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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 June 30, 2022

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, 4th Floor

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

 

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 ☒

The number of shares outstanding of the registrant’s common stock as of August 5, 2022: 168,364,752 shares.

 

 


 

 

 

 

PART I — FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements. — Unaudited

5

 

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

5

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021

6

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021

7

 

 

Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Six Months Ended June 30, 2022 and 2021

8

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

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

33

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

46

 

 

Item 4. Controls and Procedures

46

 

 

PART II — OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

46

 

 

Item 1A. Risk Factors

47

 

 

Item 6. Exhibits

51

 

 

Signatures

53

 

Epizyme® and TAZVERIK® are registered trademarks of Epizyme, Inc. in the United States and other countries. Epizyme, Inc. has also submitted trademark applications for Epizyme™ and TAZVERIK™ in 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:

the proposed acquisition of the Company by Ipsen Pharma SAS;
our plans to research, develop and commercialize novel epigenetic therapies for patients with cancer;
the ongoing commercialization of TAZVERIK;
our sales, marketing and distribution capabilities and strategies, including for the commercialization and manufacturing of TAZVERIK and any future products;
the rate and degree of market acceptance and clinical utility of TAZVERIK and any future products;
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 tazemetostat in epithelioid sarcoma, follicular lymphoma and other indications, EZM0414 and any future product candidates;
our ability to achieve anticipated milestones under our collaborations or to enter into additional collaborations;
the impact of the COVID-19 pandemic on our business, results of operations, and financial condition;
our intellectual property position;
our ability to successfully implement and execute on our changes to our commercial strategy and organization, adjustments to our operating plans, including operating expense reductions, and leadership transitions; 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 as a result of various important factors. 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, or our Annual Report, 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. Our management’s 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 the audited consolidated financial statements and notes thereto included in our Annual Report. The three months ended June 30, 2022 and 2021 are referred to as the second quarter of 2022 and 2021, respectively.

 

3


 

Note regarding certain references in this Quarterly Report on Form 10-Q

Unless otherwise stated or the context indicates otherwise, all references herein to “Epizyme,” “Epizyme, Inc.,” “we,” “us,” “our,” “our company,” “the Company” and similar references refer to Epizyme, Inc. and its wholly owned subsidiary, Epizyme Securities Corporation.

In addition, unless otherwise stated or the context indicates otherwise, all references in this Quarterly Report on Form 10-Q to “TAZVERIK (tazemetostat)” and “TAZVERIK” refer to tazemetostat in the context of the commercially-available product for which we received accelerated approval from the United States Food and Drug Administration in January 2020 for epithelioid sarcoma and in June 2020 for follicular lymphoma, as more fully described herein; whereas, unless otherwise stated or the context indicates otherwise, all references herein to “tazemetostat” refer to tazemetostat in the context of the product candidate for which we are exploring further applications and indications, as more fully described herein.

4


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

EPIZYME, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except per share data)

 

 

 

June 30,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

71,066

 

 

$

98,336

 

Marketable securities

 

 

73,346

 

 

 

78,454

 

Accounts receivable, net

 

 

11,210

 

 

 

6,572

 

Inventory

 

 

5,542

 

 

 

3,216

 

Prepaid expenses and other current assets

 

 

25,676

 

 

 

19,465

 

Total current assets

 

 

186,840

 

 

 

206,043

 

Property and equipment, net

 

 

1,052

 

 

 

1,545

 

Operating lease assets

 

 

18,124

 

 

 

20,054

 

Intangible assets, net

 

 

40,772

 

 

 

42,849

 

Restricted cash and other assets

 

 

17,371

 

 

 

18,509

 

Total assets

 

$

264,159

 

 

$

289,000

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,001

 

 

$

10,265

 

Accrued expenses

 

 

24,671

 

 

 

30,777

 

Current portion of operating lease obligation

 

 

5,282

 

 

 

4,154

 

Total current liabilities

 

 

34,954

 

 

 

45,196

 

Operating lease obligation, net of current portion

 

 

15,546

 

 

 

18,497

 

Deferred revenue

 

 

455

 

 

 

11,950

 

Related party long-term debt, net of debt discount

 

 

216,885

 

 

 

216,461

 

Related party liability related to sale of future royalties, net of current portion

 

 

16,020

 

 

 

15,654

 

Warrants to purchase common stock

 

 

580

 

 

 

1,930

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000 shares authorized; 0 shares and 338 shares issued and outstanding, respectively (equivalent to 0 shares and to 3,378 shares of common stock upon conversion at a 10:1 ratio)

 

 

 

 

 

36,127

 

Common stock, $0.0001 par value; 450,000 shares and 225,000 shares authorized, respectively; 168,365 shares and 106,098 shares issued and outstanding, respectively

 

 

17

 

 

 

11

 

Additional paid-in capital

 

 

1,311,038

 

 

 

1,183,006

 

Accumulated other comprehensive (loss) income

 

 

(252

)

 

 

3

 

Accumulated deficit

 

 

(1,331,084

)

 

 

(1,239,835

)

Total stockholders’ equity (deficit)

 

 

(20,281

)

 

 

(20,688

)

Total liabilities and stockholders’ equity (deficit)

 

$

264,159

 

 

$

289,000

 

 

See notes to condensed consolidated financial statements.

5


 

EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(Amounts in thousands, except per share data)

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

$

11,040

 

 

$

7,984

 

 

$

19,696

 

 

$

14,175

 

Collaboration and other revenue

 

16,488

 

 

 

5,026

 

 

 

16,528

 

 

 

6,466

 

Total revenue

 

27,528

 

 

 

13,010

 

 

 

36,224

 

 

 

20,641

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

5,169

 

 

 

2,492

 

 

 

7,808

 

 

 

5,346

 

Research and development

 

28,054

 

 

 

34,858

 

 

 

57,834

 

 

 

67,561

 

Selling, general and administrative

 

24,111

 

 

 

33,891

 

 

 

51,315

 

 

 

70,303

 

 Total operating expenses

 

57,334

 

 

 

71,241

 

 

 

116,957

 

 

 

143,210

 

Operating loss

 

(29,806

)

 

 

(58,231

)

 

 

(80,733

)

 

 

(122,569

)

Other (expense) income, net:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(5,392

)

 

 

(5,581

)

 

 

(10,871

)

 

 

(11,057

)

Other expense (income), net

 

(166

)

 

 

(54

)

 

 

(214

)

 

 

(44

)

Change in fair value of warrants to purchase common stock

 

 

 

 

 

 

 

1,350

 

 

 

 

Related party non-cash interest expense related to sale of future royalties

 

(380

)

 

 

(497

)

 

 

(750

)

 

 

(967

)

Other expense, net

 

(5,938

)

 

 

(6,132

)

 

 

(10,485

)

 

 

(12,068

)

Loss before income taxes

 

(35,744

)

 

 

(64,363

)

 

 

(91,218

)

 

 

(134,637

)

Income tax provision

 

 

 

 

 

 

 

(31

)

 

 

 

Net loss

$

(35,744

)

 

$

(64,363

)

 

$

(91,249

)

 

$

(134,637

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

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

 

(61

)

 

 

(8

)

 

 

(255

)

 

 

(5

)

Comprehensive loss

$

(35,805

)

 

$

(64,371

)

 

$

(91,504

)

 

$

(134,642

)

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.21

)

 

$

(0.63

)

 

$

(0.59

)

 

$

(1.32

)

Diluted

$

(0.21

)

 

$

(0.63

)

 

$

(0.59

)

 

$

(1.32

)

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

 

 

 

 

 

 

 

 

 

 

 

Basic

 

166,990

 

 

 

102,053

 

 

 

155,658

 

 

 

101,922

 

Diluted

 

166,990

 

 

 

102,053

 

 

 

155,658

 

 

 

101,922

 

 

See notes to condensed consolidated financial statements.

6


 

EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

 

(91,249

)

 

$

(134,637

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

2,580

 

 

 

2,595

 

Stock-based compensation

 

 

9,740

 

 

 

13,733

 

Amortization of discount on investments

 

 

325

 

 

 

665

 

Amortization of debt discount

 

 

424

 

 

 

382

 

Change in fair value of warrant liability

 

 

(1,350

)

 

 

 

Non-cash royalty revenue associated with the sale of future royalties

 

 

(66

)

 

 

 

Non-cash interest expense associated with the sale of future royalties

 

 

750

 

 

 

967

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(4,638

)

 

 

(4,014

)

Inventory, current and noncurrent

 

 

(1,841

)

 

 

(6,629

)

Prepaid expenses and other current assets

 

 

(5,700

)

 

 

(2,109

)

Accounts payable

 

 

(5,265

)

 

 

(2,886

)

Accrued expenses

 

 

(6,406

)

 

 

(59

)

Deferred revenue

 

 

(11,496

)

 

 

 

Operating lease assets

 

 

1,930

 

 

 

2,092

 

Operating lease liabilities

 

 

(1,823

)

 

 

(2,313

)

Other assets and liabilities

 

 

87

 

 

 

(33

)

Net cash used in operating activities

 

 

(113,998

)

 

 

(132,246

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of available-for-sale securities

 

 

(97,418

)

 

 

(170,659

)

Maturities of available-for-sale securities

 

 

101,950

 

 

 

211,539

 

Purchases of property and equipment

 

 

(10

)

 

 

(221

)

Net cash used in investing activities

 

 

4,522

 

 

 

40,659

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of commissions

 

 

82,257

 

 

 

1,534

 

Payment of offering costs

 

 

(442

)

 

 

(105

)

Proceeds from stock options exercised

 

 

 

 

 

916

 

Proceeds from the issuance of shares under employee stock purchase plan

 

 

391

 

 

 

1,191

 

Net cash provided by financing activities

 

 

82,206

 

 

 

3,536

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(27,270

)

 

 

(88,051

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

99,845

 

 

 

169,724

 

Cash, cash equivalents and restricted cash, end of period

 

$

72,575

 

 

$

81,673

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

Interest paid

 

$

10,785

 

 

$

10,785

 

Cash paid for income taxes

 

$

31

 

 

$

 

Unpaid offering costs

 

$

 

 

$

154

 

Property and equipment included in accounts payable or accruals

 

$

 

 

$

18

 

 

See notes to condensed consolidated financial statements

7


 

EPIZYME, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(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 (Deficit)

 

Balance at December 31, 2020

 

 

101,627,070

 

 

$

10

 

 

 

337,800

 

 

$

36,127

 

 

$

1,137,470

 

 

$

(988,713

)

 

$

3

 

 

$

184,897

 

Exercise of stock options and vesting of restricted stock units

 

 

188,000

 

 

 

 

 

 

 

 

 

 

 

 

199

 

 

 

 

 

 

 

 

 

199

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,943

 

 

 

 

 

 

 

 

 

6,943

 

Issuance of shares under employee stock purchase plan

 

 

146,049

 

 

 

 

 

 

 

 

 

 

 

 

1,191

 

 

 

 

 

 

 

 

 

1,191

 

Issuance of shares of common stock in lieu of board fees

 

 

7,632

 

 

 

 

 

 

 

 

 

 

 

 

72

 

 

 

 

 

 

 

 

 

72

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70,274

)

 

 

 

 

 

(70,274

)

Balance at March 31, 2021

 

 

101,968,751

 

 

$

10

 

 

 

337,800

 

 

$

36,127

 

 

$

1,145,875

 

 

$

(1,058,987

)

 

$

6

 

 

$

123,031

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock (net of commissions and offering costs of $49)

 

 

182,866

 

 

 

 

 

 

 

 

 

 

 

 

1,534

 

 

 

 

 

 

 

 

 

1,534

 

Exercise of stock options and vesting of restricted stock units

 

 

93,237

 

 

 

 

 

 

 

 

 

 

 

 

717

 

 

 

 

 

 

 

 

 

717

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,679

 

 

 

 

 

 

 

 

 

6,679

 

Issuance of shares of common stock in lieu of board fees

 

 

4,663

 

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

 

 

 

39

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

(8

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64,363

)

 

 

 

 

 

(64,363

)

Balance at June 30, 2021

 

 

102,249,517

 

 

$

10

 

 

 

337,800

 

 

$

36,127

 

 

$

1,154,844

 

 

$

(1,123,350

)

 

$

(2

)

 

$

67,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

106,097,528

 

 

$

11

 

 

 

337,800

 

 

$

36,127

 

 

$

1,183,006

 

 

$

(1,239,835

)

 

$

3

 

 

$

(20,688

)

Issuance of common stock (net of commissions and offering costs of $507)

 

 

58,139,825

 

 

 

6

 

 

 

 

 

 

 

 

 

81,822

 

 

 

 

 

 

 

 

 

81,828

 

Vesting of restricted stock units

 

 

276,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,238

 

 

 

 

 

 

 

 

 

5,238

 

Issuance of shares under employee stock purchase plan

 

 

308,473

 

 

 

 

 

 

 

 

 

 

 

 

391

 

 

 

 

 

 

 

 

 

391

 

Issuance of shares of common stock in lieu of board fees

 

 

45,109

 

 

 

 

 

 

 

 

 

 

 

 

51

 

 

 

 

 

 

 

 

 

51

 

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(194

)

 

 

(194

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55,505

)

 

 

 

 

 

(55,505

)

Balance at March 31, 2022

 

 

164,867,696

 

 

$

17

 

 

 

337,800

 

 

$

36,127

 

 

$

1,270,508

 

 

$

(1,295,340

)

 

$

(191

)

 

$

11,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in connection with the conversion of series A convertible
preferred stock

 

 

3,378,000

 

 

 

 

 

 

(337,800

)

 

 

(36,127

)

 

 

36,127

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

83,768

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,400

 

 

 

 

 

 

 

 

 

4,400

 

Issuance of shares of common stock in lieu of board fees

 

 

35,288

 

 

 

 

 

 

 

 

 

 

 

 

51

 

 

 

 

 

 

 

 

 

51

 

Offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48

)

 

 

 

 

 

 

 

 

(48

)

Unrealized gain on available for sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(61

)

 

 

(61

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,744

)

 

 

 

 

 

(35,744

)

Balance at June 30, 2022

 

 

168,364,752

 

 

$

17

 

 

 

-

 

 

$

-

 

 

$

1,311,038

 

 

$

(1,331,084

)

 

$

(252

)

 

$

(20,281

)

 

See notes to condensed consolidated financial statements.

