0001564590-20-035748 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2020	Jul. 30, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Trading Symbol	EPZM
Security Exchange Name	NASDAQ
Title of 12(b) Security	Common stock, $0.0001 par value
Entity Registrant Name	EPIZYME, INC.
Entity Central Index Key	0001571498
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Document Quarterly Report	true
Document Transition Report	false
Entity Common Stock Shares Outstanding		101,478,267
Entity Shell Company	false
Entity File Number	001-35945
Entity Tax Identification Number	26-1349956
Entity Address, Address Line One	400 Technology Square
Entity Address, City or Town	Cambridge
Entity Address, State or Province	MA
Entity Incorporation, State or Country Code	DE
Entity Address, Postal Zip Code	02139
City Area Code	617
Local Phone Number	229-5872

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
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
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

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	338,000	350,000
Preferred stock, shares outstanding	338,000	350,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	125,000,000
Common stock, shares issued	101,464,000	97,783,000
Common stock, shares outstanding	101,464,000	97,783,000
Common stock conversion ratio	10.00%	10.00%
Common stock upon conversion	3,378,000	3,500,000

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue:
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
Product [Member]
Revenue:
Total revenue	$ 2,234		$ 3,519
Collaboration Revenue
Revenue:
Total revenue	$ 233	$ 5,900	$ 303	$ 13,791

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 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

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Common Stock [Member] Series A Convertible Preferred Stock [Member]	Preferred Stock [Member]	Preferred Stock [Member] Series A Convertible Preferred Stock [Member]	Additional Paid-In Capital [Member]	Additional Paid-In Capital [Member] Series A Convertible Preferred Stock [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]
Beginning Balance, Value at Dec. 31, 2018	$ 233,009	$ 8				$ 819,779		$ (586,724)	$ (54)
Beginning Balance, Shares at Dec. 31, 2018		79,175,380
Issuance of common stock (net of commissions and offering costs), Value	122,708	$ 1				122,707
Issuance of common stock (net of commissions and offering costs), Shares		11,500,000
Issuance of Series A Convertible Preferred Stock, net of commissions and beneficial conversion charge, Value	37,432			$ 34,492		2,940
Issuance of Series A Convertible Preferred Stock, net of commissions and beneficial conversion charge, Shares				350,000
Accretion of series A convertible preferred stock				$ 2,940		(2,940)
Exercise of stock options and vesting of restricted stock units, Value	886					886
Exercise of stock options and vesting of restricted stock units, Shares		89,726
Stock-based compensation	3,211					3,211
Issuance of shares under employee stock purchase plan, Value	360					360
Issuance of shares under employee stock purchase plan, Shares		37,972
Unrealized (loss) gain on available-for-sale securities	86								86
Net loss	(29,339)							(29,339)
Ending Balance, Value at Mar. 31, 2019	368,353	$ 9		$ 37,432		946,943		(616,063)	32
Ending Balance, Shares at Mar. 31, 2019		90,803,078		350,000
Beginning Balance, Value at Dec. 31, 2018	233,009	$ 8				819,779		(586,724)	(54)
Beginning Balance, Shares at Dec. 31, 2018		79,175,380
Accretion of series A convertible preferred stock	2,940
Unrealized (loss) gain on available-for-sale securities	302
Net loss	(77,804)
Ending Balance, Value at Jun. 30, 2019	325,685	$ 9		$ 37,432		952,524		(664,528)	248
Ending Balance, Shares at Jun. 30, 2019		91,015,639		350,000
Beginning Balance, Value at Mar. 31, 2019	368,353	$ 9		$ 37,432		946,943		(616,063)	32
Beginning Balance, Shares at Mar. 31, 2019		90,803,078		350,000
Exercise of stock options and vesting of restricted stock units, Value	853					853
Exercise of stock options and vesting of restricted stock units, Shares		208,749
Stock-based compensation	4,681					4,681
Issuance of shares of common stock in lieu of board fees	47					47
Issuance of shares of common stock in lieu of board fees, Shares		3,812
Unrealized (loss) gain on available-for-sale securities	216								216
Net loss	(48,465)							(48,465)
Ending Balance, Value at Jun. 30, 2019	325,685	$ 9		$ 37,432		952,524		(664,528)	248
Ending Balance, Shares at Jun. 30, 2019		91,015,639		350,000
Beginning Balance, Value at Dec. 31, 2019	331,137	$ 10		$ 37,432		1,050,695		(757,019)	19
Beginning Balance, Shares at Dec. 31, 2019		97,783,476		350,000
Issuance of common stock (net of commissions and offering costs), Value	49,915					49,915
Issuance of common stock (net of commissions and offering costs), Shares		2,500,000
Issuance of Series A Convertible Preferred Stock, net of commissions and beneficial conversion charge, Value					$ (1,305)		$ 1,305
Issuance of Series A Convertible Preferred Stock, net of commissions and beneficial conversion charge, Shares			122,000		(12,200)
Exercise of stock options and vesting of restricted stock units, Value	3,140					3,140
Exercise of stock options and vesting of restricted stock units, Shares		579,919
Stock-based compensation	6,475					6,475
Issuance of shares under employee stock purchase plan, Value	646					646
Issuance of shares under employee stock purchase plan, Shares		60,576
Issuance of shares of common stock in lieu of board fees	35					35
Issuance of shares of common stock in lieu of board fees, Shares		1,404
Unrealized (loss) gain on available-for-sale securities	(94)								(94)
Net loss	(50,937)							(50,937)
Ending Balance, Value at Mar. 31, 2020	340,317	$ 10		$ 36,127		1,112,211		(807,956)	(75)
Ending Balance, Shares at Mar. 31, 2020		101,047,375		337,800
Beginning Balance, Value at Dec. 31, 2019	331,137	$ 10		$ 37,432		1,050,695		(757,019)	19
Beginning Balance, Shares at Dec. 31, 2019		97,783,476		350,000
Unrealized (loss) gain on available-for-sale securities	441
Net loss	(109,388)
Ending Balance, Value at Jun. 30, 2020	293,363	$ 10		$ 36,127		1,123,173		(866,407)	460
Ending Balance, Shares at Jun. 30, 2020		101,463,754		337,800
Beginning Balance, Value at Mar. 31, 2020	340,317	$ 10		$ 36,127		1,112,211		(807,956)	(75)
Beginning Balance, Shares at Mar. 31, 2020		101,047,375		337,800
Exercise of stock options and vesting of restricted stock units, Value	2,670					2,670
Exercise of stock options and vesting of restricted stock units, Shares		414,150
Stock-based compensation	8,257					8,257
Issuance of shares of common stock in lieu of board fees	35					35
Issuance of shares of common stock in lieu of board fees, Shares		2,229
Unrealized (loss) gain on available-for-sale securities	535								535
Net loss	(58,451)							(58,451)
Ending Balance, Value at Jun. 30, 2020	$ 293,363	$ 10		$ 36,127		$ 1,123,173		$ (866,407)	$ 460
Ending Balance, Shares at Jun. 30, 2020		101,463,754		337,800

Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement Of Stockholders Equity [Abstract]
commissions and offering costs	$ 85	$ 284

The Company

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

The Company

1. The Company

Epizyme, Inc. (collectively referred to with its wholly owned, controlled subsidiary, Epizyme Securities Corporation, as “Epizyme” or the “Company”) is a commercial-stage biopharmaceutical company that is committed to rewriting treatment for people with cancer and other serious diseases through the discovery, development, and commercialization of novel epigenetic medicines. By focusing on the genetic drivers of disease, the Company’s science seeks to match targeted medicines with the patients who need them.

Through June 30, 2020, in addition to revenues from product sales, the Company has raised an aggregate of $1,376.9 million to fund its operations. This includes $243.3 million of non-equity funding through its collaboration agreements, $218.1 million of funding received through agreements with RPI Finance Trust (“Royalty Pharma” or “RPI”), and BioPharma Credit Investments V (Master) LP, BPCR Limited Partnership and BioPharma Credit PLC (the “Lenders”), $839.5 million from the sale of common stock and series A convertible preferred stock in the Company’s public offerings and $76.0 million from the sale of redeemable convertible preferred stock in private financings prior to the Company’s initial public offering in May 2013. As of June 30, 2020, the Company had $322.1 million in cash, cash equivalents and marketable securities.

In 2020, the Company’s EZH2 inhibitor, tazemetostat, was approved in the United States as TAZVERIK for the treatment of epithelioid sarcoma, or ES, and follicular lymphoma, or FL. Commercial sales of TAZVERIK for the treatment of ES commenced in the first quarter of 2020 and commercial sales of TAZVERIK for the treatment of two FL indications commenced near the end of the second quarter of 2020. The Company commenced active operations in early 2008. Since its inception, the Company has generated an accumulated deficit of $866.4 million through June 30, 2020 and will require substantial additional capital to fund its research, development, and commercialization efforts. The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, risks of failure of commercialization, clinical trials and preclinical studies, the need to obtain additional financing to fund the future development and commercialization of tazemetostat and the rest of its pipeline, the need to obtain marketing approval for its product candidates, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from clinical-stage manufacturing to commercial-stage production of products.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, or the Annual Report.

The unaudited condensed consolidated financial statements include the accounts of Epizyme, Inc. and its wholly owned, controlled subsidiary, Epizyme Securities Corporation. All intercompany transactions and balances of subsidiaries have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the condensed consolidated financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The three months ended June 30, 2020 and 2019 are referred to as the second quarter of 2020 and 2019, respectively. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2020 are consistent with those discussed in Note 2 to the consolidated financial statements in the Annual Report and are updated below as necessary.

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.

The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs, and comparing those needs to the current cash, cash equivalent and marketable securities balances. After considering the Company’s current research and development plans, commercialization activities, including the build out of its salesforce and commercial infrastructure to support the launch of TAZVERIK in the ES indication and an expansion of its infrastructure to support the commercial launch in FL, and the timing expectations related to the progress of its programs, and after considering its existing cash, cash equivalents and marketable securities as of June 30, 2020, anticipated revenues, and debt service obligations as they become due, the Company did not identify conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements were issued. The Company’s current operating plan is based on assumptions that may prove to be wrong, such as the revenue that the Company expects to generate from the sale of its products, and the Company could use its capital resources sooner than it expects.

Pending Accounting Pronouncements

In November 2018, the Financial Accounting Standards Board, or the FASB, issued ASU 2018-18, Collaborative Arrangements, or ASC 808, which clarifies certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. The ASU will be effective for the Company in the first quarter of fiscal 2021, with early adoption permitted. A retrospective adoption to the date the Company adopted ASC 606 is required by recognizing a cumulative-effect adjustment to the opening balance or retained earnings of the earliest period presented. The Company is currently evaluating the impact of the adoption of this standard on its financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, or ASC 740, which simplifies the accounting for income taxes. The ASU will be effective for the Company in the first quarter of fiscal 2021, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its financial statements.

Recently Adopted Accounting Pronouncements

Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, or ASC 326, which requires earlier recognition of credit losses on financing receivables and other financial assets in scope. The new standard is effective for annual reporting periods beginning after December 15, 2019.

Effective January 1, 2020, the Company adopted ASC 326 using the required modified retrospective approach and utilizing the effective date as its date of initial application, for which prior periods are presented in accordance with the previous guidance in ASC 326, Financial Instruments – Credit Losses, or ASC 326.

The adoption of this standard resulted in an immaterial allowance for credit losses on the Company’s condensed consolidated balance sheet. The adoption of the standard did not have a material effect on the Company’s condensed consolidated statements of operations and comprehensive loss or condensed consolidated statements of cash flows.

Revenue Recognition

The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. For a further discussion of accounting for net product revenue see Note 3, “Product Revenue, Net”.

Accounts Receivable

The Company extends credit to customers based on its evaluation of the customer’s financial condition. The Company records receivables for all billings when amounts are due under standard terms. Accounts receivable are stated at amounts due net of applicable prompt pay discounts and other contractual adjustments as well as an allowance for doubtful accounts. The Company assesses the need for an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the customer’s ability to pay its obligation and the condition of the general economy and the industry as a whole. The Company will write off accounts receivable when the Company determines that they are uncollectible. In general, the Company has experienced no significant collection issues with its customers.

Inventories

The Company outsources the manufacturing of TAZVERIK and uses contract manufacturers to produce the raw and intermediate materials used in the production of TAZVERIK as well as the finished product. The Company currently has one supplier qualified for each step in the manufacturing process and is in the process of qualifying additional suppliers.

