Epizyme, inc (EPZM) Q3 2021 Earnings Call Transcript

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Epizyme, inc (EPZM)
Q3 2021 Earnings Call
Nov 9, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to Epizyme's Conference Call. All participants are in a listen-only mode. There will be a question-and-answer session after the prepared remarks. Please be advised that this call is being recorded at Epizyme's request.

I would now like to turn the call over to Craig West, Vice President of Investor Relations. You may now begin.

Craig West -- Vice President of Investor Relations

Thank you, operator. This morning, Epizyme issued a press release providing a business update in addition to the third quarter 2021 financial results. Our press release can be found in the Investors section of the Company's website at epizyme.com. On the call with me today is Grant Bogle, President and Chief Executive Officer; and Dr. Shefali Agarwal, Executive Vice President and Chief Medical and Development Officer.

As a reminder, today's discussion will include forward-looking statements related to Epizyme's current plans and expectations, which are subject to certain risks and uncertainties. Actual results may differ materially due to various important factors, including those described in the risk factors section of our most recent Forms 10-Q, 10-K, and other SEC filings. These forward-looking statements represent our views as of this call and should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to publicly update these statements.

At this time, I would like to turn the call over to Grant Bogle. Grant?

Grant Bogle -- President and Chief Executive Officer

Thank you, Craig, and good morning, everyone. It's great to be here with you to provide an update on our third quarter financial results and to share progress we've made against the four pillars of our strategic plan.

As many of you are aware, when I joined Epizyme as CEO last quarter, we announced a number of strategic and organizational changes to more favorably impact the adoption of TAZVERIK and ultimately intend to establish it as a backbone of therapy in follicular lymphoma or FL and epithelioid sarcoma or ES. We still have plenty of work to do. We believe the changes we've made were the right ones to accelerate growth, and we have begun to see positive commercial impact.

We have also started to see an impact from the cost-saving initiatives announced last quarter. We remain on track to meet the revised non-GAAP adjusted operating expense guidance of between $220 million and $230 million for 2021, with additional cost savings planned in 2022.

During the third quarter, we reported total revenue of $5.2 million from TAZVERIK net product sales. In the second quarter of 2021, we recorded net product revenue of $8 million or $4.8 million on a non-GAAP basis, which excludes $3.2 million sale of commercial product to a third-party pharmaceutical company for use in its combination clinical trials. Importantly, total patient demand for TAZVERIK grew 22% in the third quarter over the second quarter, driven primarily by FL patient sales. Free goods from our patient assistance program accounted for approximately 25% of total demand for the quarter, in line with what we had reported in the second quarter.

During the third quarter, we saw an increase in new accounts prescribing TAZVERIK and volume growth among existing accounts, both in the community and academic settings, and this growth was well dispersed across the country. We made progress partnering with several large integrated provider organizations to improve the integration of TAZVERIK into their systems of care, such as their electronic medical record or EMR in a way that makes TAZVERIK and the EZH2Now test easier to access within the workflow. This is part of our strategy to focus on systemwide integration to augment our efforts to educate individual physicians.

It is important that TAZVERIK be incorporated into provider systems and workflows. So when a provider encounters a relapsed or refractory FL patient, TAZVERIK is positioned consistent with our label and guidelines, making it easier to write a prescription when the physician believes TAZVERIK is the appropriate treatment choice.

For example, at one of the large group practices in the Southeast, while TAZVERIK was available in the EMR, it was not tied to the recommended treatment plan for relapsed or refractory FL patients. During the third quarter, this group practice made the decision to ensure TAZVERIK was appropriately positioned as a treatment option for relapsed or refractory FL patients. In addition, the practice decided to incorporate the application form to the EZH2Now test within the same EMR platform to facilitate physician ordering of the test.

Educating provider organizations about the importance of ensuring that TAZVERIK is appropriately positioned within their systems and workflow consistent with our label and guidelines will continue to be a priority for us going forward. We expect this strategy will help assure that TAZVERIK is considered as an appropriate treatment option by providers throughout the health system when a relapsed or refractory FL patient progresses and needs a new treatment option.

