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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2019

OR

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

For the transition period from                      to                     

Commission File Number: 001-35945

 

EPIZYME, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

26-1349956

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

400 Technology Square, Cambridge, Massachusetts

02139

(Address of principal executive offices)

(Zip code)

617-229-5872

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, $0.0001 par value

EPZM

Nasdaq Global Select Market

The number of shares outstanding of the registrant’s common stock as of October 25, 2019: 91,073,942 shares. 

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

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

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

 


 

PART I — FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements. — Unaudited

2

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

2

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018

3

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

4

 

 

Condensed Consolidated Statements of Stockholders Equity

5

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

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

23

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

 

 

Item 4. Controls and Procedures

30

 

 

PART II — OTHER INFORMATION

 

 

 

Item 1A. Risk Factors

31

 

 

Item 6. Exhibits

61

 

 

Signatures

62

 

Epizyme® is a registered trademark of Epizyme in the United States and/or other countries. All other trademarks, service marks or other tradenames appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

 

 

 


Forward-looking Information

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

 

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

 

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

 

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

 

our ability to achieve anticipated milestones under our collaborations;

 

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

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position; and

 

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

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

Our management’s discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim periods and with Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. This discussion and analysis should be read in conjunction with these unaudited condensed consolidated financial statements and the notes thereto as well as in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, or our Annual Report. The three months ended September 30, 2019 and 2018 are referred to as the third quarter of 2019 and 2018, respectively. Unless the context indicates otherwise, all references herein to our company include our wholly owned subsidiary.

 

1


PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

EPIZYME, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except per share data)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

93,463

 

 

$

86,671

 

Marketable securities

 

 

199,398

 

 

 

153,633

 

Accounts receivable

 

 

12,000

 

 

 

20,067

 

Prepaid expenses and other current assets

 

 

16,078

 

 

 

12,164

 

Total current assets

 

 

320,939

 

 

 

272,535

 

Property and equipment, net

 

 

1,827

 

 

 

2,057

 

Operating lease assets

 

 

9,368

 

 

 

 

Restricted cash and other assets

 

 

2,063

 

 

 

909

 

Total assets

 

$

334,197

 

 

$

275,501

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,354

 

 

$

4,780

 

Accrued expenses

 

 

19,304

 

 

 

19,700

 

Current portion of operating lease obligation

 

 

2,964

 

 

 

 

Current portion of deferred revenue

 

 

1,794

 

 

 

13,300

 

Other current liabilities

 

 

16

 

 

 

53

 

Total current liabilities

 

 

29,432

 

 

 

37,833

 

Operating lease obligation, net of current portion

 

 

7,183

 

 

 

 

Deferred revenue, net of current portion

 

 

3,806

 

 

 

3,806

 

Other long-term liabilities

 

 

38

 

 

 

853

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000 shares authorized; 350 shares

   issued and outstanding (equivalent to 3,500 shares of common stock

   upon conversion at a 10:1 ratio)

 

 

37,432

 

 

 

 

Common stock, $0.0001 par value; 125,000 shares authorized; 91,069

   shares and 79,175 shares issued and outstanding, respectively

 

 

9

 

 

 

8

 

Additional paid-in capital

 

 

956,765

 

 

 

819,779

 

Accumulated other comprehensive income (loss)

 

 

149

 

 

 

(54

)

Accumulated deficit

 

 

(700,617

)

 

 

(586,724

)

Total stockholders’ equity

 

 

293,738

 

 

 

233,009

 

Total liabilities and stockholders’ equity

 

$

334,197

 

 

$

275,501

 

 

See notes to condensed consolidated financial statements.

2


EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Amounts in thousands, except per share data)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Collaboration revenue

 

$

5,715

 

 

$

 

 

$

19,506

 

 

$

12,000

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

26,579

 

 

 

27,027

 

 

 

94,382

 

 

 

83,994

 

General and administrative

 

 

17,089

 

 

 

11,528

 

 

 

44,773

 

 

 

31,801

 

Total operating expenses

 

 

43,668

 

 

 

38,555

 

 

 

139,155

 

 

 

115,795

 

Operating loss

 

 

(37,953

)

 

 

(38,555

)

 

 

(119,649

)

 

 

(103,795

)

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

1,879

 

 

 

1,069

 

 

 

5,790

 

 

 

3,121

 

Other (expense), net

 

 

(15

)

 

 

(6

)

 

 

(34

)

 

 

(11

)

Other income, net

 

 

1,864

 

 

 

1,063

 

 

 

5,756

 

 

 

3,110

 

Net loss

 

$

(36,089

)

 

$

(37,492

)

 

$

(113,893

)

 

$

(100,685

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale securities

 

 

(99

)

 

 

3

 

 

 

203

 

 

 

26

 

Comprehensive loss

 

$

(36,188

)

 

$

(37,489

)

 

$

(113,690

)

 

$

(100,659

)

Reconciliation of net loss to net loss attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(36,089

)

 

$

(37,492

)

 

$

(113,893

)

 

$

(100,685

)

Accretion of convertible preferred stock

 

 

 

 

 

 

 

 

(2,940

)

 

 

 

Net loss attributable to common stockholders

 

$

(36,089

)

 

$

(37,492

)

 

$

(116,833

)

 

$

(100,685

)

Net loss per share attributable to common stockholders - basic and diluted

 

$

(0.40

)

 

$

(0.54

)

 

$

(1.33

)

 

$

(1.45

)

Weighted-average common shares outstanding used in net loss per share attributable to

   common stockholders - basic and diluted

 

 

91,044

 

 

 

69,539

 

 

 

88,145

 

 

 

69,472

 

 

See notes to condensed consolidated financial statements.