8


 

EPIZYME, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

1. The Company

 

Epizyme, Inc. (collectively referred to with its wholly owned, controlled subsidiary, Epizyme Securities Corporation, as “Epizyme” or the “Company”) is a commercial-stage biopharmaceutical company that is committed to rewriting treatment for people with cancer through the discovery, development, and commercialization of novel epigenetic medicines. The Company aspires to change the standard of care for patients and physicians by developing targeted medicines with fundamentally new mechanisms of action directed at specific causes of hematological malignancies and solid tumors.

 

Through June 30, 2022, in addition to revenues from product sales, the Company has raised an aggregate of $1,650.2 million to fund its operations. This includes $268.8 million of non-equity funding through its collaboration agreements, $368.1 million of funding, consisting of $150.0 million in equity funding received through agreements with RPI Finance Trust ("RPI"), and $218.1 million in debt financing received through a loan agreement with BioPharma Credit Investments V (Master) LP and BPCR Limited Partnership (as transferee of BioPharma Credit Investments V (Master) LP’s interest as a lender) (the "Lenders"), $937.3 million from the sale of common stock and series A convertible preferred stock (the “Series A Preferred Stock”) in the Company’s public offerings and at-the-market offerings and $76.0 million from the sale of redeemable convertible preferred stock in private financings prior to the Company’s initial public offering in May 2013. As of June 30, 2022, the Company had $144.4 million in cash, cash equivalents and marketable securities.

 

In 2020, the Company’s EZH2 inhibitor, tazemetostat, was approved in the United States as TAZVERIK for the treatment of epithelioid sarcoma ("ES"), and follicular lymphoma ("FL"). Commercial sales of TAZVERIK for the treatment of ES commenced in the first quarter of 2020 and commercial sales of TAZVERIK for the treatment of FL commenced in the end of the second quarter of 2020.

 

The Company commenced active operations in early 2008. Since its inception, the Company has generated an accumulated deficit of $1,331.1 million through June 30, 2022 and will require substantial additional capital to fund its research, development, and commercialization efforts. The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, risks of failure of commercialization, clinical trials and preclinical studies, the need to obtain additional financing to fund the future development and commercialization of tazemetostat and the rest of its pipeline, the need to obtain marketing approval for its product candidates, the need to successfully commercialize and gain market acceptance of TAZVERIK and of any product candidates that may be approved in the future, the impact of the COVID-19 pandemic on the Company’s business, results of operations, and financial condition, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from clinical-stage manufacturing to commercial-stage production, marketing, and sale of products.

 

Proposed Acquisition by Ipsen

 

On June 27, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ipsen Pharma SAS, a French société par actions simplifiée (the “Parent”), and Hibernia Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Ipsen Biopharmaceuticals, Inc., a Delaware corporation and wholly owned subsidiary of the Parent (“Purchaser”). Pursuant to the Merger Agreement, on July 12, 2022, the Purchaser commenced a tender offer (the “Offer”) to purchase all of the issued and outstanding shares of the Company’s common stock (the “Shares”) at a price of $1.45 per Share, payable to the holder of such common stock in cash, without interest, plus one non-transferable contractual contingent value right (“CVR”) per Share, which represents the right to receive one or more payments in cash, of up to $1.00 per CVR, contingent upon the achievement of certain specified milestones.

 

As soon as practicable after the consummation of the Offer, and subject to the satisfaction or waiver of certain conditions as set forth in the Merger Agreement, and in accordance with Section 251(h) of the General Corporation Law of the State of Delaware, the Purchaser will be merged with and into the Company, without a meeting of the Company’s stockholders, and the Company will be continuing as the surviving corporation and a wholly owned subsidiary of the Parent (such merger, the “Merger”). As a result of the Merger, the Company will cease to be a publicly traded company.

 

The Merger Agreement contains customary representations, warranties, and covenants. The Company currently expects the Offer and the Merger to be completed in the third quarter of 2022, subject to the satisfaction or waiver of customary closing conditions, including, among others, that the number of Shares tendered in the Offer represent at least one Share more than 50% of the total number of Shares outstanding immediately prior to the expiration of the Offer. The Merger Agreement provides the Parent and the

9


 

Company with certain termination rights and, under certain circumstances, may require the Company to pay the Parent a termination fee of $9.9 million.

 

For additional information related to the Merger Agreement, refer to the Company’s Solicitation/Recommendation Statement on Schedule 14D-9 filed with the U.S. Securities and Exchange Commission (“SEC”) on July 12, 2022, together with the exhibits and annexes thereto and as amended or supplemented from time to time. Please also see “Item 1A. Risk Factors—Risks Related to Our Pending Transaction with Ipsen Pharma SAS” of this Quarterly Report on Form 10-Q.

 

Operating Cost Reduction

 

In August 2021, the Company implemented a cross-functional reduction of approximately 11% of its then current workforce under a cost reduction plan. Affected employees were offered separation benefits, including severance payments along with temporary healthcare coverage assistance. The severance and termination-related costs totaled approximately $2.0 million, $1.6 million of which were recorded as selling general and administrative expenses and $0.4 million of which was recorded as research and development expenses in the third quarter of 2021. The Company expects that payments of these costs will be made through August 2022.

 

In March 2022, the Company implemented further reductions of its expenses, including a pipeline reprioritization. Given the breadth of the Company’s then-current tazemetostat clinical development program, the Company decided to discontinue enrollment in its Phase 2 study of tazemetostat in combination with rituximab with FL in the third-line or later treatment settings (SYMPHONY-2, EZH-1401), as well as in its Phase 1/1b basket study evaluating tazemetostat combinations in patients with solid tumors (EZH-1301). The decision to discontinue these studies was based on evolving market dynamics and a continued focus on optimizing the Company’s investments and eliminating potentially overlapping studies. The Company continues to study tazemetostat in combination with other therapies for both hematologic and solid tumor malignancies, both in ongoing Company-sponsored studies as well as investigator-initiated studies. In addition, as part of the cost reduction plan, the Company implemented a cross-functional workforce reduction of approximately 12% of the Company’s then-current employees. The severance and termination related costs totaled approximately $2.5 million, $1.7 million of which were recorded as selling general and administrative expenses and $0.8 million of which were recorded as research and development expenses in the first quarter of 2022. The Company expects that payments of these costs will be made through December 2022.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, or the Annual Report.

The unaudited condensed consolidated financial statements include the accounts of Epizyme, Inc. and its wholly owned, controlled subsidiary, Epizyme Securities Corporation. All intercompany transactions and balances of subsidiaries have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the condensed consolidated financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The three months ended June 30, 2022 and 2021 are referred to as the second quarter of 2022 and 2021, respectively. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

10


 

Use of Estimates

The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities, as of the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results and outcomes may differ materially from management’s estimates, judgments and assumptions.

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Annual Report and are updated below as necessary.

11


 

Going Concern

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued and such doubt is not alleviated by the Company’s plans or when the Company's plans alleviate substantial doubt about the Company’s ability to continue as a going concern. The Company’s evaluation entails analyzing prospective operating budgets and forecasts for expectations of the Company’s cash needs, and comparing those needs to its available cash, cash equivalents and marketable securities.

The Company has recurring losses and expects to have recurring losses for the foreseeable future with the continued commercialization of TAZVERIK in ES and FL, the development of tazemetostat in other indications, and the development of the Company’s other product candidates. In addition, the Company has experienced and continues to experience challenges in the commercialization of TAZVERIK resulting from the ongoing COVID-19 pandemic, which the Company believes has had an adverse impact on TAZVERIK revenues. In response to the challenges that the Company has continued to face since the Company commenced its launch of TAZVERIK in FL in June 2020, the Company implemented an operational cost reduction plan in August 2021, implemented further expense reductions in March 2022, and continues to evaluate its costs on an ongoing basis with the intention to streamline such costs. In addition, in connection with its ongoing review of the Company’s strategic plans and financing needs, the Company’s board of directors established a special committee in January 2022 to work with the Company’s management in connection with the exploration and consideration of a possible strategic transaction, a possible equity financing and a possible restructuring or refinancing of the Company’s outstanding indebtedness under the Amended and Restated Loan Agreement.

The analysis of the Company’s ability to continue as a going concern for the second quarter of 2022 included consideration of the Company’s current cash needs, including its research and development plans, commercialization activities associated with the continued commercialization of TAZVERIK in the ES and FL indications, its existing debt service obligations, anticipated cost savings resulting from its operational cost reduction plans, including ongoing efforts to eliminate costs not related to the Company’s strategic focus. The analysis included forecasted product revenues from sales of TAZVERIK. Such estimates of future sales contain significant judgment as TAZVERIK was first launched in the first half of 2020 and there is little history with which to base such estimates. In addition, the Company’s ongoing efforts to eliminate costs not related to the Company’s strategic focus contains uncertainties as to whether the Company can attain such benefits. Based on the analysis, the Company concluded that its available cash, cash equivalents and marketable securities as of June 30, 2022 will not be sufficient to fund current planned operations and capital expenditure requirements and pay its debt service obligations as they become due through at least 12 months from the date these financial statements are issued. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the date these financial statements are issued.

The Company’s ability to continue to fund its operations is dependent on management’s plans, which include the proposed acquisition by Ipsen described above. The Company’s current operating plan is based on assumptions that may prove to be wrong including that the proposed merger with Ipsen will close, and the Company could use its capital resources sooner than it expects, in which case the Company would evaluate further reductions in its expenses or obtaining additional financing sooner than it otherwise would through equity or debt financing, which additional financing may not be available or may only be available on terms that are not acceptable to the Company. Due to the inherent uncertainties with respect to these actions, management concluded they were not probable of occurrence and therefore do not mitigate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is not able to continue as a going concern.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. The Company adopted ASU 2020-06 effective as of January 1, 2022. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.

12


 

Revenue Recognition

The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. For a further discussion of accounting for net product revenue see Note 3, Product Revenue, Net.

Other Revenue

Other revenue consists of revenue from the sales of tazemetostat active pharmaceutical ingredient ("API"), drug product to the Company’s licensees or collaborators and non-cash royalty revenue related to sale of future royalties. The Company recognizes revenue on tazemetostat API and drug product when control has transferred under the terms of each agreement.

Cost of Revenues

Cost of revenues primarily consists of costs related to the sales of TAZVERIK and sales of tazemetostat API and drug product to the Company’s licensees or collaborators. These costs include materials, labor, manufacturing overhead, amortization of milestone payments, and royalties payable on net sales of TAZVERIK. Cost of revenues for each of the three and six months ended June 30, 2022 included approximately $2.3 million related to sales of tazemetostat drug product. Cost of revenues for the six months ended June 30, 2021 included approximately $0.8 million related to sales of tazemetostat drug product. There were no sales of tazemetostat drug product during the three months ended June 30, 2021.
 

Accounts Receivable

The Company extends credit to customers based on its evaluation of the customer’s financial condition. The Company records receivables for all billings when amounts are due under standard terms. Accounts receivable are stated at amounts due net of applicable prompt pay discounts and other contractual adjustments as well as an allowance for doubtful accounts. The Company assesses the need for an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the customer’s ability to pay its obligation and the condition of the general economy and the industry as a whole. The Company will write off accounts receivable when the Company determines that they are uncollectible. In general, the Company has experienced no significant collection issues with its customers.

