On a standalone basis, phase I results presented by Epizyme (EPZM) for its lead program, EPZ-5676, were not as negative as market reaction implies. The company was able to dose escalate through several cohorts without serious side effects, demonstrate target modulation in humans and show mild signs of efficacy. For a typical biotech company, that would be considered a reasonable phase I data package, given the possibility to explore higher potentially more efficacious doses. Unfortunately, an early stage biotech company with a market cap of ~$1B based purely on preclinical results and hype is anything but typical.
EPZ-5676 inhibits the enzyme DOT1L and is the first inhibitor of its kind to enter clinical testing. DOT1L belongs to an emerging class of enzymes (histone methyltransferases or HMT) which are considered a promising family of targets in cancer research. On top of the general hype around epigenetic targets, excitement around EPZ-5676 was driven by an early lucrative deal with Celgene (CELG) and more importantly, a potential biomarker for patient selection.
In cells and animal experiments, Epizyme showed that cancer cells with specific mutations (MLL rearrangement or R-MLL) are highly sensitive to EPZ-5676 whereas non-mutated cells are unaffected. This, coupled with Epizyme’s strategy to focus on R-MLL cancers gave investors the impression that EPZ-5676 will be highly active in this defined subset just like Xalkori and Zelboraf are active in their respective molecularly defined target populations.
The excitement around EPZ-5676 overshadowed the lack of clinical experience with HMT inhibitors and the drug’s unfavorable PK profile, which forced Epizyme to give it via continuous IV infusion. This is in contrast to most cancer drugs that are injected every 1-3 weeks or taken orally every day. In order to justify this problematic dosing regimen, a drug must demonstrate remarkable efficacy (Amgen’s blinatumomab is a good example).
Summary of results
The phase I enrolled 16 leukemia patients in 4 dose cohorts, 8 of whom had MLL rearrangements, which should make their disease sensitive to EPZ-5676. Of the 8 R-MLL patients, 4 demonstrated what the company defines as “treatment effects” including reduction in circulating leukemia cells in the blood, differentiation or reduction of leukemia cells in the bone marrow and resolution of leukemia related symptoms. Nevertheless, in all cases the “effects” were not clinically meaningful, did not come close to a true response and did not prevent rapid disease progression on the drug. In addition, there was no dose dependent response as “treatment effects” occurred equally across the different cohorts.
On a positive note, it appears EPZ-5676 was able to modulate its target based on a pharmacodynamics marker. Using the methylation status of a known DOT1L target, there was a dose and time dependent inhibition of the methyl mark. According to the methyl mark, Epizyme reached only 60% target inhibition, which implies that the doses are not optimal.
In summary, EPZ-5676 successfully inhibits DOT1L in humans but activity to date is limited. When given in higher doses, the drug might be the breakthrough drug Epizyme hopes it to be but the current data has very little to support this hypothesis.
When hype and reality collide
Epizyme’s case reflects the problematic side of the current biotech IPO bubble, where companies are given extremely rich valuations based on little to no clinical validation (discussed here). This is the case with Epizyme, Agios (AGIO), Intrexon (XON), Verastem (VSTM) and Oncomed (OMED). In all those cases, the underlying science is exciting and innovative but valuations factor-in a high likelihood of success in the absence of any clinical proof of concept – A problematic phenomenon in an industry where most drugs fail. As a result, there are very few attractive biotech IPOs, 2 of which are discussed here.
What I find most puzzling is the company’s decision to publish results so early in the trial’s lifetime when they know expectations are so high. Did they really think such mediocre efficacy would be received positively??? The 37% drop in Epizyme’s stock is warranted not only because EPZ-5676 failed to impress, it is a warning sign for companies who take their overblown valuations for granted and assume investors will put up with underwhelming data just because a company is in fashion. Even after today’s drop, Epizyme is still too expensive in my opinion.
I will post my ASH preview and a portfolio update on Sunday