Our field teams continue to evolve their strategies and tactics to engage customers in person, virtually or both according to our customers' preferences. During the third quarter, this resulted in our field teams having more in-depth discussions with some clinics reopened to industries representatives as our newly created field roles allowed us to engage healthcare professionals and other non-physician decision makers at a deeper level. Overall, more than 90% of Tier 1 and 75% of Tier 2 accounts were called upon in the quarter despite the reduction and reorganization of our field teams in August.

In addition to physician education, we believe we have an opportunity to directly address patients as well. Our market research shows that physicians frequently respond to patient requests for appropriate treatment options. This research shows that FL patients only make treatment requests around 15% of the time, but when they do make a request for a therapy, the requests are often granted. In an effort to educate and empower appropriate patients to participate in their treatment decisions, we have just launched a branded highly targeted direct-to-patient campaign, which we believe can make a meaningful impact in keeping TAZVERIK top of mind when a relapsed or refractory FL patient and their physician are considering treatment options.

In addition to the branded campaign, we have been working closely with a group of FL patient advocates and advisors to develop an online disease education tool called In My Blood to empower people living with FL to proactively engage in their treatment decisions. This unbranded resource, which we launched last week, features a first-of-its-kind interactive tool that provides personalized guidance and advice for patients based on where they are in their FL journey. We put out a press release on November 1 that includes more details on the In My Blood program.

Through both of these programs, our goal is to educate and activate patients to proactively engage with their physicians to select the best available treatment. All of the commercial initiatives discussed today are helping to advance our vision of transforming the lives of patients living with cancer and in helping establish TAZVERIK as a foundation of therapy in both FL and ES. To further advance this vision, we are making great progress on our key clinical trials to provide additional data and evidence of TAZVERIK's potential, not just as monotherapy, but in combination with standard of care treatments.

We believe the data pertaining to TAZVERIK combinations in FL and other heme and solid tumor indications is just beginning to emerge from important[Phonetic] clinical trials that are underway. As you'll hear from Shefali in a moment, we're making good progress with these combination trials for TAZVERIK.

Consistent with the third pillar of our strategic plan, we are excited to have announced last week a major milestone for Epizyme, where we received fast-track designation for DLBCL and initiated the first-in-human clinical trial of our first-in-class oral SETD2 inhibitor EZM0414. As leaders in pioneering novel epigenetic therapies, bringing EZM0414 to the clinic is an important advancement as we work toward our vision of making this therapy a possible treatment option for patients with -- living with devastating cancers, such as DLBCL and multiple myeloma.

At this time, I'd now like to turn the call over to Shefali, who will speak to our clinical development progress for tazemetostat and EZM0414 in more detail. Shefali?

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

Good morning, everyone. As Grant alluded to, clinical development across our portfolio of programs remain a top priority for our Epizyme. Our clinical programs supporting the expanded potential of TAZVERIK all continued to move forward as planned and investigators request to sponsor additional studies are regularly received. The scientific community's enthusiasm enhances our own excitement for the drug's full potential, which we continue to believe is very promising and just beginning to be understood.

During the third quarter, we advanced numerous important clinical programs. We progressed our active tazemetostat clinical trials and received FDA clearance to initiate two new basket studies evaluating tazemetostat combinations in solid tumors and hematological malignancies and expect the first patients to be dosed in fourth quarter 2021. We have also shared data from multiple clinical programs during the quarter, such as updated safety run-in data from our prostate cancer trial CELLO-1 at ESMO in September. We remain committed to producing a steady cadence of clinical data over the course of the next few years.

In addition to our tazemetostat studies, we are happy to announce today that we have received IND clearance from FDA to initiate the first-in-human study of our first-in-class oral SETD2 inhibitor, EZM0414, in multiple myeloma and DLBCL. The FDA has also granted fast-track designation for EZM0414 in DLBCL. This is a significant milestone that will provide important diversity to the Epizyme portfolio. The Phase 1a portion of our EZM0414 study is open, and we are actively screening patients.