Inventory

The Company outsources the manufacturing of TAZVERIK and uses contract manufacturers to produce the raw and intermediate materials used in the production of TAZVERIK as well as the finished product. The Company currently has one supplier qualified for each step in the manufacturing process and is in the process of qualifying additional suppliers.

Inventory is composed of raw materials, intermediate materials, which are classified as work-in-process, and finished goods, which are goods that are available for sale. The Company states inventory at the lower of cost or net realizable value with the cost based on the first-in, first-out method. Inventory is classified as long-term when it is expected to be utilized beyond the Company’s normal operating cycle and is included in restricted cash and other assets on the Company's condensed consolidated balance sheets. If the Company identifies excess, obsolete or unsalable items, it writes down its inventory to its net realizable value in the period in which the impairment is identified. These adjustments are recorded based upon various factors related to the product, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected demand, the expected shelf-life of the product and firm inventory purchase commitments. Shipping and handling costs incurred for inventory purchases are included in inventory costs and costs incurred for product shipments are recorded as incurred in cost of revenue.

Intangible Assets, Net

Intangible assets consist of capitalized milestone payments made to third parties under an in-license of patent rights upon receiving regulatory approval of TAZVERIK. The finite-lived intangible assets are being amortized on a straight-line basis over the expected time period the Company will benefit from the in-licensed rights, which is generally the patent life. Intangible assets are recorded at cost at the time of their acquisition and are stated in the Company’s condensed consolidated balance sheets net of accumulated amortization and impairments, if applicable. The amortization expense is recognized as cost of revenue in the Company’s condensed consolidated statement of operations and comprehensive loss. During 2020 the Company paid a total of $50.0 million in milestone

13


 

payments under its agreement with Eisai, Co., Ltd. (“Eisai”) following regulatory approval of tazemetostat for ES and FL. These regulatory milestones have been capitalized as intangible assets.

The following table presents intangible assets as of June 30, 2022 (in thousands):

 

 

June 30, 2022

 

 

Estimated useful
life (years)

 

In-licensed rights

 

$

50,000

 

 

 

12.2

 

Less: accumulated amortization

 

 

(9,228

)

 

 

 

Total intangible asset, net

 

$

40,772

 

 

 

 

The Company recorded approximately $1.0 million and $2.1 million in amortization expense related to intangible assets, using the straight-line methodology, during each of the three and six months ended June 30, 2022 and 2021, respectively. Estimated future amortization expense for intangible assets for the remainder of the year ended December 31, 2022 is $2.1 million and approximately $4.2 million per year thereafter.

The Company assesses its intangible assets for impairment if indicators are present or changes in circumstance suggest that impairment may exist. Events that could result in an impairment, or trigger an interim impairment assessment, include the receipt of additional clinical or nonclinical data regarding one of the Company’s drug candidates or a potentially competitive drug candidate, changes in the clinical development program for a drug candidate, or new information regarding potential sales for the drug. If impairment indicators are present or changes in circumstance suggest that impairment may exist, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of each intangible asset to its carrying value on the Company's condensed consolidated balance sheets. If the undiscounted cash flows used in the recoverability test are less than the carrying value, the Company would determine the fair value of the intangible asset and recognize an impairment loss if the carrying value of the intangible asset exceeds its fair value.

During the three months ended June 30, 2021, the Company concluded the lower than anticipated current and projected future revenue, due to the impact of the COVID-19 pandemic as well as other factors, was an indicator that impairment may exist related to its finite-lived intangible assets. As a result, the Company performed a recoverability test and determined that the finite-lived intangible assets were recoverable. The Company’s quantitative assessment considered significant assumptions related to estimates of future TAZVERIK sales, offset by direct costs to derive the sales. The estimates of future TAZVERIK sales and associated costs included estimates of significant growth, however, these estimates were uncertain as the product was first launched in the first half of 2020 and due to the uncertainties associated with the ongoing COVID-19 pandemic. Given the limited history of sales and the inherent difficulty in making a long-range forecast, such estimates contained significant uncertainty. If the assumptions regarding forecasted revenue or the costs to derive such revenues made at that time prove to be inaccurate, the Company may be required to perform future impairment analyses and record an impairment charge for its intangible assets in future periods.

3. Product Revenue, Net

The Company sells TAZVERIK in the United States principally to a limited number of specialty pharmacies, which dispense the product directly to patients and specialty distributors, which in turn sell the product to hospital pharmacies and community practice pharmacies (collectively, healthcare providers) for the treatment of patients. The specialty pharmacies and specialty distributors are referred to as the Company’s customers.

Product revenue is recognized by the Company in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services when the customer obtains control of the product, which occurs at a point in time, typically when the product is received by the Company’s customers. The Company provides a right of return to its customers for unopened product for a limited time before and after its expiration date, which right of return lapses upon shipment to a patient. Healthcare providers to whom specialty distributors sell TAZVERIK hold limited inventory that is designated for patients, and the Company monitors inventory levels in the distribution channel to limit the risk of return.

Reserves for Variable Consideration

Revenues from product sales are recorded as product revenue at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates, co-pay assistance and other allowances that are offered within contracts between the Company and its customers, healthcare providers, payors and other indirect customers relating to the Company’s product sales. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and

14


 

payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which the Company is entitled based on the terms of the contract(s). The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Allowances: The Company generally provides customers with discounts that include incentive fees that are explicitly stated in customer contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the Company receives sales order management, data and distribution services from certain customers. To the extent the services received are distinct from the Company’s sale of products to the customer, these payments are classified in selling, general and administrative expenses in the Company's condensed consolidated statements of operations and comprehensive loss.

Product Returns: Consistent with industry practice, the Company generally offers customers a limited right of return based on the product’s expiration date for product that has been purchased from the Company, which lapses upon shipment to a patient. The Company estimates the amount of product sales that may be returned by customers and records this estimate as a reduction of revenue in the period in which the related product revenue is recognized. The Company currently estimates product return liabilities using available industry data and the Company’s own historical sales information, including its visibility into the product remaining in the distribution channel.

Provider Chargebacks and Discounts: Chargebacks for fees and discounts to healthcare providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by customers, and the Company generally issues credits for such amounts within a few weeks of the customer’s notification to the Company of the resale. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel at each reporting period end that the Company expects will be sold to qualified healthcare providers, and chargebacks that customers have claimed but for which the Company has not yet issued a credit.

Government Rebates: The Company is subject to discount obligations under state Medicaid programs and Medicare. The Company estimates its Medicaid and Medicare rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is included in accrued expenses on the Company’s condensed consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at period end.

Payor Rebates: The Company may contract with various private payor organizations, primarily insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of the Company’s products. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Other Incentives/Patient Assistance Programs: The Company also offers voluntary patient assistance programs such as co-pay assistance. Co-pay assistance programs are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue, but remains in the distribution channel inventories at period end.

15


 

The following table summarizes activity in each of the above product revenue allowances and reserve categories for the six months ended June 30, 2022:

 

 

Chargebacks,
Discounts, and

 

 

Government
and Other

 

 

 

 

 

 

 

 

 

Fees

 

 

Rebates

 

 

Returns

 

 

Total

 

 

 

(In thousands)

 

Balance, January 1, 2022

 

$

244

 

 

$

586

 

 

$

109

 

 

$

939

 

Provision

 

 

1,139

 

 

 

2,539

 

 

 

22

 

 

 

3,700

 

Payments or credits

 

 

(1,106

)

 

 

(2,423

)

 

 

 

 

 

(3,529

)

Balance, June 30, 2022

 

$

277

 

 

$

702

 

 

$

131

 

 

$

1,110

 

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist of accounts receivable from customers and cash held at financial institutions. The Company believes that such customers and financial institutions are of high credit quality.

For the three and six months ended June 30, 2022 and 2021, net product revenue was primarily generated from four individual customers. Revenue earned from each customer as a percentage of net product revenue is as follows:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Customer 1

 

 

37

%

 

 

31

%

 

 

40

%

 

 

36

%

Customer 2

 

 

9

%

 

 

8

%

 

 

10

%

 

 

11

%

Customer 3

 

 

14

%

 

 

46

%

 

 

17

%

 

 

37

%

Customer 4

 

 

24

%

 

 

14

%

 

 

21

%

 

 

16

%

Customer 5

 

 

16

%

 

 

0

%

 

 

11

%

 

 

0

%

As of June 30, 2022 and December 31, 2021, the five individual customers represented as a percentage of accounts receivable as follows:

 

 

 

June 30,
2022

 

 

December 31,
2021

 

Customer 1

 

 

21

%

 

 

15

%

Customer 2

 

 

12

%

 

 

10

%

Customer 3

 

 

16

%

 

 

22

%

Customer 4

 

 

25

%

 

 

29

%

Customer 5

 

 

26

%

 

 

24

%

No other customer represented more than 10 percent of net product revenue or accounts receivable.

4. Cash

A reconciliation of cash, cash equivalents, and restricted cash reported within the Company's condensed consolidated balance sheets that sum to the total of the same such amounts shown in the Company's condensed consolidated statements of cash flows, is as follows:

 

 

 

As of June 30,

 

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

71,066

 

 

$

80,164

 

Restricted cash, as part of other assets

 

 

1,509

 

 

 

1,509

 

Total cash, cash equivalents, and restricted cash

 

 

 

 

 

 

shown in the condensed consolidated statements of cash flows

 

$

72,575

 

 

$

81,673

 

 

The $1.5 million in restricted cash as of both June 30, 2022 and 2021 is comprised of $0.5 million in a letter of credit as a security deposit for the Company’s office and laboratory lease at Technology Square in Cambridge, Massachusetts and $1.0 million in a letter of credit as a security deposit for the Company’s office lease at Hampshire Street in Cambridge, Massachusetts. The Company has

16


 

recorded cash held to secure these letters of credit as restricted cash in restricted cash and other assets on its condensed consolidated balance sheets. The restricted cash is classified as non-current based on the related lease terms.

5. Marketable Securities

The following table summarizes the available-for-sale securities held at June 30, 2022 (in thousands):

 

Description

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

Commercial paper

 

$

15,942

 

 

$

 

 

$

(16

)

 

$

15,926

 

U.S. government agency securities and U.S. Treasuries

 

 

57,653

 

 

 

 

 

 

(233

)

 

 

57,420

 

Total

 

$

73,595

 

 

$

 

 

$

(249

)

 

$

73,346

 

 

The following table summarizes the available-for-sale securities held at December 31, 2021 (in thousands):

 

Description

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Fair Value

 

Commercial paper

 

$

68,427

 

 

$

7

 

 

$

(3

)

 

$

68,431

 

U.S. government agency securities and U.S. Treasuries

 

 

10,025

 

 

 

 

 

 

(1

)

 

 

10,024

 

Total

 

$

78,452

 

 

$

7

 

 

$

(4

)

 

$

78,455

 

 

Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents within the Company's condensed consolidated balance sheets and are not included in the tables above.

 

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At June 30, 2022, the balance in the Company’s accumulated other comprehensive loss was composed solely of activity related to the Company’s available-for-sale marketable securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities during the six months ended June 30, 2022, and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive loss for the same period.

 

The aggregate fair value of available-for-sale securities held by the Company in an unrealized loss position for less than twelve months as of June 30, 2022 was $73.3 million, which consisted of 4 commercial paper securities and 14 United States Treasury securities. The aggregate unrealized loss for those securities in an unrealized loss position for less than twelve months as of June 30, 2022 was less than $0.3 million.

 

The Company does not intend to sell and it is unlikely that the Company will be required to sell the above investments before recovery of their amortized cost bases, which may be maturity. The Company has determined that there has been no material change in the credit risk of any of its investments. As a result, the Company determined it did not hold any investments that were impaired as of June 30, 2022. The Company reviews its portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below cost have resulted from a credit-related loss or other factors. If the decline in fair value is due to credit-related factors, a loss is recognized in net income, whereas if the decline in fair value is not due to credit-related factors, the loss is recorded in other comprehensive income (loss). The weighted-average maturity of the Company’s portfolio was approximately three months at June 30, 2022.

6. Fair Value Measurements

The Company’s financial instruments as of June 30, 2022 and December 31, 2021 consisted primarily of cash and cash equivalents, marketable securities and accounts receivable and accounts payable. As of June 30, 2022 and December 31, 2021, the Company’s financial assets recognized at fair value consisted of the following:

 

 

 

Fair Value as of June 30, 2022

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents

 

$

61,518

 

 

$

40,355

 

 

$

21,163

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

15,926

 

 

 

 

 

 

15,926

 

 

 

 

U.S. government agency securities and treasuries

 

 

57,420

 

 

 

 

 

 

57,420

 

 

 

 

Total

 

$

134,864

 

 

$

40,355

 

 

$

94,509

 

 

$

 

 

17


 

 

 

 

Fair Value as of December 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(In thousands)

 

Cash equivalents

 

$

88,637

 

 

$

67,209

 

 

$

21,428

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

68,431

 

 

 

 

 

 

68,431

 

 

 

 

U.S. government agency securities and treasuries

 

 

10,024

 

 

 

 

 

 

10,024

 

 

 

 

Total

 

$

167,092

 

 

$

67,209

 

 

$

99,883

 

 

$

 

Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third-party pricing services or other market observable data.

