SEC Filing | Epizyme, Inc.

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epzm-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35945

EPIZYME, INC.

(Exact name of registrant as specified in its charter)

Delaware

26-1349956

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

400 Technology Square, Cambridge, Massachusetts	02139
(Address of principal executive offices)	(Zip code)

617-229-5872

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value	EPZM	Nasdaq Global Select Market

The number of shares outstanding of the registrant’s common stock as of July 30, 2020: 101,478,267 shares.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements. — Unaudited	4

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019	5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	6

Condensed Consolidated Statements of Stockholders Equity	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3. Quantitative and Qualitative Disclosures About Market Risk	38

Item 4. Controls and Procedures	38

PART II — OTHER INFORMATION

Item 1A. Risk Factors	39

Item 6. Exhibits	72

Signatures	73

Epizyme^® and TAZVERIK^® are registered trademarks of Epizyme, Inc. in the United States and other countries. Epizyme, Inc. has also submitted trademark applications for Epizyme™ and/or TAZVERIK™ in the United States and/or other countries. All other trademarks, service marks or other tradenames appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

Forward-looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These statements may be identified by such forward-looking terminology as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

•

our plans to develop and commercialize novel epigenetic therapies for patients with cancer and other serious diseases;

•

the commercial launch of TAZVERIK;

•

our ongoing and planned clinical trials, including the timing of initiation and enrollment in the trials, the timing of availability of data from the trials and the anticipated results of the trials;

•

the timing of and our ability to apply for, obtain and maintain regulatory approvals for our product candidates;

•

our ability to achieve anticipated milestones under our collaborations;

•

the rate and degree of market acceptance and clinical utility of our products;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

the impact of the COVID-19 pandemic on our business, results of operations, and financial condition;

•

our intellectual property position; and

•

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

All of our forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission, or the SEC, could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q which modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.

Our management’s discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim periods and with Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. This discussion and analysis should be read in conjunction with these unaudited condensed consolidated financial statements and the notes thereto as well as in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, or our Annual Report. The three months ended June 30, 2020 and 2019 are referred to as the second quarter of 2020 and 2019, respectively.

Note regarding certain references in this Quarterly Report on Form 10-Q

Unless otherwise stated or the context indicates otherwise, all references herein to “Epizyme,” “Epizyme, Inc.,” “we,” “us,” “our,” “our company,” “the Company” and similar references refer to Epizyme, Inc. and its wholly owned subsidiary, Epizyme Securities Corporation.

In addition, unless otherwise stated or the context indicates otherwise, all references in this Quarterly Report on Form 10-Q to “TAZVERIK^® (tazemetostat),” “TAZVERIK^®” and “TAZVERIK” refer to tazemetostat in the context of the commercially-available product for which we received accelerated approval from the FDA in January 2020 for epithelioid sarcoma and in June 2020 for follicular lymphoma, as more fully described herein; whereas, unless otherwise stated or the context indicates otherwise, all references herein to “tazemetostat” refer to tazemetostat in the context of the product candidate for which we are exploring further applications and indications, as more fully described herein.

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

EPIZYME, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except per share data)

	June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	117,152		$	139,482
Marketable securities		204,910			241,605
Accounts receivable, net		1,747			2,567
Inventory		9,864			—
Prepaid expenses and other current assets		20,991			15,523
Total current assets		354,664			399,177
Property and equipment, net		2,268			2,219
Operating lease assets		19,448			21,206
Intangible assets, net		49,079			—
Restricted cash and other assets		1,924			1,987
Total assets	$	427,383		$	424,589
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,583		$	8,782
Accrued expenses		22,050			22,549
Current portion of operating lease obligation		3,878			3,039
Other current liabilities		144			16
Total current liabilities		30,655			34,386
Operating lease obligation, net of current portion		17,686			19,120
Deferred revenue, net of current portion		3,806			3,806
Long-term debt, net of debt discount		68,464			23,309
Other long-term liabilities		21			38
Liability related to sale of future royalties		13,388			12,793
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized; 338 shares and 350 shares issued and outstanding, respectively (equivalent to 3,378 shares and 3,500 shares of common stock, respectively, upon conversion at a 10:1 ratio)		36,127			37,432
Common stock, $0.0001 par value; 150,000 shares and 125,000 shares authorized, respectively; 101,464 shares and 97,783 shares issued and outstanding, respectively		10			10
Additional paid-in capital		1,123,173			1,050,695
Accumulated other comprehensive income		460			19
Accumulated deficit		(866,407	)		(757,019	)
Total stockholders’ equity		293,363			331,137
Total liabilities and stockholders’ equity	$	427,383		$	424,589

See notes to condensed consolidated financial statements.

EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Amounts in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenue:
Product revenue, net	$	2,234		$	—		$	3,519		$	—
Collaboration revenue		233			5,900			303			13,791
Total revenue		2,467			5,900			3,822			13,791
Operating expenses:
Cost of product revenue		1,022			—			1,637			—
Research and development		26,352			40,907			51,516			67,803
Selling, general and administrative		32,659			15,698			59,584			27,684
Total operating expenses		60,033			56,605			112,737			95,487
Operating loss		(57,566	)		(50,705	)		(108,915	)		(81,696	)
Other income, net:
Interest (expense) income, net		(569	)		2,253			187			3,911
Other (expense), net		(15	)		(13	)		(64	)		(19	)
Non-cash interest expense related to sale of future royalties		(301	)		—			(596	)		—
Other (expense) income, net		(885	)		2,240			(473	)		3,892
Net loss	$	(58,451	)	$	(48,465	)	$	(109,388	)	$	(77,804	)
Other comprehensive income (loss):
Unrealized gain on available-for-sale securities		535			216			441			302
Comprehensive loss	$	(57,916	)	$	(48,249	)	$	(108,947	)	$	(77,502	)
Reconciliation of net loss to net loss attributable to common stockholders:
Net loss	$	(58,451	)	$	(48,465	)	$	(109,388	)	$	(77,804	)
Accretion of convertible preferred stock		—			—			—			(2,940	)
Net loss attributable to common stockholders	$	(58,451	)	$	(48,465	)	$	(109,388	)	$	(80,744	)
Net loss per share attributable to common stockholders:
Basic	$	(0.58	)	$	(0.53	)	$	(1.09	)	$	(1.04	)
Diluted	$	(0.58	)	$	(0.53	)	$	(1.09	)	$	(1.04	)
Weighted-average common shares outstanding used in net loss per share attributable to common stockholders:
Basic		101,104			90,876			100,360			77,315
Diluted		101,104			90,876			100,360			77,315

See notes to condensed consolidated financial statements.

EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

	Six Months Ended June 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(109,388	)	$	(77,804	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,362			416
Stock-based compensation		14,802			7,939
Amortization of discount on investments		(362	)		(1,759	)
Amortization of debt discount		169			—
Loss on disposal of property and equipment		19			—
Non-cash interest expense associated with the sale of future royalties		596			—
Changes in operating assets and liabilities:
Accounts receivable		820			6,794
Inventory		(9,864	)		—
Prepaid expenses and other current assets		(5,468	)		(1,942	)
Accounts payable		(4,221	)		2,092
Accrued expenses		(499	)		(1,972	)
Deferred revenue		128			(7,041	)
Operating lease assets		1,758			1,255
Operating lease liabilities		(595	)		(1,290	)
Other assets and liabilities		47			(141	)
Net cash used in operating activities		(110,696	)		(73,453	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities		(94,120	)		(297,904	)
Maturities of available-for-sale securities		131,616			168,548
Purchase of intangible asset		(50,000	)		—
Purchases of property and equipment		(329	)		(190	)
Net cash used in investing activities		(12,833	)		(129,546	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of commissions		—			122,992
Proceeds from issuance of preferred stock, net of commissions		—			37,433
Payment of offering costs		(79	)		(264	)
Proceeds from the issuance of debt		45,000			—
Payment of debt issuance costs		(93	)		—
Proceeds from the issuance of common stock in connection with the exercise of the put option, net of financing costs		49,915			—
Proceeds from stock options exercised		5,810			1,739
Issuance of shares under employee stock purchase plan		646			360
Net cash provided by financing activities		101,199			162,260
Net increase in cash, cash equivalents and restricted cash		(22,330	)		(40,739	)
Cash, cash equivalents and restricted cash, beginning of period		140,991			87,133
Cash, cash equivalents and restricted cash, end of period	$	118,661		$	46,394
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes	$	—		$	45
Interest paid	$	2,182		$	—
Property and equipment included in accounts payable or accruals	$	181		$	208

See notes to condensed consolidated financial statements

EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(Amounts in thousands, except share amounts)

	Common Stock				Preferred Stock				Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Income (Loss)			Equity
Balance at December 31, 2018		79,175,380	$	8		—	$	—	$	819,779		$	(586,724	)	$	(54	)	$	233,009
Issuance of common stock (net of commissions and offering costs of $284)		11,500,000		1		—		—		122,707			—			—			122,708
Issuance of series A convertible preferred stock, net of commissions and beneficial conversion charge		—		—		350,000		34,492		2,940			—			—			37,432
Accretion of series A convertible preferred stock		—		—		—		2,940		(2,940	)		—			—			—
Exercise of stock options and vesting of restricted stock units		89,726		—		—		—		886			—			—			886
Stock-based compensation		—		—		—		—		3,211			—			—			3,211
Issuance of shares under employee stock purchase plan		37,972		—		—		—	360				—			—			360
Unrealized gain on available for sale securities		—		—		—		—		—			—			86			86
Net loss		—		—		—		—		—			(29,339	)		—			(29,339	)
Balance at March 31, 2019		90,803,078	$	9		350,000	$	37,432	$	946,943		$	(616,063	)	$	32		$	368,353

Exercise of stock options and vesting of restricted stock units		208,749		—		—		—		853			—			—			853
Stock-based compensation		—		—		—		—		4,681			—			—			4,681
Issuance of shares of common stock in lieu of board fees		3,812		—		—		—		47			—			—			47
Unrealized gain on available for sale securities		—		—		—		—		—			—			216			216
Net loss		—		—		—		—		—		$	(48,465	)		—			(48,465	)
Balance at June 30, 2019		91,015,639	$	9		350,000	$	37,432	$	952,524		$	(664,528	)	$	248		$	325,685