What happened
Shares of biopharmaceutical company Epizyme (EPZM) rose 32.1% this week, according to data from S&P Global Market Intelligence. The stock, which closed at $1.06 a share last Friday, opened at that same price on Monday before rising to as high as $1.49 a share on Wednesday. Even after coming back to earth a bit on Thursday, the stock is up more than 29% over the past five days.
Image source: Getty Images.
So what
There was no big news, other than a little bargain hunting after the stock lost more than half its value the week before, falling from $2.09 a share on Jan. 26 to as low as $1.01 a share on Jan. 27. That drop came after the company announced the pricing of a stock sale, diluting current investors' shares. It doesn't take much to make the small-cap biotech move, as its market cap is only $149.6 million.
The company discovers, develops, and commercializes novel epigenetic medicines to treat cancer and other diseases. It has one commercial product, Tazverik, with two other oncology therapies undergoing early-stage clinical trials in its pipeline.
Tazverik is approved to treat adults 16 and older with metastatic or locally advanced epithelioid sarcoma (a rare type of soft tissue cancer) as well as relapsed or refractory follicular lymphoma, a type of blood cancer that mostly affects the lymph nodes.
Tazverik was expected to produce fourth-quarter revenue between $11.2 million and $11.7 million, and annual revenue for 2021 of between $30.6 million to $31.1 million, the company said in a recent guidance update. The fourth-quarter figure represents a rise of between 33.7% and 39.6% year over year, while the yearly revenue number is nearly double the $15.76 million the company reported in 2020.
While the company has been increasing revenue, it is also adding to its losses. In the third quarter, the company reported a loss of $65.8 million, or $0.65 per share, up 17% and 18%, respectively, year over year, primarily because of increased research and development expenses.
Now what
The stock sale is needed, even if it did concern investors. In its third-quarter report, the biotech company said it had $221.3 million, enough cash to only last through the fourth quarter of 2022.
The stock is risky for investors but it does have long-term potential. Tazverik has only been on the market for a year, after the Food and Drug Administration made it the first drug to be specifically approved for epithelioid sarcoma last January. While epithelioid sarcoma represents less than 1% of all soft tissue cancers, there's a strong likelihood that the drug's revenue will grow, particularly if other uses are found for the drug (it is in phase 2 trials for prostate cancer). Its approval to treat follicular lymphoma only came last June, so there's room to grow there as well.
