutant bearing germinal center or GC NHL models and their opinion reports in the literature, of single agent activity of EZH2 inhibitors in EZH2 wild types or non mutant GC NHL models.

In Bob’s presentation yesterday, we showed the combining EPZ-6438 with CHOP, a chemotherapy regimen that is an NHL standard of care, broadened its activity to cell lines with wild types EZH2 and increased its potency in cell lines with either mutant or wild type EZH2.

When we looked at combinations of EPZ-6438 with each of the individual components of CHOP, we found that the synergy was driven primarily by Prednisone, the steroid component of the regimen. In particular, Prednisone was the therapy that broadened the activity of EPZ-6438 to EZH2 wild type cell lines. We also saw a synergy and activity in EZH2 wild type cell lines when we combined EPZ-6438 with another steroid, dexamethasone.

Finally, looking outside of CHOP to targeted lymphoma therapies, we saw synergy with EPZ-6438 in either B-cell signaling pathway agents or BCL-2 antagonist in both EZH2 mutant and wild type cell lines.

Before I discuss the early clinical observations, I will remind you that the ongoing Phase 1 clinical trial of EPZ-6438 is a dose escalation study being conducted in collaboration with our partner Eisai in patients with advanced solid tumors or B-cell lymphomas and the primary objective is to determine the maximum tolerated dose with a recommended Phase 2 dose of EPZ-6438.

The secondary objectives are to determine Safety, PK and PD. Bob presented observations from the first three fully evaluable cohorts evaluating doses of 100, 200 and 400 milligrams BID orally. Two additional dose cohorts at 800 and 1600 milligrams BID are currently enrolling and we anticipate presenting more complete Phase 1 results at a scientific conference later in 2014.

12 patients, four of whom had diagnoses of differing NHL histologies, were enrolled across the three completed dose cohorts. Across all 12 evaluable patients, both solid tumor and NHL, MTD was not reached and there were no dose limiting toxicities or adverse event related treatment discontinuation.

PK was dose proportional in these 12 patients and there were pharmacodynamic evidence of target inhibition in the skin as evidenced by methyl mark reduction.

The four NHL patients enrolled in these cohorts at four entirely distinct types of NHL with respect to histology, cell of origin and EZH2 mutation status. Among these patients, we saw two partial responses, one incidence of stable disease and one of progressive disease. What’s interesting even in the early cohorts of this Phase 1 experience is that responses were noted not only in a patient with NHL of GC origin, with refractory transformed lymphoma, but also in a patient with refractory, primary, media sign of B-cell lymphoma, PMBCL which is not of GC origin.

The cumulative disk preclinical experience combined with these early clinical observations suggest a broader, potential patient population for EPZ-6438 beyond the original therapeutic hypothesis that’s focused on EZH2 mutant GCD or BCL.

As part of this talk yesterday, Bob presented case studies of the two patients in whom we saw an objective response. CT scans of the transformed DLBCL patients showed a 66% reduction in lesion size from base line after two months on treatment.

In the PMBCL patient, CT scans showed a 73% reduction in lesion size from base line after six months on treatment and the patient remains on study at this time. Of note, both responding patients were found to have wild size EZH2 from sequencing.

While this is still very early, we are encouraged by this initial anti-lymphoma signal and we are looking forward to the Phase 2 program providing data on the frequency and quality of response in various NHL histologies. We plan to initiative a multi cohort proof of concept NHL Phase 2 study in 2014.

The study that will evaluate EPZ-6438 in patients with GC diffused largely cell lymphoma, primary immediate sign of B-cell lymphoma and follicular lymphoma, including patients both with and without EZH2 mutation. This is a significant expansion from our original plan which is focused exclusively on GCD or BCL with a change of function mutation in the EZH2.

The inclusion of patients with wild type EZH2 significantly broadens the potential opportunity into a patient population with an annual incidence of 72,000. In addition to the plans, NHL Phase 2 study, upon completion and review of the Phase 1 dose escalation data we plan to initiate a second proof of concept study in patients with INI1-deficient tumors, such as malignant rhabdoid tumor or synovial sarcoma.