For a deeper dive, let's start with our active studies of tazemetostat in patients with FL. We have completed the Phase 1b safety run-in portion of our SYMPHONY-1 trial, formally referred to as EZH-302, and have submitted the findings to the FDA for review. To date, the safety profile observed with tazemetostat plus R2 is consistent with that described in the respective reference safety information documents with the individual products, even at the highest tazemetostat dose of 800 milligram.

We plan to share an important data update to the Phase 1 safety run-in portion of the trial at ASH in December, which will include updated safety data, longer follow-up duration, clinical pharmacology and preliminary activity data for nearly 40 patients now enrolled. We remain excited by the response rate and safety profile of the combination, which are both consistent with what we have previously reported.

As we await response from the FDA, we have initiated global site activation in the preparation for the Phase 3 portion of the SYMPHONY-1 trial, including in China with our HUTCHMED collaboration partner, and we plan to begin enrolling the randomized portion of the study in the fourth quarter. The Phase 3 portion of the study will include 500 patients across global sites in the U.S., China and Europe.

You may recall that as part of our discussion with the FDA earlier this year, we have aligned on an important change to the Phase 3 protocol, whereby the second interim analysis will include an efficacy evaluation once 65% of progression-free survival or PFS events have occurred. This allows us to read our efficacy data earlier than previously expected and may provide an opportunity to stop the study early should the pre-defined treatment effect will be realized. We will provide periodic updates on this important study as key enrollment milestones are reached.

Separately, our SYMPHONY-2 Phase 2 trial, formally EZH-1401, evaluating tazemetostat plus Rituxan in relapsed/refractory FL continues to move forward as planned and is actively enrolling. All sites are currently active, including the large oncology network accounts, among others, that were recently added to accelerate patient accrual. Additionally, our collaborative study with LYSA in front-line FL and diffuse large B-cell, or DLBCL, are both nearly fully enrolled and we look forward to sharing updates once available.

We remain optimistic about tazemetostat's potential as a backbone of therapy in FL, and we continue to generate important clinical data to support this potential combination with other therapies. Beyond FL, we plan to generate important tazemetostat combination proof-of-concept data in new hematological and solid tumor indications over the next 12 months. We presented updated safety and activity data from the safety run-in portion of our metastatic castration-resistant prostate cancer study or mCRPC, as part of the poster presentation during 2021 European Society for Medical Oncology Congress in September.

CELLO-1, formally referred as EZH-1101, is evaluating tazemetostat plus enzalutamide compared to enzalutamide alone. Notably, a median PFS rate has still not been reached as of July 22nd data cutoffs, which would have been approximately 21 months and the six-month PFS was 61.7%. Additionally, 11 of 21 or 52% of patients experienced a PSA decrease of 50% from baseline with one patient having a decrease and also having a partial response.

Based on the Phase 1b data, Epizyme initiated enrollment in the Phase 2 efficacy portion of the study, which is evaluating the combination of 160 milligram enzalutamide and 1,200 milligram tazemetostat, twice-daily in 80 mCRPC patients. The primary endpoint of the study is PFS and the study is powered to see PFS difference of six months. The Phase 3 portion of CELLO-1 study is already nearly half enrolled. Investigators continue to remain enthusiastic about tazemetostat's potential in this difficult-to-treat population.

Moving to planned studies. We're excited to announce that we have received IND clearance from the FDA for our heme basket study, EZH-1501. This basket study will evaluate tazemetostat's safety and efficacy across multiple hematological malignancies. Using this approach, we plan to study multiple combinations with current standard of care therapies and other therapies with novel mechanism of action in an effort to expand the potential of tazemetostat. With this announcement, both of Epizyme's basket studies in heme malignancies and solid tumors have been cleared to proceed, and we plan to initiate enrollment of patients in both studies by year-end.

In addition to our studies discussed today, all other clinical trials of tazemetostat continue to advance. All of these studies are intended to provide a steady stream of important data and insight in the coming quarters regarding the development of tazemetostat when combined with other active agents in an effort to significantly broaden its therapeutic potential in both hematological and solid tumors.

