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Epizyme Buys Back Control of Cancer Drug From Eisai For up to $110M

Xconomy Boston — 

Throughout its history, Epizyme has always kept an eye on staying independent. When it was accumulating partnerships for its epigenetics research a few years ago, it made sure to preserve its ability to maneuver and keep some upside for its work. In a broad deal with Celgene for instance, it kept U.S. rights to a bunch of potential drugs. In a pact with Eisai, it kept an option to buy back into some of the potential profits.

Today, the Cambridge, MA-based company is doing that again. Feeling it has a drug with better potential than it originally thought, it’s cut a deal with Eisai to get back more rights than it originally bargained for.

Epizyme (NASDAQ: EPZM) said this morning that it’s reacquired all commercial rights—aside from in Japan—to cancer drug candidate EPZ-6438 from Eisai. Epizyme will pay Eisai $40 million up front, and potentially another $70 million in various clinical and regulatory milestones should the drug progress forward. Eisai would also get a “mid-teens” percentage royalty on sales outside of Japan, with Epizyme getting the same royalty stream from sales inside Japan.

Eisai had been footing the development and commercialization bill for this program, but that tab will now fall to Epizyme—outside of any work in Japan. So far, Eisai has paid $39 million in development costs for EPZ-6438, Epizyme CFO Andrew Singer said on a conference call with analysts this morning.

Once it hashes out the deal, Epizyme will kick off a Phase 2 study of EPZ-6438 of 150 patients with various forms of non-Hodgkin lymphoma, and a separate study in patients with so-called INI-1 deficient solid tumors. Epizyme expects to start the Phase 2 study in Europe in the second quarter, and to enroll roughly 30 patients per arm. Eisai executive Takashi Owa said in a statement that the deal would allow the Japanese company to focus more dollars on later-stage programs in multiple therapeutic areas.

On the call, Epizyme CEO Robert Gould called this deal a “transformative” one for Epizyme, based on better-than-expected early results from the drug—namely, positive responses from a broader group of patients than Epizyme had expected. Epizyme recently reported that some patients in an early EPZ-6438 study with one of three different cancer types—two forms of Non-Hodgkin lymphoma (follicular lymphoma and diffuse large B-cell lymphoma) and INI-1 deficient solid tumors—had at least partially responded to treatment with its drug. Those patients were treated only with Epizyme’s drug, and had failed up to four prior therapies before trying it, Gould said on the call.

Gould said when these data emerged late last year, Epizyme felt that it now had a drug that might be able to treat both blood cancers and solid tumors.

“It was apparent to us that this program should be accelerated and significantly expanded to address as many opportunities for the compound as possible,” he said.

That led Epizyme to cut a different deal with Eisai than originally anticipated. Four years ago, Eisai paid $6 million up front, and promised potentially $200 million more, for worldwide rights to EPZ-6438 and other drugs Epizyme develops aimed at the EZH2 enzyme target. Epizyme held an option to buy back half of U.S. rights to each drug from the collaboration, including EPZ-6438. Today it’s scrapping that deal for a new one, and grabbing control of the drug’s clinical development and strategic path forward. Gould said that Epizyme wanted to make sure it could maximize the potential of the drug with a broader clinical plan than first anticipated.

Epizyme has long made strategic decisions with independence in mind. As Gould said at an Xconomy event in 2014, Epizyme agonized over whether to try to sell itself or build a broad oncology company a few years ago. It chose the latter option when it cut a deal with Celgene in 2012, which laid the groundwork for an IPO the following year. Epizyme has yet to break out like some of the other members of the 2013 IPO class, such as Bluebird Bio (NASDAQ: BLUE) and Agios Pharmaceuticals (NASDAQ: AGIO)—its shares currently trade at about $22 apiece, some $7 higher than the IPO price—but it’s still maintaining that same strategy.

“We believe this [Eisai deal] is an important inflection point in our growth,” Gould said.