As a reminder, we are jointly developing EPZ-6438 with Eisai who is funding a 100% of the development cost. We have an option for profit sharing and co-commercialization in the U.S. that we can exercise at anytime prior to the end of the specified period following the achievement of clinical proof of concept and we will continue to receive milestone payments and ex-U.S. royalties from Eisai.

We are pleased with the Safety, PK and PD and early observation of objective responses with EPZ-6438 thus far and look forward to showing more complete Phase 1 clinical data and more details regarding our planned Phase 2 studies later this year.

Let me now focus on EPZ-5676, our first in class inhibitor of the DOT1L HMT currently in clinical trials for the treatment of genetically defined acute leukemia. We are developing EPZ-5676 globally with our collaborator Celgene for the treatment of adult and pediatric patients with one of two genetically defined acute leukemia MLL-r or MLL-PTD. In this collaboration Epizyme retains a 100% of U.S. commercial rights.

We are currently enrolling patients at ten sites in the U.S., the Netherlands and Germany and have proof-of-concept studies ongoing for EPZ-5676 in three genetically defined acute leukemia; adult MLL-r, adult MLL-PTD and pediatric MLL-r.

The expansion stages of the Phase 1 study is ongoing and enrolling adult patients with MLL-r or MLL-PTD were being treated with 90 milligrams per meter squared per day with uninterrupted administration.

We are pleased with the continued safety of the EPZ-5676 and there have been no drug related treatment discontinuations in the study to-date. We have submitted an abstract with data from the dose escalation and expansion stages of this adult Phase 1 study for the ASH Annual Meeting in San Francisco in December.

The dose escalation stage of the Phase 1b study in pediatric patients with MLL-r leukemia is ongoing and currently enrolling patients in the U.S. with doses 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.

We have submitted an abstract on PK modeling from this study for the ASH Annual Meeting. We expect to report initial clinical findings from this study in the first half of 2015.

With that, I’ll hand the call over to Jason for a discussion of our financial and business performance.

Jason Rhodes

Thanks, Robert. I will begin with our current and forecasted end of the year cash position. We began 2014 with $157.2 in cash, cash equivalents and accounts receivable and ended the second quarter of 2014 with $232.1 million. This position reflects our successful follow-on offering in February 2014, with $101 million in net proceeds and collaborative non-equity cash funding of $15 million in the six months ended June 30, 2014.

We expect to end 2014 with more than $170 million in cash and cash equivalents, which we anticipate will fund the company through at least mid-2016, prior to including any potential future milestone payments.

Turning to our second quarter and first six-month results, collaboration revenue was $9.5 million for the second quarter of 2014, compared to $14.8 million in the second quarter of 2013. Collaboration revenue for the six months ended June 30, 2014 was $22.9 million compared to $23.7 million for the six months ended June 30, 2013.

Our collaborations including our retained U.S. rights are important drivers of our strategy to become a commercial oncology company. To-date, we have earned approximately $184 million in non-equity funding from our therapeutic collaborations with Celgene, GSK and Eisai and we expect our collaborations to continue to be important sources of non-equity funding for us.

Our next potential major milestones include $10 million from Eisai for an EPZ-6438 Phase 2 initiation and $35 million from Celgene for an EPZ-5676 pivotal study. Research and development expenses have increased largely driven by the expansion of our product platform and the advancement of 5676 clinical trial and related DOT1L programs.

Expenses were $17.5 million for the second quarter of 2014, compared to $13.9 million in the second quarter of 2013 and $32.8 million for the first six months ended June 30, 2014 compared to $27.3 million for the six months ended June 30, 2013.We anticipate research and development expenses in 2014 to be approximately $75 million

We continue to 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. Our net cash we mean our cash operating expenses less the funding received from partners.

Epizyme continues to execute on our strategy of creating personalized therapeutics for patients with genetically defined cancers. We are very excited by our recent advancements and look forward to potentially having ongoing assessments, a proof-of-concept in five genetically defined cancers by the end of this year, important data readouts from both of our clinical programs and continued investment in our HMT pipeline, with prioritized new potential therapeutic programs. We remained well positioned to create value for shareholders as we work to bring these therapeutics, adult and pediatric cancer patients with significant unmet needs.

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

Question-and-Answer Session


Thank you. (Operator Instructions) And our first questioner is Mike King with JMP Securities. Please go ahead.

