Epizyme (EPZM) Down 24.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Epizyme (EPZM). Shares have lost about 24.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Epizyme due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Epizyme Q4 Earnings Miss Estimates, Revenues Beat

Epizyme incurred a loss of 59 cents per share in fourth-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 51 cents and the year-ago loss of 29 cents.

Quarter in Detail

Collaboration revenues in fourth-quarter 2019, earned as part of the company’s alliance with Boehringer Ingelheim, were $4.3 million compared with $9.7 million in the prior-year period. Revenues beat the Zacks Consensus Estimate of $3 million.

Shares of Epizyme have increased 57.3% in the past year against the industry’s 5.8% decline.

On Jan 23, 2020, the FDA granted accelerated approval to tazemetostat for the treatment of adults and pediatric patients aged 16 years and older with metastatic or locally advanced Epithelioid Sarcoma (ES) not eligible for complete resection. It will be marketed under the brand name Tazverik. Tazverik became commercially available to patients on Feb 1, 2020.

Research and development expenses increased 75.7% year over year to $38.3 million in the quarter. The increase is due to the initiation of global confirmatory studies in ES and FL, and early expansion of the tazemetostat program into new indications and combinations.

General and administrative expenses were $23.5 million in the quarter, up 92.6% from the year-ago period due to the launch and commercialization of Tazverik for the ES indication, as well as initial expansion to prepare for FL commercialization in the United States.

Epizyme had $381.1 million of cash, cash equivalents and marketable securities as of Dec 31, 2019 compared with $240.3 million in the corresponding period of 2018. The company expects its cash runway to extend into at least 2022.

2019 Results

Epizyme posted a loss of $1.93 in 2019, wider than the loss of $1.72 in 2018.

Collaboration revenues in 2019 came in at $23.8 million, up 9.7% year over year.

Pipeline Update

The FDA accepted the company’s supplemental NDA (sNDA) for filing for the accelerated approval of Tazverik for a proposed indication of patients with relapsed or refractory FL who have received at least two prior lines of systemic therapy. The FDA granted Priority Review for the sNDA and set an action date of Jun 18, 2020.

Expected Milestones in 2020

The company expects to complete the safety portion of the ongoing global, phase Ib/III confirmatory study assessing Tazverik in combination with doxorubicin compared with doxorubicin plus placebo as a front-line treatment for ES, and advance into the efficacy portion of the study.

The company also expects to complete the safety portion of the ongoing global phase Ib/III confirmatory study assessing Tazverik in combination with "R²" (Revlimid plus Rituximab) compared with R² plus placebo in the second-line treatment setting for FL and advance into the efficacy portion of the study.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -16.36% due to these changes.

VGM Scores

Currently, Epizyme has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Epizyme has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.