Epizyme Prices IPO at $15 Per Share, Begins Trading Friday

5/30/13Follow @benthefidler

[Updated: 8:05 pm ET] Epizyme has gotten plenty done in a short period of time: since it set up shop in 2007, it’s locked in three rounds of financing, signed several partnership deals with big drugmakers, and has two drugs either in clinical trials or on the verge of starting them.

Now, it will see how public investors feel about its progress.

[Updated IPO share count, confirmed late Thursday.] Cambridge, MA-based Epizyme (NASDAQ: EPZM) priced its IPO on Thursday, selling about 5.9 million shares at $15 apiece when counting the over-allotments granted to its underwriters, according to chief financial officer Jason Rhodes. If all the 771,300 extra shares are purchased by the underwriters at $15—a likely possibility given the demand for Epizyme shares so far—then the company will end up hauling in about $88.7 million in new cash.

The deal shows strong investor interest in Epizyme. As recently as May 28, the company said in a regulatory filing that it hoped to sell just 4.29 million shares, plus 643,000 shares for over-allotments, at a range of $13 to $15 apiece, so it was able to sell more shares, and get top dollar. Epizyme will now begin trading on the Nasdaq with a market capitalization of more than $400 million.

Before today’s IPO, Epizyme raised about $76.3 million through three rounds of financing. Epizyme’s largest shareholders prior to the IPO were New Enterprise Associates (25.1 percent), Kleiner Perkins Caulfield and Byers (20.1 percent), Bay City Capital (15.5 percent), Celgene (14.5 percent), and MPM Capital (12.8 percent), according to its May 28 IPO prospectus.

Citi, Cowen & Co., Leerink Swann, JMP Securities, and Wedbush Securities are Epizyme’s underwriters. Citi, Cowen, and Leerink are the joint bookrunning managers of the offering.

Epizyme uses epigenetics—a field of biology based on the idea of turning genes on and off without altering the underlying DNA—to create cancer drugs for small patient groups.

As its name suggests, Epizyme harnesses epigenetics to target enzymes with its drugs. Those drugs are designed to switch off the activity of a specific enzyme implicated in a cancer that is clearly genetically defined. By shutting off the targeted enzyme, the idea is that the genes and proteins that would have malfunctioned due to cancer don’t.

The epigenetics approach isn’t unique to Epizyme: several companies (Celgene and Merck, for example) have already created epigenetic drugs, and others such as Constellation Pharmaceuticals are developing them. But what stands out about Epizyme is the molecular targets it has selected.

Epizyme is going after a 96-member class of enzymes called histone methyltransferases, or HMTs. The two drugs it has created so far, EPZ-5676 and EPZ-6438, each inhibit a specific HMT: EPZ-5676 is going after a target called DOT1L, and EPZ-6438 blocks an enzyme known as EZH2.

Epizyme has a long way to go to show that its drugs work, but its plan is to go after small patient populations with the specific genetic mutations it is looking for, identify those variations with companion diagnostics—it already has deals with Roche and Abbott to help create two of them—and treat them. Epizyme began an early-stage study in September of EPZ-5676 in patients with mixed lineage leukemia, a genetically-defined subtype of common blood cancers such as acute myeloid leukemia and acute lymphoblastic leukemia for which there are no approved drugs. It plans to start an early-stage trial of EPZ-6438 in patients with genetically-defined subtypes of non-Hodgkin’s lymphoma later this year. EPZ-5676 is taken intravenously, while EPZ-6438 is a pill.

By going after these small groups with a targeted therapy, Epizyme is putting itself in position to essentially create a factory of orphan cancer drugs that can move quickly through clinical development, get longer market exclusivity, and of course, command high prices.

Epizyme has already attracted the interest of several pharmaceutical companies. Celgene grabbed international rights to EPZ-5676 in a deal worth as much as $250 million that also gave the company the option to pick up rights outside the U.S. to some of Epizyme’s other HMT drugs. Eisai Pharmaceuticals bought worldwide rights to EPZ-6438, but Epizyme has the chance to opt into a profit sharing arrangement in the U.S. And GlaxoSmithKline has licensed a few compounds from the company as well.

Epizyme had $85 million in cash as of March 31. According the prospectus, it plans to use $7 million of the IPO cash for the early study of EPZ-5676, $30 million to fund research and advance its other preclinical drug candidates, and another $8 million to help develop EPZ-6438, assuming it opts in to U.S. rights for the drug.

Ben Fidler is Xconomy's Deputy Biotechnology Editor. You can e-mail him at bfidler@xconomy.com Follow @benthefidler

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