Shares of Epizyme (NASDAQ: EPZM) rose nearly 104% in the first six months of the year, according to data provided by S&P Global Market Intelligence. While the surge seems impressive, it's mostly attributable to the free fall that shares took in the second half of 2018. For perspective, the stock has gained just over 9% since the beginning of 2018.
That's not to suggest there are no potential catalysts on the horizon. The clinical-stage pharma company recently submitted a new drug application (NDA) for tazemetostat as a treatment for epithelioid sarcoma, making good on an earlier promise. Epizyme plans to submit another NDA before 2019 comes to an end, but investors have good reason to remain cautious.
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According to Biopharma Dive, Wall Street thinks tazemetostat will achieve peak annual sales of just $100 million in epithelioid sarcoma. That's not a significant market opportunity, but Epizyme hopes to spread the asset's revenue-generating potential across several indications, including solid tumor cancers. The company is on pace to submit an NDA for the lead drug candidate in follicular lymphoma in Q4 2019.
The strategy could pay off. However, investors weren't quite sure how to interpret the drug candidate's chances of success based on data presented at the 2019 American Society of Clinical Oncology (ASCO) meeting in early June. Epizyme reported that tazemetostat demonstrated an objective response rate (ORR) of 15% and a disease control rate of 26%. While the latter could prove significant for a patient population with limited options, the former could make regulators think twice about approving the drug candidate, given the data collected to date.
Epizyme sports a market cap of $1.2 billion and exited March with $371 million in cash. That's a relatively high ratio of cash-to-market cap (31%) and suggests investors are taking a cautious approach with the company.
That could prove prudent, considering the small market opportunity in epithelioid sarcoma won't provide much financial relief for a business that lost $31 million from operations in Q1 2019.
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