Beyond tazemetostat, I'm excited to share that we are making progress in our novel first-in-class oral SETD2 inhibitor, EZM0414. We have opened sites for enrollment and are currently screening patients for Phase 1b first-in-human study. We expect to dose the first patient before the end of 2021. The study is intended to evaluate the safety and optimize the dose and schedule of EZM0414 in multiple myeloma and DLBCL patients.

Our innovative approach to intervention in this pathway, which has not been successfully drugged to date, demonstrates the utility and potential of our epigenetic approach from quality research and the productivity of Epizyme's platform. SETD2 inhibition has been shown to have clinical potential in multiple settings, including high risk t(4;14) multiple myeloma and DLBCL as monotherapy and in combination with existing and emerging therapies including tazemetostat.

Once we have optimized the dose, the Phase 1 study will be expanded to three per patient cohorts; t(4;14) multiple myeloma, non-t(4;14) multiple myeloma and DLBCL.

Finally, our partnership with HUTCHMED is advancing. We are working collaboratively to get SYMPHONY-1 sites activated in China, and HUTCHMED is already working on a proposal for additional combination trials with tazemetostat that can produce meaningful new data.

As you can see, we continue to execute across our existing and planned clinical trials as we look to develop TAZVERIK, not just as a foundational therapy in both FL and ES, but to expand on its pipeline and a drug potential. These clinical trials are intended to yield a steady cadence of clinical data results from ASH in December for the coming years, and we look forward to sharing regular updates.

At this time, I'd like to pass the call back to Grant.

Grant Bogle -- President and Chief Executive Officer

Thank you, Shefali. We ended the third quarter with $221.3 million in cash, cash equivalents and marketable securities. This includes $25 million received from HUTCHMED as part of the upfront payment from our TAZVERIK collaboration in China, which we announced on the Q2 earnings call.

Our total non-GAAP operating expenses for the third quarter 2021 were $61.9 million, of which R&D and SG&A accounted for approximately $32.3 million and $28.5 million, respectively. Based on the changes to our operating plan and the structure announced during our second quarter earnings call, we expect our current cash will fund operations into the fourth quarter of 2022. We believe it is sufficient to sustain operations for at least the next 12 months.

We remain on target with a revised non-GAAP adjusted operating expense guidance of between $220 million to $230 million for 2021, and we expect the changes previously announced on the second quarter earnings call to have a more significant impact on our full-year budget for 2022.

As you will recall, we reduced our budgeted headcount by 20%, including 11% of our current employees, resulting in estimated severance and termination costs of approximately $2 million. These charges were recorded in the third quarter of 2021.

Overall, after reflecting on my first quarter as Epizyme's CEO, I'm pleased with the Company's receptivity to change, the tenacity with which the team has been willing to take action and the results we're already beginning to see from these changes. While early, we expect the changes we have implemented to continue to bear fruit as we move into 2022.

We continue to be guided by the four pillars of our strategy announced during our Vision Call in March, and have made important progress against each: number one, maximizing the commercial adoption of TAZVERIK; number two, building on TAZVERIK pipeline and the drug potential; and three, expanding our pipeline and portfolio; and finally, number four, collaborating to expand our reach to patients and building incremental value.

The Epizyme team is incredibly dedicated to the patients we serve, and we believe we are on the right track.

Operator, you may now open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Peter Lawson from Barclays. Your line is now open.

Peter Lawson -- Barclays -- Analyst

Hey. Thanks for taking the question. I guess maybe on the SETD2, just with the progress you've made there, just where do you think that that could fit into the landscape in multiple myeloma and DLBCL, and kind of how you think about combination use and if there's good candidates for combination use, or do you think you would actually see single-agent activity? Thank you.

Grant Bogle -- President and Chief Executive Officer

Thank you, Peter, and good morning. Thanks for joining us. I think that's probably best answered by Shefali. So Shefali?