Inventories are composed of raw materials, intermediate materials, which are classified as work-in-process, and finished goods, which are goods that are available for sale. The Company states inventories at the lower of cost or net realizable value with the cost based on the first-in, first-out method. If the Company identifies excess, obsolete or unsalable items, it writes down its inventory to its net realizable value in the period in which the impairment is identified. These adjustments are recorded based upon various factors related to the product, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected demand, the expected shelf-life of the product and firm inventory purchase commitments. Shipping and handling costs incurred for inventory purchases are included in inventory costs and costs incurred for product shipments are recorded as incurred in cost of product revenue.

Prior to receiving its first approval from the U.S. Food and Drug Administration, or FDA, on January 23, 2020 to sell TAZVERIK, the Company expensed all costs incurred related to the manufacture of TAZVERIK as research and development expense because of the inherent risks associated with the development of a product candidate, the uncertainty about the regulatory approval process and the lack of history for the Company of regulatory approval of drug candidates.

Intangible Assets, Net

Intangible assets consist of capitalized milestone payments made to third parties under an in-license of patent rights upon receiving regulatory approval of TAZVERIK. The finite lived intangible assets are being amortized on a straight-line basis over the expected time period the Company will benefit from the in-licensed rights, which is generally the patent life. Intangible assets are recorded at cost at the time of their acquisition and are stated in the Company’s condensed consolidated balance sheets net of accumulated amortization and impairments, if applicable. The amortization expense is recognized as cost of product revenue in the Company’s condensed consolidated statement of operations. During the first quarter of 2020 the Company paid a $25.0 million milestone payment under its agreement with Eisai upon regulatory approval of tazemetostat for ES. During the second quarter of 2020 the Company paid a $25.0 million milestone payment under its agreement with Eisai upon regulatory approval of tazemetostat for two FL indications. Both regulatory milestones have been capitalized as intangible assets.

The following table presents intangible assets as of June 30, 2020 (in thousands):

	June 30, 2020			Estimated useful life (years)
In-licensed rights	$	50,000			12.2
Less: accumulated amortization		(921	)
Total intangible asset, net	$	49,079

The Company recorded approximately $0.6 million and $0.9 million in amortization expense related to intangible assets, using the straight-line methodology, during the three and six months ended June 30, 2020. Estimated future amortization expense for intangible assets for the year ended December 31, 2020 is $2.1 million and approximately $4.2 million per year thereafter.

The Company assesses its intangible assets for impairment if indicators are present or changes in circumstance suggest that impairment may exist. Events that could result in an impairment, or trigger an interim impairment assessment, include the receipt of additional clinical or nonclinical data regarding one of the Company’s drug candidates or a potentially competitive drug candidate, changes in the clinical development program for a drug candidate, or new information regarding potential sales for the drug. If

impairment indicators are present or changes in circumstance suggest that impairment may exist, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of each intangible asset to its carrying value on the consolidated balance sheet. If the undiscounted cash flows used in the recoverability test are less than the carrying value, the Company would determine the fair value of the intangible asset and recognize an impairment loss if the carrying value of the intangible asset exceeds its fair value.

Product Revenue Net

6 Months Ended

Jun. 30, 2020

TAZVERIK [Member]

Concentration Risk [Line Items]

Product Revenue Net

3. Product Revenue, Net

The Company sells TAZVERIK in the United States principally to a limited number of specialty pharmacies, which dispense the product directly to patients, and specialty distributors, which in turn sell the product to hospital pharmacies and community practice pharmacies (collectively, healthcare providers) for the treatment of patients. The specialty pharmacies and specialty distributors are referred to as the Company’s customers.

Product revenue is recognized by the Company in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services when the customer obtains control of the product, which occurs at a point in time, typically when the product is received by the Company’s customers. The Company provides a right of return to its customers for unopened product for a limited time before and after its expiration date, which lapses upon shipment to a patient. Healthcare providers to whom specialty distributors sell TAZVERIK hold limited inventory that is designated for patients, and the Company monitors inventory levels in the distribution channel, to limit the risk of return.

Reserves for Variable Consideration

Revenues from product sales are recorded as product revenue at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates, co-pay assistance and other allowances that are offered within contracts between the Company and its customers, health care providers, payors and other indirect customers relating to the Company’s product sales. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which the Company is entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Allowances: The Company generally provides customers with discounts that include incentive fees that are explicitly stated in customer contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the Company receives sales order management, data and distribution services from certain customers. To the extent the services received are distinct from the Company’s sale of products to the customer, these payments are classified in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Product Returns: Consistent with industry practice, the Company generally offers customers a limited right of return based on the product’s expiration date for product that has been purchased from the Company, which lapses upon shipment to a patient. The Company estimates the amount of product sales that may be returned by customers and records this estimate as a reduction of revenue in the period in which the related product revenue is recognized. The Company currently estimates product return liabilities using available industry data and the Company’s own historical sales information, including its visibility into the inventory remaining in the distribution channel.

Provider Chargebacks and Discounts: Chargebacks for fees and discounts to healthcare providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by customers, and the Company generally issues credits for such amounts within a few weeks of the customer’s notification to the Company of the resale. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel inventories at each reporting period end that the Company expects will be sold to qualified healthcare providers, and chargebacks that customers have claimed but for which the Company has not yet issued a credit.

Government Rebates: The Company is subject to discount obligations under state Medicaid programs and Medicare. The Company estimates its Medicaid and Medicare rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is included in accrued expenses on the Company’s consolidated balance sheet. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at period end.

Payor Rebates: The Company may contract with various private payor organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of the Company’s products. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Other Incentives/Patient Assistance Programs: The Company also offers voluntary patient assistance programs such as co-pay assistance. Co-pay assistance programs are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue, but remains in the distribution channel inventories at period end.

The following table summarizes activity in each of the above product revenue allowances and reserve categories for the six-months ended June 30, 2020:

	Chargebacks, Discounts, and			Government and Other
	Fees			Rebates			Returns		Total
	(In thousands)
Balance, January 1, 2020	$	—		$	—		$	—	$	—
Provision		288			420			21		729
Payments or credits		(160	)		(83	)		—		(243	)
Balance, June 30, 2020	$	128		$	337		$	21	$	486

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers and cash held at financial institutions. The Company believes that such customers and financial institutions are of high credit quality.