The Company measures its cash equivalents at fair value on a recurring basis, which approximates the net asset value per share. The Company classifies some of its cash equivalents within Level 1 of the fair value hierarchy because they are valued using observable inputs that reflect quoted prices for identical assets in active markets. The Company measures its marketable securities at fair value on a recurring basis and classifies those instruments and some cash equivalents within Level 2 of the fair value hierarchy. The pricing services used by management utilize industry standard valuation models, including both income- and market- based approaches and observable market inputs to determine the fair value of marketable securities and those cash equivalents classified within Level 2 of the fair value hierarchy.

7. Inventory

All of the Company’s inventory relates to the manufacturing of TAZVERIK. The following table sets forth the Company’s inventory as of June 30, 2022 and December 31, 2021:

 

 

 

June 30,
2022

 

 

December 31,
2021

 

 

 

(In thousands)

 

Raw materials

 

$

1,676

 

 

$

3,227

 

Work in process

 

 

17,930

 

 

 

13,748

 

Finished goods

 

 

917

 

 

 

1,710

 

Total

 

$

20,523

 

 

$

18,685

 

 

 

 

 

 

 

 

Balance sheet classification

 

 

 

 

 

 

Inventory

 

$

5,542

 

 

$

3,216

 

Restricted cash and other assets

 

 

14,981

 

 

 

15,469

 

Total

 

$

20,523

 

 

$

18,685

 

 

The Company’s active pharmaceutical ingredient has a long shelf life and the Company’s finished drug product has a three-year expiry, however the realizability of the inventory is subject to forecasted future sales of TAZVERIK. The Company’s forecasted sales currently support the realizability of the Company’s inventory but are uncertain and could change in the future, which would require the Company to write down the value of such inventory.

 

As of June 30, 2022 the Company has not capitalized inventory costs related to its other drug development programs.

8. Supplemental Balance Sheet Information

Accrued expenses consisted of the following:

 

 

 

June 30,
2022

 

 

December 31,
2021

 

 

 

(In thousands)

 

Employee compensation and benefits

 

$

7,614

 

 

$

11,737

 

Research and development expenses

 

 

10,488

 

 

 

13,744

 

Current portion of liability related to the sale of future royalties

 

 

592

 

 

 

273

 

Professional services and other

 

 

5,977

 

 

 

5,023

 

Accrued expenses

 

$

24,671

 

 

$

30,777

 

 

18


 

9. Income Taxes

 

The Company recorded less than $0.1 million of federal or state income tax provision for the three and six months ended June 30, 2022 due to the expected and known loss before income taxes to be incurred, or incurred, as applicable, for the year ended December 31, 2022, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets. The Company did not record a federal or state income tax provision or benefit for the three and six months ended June 30, 2021 due to the expected and known loss before income taxes to be incurred, or incurred, as applicable, for the year ended December 31, 2021, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets.

 

10. Commitments and Contingencies

 

Legal Proceedings

 

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the three and six months ended June 30, 2022. Subsequent to June 30, 2022, a number of complaints have been filed in federal court by purported stockholders of the Company regarding the Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Ipsen Pharma SAS, a French société par actions simplifiée (the “Parent”), and Hibernia Merger Sub, Inc., a Delaware corporation (the “Purchaser”) and a wholly owned subsidiary of Ipsen Biopharmaceuticals, Inc., a Delaware corporation, dated as of June 27, 2022. The complaints generally contend that the Solicitation/Recommendation Statement on Schedule 14D-9, filed on July 12, 2022, has omitted or misrepresented material information regarding the merger. The complaints seek, among other relief, (i) injunctive relief preventing the consummation of the transaction contemplated by the Merger Agreement; (ii) rescission or rescissory damages in the event the Merger Agreement is implemented; (iii) other damages purportedly incurred on account of defendants’ alleged misstatements or omissions; (iv) dissemination of an Amendment to the Schedule 14D-9 that discloses certain information requested by the plaintiffs; (v) declaratory relief stating defendants violated the Exchange Act of 1934, as amended; and (vi) an award of plaintiffs’ expenses and attorneys’ fees. The Company believes that the claims asserted in the complaints are without merit. Additional lawsuits arising out of or relating to the Merger Agreement may be filed in the future. For a description of the Company's material legal proceedings since June 30, 2022, see "Part II. Other Information - Item 1. Legal Proceedings" of this Quarterly Report on Form 10-Q.

 

Merger Agreement

 

In connection with a termination of the Merger Agreement under certain circumstances, including termination by the Company in order to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger Agreement), the Company will be required to pay the Parent a termination fee of $9.9 million.

 

Other

 

There have been no other significant changes to the Company’s commitments and contingencies, other than the minimum lease payments as disclosed in Note 11, Leases, in the three and six months ended June 30, 2022, as compared to those disclosed in Note 9, Commitments and Contingencies, included in the Annual Report.

11. Leases

The Company enters into lease arrangements for its facilities as well as certain equipment. A summary of the arrangements is as follows:

Operating Leases

The Company leases office and laboratory space at Technology Square in Cambridge, Massachusetts under a Lease Agreement, dated as of June 15, 2012, as amended (the "Technology Square Lease") with ARE-TECH Square, LLC, a Delaware limited liability company.

In May 2017, the Company exercised its option to extend the term of the Technology Square Lease to November 30, 2022. Under the Technology Square Lease as amended, the Company agreed to pay a monthly base rent of approximately $0.2 million for the period commencing December 1, 2017 through May 31, 2018, with an increase on June 1, 2018 of approximately $33,000 and annual increases of approximately $9,000 on December 1 of each subsequent year until the last increase, which occurred on December 1, 2021.

On August 11, 2021, the Company, entered into a fifth amendment to the Technology Square Lease (the “Fifth Amendment”) with ARE-TECH Square, LLC. Under the Fifth Amendment, the Company extended the term of the Technology Square Lease through

19


 

November 30, 2024. Under the Fifth Amendment, the Company will continue to pay the landlord the current monthly base rent amount contemplated by the Technology Square Lease through November 30, 2022, with an increase commencing on December 1, 2022 and adjusting the monthly base rent amount to approximately $377,000 and an increase commencing on December 1, 2023 and adjusting the monthly base rent amount to approximately $388,000 through November 30, 2024. In addition, under the Fifth Amendment, the landlord agreed to provide the Company with a tenant improvement allowance of up to approximately $430,000 if requested by the Company by August 11, 2022, subject to specified terms and conditions. In accordance with ASU 2016-02, Leases, or ASC 842, the Company accounted for the Fifth Amendment as a lease modification and remeasured the operating lease liability, resulting in an additional $7.0 million operating lease liability and right of use asset. Under the current terms of the Technology Square Lease and Fifth Amendment, the Company does not have any further right to extend the term beyond November 30, 2024.

The Company has a $0.5 million letter of credit as a security deposit for the Technology Square Lease and has recorded cash held to secure this letter of credit as restricted cash and other assets on the Company's condensed consolidated balance sheets.

On August 16, 2019, the Company entered into a lease (the "Hampshire Street Lease") with BMR-Hampshire LLC ("BMR"). The Hampshire Street Lease is for 33,525 rentable square feet of office space in Cambridge, Massachusetts. The Hampshire Street Lease commenced as of December 1, 2019. The Hampshire Street Lease has an initial term of seven years and four months from the commencement date and provides the Company with an option to extend the lease term for one additional five-year period. After a four-month period during which base rent was not payable, the Hampshire Street Lease provides for monthly rent payments starting at approximately $0.2 million and increasing 2.5% per year. In the event that the Company exercises its option to extend the lease term, the Hampshire Street Lease provides for monthly rent payments during the additional five-year period at the greater of the base rent rate at the end of the initial term or the then-current market rent.

The Company has a $1.0 million letter of credit in favor of BMR as a security deposit for the Hampshire Street Lease and has recorded cash held to secure this letter of credit as restricted cash and other assets on the Company's condensed consolidated balance sheets. In applying ASC 842, the Company determined the classification of the Hampshire Street Lease to be operating and recorded a lease liability and a right-of-use asset as of December 31, 2019.

The Company is required to pay certain variable costs to its landlords in addition to fixed rent. These costs include common area maintenance, real estate taxes, and parking and are included in lease expense.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the three and six months ended June 30, 2022 and 2021:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

 

 

 

Lease cost

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

1,689

 

 

$

1,515

 

 

$

3,378

 

 

$

3,031

 

Variable lease cost

 

 

491

 

 

 

566

 

 

 

933

 

 

 

1,046

 

Total lease cost

 

$

2,180

 

 

$

2,081

 

 

$

4,311

 

 

$

4,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other information

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows used for operating leases

 

$

1,589

 

 

$

1,621

 

 

$

3,216

 

 

$

3,225

 

Weighted average remaining lease term

 

3.7 years

 

 

4.6 years

 

 

3.7 years

 

 

4.6 years

 

Weighted average discount rate

 

 

9.75

%

 

 

9.86

%

 

 

9.75

%

 

 

9.86

%

 

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Future minimum lease payments under the Company’s non-cancelable operating leases as of June 30, 2022, are as follows:

 

 

 

 

 

 

 

(In thousands)

 

2022

 

$

3,361

 

2023

 

 

7,517

 

2024

 

 

7,322

 

2025

 

 

3,057

 

Thereafter

 

 

3,909

 

Total lease payments

 

$

25,166

 

Less: imputed interest

 

 

(4,338

)

Total operating lease liabilities at June 30, 2022

 

$

20,828

 

 

12. Collaborations and Licensing Agreements

HutchMed

On August 7, 2021 (the “HutchMed Effective Date”), the Company entered into a strategic collaboration pursuant to a license agreement (the “HutchMed License Agreement”) with Hutchmed Group Investment Limited (formerly known as Hutchison China MediTech Investment Limited) (“HutchMed”), which was amended in May 2022, for the development, manufacture and commercialization of tazemetostat, either as a monotherapy or as a part of combinations with other therapies, including HutchMed proprietary compounds, agreed by the parties under the HutchMed License Agreement (“Licensed Products”) for the treatment of ES, FL, diffuse large B-cell lymphoma in humans, and any additional indications agreed by the parties in accordance with the terms of the HutchMed License Agreement (the “Field”) in mainland China, Taiwan, Hong Kong and Macau (each, a “Jurisdiction”, and collectively, the “Territory”).

Agreement Structure

The Company has granted HutchMed licenses under patent rights and know-how controlled by the Company to enable HutchMed to develop and commercialize Licensed Products in the Field in the Territory. The licenses granted to HutchMed are co-exclusive with the Company with respect to the development of Licensed Products in the Field in the Territory and exclusive with respect to the commercialization of Licensed Products in the Field in the Territory. The Company also granted HutchMed a license under patent rights and know-how controlled by the Company to enable HutchMed to manufacture tazemetostat drug substance and drug product for the purpose of developing and commercializing Licensed Products in the Field in the Territory. The Company retains development and commercialization rights with respect to Licensed Products in the rest of the world outside of the Territory except for Japan.

On May 6, 2022, as contemplated by the HutchMed License Agreement, the Company, Hutchmed Limited (formerly known as Hutchison MediPharma Limited) and Hutchmed (Hong Kong) Limited entered into a manufacturing technology transfer and supply agreement under which the Company has agreed to conduct a technology transfer of manufacturing technology to HutchMed to enable HutchMed to manufacture clinical and commercial quantities of tazemetostat drug substance and drug product to carry out its obligations and exercise its rights under the HutchMed License Agreement. Until the completion of the technology transfer to HutchMed, the Company has agreed to manufacture and supply HutchMed with tazemetostat drug substance and drug product in sufficient quantities for HutchMed’s development and commercialization activities for Licensed Products in the Field in the Territory.