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

Yeah. Thank you, Peter, for the question. So as you know, SETD2 is a histone methyltransferase. And one of the strengths of this is that it's actually the first-of-its-kind SETD2 inhibitor. There's none in the clinic. And what's exciting is that it plays an important role in t(4;14) multiple myeloma, which is a big unmet need. There is poor prognosis in that patient population. So although we realize multiple myeloma as competitive, there is a subset of patient population where we really see, based on preclinical data, that there is a great effect.

However, we do see effect in non-SETD2 patients as well. So the way the study is designed is we will first find the dose. And once we have the dose, we will open the study into three expansion cohorts. The first expansion cohort is in t(4;14) multiple myeloma, the second one is in non-t(4;14) multiple myeloma and the third one in DLBCL. Our approach would be to first get monotherapy data and then eventually definitely test combinations. We have done multiple combinations in multiple myeloma and DLBCL in our preclinical models, and we plan to validate that.

Peter Lawson -- Barclays -- Analyst

Got you. Thank you. And then just as we look ahead to ASH, what do you want to see in that data from the 40 patients from the Phase 1b?

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

Sure. So I think in terms of -- for the SYMPHONY-1 study, it's a rather big Phase 1 study, right? It's about 40 patients. So we are looking at a consistent response rate that we have shown. If you remember that we showed almost 100% response rate in the last earnings, so we plan to show a consistent response rate.

We are looking for more safety clinical pharmacology that we can combine with the highest dose, as well as a little more follow up. So it is important because it's a big data set, unlike other smaller safety run-in studies. And I think it's important that we're working -- really working hard to get our Phase 3 ready globally, including China, to start our randomized portion planning this year.

Peter Lawson -- Barclays -- Analyst

Okay. Thank you. And then I may have missed this, Shefali, but when do we see the next update for prostate?

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

So it's an open-label study. The safety run-in data was presented at ESMO, Peter. And it really was encouraging because you saw that we didn't reach median PFS even after 21 months of follow-up and combined with enza. And so, we will provide more updated data for safety run-in next year. But the other thing that we'll be looking at is the randomized portion of the study. We are actively enrolling and nearly half complete in that study. It's an open-label study. So we plan to present interim data next year, and we'll provide more guidance as the study enrolls as to when we will be able to do that.

Peter Lawson -- Barclays -- Analyst

Got you. Do you think beginning of this year -- beginning of next year '22, we'd get more measured timelines around data readouts from various trials?

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

I think so. I think as we enroll, we'll be able to provide more update next year, early next year probably because we are doing a lot of studies. We are doing the basket study, which is open label, both for heme and solid tumors. We have the LYSA trial, that I said, nearly complete. In front-line high-risk FL and DLBCL, we have the updated data for 302, as well as the SETD2 which is also open label. So we are looking forward to providing a constant stream of data in the next couple of years.

Peter Lawson -- Barclays -- Analyst

Great. Thank you so much.

Operator

Thank you. Our next question comes from the line of Michael Yee from Jefferies. Your line is now open.

Kelechi Chikere -- Jefferies LLC -- Analyst

Hello. Thank you. You have Kelechi Chikere on from Michael Yee. Just one question from us here. I'm wondering if you could provide any more color on what's driving organizations to actually optimize their workflow with TAZ. Does it occur after a certain number of interactions that particular healthcare system has with your sales team? And I guess if that is the case, do you have a sense of how many interactions are needed in order to really drive workflow optimization on that front? Any color there would be really helpful. Thank you.

Grant Bogle -- President and Chief Executive Officer

Thank you. That's a great question. And each organization is different, but let me start at a foundational level. Number one, it's important to develop advocates for TAZVERIK within the account and our sales team has been doing that from the start. So getting physician advocates that really want to optimize the use of TAZVERIK is critical. The next step is then engaging not just with the physicians individually, but then with the leadership, both the physician leadership and then the operational leadership, within these organizations with this physician advocate or physician advocates and looking at the workflow, and basically helping them understand that there may be opportunities to improve it.