For the three and six months ended June 30, 2020, net product revenue was primarily accounted from four individual customers. Revenue earned from each customer as a percentage of net product revenue is as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Customer 1		51	%		—		54	%		—
Customer 2		19	%		—		14	%		—
Customer 3		12	%		—		14	%		—
Customer 4		11	%		—		12	%		—

There was no product revenue for the three and six-months ended June 30, 2019.

As of June 30, 2020, five individual customers were accounted for as a percentage of accounts receivable as follows:

	June 30, 2020			December 31, 2019
Customer 1		31	%		—
Customer 2		21	%		—
Customer 3		17	%		—
Customer 4		12	%		—
Customer 5		11	%		—

No other customer accounted for more than 10 percent of net product revenue or accounts receivable.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Cash

6 Months Ended

Jun. 30, 2020

Cash And Cash Equivalents [Abstract]

Cash

4. Cash

A reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows, is as follows:

	As of June 30,
	2020		2019
	(In thousands)
Cash and cash equivalents	$	117,152	$	45,932
Restricted cash, as part of other assets		1,509		462
Total cash, cash equivalents, and restricted cash
shown in the condensed consolidated statements of cash flows	$	118,661	$	46,394

The $1.5 million in restricted cash as of June 30, 2020 is comprised of $0.5 million in a letter of credit as a security deposit for the Company’s office and laboratory lease at Technology Square in Cambridge, Massachusetts and $1.0 million in a letter of credit as a security deposit for the Company’s office lease at Hampshire Street in Cambridge, Massachusetts. As of June 30, 2019, restricted cash is comprised of $0.5 million in a letter of credit as a security deposit for the Company’s office and laboratory lease at Technology Square in Cambridge, Massachusetts. The Company has recorded cash held to secure these letters of credit as restricted cash in restricted cash and other assets on the condensed consolidated balance sheet. The restricted cash is classified as non-current based on the related lease terms.

Marketable Securities

6 Months Ended

Jun. 30, 2020

Investments Debt And Equity Securities [Abstract]

Marketable Securities

5. Marketable Securities

The following table summarizes the available-for-sale securities held at June 30, 2020 (in thousands):

Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	91,554	$	139	$	(9	)	$	91,684
Corporate notes		102,403		339		(10	)		102,732
U.S. government agency securities and U.S. Treasuries		10,493		1		—			10,494
Total	$	204,450	$	479	$	(19	)	$	204,910

The following table summarizes the available-for-sale securities held at December 31, 2019 (in thousands):

Description	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	96,952	$	27	$	(16	)	$	96,963
Corporate notes		140,634		49		(41	)		140,642
U.S. government agency securities and U.S. Treasuries		4,000		—		—			4,000
Total	$	241,586	$	76	$	(57	)	$	241,605

Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents within the consolidated balance sheets and are not included in the tables above.

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At June 30, 2020, the balance in the Company’s accumulated other comprehensive loss was composed solely of activity related to the Company’s available-for-sale marketable securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities during the three and six months ended June 30, 2020, and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive loss for the same period.

The aggregate fair value of available-for-sale securities held by the Company in an unrealized loss position for less than twelve months as of June 30, 2020 was $36.1 million, which consisted of 3 commercial paper securities and 5 corporate notes securities. The aggregate unrealized loss for those securities in an unrealized loss position for less than twelve months as of June 30, 2020 was less than $0.1 million.

The Company does not intend to sell and it is unlikely that the Company will be required to sell the above investments before recovery of their amortized cost bases, which may be maturity. The Company determined that there was no material change in the credit risk of any of its investments. As a result, the Company determined it did not hold any investments with any other-than-temporary impairment as of June 30, 2020. The weighted-average maturity of the Company’s portfolio was approximately four months at June 30, 2020.

Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

6. Fair Value Measurements

The Company’s financial instruments as of June 30, 2020 and December 31, 2019 consisted primarily of cash and cash equivalents, marketable securities and accounts receivable and accounts payable. As of June 30, 2020 and December 31, 2019, the Company’s financial assets recognized at fair value consisted of the following:

	Fair Value as of June 30, 2020
	Total		Level 1		Level 2		Level 3
	(In thousands)
Cash equivalents	$	106,915	$	53,247	$	53,668	$	—
Marketable securities:
Commercial paper		91,684		—		91,684		—
Corporate notes		102,732		—		102,732		—
U.S. government agency securities and treasuries		10,494		—		10,494		—
Total	$	311,825	$	53,247	$	258,578	$	—

	Fair Value as of December 31, 2019
	Total		Level 1		Level 2		Level 3
	(In thousands)
Cash equivalents	$	132,193	$	124,419	$	7,774	$	—
Marketable securities:
Commercial paper		96,963		—		96,963		—
Corporate notes		140,642		—		140,642		—
U.S. government agency securities and treasuries		4,000		—		4,000		—
Total	$	373,798	$	124,419	$	249,379	$	—

Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third-party pricing services or other market observable data.

The Company measures its cash equivalents at fair value on a recurring basis, which approximates the net asset value per share. The Company classifies some of its cash equivalents within Level 1 of the fair value hierarchy because they are valued using observable inputs that reflect quoted prices for identical assets in active markets. The Company measures its marketable securities at fair value on a recurring basis and classifies those instruments and some cash equivalents within Level 2 of the fair value hierarchy. The pricing services used by management utilize industry standard valuation models, including both income- and market- based approaches and observable market inputs to determine the fair value of marketable securities and those cash equivalents classified within Level 2 of the fair value hierarchy.

Inventory

6 Months Ended

Jun. 30, 2020

Inventory Disclosure [Abstract]

Inventory

7. Inventory

All of the Company’s inventories relate to the manufacturing of TAZVERIK. The following table sets forth the Company’s inventories as of June 30, 2020 and December 31, 2019:

	June 30, 2020		December 31, 2019
	(In thousands)
Raw materials	$	606	$	—
Work in process		9,220		—
Finished goods		38		—
Total	$	9,864	$	—

As of June 30, 2020 the Company has not capitalized inventory costs related to its other drug development programs.