HutchMed has agreed to use commercially reasonable efforts to carry out development activities in the Territory as agreed by the parties and to seek to obtain and maintain regulatory approval of the Licensed Products in the Territory. HutchMed has also agreed to use commercially reasonable efforts to commercialize Licensed Products in the Field in the Territory. HutchMed is responsible for all costs it incurs in developing, obtaining regulatory approval of, and commercializing Licensed Products in the Field in the Territory, including costs incurred by HutchMed in conducting clinical trials that only include clinical sites in the Territory. For global studies conducted by the Company that HutchMed elects to participate in by conducting any such study in the Territory, HutchMed will be responsible for enrolling and treating in the Territory 20% of the total number of study patients of such global study and will be responsible for costs for those patients enrolled and treated in such trials. HutchMed will also be responsible for 20% of the costs of such global studies that are not specific to any territory and the Company will be responsible for all other costs of such global studies. HutchMed has agreed to participate in the Company’s EZH-301 and SYMPHONY-1 (EZH-302) global studies. Under an amendment to the HutchMed License Agreement executed by the parties on May 6, 2022, HutchMed has responsibility for the SYMPHONY-1 trial in the Territory at HutchMed’s expense, except the Company is responsible for regulatory interactions and filings in mainland China and for the conduct of the SYMPHONY-1 trial in Taiwan, in each case subject to HutchMed’s reimbursement of the Company’s expenses commencing as of the HutchMed Effective Date, and Epizyme has oversight of the conduct of the SYMPHONY-1 trial to ensure consistency with the conduct of the trial globally.

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Pursuant to the HutchMed License Agreement, the Company received a nonrefundable upfront payment of $25.0 million in September 2021. The Company is also entitled to milestone payments of up to $110.0 million in the aggregate for achievement of specified development and regulatory milestones with respect to Licensed Products in the Territory, and up to $175.0 million in the aggregate for achievement of specified sales milestones in the Territory with respect to the Licensed Products. The Company will also be entitled to receive tiered royalties, ranging from a mid-teens percentage to a low twenties percentage based on HutchMed’s cumulative annual net sales, if any, of Licensed Products in the Territory. Royalties are payable for each Licensed Product commencing on the first commercial sale of the applicable Licensed Product and ending, on a Jurisdiction-by-Jurisdiction basis, on the latest of expiration of specified patent coverage, expiration of specified regulatory exclusivity or a specified period following the first commercial sale in such Jurisdiction and may be reduced in various circumstances.

Under the HutchMed License Agreement, the Company issued a warrant to HutchMed (the “HutchMed Warrant”), exercisable at any time prior to August 7, 2025, for up to 5,653,000 shares of the Company’s common stock at an exercise price of $11.50 per share. On September 21, 2021, the Company filed with the SEC a registration statement on Form S-3 registering for resale the shares of the Company’s common stock issuable upon exercise of the HutchMed Warrant in accordance with the HutchMed Warrant. Such registration statement on Form S-3 was declared effective by the SEC on September 29, 2021.

Unless earlier terminated, the HutchMed License Agreement will expire upon the expiration of the last royalty term for the last Licensed Product in the Field in the Territory. HutchMed may terminate the HutchMed License Agreement in its entirety for any or no reason upon 12 months’ prior written notice to the Company. Either party may, subject to specified cure periods, terminate the HutchMed License Agreement in the event of the other party’s uncured material breach, and under specified circumstances relating to the other party’s insolvency or if the other party or its affiliates challenges the validity, patentability, or enforceability of patent rights that are owned by or licensed to such party or its affiliates and that are subject to the licenses granted in the HutchMed License Agreement.

License Revenue

The Company evaluated the terms of the HutchMed License Agreement and first determined that the HutchMed Warrant should be accounted for pursuant to ASC 815, Derivatives and Hedging, with the HutchMed Warrant's fair value of approximately $13.0 million (Note 15) at execution considered outside of the revenue arrangement.

The Company then evaluated the HutchMed License Agreement under ASC 606, Revenue from Contracts with Customers ("Topic 606") and concluded that the contract counterparty, HutchMed, is a customer. The Company identified the following performance obligations at the inception of the HutchMed License Agreement: (1) exclusive license of rights to develop, manufacture and commercialize tazemetostat in the Territory and (2) research and development services related to global trials. In addition, the Company identified the following customer options that will create manufacturing or supply obligations for the Company upon exercise by HutchMed (1) the supply of tazemetostat, (2) the supply of rituximab, lenalidomide, and placebo and (3) the supply of tazemetostat drug product. The customer options were evaluated as a material right and identified as the third performance obligation. In addition, the Company may also provide certain technology transfer services related to providing HutchMed with the capability to manufacture tazemetostat, for which the Company will receive reimbursement that approximates stand-alone selling price.

Under the HutchMed License Agreement, as amended, in order to evaluate the appropriate transaction price, the Company determined that the $12.0 million of the up-front fee remaining after allocation to the HutchMed Warrant and the reimbursement to be received for its research and development services constituted the amount of the consideration to be included in the transaction price. Prior to the May 6, 2022 amendment to the HutchMed License Agreement, had the EZH-302 global trial not been deemed a confirmatory trial for purposes of regulatory approval in China, the Company would have been responsible for reimbursing HutchMed for the costs of the portion of the EZH-302 global trial that would be performed in China. The Company had concluded that this potential repayment provision represented variable consideration under the arrangement. Due to the uncertainty of potential repayment, which was based solely on the decision of a regulatory authority, the Company could not assert that it was probable that a significant reversal of revenue would not occur. As a result, the Company determined that the transaction price should be fully constrained. Pursuant to the May 6, 2022 amendment to the HutchMed License Agreement, this potential repayment provision was removed. The Company reevaluated its rights and obligations under the HutchMed License Agreement, as amended, and concluded that the removal of the repayment provision as well as its additional performance obligations with respect to regulatory interactions and filings in mainland China and for the conduct of the SYMPHONY-1 trial in Taiwan represented a modification of the arrangement. Consequently, the Company reassessed its accounting pursuant to the arrangement.

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The Company determined that the $12.0 million of the up-front fee remaining after allocation to the HutchMed Warrant and the reimbursement to be received for its research and development services constituted the amount of the consideration to be included in the transaction price and to be allocated to the performance obligations. In order to meet the allocation objective under Topic 606, the Company determined that it should allocate to each performance obligation the portion of the transaction price that reflects the amount of consideration the entity expects to be entitled to in exchange for transferring those goods or services to the customer. The Company therefore allocated the variable consideration associated with its research and development services entirely to the research and development performance obligation. The remaining consideration of $12.0 million was allocated to the remaining performance obligations – the exclusive license and the material right related to manufacturing obligations, based on the stand-alone selling price for each. For the license, the stand-alone selling price was calculated using an income approach model and included the following key assumptions: the development timeline, discount rate, and probabilities of technical and regulatory success. The value of the material right was determined by calculating the incremental discount provided to HutchMed with respect to its purchases of manufacturing materials. The Company believes that a change in the assumptions used to determine its stand-alone selling price for the license and material right most likely would not have a significant effect on the allocation of consideration received (or receivable) to the performance obligations. The Company concluded that after the amendment, the total transaction price to be allocated to the satisfied performance obligations was $17.1 million, which consisted of the license fee and the reimbursement of research and development services. The Company estimated there to be $4.0 million of variable consideration allocated to its research and development obligations that will be recognized as such services are performed.

None of the development or regulatory milestones have been included in the transaction price, as all such milestone amounts were fully constrained. As part of the Company's evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to HutchMed and therefore are recognized at the later of when the performance obligation is satisfied or the related sales occur. The Company will reevaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstance occur.

Topic 606 requires the Company to select a single revenue recognition method for the performance obligation that depicts the Company’s performance in transferring control of services or goods. Accordingly, the Company recognized the revenue from the license at a point in time as the licenses associated with the license performance obligation have significant standalone functionality that HutchMed can immediately use. The licenses were delivered in the third quarter of 2021. Therefore, the promise to provide a customer with a right to use the Company's intellectual property would indicate revenue is satisfied at a point in time.
 

For the research and development performance obligation, the Company utilizes a cost-based input method to measure proportional performance and to calculate the amount of revenue to recognize. The Company believes that this is the best measure of progress because it reflects the manner in which the Company transfers its performance obligation to HutchMed.

The Company recognizes the amount allocated to the material right associated with manufacturing materials as revenue based on the output method as HutchMed exercises its options and the manufacturing materials are transferred to HutchMed.

During the second quarter of 2022, the Company allocated $11.8 million of the transaction price to the license and recognized this amount as revenue during the second quarter of 2022. Consideration allocated to the research and development performance obligation was $4.7 million, of which $0.8 million was recognized during the second quarter of 2022. Revenue allocated to the material right was $0.6 million, $0.1 million of which was recognized during the second quarter of 2022. In addition, HutchMed made manufacturing material purchases of $3.8 million during the second quarter of 2022, which were recognized upon delivery.

GSK

In January 2011, the Company entered into a collaboration and license agreement (the “GSK Collaboration and License Agreement”) with Glaxo Group Limited (an affiliate of GlaxoSmithKline plc) (“GSK”), to discover, develop and commercialize novel small molecule histone methyltransferase ("HMT") inhibitors directed to available targets from the Company’s platform. Under the terms of the GSK Collaboration and License Agreement, the Company granted GSK exclusive worldwide license rights to HMT inhibitors directed to three targets. In March 2014, the Company and GSK amended certain terms of this agreement for the third licensed target, revising the license terms with respect to candidate compounds and amending the corresponding financial terms, including reallocating milestone payments and increasing royalty rates as to the third target. Subsequent to a GSK strategic portfolio prioritization, the Company received notice in October 2017 that GSK terminated the agreement with respect to the third target, effective December 31, 2017, which returned all rights to that target to the Company. On December 16, 2021, the Company received written notice from GSK that GSK elected to terminate the GSK Collaboration and License Agreement without cause, and in accordance with the terms of the agreement and the notice of termination, the termination became effective as of March 16, 2022. As a result of the termination of the agreement, as of the termination effective date, the license rights granted by the Company to GSK

23


 

terminated, and GSK ceased to accrue any financial obligations to the Company and the Company is entitled to pursue PRMT5 and PRMT1 targets in all fields worldwide without further obligation to GSK. The Company substantially completed all of its obligations under this agreement by the end of 2015. The termination of the agreement had no impact on the Company’s financial statements.

Eisai

In April 2011, the Company entered into a collaboration and license agreement with Eisai, under which the Company granted Eisai an exclusive worldwide license to its small molecule HMT inhibitors directed to the EZH2 HMT, including the Company’s product candidate tazemetostat, while retaining an opt-in right to co-develop, co-commercialize and share profits with Eisai as to licensed products in the United States. In March 2015, the Company entered into an amended and restated collaboration and license agreement with Eisai (the “Eisai License Agreement”), under which the Company reacquired worldwide rights, excluding Japan, to its EZH2 program, including tazemetostat. Under the Eisai License Agreement, the Company is responsible for global development, manufacturing and commercialization outside of Japan of tazemetostat and any other EZH2 product candidates, with Eisai retaining development and commercialization rights in Japan, as well as a right to elect to manufacture tazemetostat and any other EZH2 product candidates in Japan, and a right of first negotiation for the rest of Asia. Eisai waived its right of first negotiation for the rest of Asia in 2018.

In March 2021, the Company and Eisai entered into a supply agreement providing for the manufacture and supply to Eisai of tazemetostat drug product. Under the terms of the supply agreement, the Company also agreed to waive its right of exclusive supply of tazemetostat drug substance from the Company’s drug substance manufacturer. The Company deferred $5.0 million of revenue allocated to the Company’s waiver of its exclusive right to supply of tazemetostat drug substance as of March 31, 2021, which was recognized in April 2021 upon delivery of the Company's waiver to the drug substance manufacture. During the three and six months ended June 30, 2021, the Company recognized $5.0 million and $6.3 million, respectively, related to the Company's waiver of its exclusive right to supply of tazemetostat drug substance from the Company's drug substance manufacturer and delivery of tazemetostat drug product in collaboration and other revenue.

As of June 30, 2022 and December 31, 2021, the Company had accounts receivable of less than $0.1 million for both periods, due from Eisai.

During the three and six months ended June 30, 2022, the Company recorded $1.3 million and $2.6 million, respectively, related to the worldwide royalties due under the Eisai License Agreement in cost of revenue based on U.S. sales of TAZVERIK. During the three and six months ended June 30, 2021, the Company recorded $1.2 million and $2.1 million, respectively, related to the worldwide royalties due under the Eisai License Agreement in cost of revenue based on U.S. sales of TAZVERIK. As of June 30, 2022 and 2021, $1.3 million and $1.2 million, respectively, in royalties were payable under the Eisai License Agreement. For additional information regarding certain of the Eisai royalties, see Note 13, Sale of Future Royalties.