And in essence, if the organization comes to that conclusion, and of course we're supporting them and helping them get there to that conclusion in an appropriate way, then the steps to optimize it vary by organization, but it's not that much work to do once they've made that decision. But understand that given all the different things that are going on in healthcare and these organizations and so forth, unless this becomes a priority, and someone actually looks, it just doesn't always get done.

And so that's really the process. It doesn't -- it takes several calls and it takes different touch points within the organization. So it's a matter of months probably to get it done. It's not something you do in a single call. And -- but they've been very receptive. I must say that the organizations want their patients to have access to what they consider a very important treatment option. And they realize that this is a way to help ensure that physicians have all the information available to them when they're in front of a relapsed or refractory patient to help them make the appropriate decision.

Kelechi Chikere -- Jefferies LLC -- Analyst

Got it. Thank you very much.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Peyton Bohnsack from Cowen. Your line is now open.

Peyton Bohnsack -- Cowen and Company -- Analyst

Hi, guys. Good morning. This is Peyton on for Joe, and thanks for taking our questions. I guess just really quick on the basket studies and the collaboration with HUTCHMED, you mentioned on the call that you're going to do possibly some additional collaborations with HUTCHMED. Would this include the basket studies for TAZVERIK? Or are these going to be separate studies, mostly with HUTCHMED on other oncology drug portfolio?

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

So the basket study we[Phonetic] talked about that actually have IND clearance both for heme and solid tumors is in U.S. to begin with. Of course, we are collaborating with HUTCHMED and we'll see how it proceeds. At the moment, it's U.S. only and we are ready to start the study and get the first patient in as quickly as possible.

You remember in those basket studies, we are doing multiple combinations and indications with a Bayesian method to be able to get more proof-of-concept data. In terms of HUTCHMED, they have a big pipeline as you can see. They basically are going to do innovative combinations further more than what we are doing in a basket form as well. So we are excited that we'll be able to get the data not only in what we are doing, but also what HUTCHMED will do with multiple different combinations, like VEGF and others that are in their pipeline.

Peyton Bohnsack -- Cowen and Company -- Analyst

Great. Awesome. Thank you. And then kind of secondly, for the SETD2 study, are you guys doing any exploratory analysis on biomarkers like looking at any differences in H3K36 methylation? And is there any plan to develop a companion diagnostic test if anything comes out of these biomarker exploratory analyses that are being conducted?

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

Yeah. So that's absolutely -- as a company, we are very committed to translation medicine. We are actually looking at all of those, including H3K36, study of overexpression and mutation. So we are looking at all those things in our study. The goal is to first find the dose and then eventually when we do the expansion, we'll be looking at PK biomarkers. We also have option of biopsy there as well, so collect that data and understand.

In terms of companion diagnostic, I think we'll have to see how it goes. Our goal is to be able to study this in both t(4;14) and non-t(4;14). And depending on how we see the activity, we'll think about whether we need a diagnostic or not. Right now, we'll be studying in all the patient population.

Peyton Bohnsack -- Cowen and Company -- Analyst

Thank you. I'll hop back in the queue.

Operator

Thank you. [Operator Instructions] At this time, I am showing no further questions. I would like to turn the call back over to Grant Bogle for closing remarks.

Grant Bogle -- President and Chief Executive Officer

Thank you, operator. And I just want to say on behalf of all of us here at Epizyme, we're excited about the progress we're making and look forward to continuing to report steady steps to improve the lives of patients that are facing many of the devastating disease in follicular lymphoma and myeloma and other areas that we're exploring. I also want to thank you all for joining us this morning, and I look forward to further interactions in the months ahead. Thank you, operator.

Operator

[Operator Closing Remarks]

Duration: 33 minutes

Call participants:

Craig West -- Vice President of Investor Relations

Grant Bogle -- President and Chief Executive Officer

Shefali Agarwal -- Executive Vice President, Chief Medical and Development Officer

Peter Lawson -- Barclays -- Analyst

Kelechi Chikere -- Jefferies LLC -- Analyst

Peyton Bohnsack -- Cowen and Company -- Analyst

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