Supplemental Balance Sheet Information

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Supplemental Balance Sheet Information

8. Supplemental Balance Sheet Information

Accrued expenses consisted of the following:

	June 30, 2020		December 31, 2019
	(In thousands)
Employee compensation and benefits	$	8,211	$	7,844
Research and development expenses		8,168		9,706
Professional services and other		5,671		4,999
Accrued expenses	$	22,050	$	22,549

Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The Company did not record a federal or state income tax provision or benefit for the three and six months ended June 30, 2020 and 2019 due to the expected and known loss before income taxes to be incurred, or incurred, as applicable, for the years ended December 31, 2020 and 2019, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets, with the exception of the deferred tax asset related to alternative minimum tax credit.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

10. Commitments and Contingencies

There have been no significant changes to the Company’s commitments and contingencies, other than the minimum lease payments as disclosed in Note 11, Leases, in the three and six months ended June 30, 2020, as compared to those disclosed in Note 7, Commitments and Contingencies, included in its Annual Report.

Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

11. Leases

The Company enters into lease arrangements for its facilities as well as certain equipment. A summary of the arrangements are as follows:

Operating Leases

The Company leases office and laboratory space at Technology Square in Cambridge, Massachusetts under a Lease Agreement, dated as of June 15, 2012, as amended, or the Technology Square Lease, with ARE-TECH Square, LLC, a Delaware limited liability company, or ARE, with a term that originally continued through May 31, 2018, and a Company option to extend the term of the lease at the then-current market rent, as defined in the Technology Square Lease, through November 30, 2022.

In May 2017, the Company entered into a Third Amendment to the Technology Square Lease, or the Third Amendment, with ARE, and a Fourth Amendment to the Technology Square Lease with ARE, or the Fourth Amendment, and, together with the Third Amendment, the Amendments.

Under the Amendments, the Company extended the term of the Technology Square Lease to November 30, 2022 but retained the right to terminate the Technology Square Lease, effective as of December 31, 2018, by giving written notice to ARE by December 31, 2017 and paying an early termination fee. The Company did not exercise this right. Under the Technology Square Lease as amended, the Company has agreed to pay a monthly base rent of approximately $0.2 million for the period commencing December 1, 2017 through May 31, 2018, with an increase on June 1, 2018 of approximately $33,000 and annual increases of approximately $9,000 on December 1 of each subsequent year until December 1, 2021.

The Company has a $0.5 million letter of credit as a security deposit for the Technology Square Lease and has recorded cash held to secure this letter of credit as restricted cash and other assets on the condensed consolidated balance sheet. In applying the ASU 2016-02, Leases, or ASC 842, transition guidance, the Company determined the classification of this lease to be operating and recorded a lease liability and a right-of-use asset on January 1, 2019.

On August 16, 2019, the Company entered into a lease, or the Hampshire Street Lease, with BMR-Hampshire LLC, or BMR. The Hampshire Street Lease is for 33,525 rentable square feet of office space in Cambridge, Massachusetts. The Hampshire Street Lease commenced as of December 1, 2019. The Hampshire Street Lease has an initial term of seven years and four months from the commencement date and provides the Company with an option to extend the lease term for one additional five-year period. After a four-month period during which base rent is not payable, the Hampshire Street Lease provides for monthly rent payments starting at $0.2 million and increasing 2.5% per year. In the event that the Company exercises its option to extend the lease term, the Hampshire Street Lease provides for monthly rent payments during the additional five-year period at the greater of the base rent rate at the end of the initial term or the then-current market rent. In addition to base rent, the Hampshire Street Lease requires the Company to pay certain variable costs, including taxes, insurance, maintenance and other operating expenses.

The Company has a $1.0 million letter of credit in favor of the BMR as a security deposit for the Hampshire Street Lease and has recorded cash held to secure this letter of credit as restricted cash and other assets on the consolidated balance sheet. In applying ASC 842, the Company determined the classification of the Hampshire Street Lease to be operating and recorded a lease liability and a right-of-use asset as of December 31, 2019.

The Company is required to pay certain variable costs to its landlords in addition to fixed rent. These costs include common area maintenance, real estate taxes, and parking and are included in lease expense.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Lease cost
Operating lease cost	$	1,555		$	889		$	3,105		$	1,777
Variable lease cost		524			305			946			628
Total lease cost	$	2,079		$	1,194		$	4,051		$	2,405

Other information
Operating cash flows used for operating leases	$	1,000		$	907		$	1,981		$	1,812
Weighted average remaining lease term	5.1 years			3.4 years			5.1 years			3.4 years
Weighted average discount rate		9.68	%		8.55	%		9.68	%		8.55	%

Future minimum lease payments under the Company’s non-cancelable operating leases as of June 30, 2020, are as follows:


	(In thousands)
2020	$	2,603
2021		6,442
2022		6,262
2023		2,989
2024		3,059
Thereafter		6,716
Total lease payments	$	28,071
Less: imputed interest		(6,507	)
Total operating lease liabilities at June 30, 2020	$	21,564

Collaborations

6 Months Ended

Jun. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Collaborations

12. Collaborations

GSK

In January 2011, the Company entered into a collaboration and license agreement with Glaxo Group Limited (an affiliate of GlaxoSmithKline plc), or GSK, to discover, develop and commercialize novel small molecule HMT inhibitors directed to available targets from the Company’s platform. Under the terms of the agreement, the Company granted GSK exclusive worldwide license rights to HMT inhibitors directed to three targets. Additionally, as part of the research collaboration, the Company agreed to provide research and development services related to the licensed targets pursuant to agreed-upon research plans during a research term that ended January 8, 2015. In March 2014, the Company and GSK amended certain terms of this agreement for the third licensed target, revising the license terms with respect to candidate compounds and amending the corresponding financial terms, including reallocating milestone payments and increasing royalty rates as to the third target. Subsequent to a GSK strategic portfolio prioritization, the Company received notice in October 2017 that GSK terminated the agreement with respect to the third target, effective December 31, 2017, which returned all rights to that target to the Company. The two other targets, PRMT5 and PRMT1, continue to be subject to the agreement and were not impacted by the termination with respect to the third target. The Company substantially completed all research obligations under this agreement by the end of the first quarter of 2015 and completed the transfer of the remaining data and materials for these programs to GSK in the second quarter of 2015.

Agreement Structure

Under the agreement, the Company has received and recognized as collaboration revenue totaling $89.0 million, consisting of upfront payments, fixed research funding, research and development services and preclinical and research and development milestone payments. As of June 30, 2020, for the two remaining targets, the Company is eligible to receive up to $50.0 million in clinical development milestone payments, up to $197.0 million in regulatory milestone payments and up to $128.0 million in sales-based milestone payments. As a result of the termination of the agreement as it relates to the third target, the Company will receive no additional payments related to that target. In addition, GSK is required to pay the Company royalties, at percentages from the mid-single digits to the low double-digits, on a licensed product-by-licensed product basis, on worldwide net product sales, subject to reduction in specified circumstances. Due to the uncertainty of pharmaceutical development and the high historical failure rates generally associated with drug development, the Company may not receive any additional milestone payments or royalty payments from GSK. GSK became solely responsible for development and commercialization for each licensed target in the collaboration when the research term ended on January 8, 2015.