Mike King - JMP Securities

Good morning, guys. Thanks for taking the question and congrats on the positive data yesterday. A couple questions from me. I just wanted to start with the dose titration for 6438. I wanted to ask how we should think about dose expansion if there's no MTD achieved. And secondarily to that, if you could talk about just where in the process you are thinking about adding steroids?

Eric Hedrick

Hi, Mike. Thanks for your question. This is Eric. In terms of continued dose escalation as we said yesterday and as Robert reiterated today, we’ve not yet reached MTD. We’re going through planned dose escalation as we speak. I think your question was more related to in the event that we do not determine an MTD how will we go forward with Phase 2 dose?

Mike King - JMP Securities


Eric Hedrick

And that would be based really on the conglomerated data around exposure of PK, PD activity in order to make that decision, but the fact that we’re seeing activity at relatively low dose levels is obviously encouraging. You also ask about adding steroid. So, we commented in the call today about the multi-cohort single agent Phase 2 proof-of-concept study which we certainly intend on doing. And we would also plan to expand the program to include not only a combination with steroids but with other standard anti-lymphoma agents sometime relatively soon.

Mike King - JMP Securities

Okay. Would that be prior to establishing a Phase 2 dose for the dose expansion?

Eric Hedrick

No. We’ll establish the Phase 2 dose and then go to the broader [stage 2] program, correct.

Mike King - JMP Securities

Okay. And then, great, the other question is last night there were a couple talks on the genetics and there was a great talk by Randy [Gascoigne] who discussed the different sequencing programs that have been taking place looking at ABC and GCB. And just wondering how you guys think about some of the concurrent genetic mutations that accompany EZH2 mutations? Because there was a number of other -- there were a number of other genes that look to be mutated frequently, maybe more commonly than EZH2 like MLL and some others. And I'm just wondering will there be any attempt to try to gain more granularity on the molecular profile of the patients in your trials? Thanks

Robert Copeland

Thanks for the question, Mike. This is Bob Copeland. So, we are actively studying that in the preclinical setting, all of the data that we have obtained to-date really speaks to EZH2 as driver of number of germinal center derived non-Hodgkin lymphomas. And we to-date don’t have any specific information to share about other background mutation and their impact on EZH2 sensitivity. That’s data that we are gathering right now, and as we learned more from the preclinical work at Epizyme as well as within the broad scientific community, we’ll certainly incorporate those learnings into our clinical trial designs.

Mike King - JMP Securities

Thanks for taking the questions.


(Operator Instructions) The next questioner is Howard Liang with Leerink. Your line is open.

Howard Liang - Leerink Swann

Thanks very much. I have a question on the DOT1L program. You mentioned the expansion cohort or what cohorts are you seeing really, 90 milligram dose? Can you talk about how you decided on that dose? I think you said there is no dose limiting toxicity?

Eric Hedrick

Thanks, Howard. This is Eric. So that dose was expanded really on the basis of exposure PD data and sort of activity signal data. So, you’re correct we did not or have not yet established maximally tolerated dose and yet those factors led to our thinking around expanding at the 90 milligram per meter squared dose.

Howard Liang - Leerink Swann

Okay. For the EZH2 expansion cohorts, can you give us a little more detail on the size of these cohorts and were there would be -- where the study would be conducted? Also can you talk about the U.S. IND filing plans?

Eric Hedrick

Yeah. So thanks for the question. So that study, I won’t comment specifically today about sample size considerations there. We do expect that that study will be unveiled and detailed before the end of the year and so you will see this specific design and sample size considerations. And we expect this to be an international study. Right now the drug is being evaluated in the EU, but once we get into Phase 2, the program will be expanded internationally. And again we’ll get into more of those details later in the year when we talk more specifically about that Phase 2 design.

Howard Liang - Leerink Swann

Thank you.


(Operator Instructions). One moment. And I am showing no further questions in the queue and would like turn the conference back for any further remarks.

Robert Gould

Well, thank you everybody for your time. I think we’re very appreciative of the patients who have enrolled in the studies to date as well as our collaborators that have enabled us to move forward with these programs. So thanks for you time and have a good day. Bye, bye.


Ladies and gentlemen, thank you for participating in today's program. This does conclude the meeting and you may all disconnect. Everyone have a wonderful day.

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