Leerink cuts Epizyme to market perform and PT to $16

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Leerink downgraded Epizyme (NASDAQ:EPZM) to “market perform” from “outperform” and lowered its price target to $16 from $24 after making extensive changes to its revenue forecasts for Epizyme’s only drug, tazemetostat. The stock closed at $13.60 on July 2.

Analyst Geoffrey Porges writes that those changes reflect recent disclosures at ASCO about mesothelioma and the European Hematology Association (EHA) about follicular lymphoma (FL). 

“The changes to our forecast are a result of us reassessing our assumptions about the timing of approvals for tazemetostat in non-Hodgkin’s lymphoma (NHL) and mesothelioma indications as well as lowered probability of success in diffuse large B cell lymphoma (DLBCL),” he added. 

In addition, he said the reduced revenue, and valuation, are associated with later timing for approvals due to the continuing clinical hold on development in the U.S., the slow pace of recruitment of new EZH2 mutated patients in non-clinical hold countries, the lack of clarity about development strategy and timing for non EZH2 NHL (FL and DLBCL) and the uncertainty about the development strategy, timing and regulatory path in mesothelioma. 

“We now believe there is significant risk that Epizyme fails to meet its prior guidance of regulatory submissions for lymphoma in 2019, and would only expect that submission to be for the EZH2 mutated cohort, rather than all genotypes with refractory disease,” he added. 

However, Mr. Porges said that all the negative changes in his model are partially offset by an increased expected treatment duration in EZH2 FL based on the promising data presented at the EHA meeting in June, “but the net effect is still a significant reduction in our revenue forecast in all years through 2025.”