Collaboration Revenue

Through June 30, 2020, the Company has earned a total of $89.0 million in total collaboration revenue since inception of the GSK agreement, which the Company recognized as collaboration revenue in the condensed consolidated statements of operations and comprehensive loss. The Company did not recognize any collaboration revenue under the agreement in the three and six months ended June 30, 2020 and June 30, 2019, respectively. Any future revenues pursuant to this arrangement will relate to milestone payments and royalties received under the agreement with respect to the two remaining targets. All remaining milestone payments as of June 30, 2020 have been deemed not probable and therefore have not been recognized as revenue.

Eisai

In April 2011, the Company entered into a collaboration and license agreement with Eisai Co. Ltd., or Eisai, under which the Company granted Eisai an exclusive worldwide license to its small molecule HMT inhibitors directed to the EZH2 HMT, including the Company’s product candidate tazemetostat, while retaining an opt-in right to co-develop, co-commercialize and share profits with Eisai as to licensed products in the United States.

As of December 31, 2014, the Company had completed its performance obligations under the original agreement.

In March 2015, the Company entered into an amended and restated collaboration and license agreement with Eisai (the “Eisai License Agreement”), under which the Company reacquired worldwide rights, excluding Japan, to its EZH2 program, including tazemetostat. Under the Eisai License Agreement, the Company is responsible for global development, manufacturing and commercialization outside of Japan of tazemetostat and any other EZH2 product candidates, with Eisai retaining development and commercialization rights in Japan, as well as a right to elect to manufacture tazemetostat and any other EZH2 product candidates in Japan, and a right of first negotiation for the rest of Asia. Eisai waived its right of first negotiation for the rest of Asia in 2018.

Under the original collaboration and license agreement, Eisai was solely responsible for funding all research, development and commercialization costs for EZH2 compounds. Under the Eisai License Agreement, the Company is solely responsible for funding global development, manufacturing and commercialization costs for EZH2 compounds outside of Japan, including the remaining development costs due under a companion diagnostics agreement with Roche Molecular Systems, Inc., or Roche Molecular, which was amended to assign all of Roche Molecular’s rights and obligations under the companion diagnostics agreement to Roche Sequencing Solutions, Inc., or Roche Sequencing, effective January 1, 2020. Eisai is solely responsible for funding Japan-specific development and commercialization costs for EZH2 compounds.

The Company recorded the reacquisition of worldwide rights, excluding Japan, to the EZH2 program, including tazemetostat, under the Eisai License Agreement, as an acquisition of an in-process research and development asset. As this asset was acquired without corresponding processes or activities that would constitute a business, had not achieved regulatory approval for marketing and, absent obtaining such approval, had no alternative future use, the Company recorded the $40.0 million upfront payment made to Eisai in March 2015 as research and development expense in the consolidated statements of operations and comprehensive loss. The Company also agreed to pay Eisai up to $20.0 million in clinical development milestone payments, including a $10.0 million milestone upon the earlier of initiation of a first phase 3 clinical trial of any EZH2 product or the first submission of an NDA or Market Authorization Application, or MAA, and a $10.0 million milestone upon the earlier of initiation of a first phase 3 clinical trial of an EZH2 product or the first submission of an NDA or MAA for an indication different from the previous indication, up to $50.0 million in regulatory milestone payments, including a $25.0 million milestone payment upon regulatory approval of the first NDA or MAA, and a $25.0 million milestone payment upon regulatory approval of the next NDA or MAA of the different indication, and royalties at a percentage in the mid-teens on worldwide net sales of any EZH2 product, excluding net sales in Japan. The Company is eligible to receive from Eisai royalties at a percentage in the mid-teens on net sales of any EZH2 product in Japan. In the second quarter of 2019, the Company submitted its first NDA to the FDA, for the treatment of patients with ES, triggering the payment of the first $10 million clinical development milestone to Eisai and the recording of this amount to research and development expense. The Company paid the $10.0 million clinical development milestone to Eisai in June 2019. In the fourth quarter of 2019, the Company submitted its second NDA to the FDA, for the treatment of patients with FL, triggering the payment of the second $10.0 million clinical development milestone to Eisai and the recording of this amount to research and development expense. The Company paid the $10.0 million clinical development milestone to Eisai in December 2019. In January 2020, the Company triggered the payment of the $25.0 million milestone payment upon regulatory approval of tazemetostat for ES, which was capitalized as an intangible asset on the Company’s condensed consolidated balance sheet as of June 30, 2020. In June 2020, the Company triggered the payment of the $25.0 million milestone payment upon regulatory approval of tazemetostat for FL, which was capitalized as an intangible asset on the Company’s condensed consolidated balance sheet as of June 30, 2020. During the three and six months ended June 30, 2020 and 2019, Eisai purchased drug product from the Company at cost to facilitate development within Japan under the Eisai License Agreement and the Company recognized approximately $0.3 million and $0.7 million, respectively, and $1.3 million and $2.3 million, respectively, as a reduction to research and development expense. During the three and six months ended June 30, 2020, the Company recorded $0.3 million and $0.5 million, respectively, related to the world wide royalty due under the Eisai License Agreement in cost of product revenue based on U.S. sales of TAZVERIK and as of June 30, 2020, $0.3 million in royalties were payable under the Eisai License Agreement. As of June 30, 2020 and December 31, 2019, the Company had accounts receivable of $0.3 million and $1.3 million, respectively, due from Eisai.

