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Can Epizyme (EPZM) Spring a Surprise This Earnings Season?

Zacks Equity Research

Epizyme, Inc. EPZM is scheduled to report fourth-quarter 2016 results on Mar 9, before the opening bell. Last quarter, the company recorded a positive earnings surprise of 20.8%. Let’s see how things are shaping up for this quarter.

Epizyme’s share price has outperformed the Zacks classified Medical-Biomedical/Genetics industry in the last twelve months. The stock gained 45.7% during this time period compared to the industry’s loss of 2.5%.

Factors Influencing This Quarter

Epizyme is a development-stage company with no approved products in its portfolio. Its top line comprises revenues earned through collaborations. Hence, investor focus will remain on the company’s pipeline updates.

Epizyme’s lead candidate, tazemetostat (an EZH2 inhibitor), is being evaluated for relapsed or refractory non-Hodgkin lymphoma (NHL) and advanced solid tumors.

The company is currently evaluating tazemetostat in a phase II study in adults with relapsed or refractory NHL, a phase II study in adults with certain genetically defined solid tumor (INI1-negative tumors, SMARCA4-negative tumors or synovial sarcomas) and a phase I study in children with certain INI1-negative tumors (rhabdoid tumors and synovial sarcomas).

The company is also evaluating tazemetostat in a phase II study in patients with mesothelioma characterized by a loss-of-function of BAP1.

Epizyme initiated a phase I/II clinical trial in collaboration with the Lymphoma Study Association to evaluate tazemetostat in combination with R-CHOP. Moreover, in Jul 2016, Epizyme entered into collaboration with Roche Holding AG RHHBY to evaluate tazemetostat, in combination with Roche's Tecentriq, in a phase Ib study for the treatment of patients with relapsed or refractory DLBCL.

We note that tazemetostat was granted orphan drug designation by the FDA for the treatment of malignant rhabdoid tumors (MRT). The orphan drug designation applies to INI1-negative MRT as well as SMARCA4-negative malignant rhabdoid tumor of ovary, or MRTO.

The company’s another experimental candidate, pinometostat, an inhibitor of the DOT1L HMT, is currently in a phase I study for the treatment of children with MLL-r.

Epizyme continues to expect a significant increase in R&D expenses in the fourth quarter due to the ongoing and planned studies on tazemetostat. The company expects G&A expenses to remain almost same through the fourth quarter.

Epizyme maintains that its cash, cash equivalents and marketable securities of $263.3 million as of Sep 30, 2016 will be sufficient to fund its planned operations through at least second-quarter 2018.

Surprise History

Epizyme’s track record has been strong, with the company surpassing expectations in all of the four trailing quarters, with an average positive earnings surprise of 14.0%.

Earnings Whispers

Our proven model does not conclusively show that Epizyme is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 62 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Epizyme has a Zacks Rank #3, a breakeven ESP makes surprise prediction difficult.

Note thatwe caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Epizyme, Inc. Price and EPS Surprise


Epizyme, Inc. Price and EPS Surprise | Epizyme, Inc. Quote

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Spectrum Pharmaceuticals, Inc. SPPI has an Earnings ESP of 15.4% and carries a Zacks Rank #3. The company is expected to release results on Mar 8.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Aratana Therapeutics, Inc. PETX has an Earnings ESP of 9.30% and a Zacks Rank #3. The company is expected to release results on Mar 13.

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Roche Holding AG (RHHBY): Free Stock Analysis Report
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Epizyme, Inc. (EPZM): Free Stock Analysis Report
Aratana Therapeutics, Inc. (PETX): Free Stock Analysis Report
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