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Here's Why Epizyme's Shares Are Surging 19.6% Higher Today

By Todd Campbell – Jan 4, 2019 at 2:13PM

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A new update on its epigenetics drug, tazemetostat, has kindled investor optimism.

What happened

After the company reported that following discussions with the Food and Drug Administration (FDA), it plans to file for approval of its lead drug candidate, tazemetostat, later this year, shares of Epizyme (EPZM) rallied 19.6% higher at 1:30 p.m. EST on Friday.

So what

Tazemetostat is being evaluated as a late-line treatment option for follicular lymphoma patients with either wild-type EZH2 or EZH2-activating mutations.

A man pumps his fist while looking at a monitor on a laptop.

IMAGE SOURCE: GETTY IMAGES.

An epigenetic therapy, tazemetostat attempts to improve patient outcomes by inhibiting chromatin-modifying proteins, or CMPs, that regulate chromatin, a complex comprising DNA and histone proteins responsible for gene expression. In June, Epizyme reported interim phase 2 study results showing an objective response rate (ORR) of 71% in patients with an EZH2-activating mutation, including 11% who had a complete response. The ORR was 33% for patients with the wild-type EZH2 mutation, including 6% who achieved a complete response.

On Jan. 4, Epizyme announced that its phase 2 data, once complete, could serve as the basis for a new drug application in Q4 2018 in follicular lymphoma. It also said it plans to file for FDA approval in Q2 2019 for tazemetostat's use in epithelioid sarcoma, a rare cancer without a currently approved drug therapy.

Now what

The FDA timeline announced today suggests approval decisions are on tap for 2020. If approved, tazemetostat could generate hundreds of millions in annual sales for Epizyme. Roughly 25,000 cases of follicular lymphoma are diagnosed in the U.S. and the five largest EU countries annually, and about 20% of those cases have the EZH2 mutation. Because limited treatment options are available for patients who have failed to respond or have seen their disease return, this could become an important drug. However, investors may want to temper their optimism, given there's no guarantee that the full data set from phase 2 will pan out as hoped or that the FDA will approve this drug someday.

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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