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Epizyme (EPZM) Up 7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Epizyme (EPZM). Shares have added about 7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Epizyme due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Epizyme Q2 Loss In Line, Revenues Beat Estimates

Epizyme incurred a loss of 53 cents per share in the second quarter of 2019, in line with the Zacks Consensus Estimate but wider than the year-ago loss of 42 cents.

Quarter in Detail

With its lead candidate still under FDA’s review, the company relies on collaborators for revenue. Collaboration revenues in the second quarter of 2019, earned as part of the company’s alliance with Boehringer Ingelheim, were $5.9 million compared with $12.0 million in the second quarter of 2018. Revenues beat the Zacks Consensus Estimate of $1 million.  

Research and development (R&D) expenses increased 30.7% year over year to $40.9 million in the quarter. This increase was primarily due to a $10-million development milestone paid to Eisai for the submission of the new drug application (NDA) for its lead pipeline candidate, tazemetostat, in the second quarter of 2019.

General and administrative (G&A) expenses were $15.7 million in the quarter, up 44% from the year-ago period due to increased pre-commercialization activities and staffing, and increased personnel-related expenses.

Epizyme had $331 million of cash, cash equivalents and marketable securities as of Jun 30, 2019, compared with $240.3 million as of Dec 31, 2018. The company expects its cash runway to extend into the first quarter of 2021.

Pipeline Update

Epizyme’s NDA for accelerated approval of tazemetostat for the treatment of patients with metastatic or locally advanced epithelioid sarcoma (ES), who are not eligible for curative surgery, was accepted by the FDA for priority review  in July 2019. The FDA is expected to give its decision on Jan 23, 2020.

The company also plans to submit an NDA for accelerated approval of tazemetostat for patients with follicular lymphoma (FL), regardless of their EZH2 mutational status, who have been previously treated with two or more systemic therapies. The company expects to submit the NDA for accelerated approval in the fourth quarter of 2019. 

Epizyme is planning to initiate multiple clinical studies to evaluate tazemetostat in earlier treatment lines of follicular lymphoma, and explore new combinations and potential indications in both FL and solid tumors.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -11.48% due to these changes.

VGM Scores

Currently, Epizyme has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Epizyme has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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