3


EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

 

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(113,893

)

 

$

(100,685

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

626

 

 

 

804

 

Stock-based compensation

 

 

11,616

 

 

 

9,514

 

Amortization of discount on investments

 

 

(2,707

)

 

 

(1,044

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8,067

 

 

 

(11,962

)

Prepaid expenses and other current assets

 

 

(3,914

)

 

 

1,973

 

Accounts payable

 

 

573

 

 

 

(701

)

Accrued expenses

 

 

(369

)

 

 

2,859

 

Deferred revenue

 

 

(11,506

)

 

 

 

Operating lease assets

 

 

1,916

 

 

 

 

Operating lease liabilities

 

 

(1,969

)

 

 

 

Other assets

 

 

(106

)

 

 

(18

)

Other liabilities

 

 

(18

)

 

 

213

 

Net cash used in operating activities

 

 

(111,684

)

 

 

(99,047

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of available-for-sale securities

 

 

(343,173

)

 

 

(197,789

)

Maturities of available-for-sale securities

 

 

300,316

 

 

 

134,130

 

Purchases of property and equipment

 

 

(423

)

 

 

(152

)

Net cash used in investing activities

 

 

(43,280

)

 

 

(63,811

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments under capital lease obligation

 

 

 

 

 

(129

)

Proceeds from issuance of common stock, net of commissions

 

 

122,992

 

 

 

 

Proceeds from issuance of preferred stock, net of commissions

 

 

37,433

 

 

 

 

Proceeds from stock options exercised

 

 

1,922

 

 

 

1,823

 

Proceeds from issuance of shares under employee stock purchase plan

 

 

740

 

 

 

779

 

Payment of public offering costs

 

 

(284

)

 

 

 

Net cash provided by financing activities

 

 

162,803

 

 

 

2,473

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

7,839

 

 

 

(160,385

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

87,133

 

 

 

227,126

 

Cash, cash equivalents and restricted cash, end of period

 

$

94,972

 

 

$

66,741

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

45

 

 

$

45

 

 

See notes to condensed consolidated financial statements.

 

 

 

4


 

EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(Amounts in thousands, except share amounts)

 

 

Common Stock

 

 

Preferred Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2017

 

 

69,301,691

 

 

$

7

 

 

 

 

 

$

 

 

$

723,510

 

 

$

(488,097

)

 

$

(49

)

 

$

235,371

 

Cumulative catch up related to the adoption of ASU 2016-09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,003

 

 

 

 

 

 

25,003

 

Exercise of stock options and vesting of restricted stock units

 

 

152,734

 

 

 

 

 

 

 

 

 

 

 

 

1,500

 

 

 

 

 

 

 

 

 

1,500

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,887

 

 

 

 

 

 

 

 

 

2,887

 

Issuance of shares under employee stock purchase plan

 

 

31,116

 

 

 

 

 

 

 

 

 

 

 

 

459

 

 

 

 

 

 

 

 

 

459

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(23

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,065

)

 

 

 

 

 

(34,065

)

Balance at March 31, 2018

 

 

69,485,541

 

 

$

7

 

 

 

 

 

$

 

 

$

728,356

 

 

$

(497,159

)

 

$

(72

)

 

$

231,132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options and vesting of restricted stock units

 

 

9,460

 

 

 

 

 

 

 

 

 

 

 

 

105

 

 

 

 

 

 

 

 

 

105

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,423

 

 

 

 

 

 

 

 

 

3,423

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46

 

 

 

46

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,128

)

 

 

 

 

 

(29,128

)

Balance at June 30, 2018

 

 

69,495,001

 

 

$

7

 

 

 

 

 

$

 

 

$

731,884

 

 

$

(526,287

)

 

$

(26

)

 

$

205,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options and vesting of restricted stock units

 

 

36,436

 

 

 

 

 

 

 

 

 

 

 

 

219

 

 

 

 

 

 

 

 

 

219

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,037

 

 

 

 

 

 

 

 

 

3,037

 

Issuance of shares under employee stock purchase plan

 

 

31,870

 

 

 

 

 

 

 

 

 

 

 

 

320

 

 

 

 

 

 

 

 

 

320

 

Issuance of shares of common stock in lieu of board fees

 

 

12,213

 

 

 

 

 

 

 

 

 

 

 

 

166

 

 

 

 

 

 

 

 

 

166

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,492

)

 

 

 

 

 

(37,492

)

Balance at September 30, 2018

 

 

69,575,520

 

 

$

7

 

 

 

 

 

$

 

 

$

735,626

 

 

$

(563,779

)

 

$

(23

)

 

$

171,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

79,175,380

 

 

$

8

 

 

 

 

 

 

 

 

$

819,779

 

 

$

(586,724

)

 

$

(54

)

 

$

233,009

 

Issuance of common stock (net of commissions and offering costs of $284)

 

 

11,500,000

 

 

 

1

 

 

 

 

 

 

 

 

 

122,707

 

 

 

 

 

 

 

 

 

122,708

 

Issuance of series A convertible preferred stock, net of commissions and

   beneficial conversion charge

 

 

 

 

 

 

 

 

350,000

 

 

 

34,492

 

 

 

2,940

 

 

 

 

 

 

 

 

 

37,432

 

Accretion of series A convertible preferred stock

 

 

 

 

 

 

 

 

 

 

 

2,940

 

 

 

(2,940

)

 

 

 

 

 

 

 

 

 

Exercise of stock options and vesting of restricted stock units

 

 

89,726

 

 

 

 

 

 

 

 

 

 

 

 

886

 

 

 

 

 

 

 

 

 

886

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,211