Roche

In December 2012, Eisai and the Company entered into a companion diagnostics agreement with Roche Molecular Systems, Inc. (“Roche Molecular”), under which Eisai and the Company engaged Roche Molecular to develop a companion diagnostic to identify patients who possess certain activating mutations of EZH2. In October 2013, this agreement was amended to include additional mutations in EZH2. The development costs due under the amended agreement with Roche Molecular were the responsibility of Eisai until the execution of the amended and restated collaboration and license agreement with Eisai in March 2015, at which time the Company assumed responsibility for the remaining development costs due under the agreement. In December 2015, the Company and Eisai entered into a second amendment to the companion diagnostics agreement with Roche Molecular. The agreement was further amended in March 2018. Under the amended agreement, the Company was responsible for remaining development costs of $10.4 million due under the agreement as of March 2018 and Eisai agreed to reimburse the Company $0.9 million of this amount related to a regulatory milestone for Japan. In July 2019, the Company entered into a fourth amendment to the companion diagnostics agreement. Under the amended agreement, the Company and Roche Molecular agreed to divide a $1.0 million regulatory milestone for the United States into two separate milestone payments, of which $0.5 million was paid by the Company as part of the signed amendment, and the remaining $0.5 million was paid by the Company in December 2019 upon the satisfaction of certain conditions set forth in the fourth amendment to the companion diagnostics agreement. As part of this fourth amendment, Roche Molecular also assigned all of its rights and obligations under the companion diagnostics agreement to Roche Sequencing Solutions (“Roche Sequencing”) due to an internal reorganization, and this assignment became effective as of January 1, 2020. As of June 30, 2022, the Company is responsible for the remaining development costs of $1.0 million due under the agreement. The $0.9 million that Eisai agreed to reimburse the Company related to a regulatory milestone for Japan was achieved as of June 30, 2020 and the payment was received in the fourth

24


 

quarter of 2020. In addition, the Company paid $1.0 million for the achievement of a development milestone in the fourth quarter of 2020.

Under the agreement with Roche Sequencing, Roche Sequencing is obligated to use commercially reasonable efforts to develop and to make commercially available the companion diagnostic. Roche Sequencing has exclusive rights to commercialize the companion diagnostic. On June 18, 2020, the FDA approved the companion diagnostic that is intended to identify FL patients with an EZH2 mutation for treatment with tazemetostat.

The agreement with Roche Sequencing will expire when the Company and Eisai are no longer developing or commercializing tazemetostat. The Company and Eisai may terminate the agreement by giving Roche Sequencing 90 days’ written notice if the Company and Eisai discontinue development and commercialization of tazemetostat or determine, in conjunction with Roche Sequencing, that the companion diagnostic is not needed for use with tazemetostat. Any party may also terminate the agreement in the event of a material breach by any party, in the event of material changes in circumstances that are contrary to key assumptions specified in the agreement or in the event of specified bankruptcy or similar circumstances. Under specified termination circumstances, Roche Sequencing may become entitled to specified termination fees.

13. Sale of Future Royalties

On November 4, 2019, the Company entered into a loan agreement with BioPharma Credit PLC (the “Collateral Agent”), and the Lenders (as defined therein), providing for up to $70.0 million in secured term loans to be advanced in up to three tranches (the “Loan Agreement”). As of June 30, 2020, the Company had borrowed an aggregate principal amount under the first tranche of $25.0 million (the “Tranche A Note Payable”), the second tranche of $25.0 million (the “Tranche B Note Payable”), and the third tranche of $20.0 million (the “Tranche C Note Payable”) under the Loan Agreement. On November 3, 2020, the Company, the Collateral Agent and the Lenders amended and restated the Loan Agreement, (as amended and restated, the “Amended and Restated Loan Agreement”), to provide for, among other things, an additional secured term loan of $150.0 million, or the Tranche D Loan. On November 18, 2020, the Company borrowed the Tranche D Loan (see Note 14, Long-Term Debt). The Company paid a commitment fee of 2.00% of the original $70.0 million committed facility amount in November 2019 and 2% of the $150.0 million Tranche D Loan in November 2020, as well as expenses incurred by the Lender in executing the agreements. The interest rate for the Tranche D Loan will be determined by reference to a Eurodollar rate plus 7.75% above such Eurodollar rate. The Eurodollar rate will have a 2.00% floor. The Tranche D Loan will be due in eight equal quarterly principal payments commencing on the 51st month anniversary of the date on which the Lenders fund the Tranche D Loan. All unpaid principal and interest under the Tranche D Loan will be due and payable on the 72nd month anniversary of the date on which the Lenders funded the Tranche D Loan.

On November 4, 2019, the Company also executed a purchase agreement (the “RPI Purchase Agreement”) with RPI. Pursuant to the RPI Purchase Agreement, the Company agreed to sell to RPI 6,666,667 shares of its common stock, a warrant to purchase up to 2,500,000 shares of common stock at an exercise price of $20.00 per share (the “Common Stock Warrant”), and all of the Company’s rights to receive royalties from Eisai with respect to net sales by Eisai of tazemetostat products in Japan pursuant to the Eisai License Agreement and any successor arrangement for Japan sales (the “Japan Royalty”, and collectively, the “Transaction”). In consideration for the sale of shares of common stock, the Common Stock Warrant and the Japan Royalty, RPI paid the Company $100.0 million upon the closing of the RPI Purchase Agreement. In addition, RPI agreed, in connection with RPI’s acquisition from Eisai of the right to receive royalties from the Company under the Eisai License Agreement, to reduce the Company’s royalty obligation by low single digits upon the achievement of specified annual net sales levels over $1.5 billion. In addition, under the RPI Purchase Agreement, the Company had the right to sell, and RPI had the obligation to purchase, subject to certain conditions, including a maximum purchase price of $20.00 per share, $50.0 million of shares of common stock at the Company’s option for an 18-month period from the date of execution of the RPI Purchase Agreement (the “Put Option”). In February 2020, the Company sold 2.5 million shares of its common stock to RPI, for an aggregate of $50.0 million in proceeds pursuant to the Put Option. Additionally, under the terms of the RPI Purchase Agreement, the founder and chief executive officer of RP Management, an affiliate of RPI, and a co-founder of Pharmakon Advisors LP, an affiliate of the Lenders, was elected as a director of the Company. As of June 30, 2022 and December 31, 2021, RPI and its affiliates owned approximately 18.9% and 8.6% of the Company’s common stock, respectively.

The Company accounted for the Loan Agreement and RPI Purchase Agreement as a single arrangement as RPI and the Lenders are related parties and the agreements were negotiated together. The aggregate proceeds of $125.0 million were allocated on a relative fair value basis, which approximated their respective actual fair values, to the four units of accounting pursuant to the transaction as follows: (1) $79.0 million to the common stock issued to RPI based on the closing price of the Company’s common stock on the date of the transaction, (2) $8.4 million to the Common Stock Warrant to purchase shares of common stock, based on the Black-Scholes option pricing model, (3) $12.6 million to the liability related to the sale of future royalties based on a discounted cash flow model and (4) $25.0 million to the Tranche A Note Payable based on the terms of the Loan Agreement. Transaction costs of $2.0 million were allocated directly to the units of accounting it relates to.

25


 

Although the Company sold all of its rights to receive the Japan Royalty, under the terms of the RPI Agreement, the Company continues to own all tazemetostat intellectual property rights and at execution had significant continuing involvement in the generation of these royalties. Due to the Company’s continuing involvement, the Company will continue to account for any royalties due as revenue and recorded the proceeds from this transaction as a liability (“Royalty Obligation”) that will be accreted using the effective interest method over the estimated life of the RPI Purchase Agreement.

As royalties are remitted to RPI from Eisai, the balance of the Royalty Obligation will be effectively repaid over the life of the Eisai License Agreement. In order to determine the accretion of the Royalty Obligation, the Company is required to estimate the total amount of future royalty payments to RPI over the life of the Eisai License Agreement. The $12.6 million recorded at execution will be accreted to the total of these royalty payments as interest expense over the life of the Royalty Obligation. At execution, the Company’s estimate of this total interest expense resulted in an effective annual interest rate of approximately 9.01%. This estimate contains significant assumptions that impact both the amount recorded at execution and the interest expense that will be recognized over the royalty period. The Company periodically assesses the estimated royalty payments to RPI from Eisai and to the extent the amount or timing of such payments is materially different than the original estimates, an adjustment is made to the effective interest rate, which will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of royalty payments to RPI from Eisai, and correspondingly, the amount of interest expense recorded by the Company, most of which are not within the Company’s control. Such factors include, but are not limited to, delays or discontinuation of development of tazemetostat in Japan, regulatory approval, changing standards of care, the introduction of competing products, manufacturing or other delays, generic competition, intellectual property matters, adverse events that result in governmental health authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to RPI are made in U.S. dollars (USD) while the underlying Japan sales of tazemetostat will be made in currencies other than USD, and other events or circumstances that are not currently foreseen as tazemetostat is still under development in Japan and subject to regulatory approval. Changes to any of these factors could result in increases or decreases to both royalty revenues and interest expense. On June 23, 2021, Eisai announced that it had obtained manufacturing and marketing approval for the EZH2 inhibitor “Tazverik® Tablets 200 mg” (tazemetostat hydrobromide) in Japan with the indication of relapsed or refractory EZH2 gene mutation-positive FL (only when standard treatment is not applicable), which caused the Company to reassess the estimated future royalty payments to RPI. As of June 30, 2022, the Company’s assessment of the estimated future royalty payments to RPI resulted in a current effective interest rate of approximately 9.2%.

The following table shows the activity of the Royalty Obligation since the transaction inception through June 30, 2022:

 

 

 

As of June 30, 2022

 

 

 

(In thousands)

 

Proceeds from sale of future royalties

 

$

12,601

 

Non-cash royalty revenue

 

 

(93

)

Non-cash interest expense recognized

 

 

4,104

 

Liability related to the sale of future royalties - ending balance

 

$

16,612

 

Less current portion

 

 

(592

)

Related party liability related to sale of future royalties, net of current portion

 

$

16,020

 

 

During the three months and six months ended June 30, 2022, the Company recorded $40.0 thousand and $66.0 thousand, respectively, in non-cash royalties from net sales of tazemetostat in Japan. During the three and six months ended June 30, 2021, no non-cash royalties from net sales of tazemetostat in Japan were recorded. During the three and six months ended June 30, 2022, the Company recorded $0.4 and $0.7 million, respectively, of related non-cash interest expense. During the three and six months ended June 30, 2021, the Company recorded $0.5 and $0.9 million, respectively, of related non-cash interest expense.

 

14. Long-Term Debt

On November 4, 2019, the Company entered into the Loan Agreement, which provided for up to $70.0 million in secured term loans to be advanced in up to three tranches. The Company borrowed $70.0 million in the aggregate under the three tranches pursuant to the Loan Agreement. With the FDA’s June 2020 approval of tazemetostat for the treatment of FL in the United States, the Company also had the right, but not the obligation, to request up to an additional $300.0 million in secured term loans, subject to the approval of the Lenders, provided the Company had not prepaid any outstanding term loans at the time of such request and such request was made before November 18, 2021. On November 3, 2020, the Company entered into the Amended and Restated Loan Agreement with the Lenders. The Amended and Restated Loan Agreement provides for, among other things, an additional secured term loan of $150.0 million, or the Tranche D Loan. On November 3, 2020, the Company also delivered written notice to the Lenders to draw down the Tranche D Loan, which was funded on November 18, 2020. The Company paid a commitment fee of 2.00% of the original $70.0 million committed facility amount in November 2019 and 2% of the $150.0 million Tranche D Loan in November 2020, as well as expenses incurred by the Lender in executing the agreements.

26


 

The interest rate for the Tranche D Loan will be determined by reference to a Eurodollar rate plus 7.75% above such Eurodollar rate. The Eurodollar rate will have a 2.00% floor. The Tranche D Loan will be due in eight equal quarterly principal payments commencing on the 51st month anniversary of the date on which the Lenders fund the Tranche D Loan. All unpaid principal and interest under the Tranche D Loan will be due and payable on the 72nd month anniversary of the date on which the Lenders funded the Tranche D Loan.

The Amended and Restated Loan Agreement also amended the payment period principal and interest for the first three tranches of term loans. Under the original terms, the Company was required to make interest only payments on the outstanding obligation through February 28, 2023, and thereafter eight quarterly payments of principal and interest. Under the amended and restated terms, the Company is required to make interest only payments on the $70.0 million outstanding obligation through November 2023, and thereafter four quarterly payments of principal and interest. All unpaid principal and interest on the $70.0 million borrowed under the original Loan Agreement is due and payable in November 2024, the 60th month anniversary of the date on which the Lenders funded the first tranche of term loans. The interest rates for the existing tranches of term loans remain unchanged and will continue to be determined by reference to a Eurodollar rate plus 7.75% above such Eurodollar rate. The Eurodollar rate will have a 2.00% floor.

