Epizyme’s stock got off to a great start this year, likely as a result of renewed big pharma interest in epigenetics, and a 15% climb yesterday on the regaining of a phase I/II oncology asset from Eisai shows that the enthusiasm is not about to die down.
This is unusual, given that the handing back of rights, especially by a player that, like Eisai, is known to be building a cancer presence, is normally a vote of no confidence. But Epizyme has convinced the market that the move was of its own making, and the sellside must already be salivating at the prospect of the US biotech raising cash.
The need for more money is itself surprising, since Epizyme ended 2014 with a healthy $190m in the bank. But the move to buy back ex-Japan rights to EPZ-6438 from Eisai will cost it $40m up front, and an expansion in clinical activity – now fully funded by Epizyme – means its cash will only stretch into the first quarter of 2016.
Epizyme’s chief executive, Robert Gould, said he had approached Eisai in the winter as phase I data were emerging showing durable responses to EPZ-6438 in non-Hodgkin’s lymphoma and INI1-deficient tumours. It was particularly encouraging that activity was seen in a broader patient population than expected, he said on a call yesterday.
Still, it is not clear if the move to reclaim EPZ-6438 came about because Eisai, which had licensed global rights in 2011, was dragging its heels or whether the Japanese group simply wanted to get out of the asset. Mr Gould said Epizyme’s approach “coincided” with Eisai deciding to focus on later-stage projects.
Eisai stands to get a further $70m in milestones plus a remarkably generous mid-teen royalty on ex-Japan sales, with Eisai paying Epizyme a similar royalty on revenue generated in Japan, where it retains rights. The US biotech will now fund an ambitious clinical programme, including a five-arm, 150-patient phase II lymphoma trial starting in the second quarter.
With just a year’s cash Epizyme said it would take a look at which projects it now funds, and one obvious conclusion is that EPZ-6438, an EZH2 inhibitor, is being prioritised over the DOT1L inhibitor EPZ-5676, which had disappointed at December’s ASH meeting.
Fortified by a share price that is up 35% year to date, Epizyme will surely go back to investors for more cash sooner rather than later. Leerink analysts today praised the “proactive” move by Epizyme, which they said could now benefit from improved downstream economics.
It is also important to remember that epigenetics – using small molecules to target mechanisms that affect gene expression – is gaining traction with big pharma. For instance, late last year Merck & Co paid $110m for the private Swiss player OncoEthix (Merck & Co gives epigenetics a boost, December 19, 2014).
Epigenetics is what Epizyme is all about, its focus being on inhibitors of histone methyltransferases, of which EZH2 and DOT1L are two examples. Speaking to EP Vantage at ASH, Mr Gould highlighted the endorsements Epizyme already had: Celgene is its ex-US partner for EPZ-5676; GSK2816126, another EZ2H inhibitor, is partnered with GlaxoSmithKline, as is the PRMT5-targeting EPZ015666.
In addition, a deal with Roche has yielded a diagnostic for the EZH2 mutation; one of the five arms in the upcoming trial will recruit follicular lymphoma patients with this genotype, while a second will enrol EZH2 wild-types, and the Roche diagnostic will be used to identify the relevant patients.
It is not clear how long Epizyme intends to finance the development of EPZ-6438 before trying to find another ex-Japan partner, which it might want to do if indeed big pharma is interested in epigenetics again. One problem, however, lies in the remarkably high royalty payaway it has agreed with Eisai.
Put simply, with Eisai already holding such a large chunk of the asset, it might make little economic sense to license it out again.