Why Epizyme Inc. Shares Exploded Higher

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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 developing treatments for patients with genetically defined cancers, exploded higher by as much as 84% after it announced after the bell on Monday that EPZ-5676, a DOT1L inhibitor for acute leukemias, had reached its proof-of-concept milestone.

So what: According to Epizyme's press release, its achievement of the proof-of-concept milestone, which was triggered by "objective responses in patients with translocations of the MLL gene," earns the company a $25 million milestone payment from its collaborative partner Celgene (NASDAQ: CELG  ) , which has the rights to the currently experimental drug outside the U.S. In addition, Epizyme's update also notes that it earned a separate $4 million milestone payment from GlaxoSmithKline (NYSE: GSK  ) for one of three histone methyltransferase target included in the duo's collaborative efforts. Because of these payments, Epizyme boosted its year-end cash guidance to $145 million from previous forecasts of $115 million.

Now what: The real news here is that if Celgene is forking over $25 million to Epizyme, EPZ-5676's data must be impressive. We should have a better idea of exactly how promising that data is sometime in the first half of 2014. With Epizyme's press release also noting its intention to run five clinical proof-of-concept trials in 2014, it's clear that this is going to be a company with a lot going on this year. I'm personally not chasing today's run-up higher because I'd much rather see that early-stage data in plain-as-day text than guess how good or bad it might be. Until we get more concrete data, the risks at these lofty levels could outweigh the rewards.

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Sean Williams

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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8/28/2015 3:59 PM
EPZM $20.10 Up +2.60 +14.86%
Epizyme CAPS Rating: ****
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GSK $41.25 Up +0.04 +0.10%
GlaxoSmithKline CAPS Rating: ****