Each of the four term loans may be prepaid before maturity in whole or in part, however there is a $50.0 million minimum prepayment for any prepayment of the loans. If the Company prepays any tranche of term loans, in whole or in part, during the first 36 months from the date on which the Lenders funded such tranche of term loans, then the Company must pay a prepayment premium equal to the greater of (x) a make-whole amount equal to the interest that would have accrued on the principal amount to be prepaid and (y) a premium equal to 0.03 multiplied by the principal amount to be prepaid. If the Company prepays a tranche of term loan, in whole or in part, between the 36th month and 48th month from the date on which the Lenders funded such tranche of term loans, then the Company must pay a prepayment premium equal to 0.02 multiplied by the principal amount to be prepaid. If the Company prepays a tranche of term loans, in whole or in part, between the 48th month and 60th month from the date on which the Lenders funded such tranche of term loans, then the Company must pay a prepayment premium equal to 0.01 multiplied by the principal amount to be prepaid.

The Amended and Restated Loan Agreement was accounted for as a debt modification based on a comparison of the present value of the cash flows under the terms of the debt immediately before and after the effective date of The Amended and Restated Loan Agreement, which resulted in a change of less than 10%. As a result, issuance costs paid to the Lenders in connection with The Amended and Restated Loan Agreement were recorded as a reduction of the carrying amount of the debt liability and unamortized issuance costs as of the date of the modification are amortized to interest expense over the repayment term of The Amended and Restated Loan Agreement.

The obligations under the Amended and Restated Loan Agreement, including the Company’s payment obligations in respect of the Tranche D Loan are secured by the first priority security interest in and a lien on substantially all of the assets of the Company, subject to certain exceptions, that the Company granted to the Lenders in connection with the first tranche of term loans under the Loan Agreement.

The Amended and Restated Loan Agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default applicable to the Company and its subsidiaries. If an event of default occurs and is continuing, the Collateral Agent may, among other things, accelerate the loans and foreclose on the collateral. The Company has determined that the risk of subjective acceleration under the material adverse events clause is not probable and therefore has classified the outstanding principal in non-current liabilities based on scheduled principal payments.

The Company has the following minimum aggregate future loan payments at June 30, 2022 :

 

 

 

As of June 30, 2022

 

 

 

(In thousands)

 

2022

 

$

 

2023

 

 

 

2024

 

 

70,000

 

2025

 

 

75,000

 

2026

 

 

75,000

 

Total minimum payments

 

 

220,000

 

Less amounts representing interest and discount

 

 

(3,115

)

Less current portion

 

 

 

Long-term debt, net of current portion

 

$

216,885

 

 

For the three and six months ended June 30, 2022 and 2021, interest expense related to the Company's Amended and Restated Loan Agreement was approximately $5.4 million and $10.8 million, respectively, in both periods. The total carrying value of debt is classified as long-term on the Company's condensed consolidated balance sheet as of June 30, 2022 and December 31, 2021.

27


 

15. Stockholders’ (Deficit) Equity

Common Stock

On April 8, 2021, the Company’s board of directors adopted, subject to stockholder approval, an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 150,000,000 to 225,000,000 (the "2021 Charter Amendment"). At the Company’s 2021 Annual Meeting of Stockholders, the stockholders of the Company approved the 2021 Charter Amendment, which was filed with the Secretary of State of the State of Delaware on June 11, 2021. The number of authorized shares of preferred stock was not affected by the 2021 Charter Amendment. On March 16, 2022, the Company’s board of directors adopted, subject to stockholder approval, a proposed amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 225,000,000 to 450,000,000 (the "2022 Charter Amendment"). At the Company’s 2022 Annual Meeting of Stockholders, the stockholders of the Company approved the 2022 Charter Amendment, which was filed with the Secretary of State of the State of Delaware on May 17, 2022. The number of authorized shares of preferred stock was not affected by the 2022 Charter Amendment.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to dividends when and if declared by the board of directors.

In January 2022, the Company raised approximately $79.5 million in net proceeds (after deducting underwriting discounts and commissions and estimated offering costs but excluding any expenses and other costs reimbursed by the underwriters) from the sale of 56,666,667 shares of its common stock in a public offering at a price of $1.50 per share.

2021 At-the-Market Offering Program

On May 6, 2021, the Company entered into an Open Market Sale AgreementSM (“ATM Sale Agreement”), with Jefferies LLC (“Jefferies”) to sell, from time to time, shares of the Company's common stock having an aggregate offering price of up to $200.0 million through an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, under which Jefferies would act as sales agent (the "ATM Offering"). The shares that may be sold under the ATM Sale Agreement, if any, are issued and sold pursuant to the Company’s shelf registration statement on Form S -3 that was declared effective by the Securities and Exchange Commission on May 13, 2021. The Company agreed to compensate Jefferies at a fixed commission rate equal to 3.0% of the gross sales proceeds of such shares.

From the initiation of the ATM Offering through June 30, 2022, the Company has issued and sold 5,314,135 shares under the ATM Sale Agreement, resulting in aggregate net proceeds of $18.3 million after deducting issuance costs of $0.6 million.

During the three months ended June 30 2022, there were no sales of the Company's common stock under the ATM Sale Agreement. During the six months ended June 30, 2022, the Company sold a total of 1,473,158 shares of the Company's common stock under the ATM Sale Agreement, at a volume weighted average gross selling price of approximately $1.82 per share for net proceeds of approximately $2.4 million.

Convertible Preferred Stock

The Company had no shares of Series A Preferred Stock outstanding as of June 30, 2022. The Company had 337,800 shares of Series A Preferred Stock outstanding as of December 31, 2021.

Voting Rights

Shares of Series A Preferred Stock will generally have no voting rights except as required by law and except that the consent of the holders of a majority of the outstanding shares of Series A Preferred Stock will be required to amend the terms of the Series A Preferred Stock or take certain other actions with respect to the Series A Preferred Stock.

Dividends

Shares of Series A Preferred Stock will be entitled to receive dividends equal to (on an as-if-converted-to-common stock basis), and in the same form and manner as, dividends actually paid on shares of the Company’s common stock.

Liquidation Rights

Subject to the prior and superior rights of the holders of any senior securities of the Company, upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, each holder of shares of Series A Preferred Stock shall be entitled to receive, in preference to any distributions of any of the assets or surplus funds of the Company to the holders of common stock, an amount equal

28


 

to $0.001 per share of Series A Preferred Stock, plus an additional amount equal to any dividends declared but unpaid on such shares, before any payments shall be made or any assets distributed to holders of any class of common stock.

If, upon any such liquidation, dissolution or winding up of the Company, the assets of the Company shall be insufficient to pay the holders of shares of the Series A Preferred Stock the amount required under the preceding sentence, then all remaining assets of the Company shall be distributed ratably to holders of the shares of the Series A Preferred Stock in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Conversion

Each share of Series A Preferred Stock shall be convertible, at any time and from time to time from and after the issuance date, at the option of the holder thereof, into a number of shares of common stock equal to 10 shares of common stock, provided that the holder will be prohibited from converting Series A Preferred Stock into shares of the Company’s common stock if, as a result of such conversion, the holder, together with its affiliates and attribution parties, would own more than 9.99% of the total number of shares of common stock then issued and outstanding. The holder can change this requirement to a higher or lower percentage, not to exceed 9.99% of the number of shares of common stock outstanding, upon 61 days’ notice to the Company.

In February 2020, 12,200 shares of Series A Preferred Stock were converted to 122,000 shares of common stock.

In May 2022, 337,800 shares of Series A Preferred Stock were converted to 3,378,000 shares of common stock.

Redemption

The Company is not obligated to redeem or repurchase any shares of Series A Preferred Stock. Shares of Series A Preferred Stock are not entitled to any redemption rights or mandatory sinking fund or analogous fund provisions.

Warrants

In November 2019, the Company issued the Common Stock Warrant for the purchase of up to 2,500,000 shares of Common Stock at an exercise price of $20.00 per share to RPI pursuant to the RPI Purchase Agreement (for additional information see Note 13, Sale of Future Royalties), which was classified as equity and recorded at its relative fair value of $8.4 million to additional paid-in capital on the Company's condensed consolidated balance sheets. The Common Stock Warrant remains outstanding as of June 30, 2022.

In August 2021, the Company issued the HutchMed Warrant to HutchMed under the HutchMed License Agreement, exercisable at any time prior to August 7, 2025, for up to 5,653,000 shares of the Company’s common stock at an exercise price of $11.50 per share. Under the HutchMed Warrant, the number of shares issuable under the warrant is reduced from 5,653,000 to 2,826,500 in the event that the HutchMed License Agreement is terminated for certain reasons as more fully described in the HutchMed License Agreement. Due to this provision in the HutchMed Warrant, the Company concluded that the warrant does not meet the exception from derivative accounting pursuant to ASC 815, Derivatives and Hedging, which requires that the warrant be accounted for as a derivative. Accordingly, the Company recorded a warrant liability in the amount of approximately $13.0 million upon issuance of the HutchMed Warrant. The fair value of the HutchMed Warrant was determined using a Black-Scholes and Monte Carlo pricing model.

The HutchMed Warrant is subject to revaluation at each balance sheet date and any changes in fair value are recorded as a non-cash gain or (loss) in the Company's condensed consolidated statement of operations and comprehensive loss as a component of other income (expense), net until the earlier of the exercise or expiration of the HutchMed Warrant or upon the completion of a liquidation event. Upon exercise, the HutchMed Warrant is subject to revaluation just prior to the date of the warrant exercise and any changes in fair value are recorded as a non-cash gain or (loss).

The Company recorded non-cash gains of approximately $1.4 million during the six months ended June 30, 2022 in its condensed consolidated statement of operations and comprehensive loss attributable to the decreases in the fair value of the warrant liability that resulted from a reduction in the Company's stock price as of June 30, 2022.

The following table rolls forward the fair value of the HutchMed Warrant liability, the fair value of which is determined by Level 3 inputs at inception on August 7, 2021, and as of June 30, 2022:

 

 

 

 

 

(In thousands)

 

Fair value at January 1, 2022

 

 

$

 

1,930

 

Decrease in fair value

 

 

 

 

(1,350

)

Fair value at June 30, 2022

 

 

$

 

580

 

 

29


 

 

The key assumptions used to value the HutchMed Warrant were as follows:

 

 

 

Inception

 

 

As of June 30, 2022

 

Risk-free interest rate

 

 

0.6

%

 

 

2.99

%

Expected term (in years)

 

4.0 years

 

 

3.11 years

 

Expected volatility of underlying stock

 

 

70.0

%

 

 

88.3

%

Expected dividend yield

 

 

 

 

 

 

Stock price

 

$

6.47

 

 

$

1.47

 

 

16. Stock-Based Compensation

On March 11, 2022, upon the recommendation of the compensation committee of the Company’s board of directors, and subject to stockholder approval, the Company’s board of directors adopted the 2022 Equity Incentive Plan. At the Company’s 2022 Annual Meeting of Stockholders on May 17, 2022, the stockholders of the Company approved the 2022 Equity Incentive Plan, which replaces the Company’s 2013 Stock Incentive Plan. Following approval of the 2022 Equity Incentive Plan, no additional awards may be made under the 2013 Stock Incentive Plan.

The Company also maintains the 2013 Employee Stock Purchase Plan. At the Company’s 2022 Annual Meeting of Stockholders on May 17, 2022, the stockholders of the Company also approved an amendment to the 2013 Employee Stock Purchase Plan to eliminate the annual “evergreen” provision and authorize an aggregate of 2,500,000 shares of the Company’s common stock for issuance under such plan. Such amendment will become effective as of September 1, 2022.

In addition, during the year ended December 31, 2021, the Company granted options to purchase an aggregate of 248,366 shares of the Company's common stock and 106,955 restricted stock units (RSUs) to four new employees as equity inducement awards outside of the Company's 2013 Stock Incentive Plan and material to the employees’ acceptance of employment with the Company. These options have a weighted average exercise price of $5.12 per share, and the RSUs have a weighted average grant date fair value of $5.08 per unit. On April 1, 2022, the Company granted options to purchase an aggregate of 800,000 shares of the Company's common stock to a new employee as equity inducement awards outside of the Company's 2013 Stock Incentive Plan and material to the employee’s acceptance of employment with the Company. These options have an exercise price of $1.14 per share, which is equal to the closing price of the Company's common stock on April 1, 2022, the grant date of these options. These equity inducement awards were approved in accordance with Nasdaq Listing Rule 5635(c)(4), and these equity inducement awards remained outstanding as of June 30, 2022. These equity inducement awards are included in stock-based compensation expense and the following tables.

Total stock-based compensation expense related to stock options, restricted stock units, shares issued under the 2013 Employee Stock Purchase Plan, and shares of common stock issued to non-employee directors in lieu of board and board committee fees was $4.5 million and $6.7 million for the three months ended June 30, 2022 and 2021, respectively, and $9.7 million and $13.7 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Stock-based compensation expense is classified in the condensed consolidated statements of operations and comprehensive loss as follows:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

 

(In thousands)

 

Research and development

 

$

1,417

 

 

$

2,023

 

 

$

3,209

 

 

$

4,253

 

General and administrative

 

 

3,034

 

 

 

4,695

 

 

 

6,531

 

 

 

9,480

 

Total

 

$

4,451

 

 

$

6,718

 

 

$

9,740

 

 

$

13,733

 

 

30


 

Stock Options

The weighted-average grant date fair value of options, estimated as of the grant date using the Black-Scholes option pricing model, was $0.84 and $5.10 per option for those options granted during the six months ended June 30, 2022 and June 30, 2021, respectively.