Roche

In December 2012, Eisai and the Company entered into a companion diagnostics agreement with Roche Molecular, under which Eisai and the Company engaged Roche Molecular to develop a companion diagnostic to identify patients who possess certain activating mutations of EZH2. In October 2013, this agreement was amended to include additional mutations in EZH2. The development costs due under the amended agreement with Roche Molecular were the responsibility of Eisai until the execution of the amended and restated collaboration and license agreement with Eisai in March 2015, at which time the Company assumed responsibility for the remaining development costs due under the agreement. In December 2015, the Company and Eisai entered into a second amendment to the companion diagnostics agreement with Roche Molecular. The agreement was further amended in March 2018. Under the amended agreement, the Company was responsible for remaining development costs of $10.4 million due under the agreement as of March 2018 and Eisai has agreed to reimburse the Company $0.9 million of this amount related to a regulatory milestone for Japan. In July 2019, the Company entered into a fourth amendment to the companion diagnostics agreement. Under the amended agreement, the Company and Roche Molecular agreed to divide a $1.0 million regulatory milestone for the United States into two separate milestone payments, of which $0.5 million was paid by the Company as part of the signed amendment, and the remaining $0.5 million was paid by the Company in December 2019 upon the satisfaction of certain conditions set forth in the fourth amendment to the companion diagnostics agreement. As part of this fourth amendment, Roche Molecular also assigned all of its rights and obligations under the companion diagnostics agreement to Roche Sequencing due to a reorganization at Roche group, and this assignment became effective as of January 1, 2020. As of June 30, 2020, the Company is responsible for the remaining development costs of $2.9 million due under the agreement. The $0.9 million that Eisai has agreed to reimburse the Company related to a regulatory milestone for Japan was achieved as of June 30, 2020 with payment expected to be received in the third quarter of 2020. The Company anticipates the next payment of $1.0 million for achievement of a development milestone will become due in the third quarter of 2020.

Under the agreement with Roche Sequencing, Roche Sequencing is obligated to use commercially reasonable efforts to develop and to make commercially available the companion diagnostic. Roche Sequencing has exclusive rights to commercialize the companion diagnostic.

The agreement with Roche Sequencing will expire when the Company is no longer developing or commercializing tazemetostat. The Company may terminate the agreement by giving Roche Sequencing 90 days’ written notice if the Company discontinues development and commercialization of tazemetostat or determines, in conjunction with Roche Sequencing, that the companion diagnostic is not needed for use with tazemetostat. Either the Company or Roche Sequencing may also terminate the agreement in the event of a material breach by the other party, in the event of material changes in circumstances that are contrary to key assumptions specified in the agreement or in the event of specified bankruptcy or similar circumstances. Under specified termination circumstances, Roche Sequencing may become entitled to specified termination fees.

Boehringer Ingelheim

In November 2018, the Company entered into a collaboration and license agreement with Boehringer Ingelheim International GmbH (“Boehringer Ingelheim”) to discover, research, develop and commercialize small molecule compounds that are inhibitors of an undisclosed histone acetyltransferase, or HAT, target and an undisclosed helicase target, along with associated predictive biomarkers (the “Target Projects”). Under the terms of the agreement, the Company granted to Boehringer Ingelheim an exclusive, world-wide license to the undisclosed target inhibitors technology. The agreement also includes reciprocal licenses to utilize each other’s know-how, patents and technologies for activities under the agreement. Further, each party is granted the license to develop, manufacture, commercialize and otherwise exploit any compound or product that successfully achieves start of lead optimization (“SoLO”). The Company is also obligated to provide R&D services through SoLO approval for both Target Projects, and to serve on the Joint Steering Committee (“JSC”) throughout the term of the contract. The parties will jointly research and develop the first target program and will share commercialization activities within the United States. Boehringer Ingelheim will assume responsibility for commercialization outside of the United States.

Agreement Structure

Under the terms of the agreement, the Company received a $15.0 million upfront payment and $5.0 million in research funding for the costs to be incurred by the Company in connection with its research activities, payable quarterly in four equal installments during 2019. At its discretion, Boehringer Ingelheim had the option to extend the research period by up to one year, subject to the Company’s agreement to the specified research activities and additional research funding. During the third quarter of 2019, Boehringer Ingelheim’s option to extend the research period expired unexercised, and therefore the research period ended on December 31, 2019. In March 2020, the Company and Boehringer Ingelheim amended the agreement to extend the research period for the shared program targeting enzymes within helicase families with Boehringer Ingelheim providing research funding of $0.4 million. The additional research activities are expected to be completed prior to the end of 2020. Additionally, in March 2020, the Company received notice

of termination for the program targeting enzymes with HAT families, which program termination became effective in June 2020. With regards to the shared program targeting enzymes within helicase families, the Company is eligible to receive up to $30.0 million in clinical development milestone payments, up to $46.5 million in regulatory milestone payments and up to $26.0 million in sales-based milestone payments. In addition, Boehringer Ingelheim is required to pay the Company tiered royalties, on a product by product, and country by country basis, at percentages ranging from the mid-single digits to low-double digits. Royalties will be payable on net product sales for therapies directed at the second target both in the United States and the rest of the world and net product sales outside of the United States for therapies directed at the first target.

Accounting Considerations of the Agreement

The Company assessed the arrangement in accordance with ASC 606 and concluded that the contract counterparty, Boehringer Ingelheim, is a customer based on the arrangement structure, through the satisfaction of each target’s performance obligations. The Company identified the following performance obligations under the arrangement:

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the combination of the Epizyme license to the first undisclosed target inhibitor technology, associated research and development services through the research period; and,

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the combination of the Epizyme license to the second undisclosed target inhibitor technology, associated research and development services through the research period.

The Company determined that each Epizyme license was not distinct from the associated research and development services due to the limited economic benefit that Boehringer Ingelheim would derive from the Epizyme license if the research services were not provided by the Company. Accordingly, the Epizyme licenses and associated research and development services, for each Target Project, are each accounted for as a combined performance obligation.

Under the agreement, the Company determined that the total transaction price at execution was $20.0 million, comprised of the following:

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$15.0 million total upfront payment received under the agreement;

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$5.0 million research funding payment to be received in 2019;

In addition, during 2019, the Company achieved a $5.5 million development milestone for selection of a lead optimization candidate for the shared program targeting enzymes within helicase families, which was added to the transaction price. The next potential milestone payment that the Company might be entitled to receive under this agreement is a $7.0 million milestone, for selection of a development candidate for the shared program targeting enzymes within the helicase families under the agreement. Due to the uncertainty of pharmaceutical development and the high historical failure rates generally associated with drug development, the Company may not receive any additional milestone or royalty payments from Boehringer Ingelheim.

