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Why Is Epizyme (EPZM) Up 10.9% Since Last Earnings Report?

Zacks Equity Research
Is (NSSC) Outperforming Other Industrial Products Stocks This Year?

A month has gone by since the last earnings report for Epizyme (EPZM). Shares have added about 10.9% 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 Reports Narrower-Than-Expected Loss in Q1

Epizyme incurred a loss of 39 cents per share in the first quarter of 2019, narrower than the Zacks Consensus Estimate of loss of 47 cents and the year-ago loss of 49 cents.

Quarter in Detail

With no approved products in its portfolio as of now, the company heavily relies on its collaborators for revenues. Collaboration revenues for the first quarter of 2019 were $7.9 million against no revenues in the first quarter of 2018.

Research and development (R&D) expenses increased 5% year over year to $26.9 million in the quarter.This increase was primarily due to greater tazemetostat manufacturing costs and expenses incurred in preparation for two NDA submissions, offset by decreases in clinical trial expenses.

General and administrative (G&A) expenses were $12 million in the quarter, up 28.1% from the year-ago period due to rise in medical affairs and commercial costs as a result of organizational development in preparation for tazemetostat commercialization.

Epizyme had $371.1 million of cash, cash equivalents and marketable securities as of Mar 31, 2019, compared with $247.9 million as of Mar 31, 2018. The company expects its cash to extend to at least the first quarter of 2021.

Pipeline Update

Epizyme is on track to submit its first new drug application (NDA) for accelerated approval to the FDA for tazemetostat in patients with epithelioid sarcoma (ES) in the second quarter of 2019. If approved, tazemetostat will be the first commercially available EZH2 inhibitor and the first treatment specifically indicated for epithelioid sarcoma patients.

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 ongoing phase II study has completed enrollment, and the company is working toward the submission of the NDA for accelerated approval in the fourth quarter of 2019. 

Epizyme is planning multiple clinical trials to expand the benefit of tazemetostat in earlier treatment lines of follicular lymphoma, and explore new combinations and potential indications in both FL and solid tumors.

The company earned a $5.5-million milestone payment from Boehringer Ingelheim, following the selection of a lead optimization candidate for the shared program targeting an enzyme within the helicase family. The companies are jointly researching and developing this program, with both parties sharing U.S. commercialization responsibilities, and Boehringer Ingelheim assuming responsibility for commercialization outside the United States. The companies will also share research responsibilities for a histone acetyltransferase (HAT) program that is under development.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Epizyme has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest 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 upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Epizyme has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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