With efficacy box ticked, Epizyme faces economics question

The remarkable fortune of Epizyme’s tazemetostat leaves open two issues: why did Eisai give up on the project in March, and would any economic interest remain for Epizyme if the US biotech were to license it out again?

Yesterday’s phase I update has shown responses to tazemetostat deepening over time, as well as backing the project’s potential in a very specific genetic subtype. If Epizyme could pitch it as an orphan disease drug with premium pricing and a high margin the question about economics might be answered.

As for why Eisai handed back ex-Japan rights, investors must accept the formal explanation that Epizyme wanted greater control at a time when its Japanese partner was shifting to later-stage assets (How Epizyme turned the tables on Eisai, March 13, 2015).

After all, there seems to be little to sound the alarm bells in yesterday’s open-label phase I non-Hodgkin’s lymphoma trial, as revealed at the International Conference on Malignant Lymphoma.

On the contrary: with 15 heavily pretreated patients enrolled now, nine have shown objective responses, including two complete remissions. This compares with a 10-patient November 2014 data cut that showed four objective responses of which one was complete, and suggests a promising strengthening of the result over time.

Perhaps even more impressive was that the cohort now includes the first patient with an EZH2 tumour mutation known as Y646H. This patient had failed six prior lines of therapy, yet developed a partial remission after 16 weeks of tazemetostat (EPZ-6438), and remains in the study.

This is interesting because tazemetostat is an EZH2 inhibitor, and the finding suggests that it has potential as a specifically targeted therapy. EZH2 is a histone methyltransferase, whose inhibition is thought to affect gene expression – an example of epigenetics.

Partnering?

In the current market such an asset, though early-stage, should be able to attract significant partnering interest; indeed, Epizyme already has separate licensees that might want to take a look, including Celgene, GlaxoSmithKline and Roche.

Epizyme's problem is that in buying rights back from Eisai for $40m up front it gave up a surprisingly high mid-teen royalty, plus future milestone fees, to the Japanese firm. Thus, with Eisai already having secured a healthy interest in tazemetostat, any further licensing deal would need to comprise a relatively high royalty for it to make sense to Epizyme.

Of course, setting an orphan disease price on the project, as well as Epizyme selling it itself, could render the question moot. Epizyme says it wants to retain at least US rights, and possibly commercialise itself in Europe too, so this seems to be what the group has seized on.

It has already started an ambitious 150-patient phase II trial, and plans a second phase II study in adults with INI1-deficient solid tumours, where EZH2 is thought to play a role.

The group had $224m in the bank at the end of the first quarter, but its stock has been on a rollercoaster since December’s ASH meeting, presumably on fears of a dilutive equity fund raising. It closed down 7% on Friday, and was up 30% in early trade today.

If an equity raise is unavoidable then another option could be for Epizyme to try and buy itself out of the future Eisai obligation, a strategy Puma demonstrated perfectly a year ago with its partner Pfizer – just before reporting stellar clinical data. It would just be a case of picking the moment.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobPlieth on Twitter