The future potential milestone payments are excluded from the transaction price at inception, as the achievement of the milestone events are highly uncertain. As such, all milestone payments are fully constrained. The Company will reevaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

The Company determined that a 50/50 allocation of transaction price between the two performance obligations is appropriate considering the following factors: (i) R&D components’ standalone selling price estimated using the cost plus margin approach; based on cost plus 10%; (ii) the license rights granted for each program (world-wide or ex-U.S. only) and their potential market opportunities; (iii) the total potential milestone payments for each program; and (iv) the expected revenue recognition pattern for each program, which is expected to be relatively consistent. Therefore, $10.0 million was allocated to the first undisclosed target license and associated research services and $10.0 million was allocated to the second undisclosed target license and associated research services and was recognized through December 31, 2019. The $5.5 million development milestone for selection of a lead optimization candidate for the shared program targeting enzymes within helicase families was allocated to the first undisclosed target license and associated research services and was recognized in the year ended December 31, 2019.

The allocation of the variable consideration, the development milestones, will be allocated to each performance obligation as described in the contract. The milestone payments are defined by program and are directly attributable to distinct achievements in each program. The recognition of revenue for each milestone will be based on progress to date in satisfying the applicable performance obligation.

During the first quarter of 2020, the Company added $0.4 million in research funding for the shared program targeting enzymes within helicase families to the transaction price which will be recognized as the research performance obligation is performed prior to the end of 2020.

Collaboration Revenue

Through June 30, 2020, the Company has recognized $25.8 million in total collaboration revenue since the inception of this collaboration, including $0.2 million and $0.3 million, respectively, during the three and six months ended June 30, 2020. During the three and six months ended June 30, 2019, the Company recognized $5.9 million and $13.8 million, respectively, in collaboration revenue under its agreement with Boehringer Ingelheim.

As of June 30, 2020 and December 31, 2019, the Company had $0.1 million and $0.0 million, respectively, of deferred revenue related to this agreement. As of June 30, 2020 and December 31, 2019, the Company had accounts receivable of $0.0 million and $1.3 million, respectively.

The Company will reevaluate the likelihood of achieving future milestones at the end of each reporting period. If the performance obligations have not been satisfied at the point at which the risk of significant revenue reversal is resolved, the transaction price will be adjusted and a cumulative catch up based on performance to date will be recorded. If the performance obligations have been satisfied, the milestone revenue from the arrangement will be recognized as revenue in the period the risk of significant reversal is relieved.

Celgene (a subsidiary of Bristol-Myers Squibb Company)

In April 2012, the Company entered into a collaboration and license agreement with Celgene Corporation, or Celgene. On July 8, 2015, the Company entered into an amendment and restatement of the collaboration and license agreement with Celgene.

All performance obligations, except for the three material rights were substantially satisfied as of the adoption of ASC 606 and therefore all of the transaction price allocated to those performance obligations has been recognized as revenue under ASC 606. Through June 30, 2020, the Company has recognized revenue of $99.2 million under the agreement as collaboration revenue in the Company’s consolidated statements of operations and comprehensive loss and in accumulated deficit as a result of the cumulative-effect recognition upon adoption of ASC 606. The amounts received that have not yet been recognized as revenue, relate to the material rights, and are recorded in deferred revenue on the Company’s condensed consolidated balance sheet. Deferred revenue related to the agreement amounted to $3.8 million as of June 30, 2020, all of which is included in noncurrent liabilities.

Sale of Future Royalties

6 Months Ended

Jun. 30, 2020

Deferred Revenue Disclosure [Abstract]

Sale of Future Royalties

13. Sale of Future Royalties

On November 4, 2019, the Company entered into a loan agreement with BioPharma Credit PLC (the “Collateral Agent”), BioPharma Credit Investments V (Master) LP, and BPCR Limited Partnership (as transferee of the Collateral Agent’s interest as a lender, and together with BioPharma Credit Investments V (Master) LP, the “Lenders”), providing for up to $70.0 million in secured term loans to be advanced in up to three tranches (the “Loan Agreement”). As of June 30, 2020, the Company had borrowed an aggregate principal amount under the first tranche of $25.0 million (the “Tranche A Note Payable”), the second tranche of $25.0 million (the “Tranche B Note Payable”), and the third tranche of $20.0 million (the “Tranche C Note Payable”) under the Loan Agreement. The Company also has the right to request up to an additional $300.0 million in secured term loans, subject to the approval of the Lenders, following FDA approval of tazemetostat for the treatment of FL in the United States, provided that the Company has not prepaid any outstanding term loans at the time of such request and such request is made before November 18, 2021. (See Note 14, Long-Term Debt).

On the same day, the Company executed a purchase agreement (the “RPI Purchase Agreement”) with RPI. Pursuant to the RPI Purchase Agreement, the Company agreed to sell to RPI 6,666,667 shares of its common stock, a warrant to purchase up to 2,500,000 shares of common stock at an exercise price of $20.00 per share (the “Common Stock Warrant”), and all of the Company’s rights to receive royalties from Eisai with respect to net sales by Eisai of tazemetostat products in Japan pursuant to the Eisai License Agreement and any successor arrangement for Japan sales (the “Japan Royalty”, and collectively, the “Transaction”). In consideration for the sale of shares of common stock, the Common Stock Warrant and the Japan Royalty, RPI paid the Company $100.0 million upon the closing of the RPI Purchase Agreement. In addition, RPI agreed, in connection with RPI’s acquisition from Eisai of the right to receive royalties from the Company under the Eisai License Agreement, to reduce the Company’s royalty obligation by low single digits upon the achievement of specified annual net sales levels over $1.5 billion. In addition, under the RPI Purchase Agreement, the Company has the right to sell, and RPI has the obligation to purchase, subject to certain conditions, including a maximum purchase price of $20.00 per share, $50.0 million of shares of common stock at the Company’s option for an 18-month period from the date of execution of the RPI Purchase Agreement (the “Put Option”). In February 2020, the Company sold 2.5 million shares of its common

stock to RPI, for an aggregate of $50.0 million in proceeds pursuant to the Put Option. Additionally, under the terms of the RPI Purchase Agreement, the founder and chief executive officer of RP Management, an affiliate of RPI, and a co-founder of Pharmakon Advisors LP, an affiliate of the Lenders, was elected as a director of the Company. As of June 30, 2020 and December 31, 2019, RPI and its affiliates owned 9.0% and 6.8% of the Company’s common stock, respectively.

The Company accounted for the Loan Agreement and RPI Purchase Agreement as a single arrangement as RPI and the Lenders are related parties and the agreements were negotiated together. T