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Why Epizyme Inc. Shares Were Hammered

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Epizyme (NASDAQ: EPZM  ) , a clinical-stage biopharmaceutical company focused on developing anticancer therapies, tanked as much as 43% after reporting early-stage results for leukemia drug EPZ-5676.

So what: According to the company's press release, EPZ-5676 -- which blocks a select protein known as DOT1L, which is responsible for the development of acute leukemia with MLL-rearrangement -- demonstrated a "therapeutic mechanism of action" in four of eight MLL-r patients and no response in non-MLL-r patients. Epizyme also notes that it did not achieve a maximum tolerated dose in its studies although EPZ-5676 appeared to be safe and well-tolerated.

Now what: It seems like a fairly benign and innocuous early stage press release, but investors seem keen on focusing on the early efficacy of the EPZ-5676. Even though it delivered what looks like a 50% response rate, analysts and investors are concerned that its effectiveness is being glossed over early on in this study. In Epizyme's defense, the company is still dose-escalating EPZ-5676 to discover the right dosing period and didn't reach a maximum-tolerated dose which means there could be room for improved clinical benefit. I generally dislike placing too much credence in very early-stage results like this, but if my arm were twisted I would say that emotions probably got the better of investors today with Epizyme.

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Sean Williams
TMFUltraLong

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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Related Tickers

9/4/2015 12:39 PM
EPZM $19.46 Down -0.07 -0.36%
Epizyme CAPS Rating: ****