Key assumptions used to apply this pricing model were as follows:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Risk-free interest rate

 

 

2.7

%

 

 

0.8

%

 

 

2.2

%

 

 

0.5

%

Expected life of options

 

5.87 years

 

 

5.71 years

 

 

5.94 years

 

 

5.94 years

 

Expected volatility of underlying stock

 

 

74.2

%

 

 

70.7

%

 

 

73.1

%

 

 

70.5

%

Expected dividend yield

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

 

The following is a summary of stock option activity for the six months ended June 30, 2022:

 

 

 

Number of
Options

 

 

Weighted
Average
Exercise
Price per
Share

 

 

Weighted
Average
Remaining
Contractual
Term

 

 

Aggregate
Intrinsic
Value

 

 

 

(In thousands)

 

 

 

 

 

(In years)

 

 

(In thousands)

 

Outstanding at December 31, 2021

 

 

12,946

 

 

$

11.61

 

 

 

 

 

 

 

Granted

 

 

5,681

 

 

 

1.29

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(3,204

)

 

 

11.26

 

 

 

 

 

 

 

Outstanding at June 30, 2022

 

 

15,423

 

 

$

7.87

 

 

 

8.06

 

 

$

1,073

 

Exercisable at June 30, 2022

 

 

5,525

 

 

$

13.85

 

 

 

5.95

 

 

$

 

 

As of June 30, 2022, there was $23.8 million of unrecognized compensation cost related to stock options that are expected to vest. These costs are expected to be recognized over a weighted average remaining vesting period of 2.71 years.

 

Restricted Stock Units

 

During the six months ended June 30, 2022, 87,500 RSUs were granted to an executive (the “executive RSUs”) and 80,946 RSUs were granted to non-employee directors (the “non-employee RSUs”). RSUs vest based on continuing service to the Company. Assuming all service conditions are achieved, the executive RSUs will vest in three equal installments with the first installment vesting approximately six and a half months following the grant date and the second and third installments vesting annually thereafter, and the non-employee director RSUs will vest as to 100% of the RSUs on the earlier of the first anniversary of the grant date and the date of the succeeding annual meeting of stockholders.

 

 

 

Number
of Service Based
RSU Shares
(in thousands)

 

 

Weighted
Average
Grant
Date Fair
Value

 

Outstanding at December 31, 2021

 

 

2,222

 

 

$

8.70

 

Granted

 

 

169

 

 

 

1.00

 

Vested

 

 

(361

)

 

 

12.57

 

Forfeited

 

 

(537

)

 

 

7.62

 

Outstanding at June 30, 2022

 

 

1,493

 

 

$

7.28

 

 

Compensation expense totaling $1.1 million and $2.3 million was recognized for the RSUs for the three and six months ended June 30, 2022, respectively. Compensation expense totaling $1.2 million and $2.2 million was recognized for the RSUs for the three and six months ended June 30, 2021, respectively.

 

As of June 30, 2022, there was $8.0 million of unrecognized compensation cost related to RSUs that are expected to vest. These costs are expected to be recognized over a weighted average remaining vesting period of 1.72 years.

31


 

17. Loss Per Share

 

Basic and diluted loss per share allocable to common stockholders are computed as follows:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands except per share data)

 

 

(In thousands except per share data)

 

Net loss

 

$

(35,744

)

 

$

(64,363

)

 

$

(91,249

)

 

$

(134,637

)

Weighted average shares outstanding

 

 

166,990

 

 

 

102,053

 

 

 

155,658

 

 

 

101,922

 

Basic and diluted loss per share allocable to common stockholders

 

$

(0.21

)

 

$

(0.63

)

 

$

(0.59

)

 

$

(1.32

)

 

The following common stock equivalents were excluded from the calculation of diluted loss per share allocable to common stockholders because their inclusion would have been anti-dilutive:

 

 

 

As of June 30,

 

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Stock options

 

 

15,423

 

 

 

12,058

 

Restricted stock units

 

 

1,493

 

 

 

1,358

 

Shares issuable under employee stock purchase plan

 

 

83

 

 

 

113

 

Series A Preferred Stock (if converted)

 

 

 

 

 

3,378

 

Warrants

 

 

8,153

 

 

 

2,500

 

 

 

 

25,152

 

 

 

19,407

 

 

32


 

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

 

Our management’s discussion and analysis of our financial condition and results of operations are based upon our 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, or GAAP, and with Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended. This discussion and analysis should be read in conjunction with these condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 1, 2022 and in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

Proposed Acquisition by Ipsen

 

On June 27, 2022, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Ipsen Pharma SAS, or the Parent, and Hibernia Merger Sub, Inc., or the Purchaser. Pursuant to the Merger Agreement, on July 12, 2022, Purchaser commenced an Offer to purchase all of the Shares at a price of $1.45 per Share, payable to the holder in cash, without interest, plus one non-transferable CVR per Share, which represents the right to receive one or more payments in cash, of up to $1.00 per CVR, contingent upon the achievement of certain specified milestones.

 

As soon as practicable after the consummation of the Offer and the satisfaction or waiver of certain conditions as set forth in the Merger Agreement, Purchaser will be merged with and into the Company, without a meeting of the Company stockholders in accordance with Section 251(h) of the General Corporation Law of the State of Delaware, and the Company will be the surviving corporation and a wholly owned indirect subsidiary of Parent, the Merger. As a result of the Merger, we will cease to be a publicly traded company.

 

The Merger Agreement contains customary representations, warranties, and covenants. We currently expect the Offer and the Merger to be completed in the third quarter of 2022, subject to the satisfaction or waiver of customary closing conditions, including, among others, that the number of Shares tendered in the Offer represent at least one Share more than 50% of the total number of Shares outstanding immediately prior to the expiration of the Offer. The Merger Agreement provides Parent and the Company with certain termination rights and, under certain circumstances, may require us to pay Parent a termination fee of $9.9 million.

 

For additional information related to the Merger Agreement, refer to the Company’s Solicitation/Recommendation Statement on Schedule 14D-9 filed with the SEC on July 12, 2022, together with the exhibits and annexes thereto and as amended or supplemented from time to time. Please also see “Item 1A. Risk Factors—Risks Related to Our Pending Transaction with Ipsen Pharma SAS.”

 

Note on the COVID-19 Pandemic

 

The ongoing COVID-19 pandemic continues to have widespread, evolving, and unpredictable impacts on global economies, supply chains, financial markets, business practices and societies. The complex challenges created by the COVID-19 pandemic have had an adverse impact on our business, operations, and financial performance, and as such we continue to take steps to respond to these challenges and adjust our commercial strategy and operating plans accordingly.

 

We believe that the COVID-19 pandemic has had an adverse impact on sales of TAZVERIK since the June 2020 FDA approval of TAZVERIK for FL. Our commercial and medical affairs field teams continue to use virtual formats as well as in-person interactions, where possible, to allow us to serve the needs of healthcare providers, patients and other stakeholders. However, access to prescribers remains restrictive in some areas of the United States, including at certain academic institutions and in some portions of the Northeast and West, and we expect these challenges to continue.

 

In response, we have taken steps to adjust our commercial strategy and continue to further refine our commercial strategy, recognizing that some of the changes brought about by the COVID-19 pandemic, such as ongoing restrictions to access prescribers by traditional sales personnel, will likely persist after the resolution of the pandemic. We are evolving our commercial strategies and deployment of resources to address these changes in market dynamics as we seek to increase awareness of TAZVERIK in ES and FL.

 

Although the initiation, enrollment and completion of our ongoing and planned clinical trials have not been materially disrupted, we have experienced some delays in clinical trial startup activities due to what we believe to be mostly COVID-19 related capacity constraints and resulting delays in the packaging and labeling of clinical drug supply at a third-party manufacturer. We are aware of

33


 

the impact that COVID-19 continues to have on other clinical trials in our industry and there is a risk of material impact on the conduct of our clinical trials as well. We are continuing to work with our clinical trial sites as we seek to ensure study continuity, enable medical monitoring, facilitate study procedures and maintain clinical data and records, including the use of local laboratories for testing, home delivery of study drug and remote data and records monitoring.

 

To date, the COVID-19 pandemic has not had a material impact on our commercial supply chain, and we currently have a consistent supply of tazemetostat and TAZVERIK that we believe will cover our ongoing clinical development as well as the ongoing commercialization for ES and FL. From time to time, however, we have experienced some occasional delays in connection with our clinical supply, including delays related to packaging and labeling. As a proactive measure, we have taken certain steps to try to reduce the risk to our supply chain, such as advancing orders for long-lead items in anticipation of potential future delays or shortages. Because the ongoing COVID-19 pandemic could materially adversely impact our suppliers and result in delays or disruptions in our current or future supply chain, we are continuing to monitor and manage our supply chain accordingly.

 

In October 2021 we opened our facilities to all employees who expressed interest in participating in a return-to-office pilot program, and starting in April 2022 we encouraged all Cambridge-based employees to return to the office in a hybrid virtual/in-office model. In leveraging feedback from our pilot program, we have embraced a hybrid virtual/in-office model that will balance health, safety, and flexibility with the benefits of in-office work and collaboration as we safely welcome our team back to the office. Our hybrid approach will continue to be informed by guidance from federal, state and local government authorities, and we expect that some form of a hybrid model will continue to exist for us in the future.

 

We are closely monitoring the impact of the COVID-19 pandemic and related developments on our business, operations and financial performance. We plan to continue to assess the potential duration, scope and severity of the COVID-19 pandemic and its impacts on our business, operations and financial performance, and to continue to work closely with our third-party vendors, collaborators and other parties in order to seek to continue to advance our efforts with respect to the commercialization of TAZVERIK and to continue to advance the development of EZM0414 and our pipeline, while making the health and safety of our employees and their families, healthcare providers, patients and communities a top priority. Additionally, we continue to monitor the impact of conditions globally, including for example the impact of lockdowns in China, on drug supply and research activities. Due to the evolving and uncertain global impacts of the COVID-19 pandemic, however, we cannot precisely determine or quantify the impact that this pandemic has had on our business, operations and financial performance to date or the impact that this pandemic will have in 2022 and beyond.

 

Please refer to our risk factors set forth in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion of risks related to the COVID-19 pandemic.

 

Operating Expense Reductions

 

In addition to organizational changes and cross-functional headcount reduction that we implemented in August 2021, in March 2022, we implemented further reductions of our expenses, including a cross-functional workforce reduction of approximately 12% of our then-current employees, as well as a pipeline reprioritization. Given the breadth of our then-current tazemetostat clinical development program, we decided to discontinue enrollment in our Phase 2 study of tazemetostat in combination with rituximab with FL in the third-line or later treatment settings (SYMPHONY-2, EZH-1401), as well as in our Phase 1/1b basket study evaluating tazemetostat combinations in patients with solid tumors (EZH-1301). The decision to discontinue these studies was based on evolving market dynamics and a continued focus on optimizing our investments and eliminating potentially overlapping studies. We continue to study tazemetostat in combination with other therapies for both hematologic and solid tumor malignancies, both in ongoing Company-sponsored studies as well as investigator-initiated studies.

 

As part of those headcount reductions and our pipeline reprioritization, we have implemented changes to our commercial strategy, to our medical affairs and clinical development teams and to our broader organization. We remain focused on accelerating commercial adoption of TAZVERIK in appropriate patients and optimizing our investment of company resources in important clinical trials and programs, including our SYMPHONY-1 (EZH-302), CELLO-1 (EZH-1101), ARIA (EZH-1501) and SET-101 trials.

 

The severance and termination-related costs associated with the March 2022 workforce reduction were approximately $2.5 million. We recorded these costs in the first quarter of 2022 and expect that payments of these costs will be made through the end of the fourth quarter of 2022.

Overview

 

We are a commercial-stage biopharmaceutical company committed to rewriting treatment for people with cancer through the discovery, development, and commercialization of novel epigenetic medicines. We aspire to change the standard of care for patients

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and physicians by developing targeted medicines with fundamentally new mechanisms of action directed at specific causes of hematological malignancies and solid tumors.

 

We have one approved product, TAZVERIK (tazemetostat), which was granted accelerated approval by the FDA in January 2020 for ES and in June 2020 for FL. A significant focus for us is on maximizing our effectiveness as a commercial organization to achieve adoption of TAZVERIK among as many appropriate patients as possible, including in earlier treatment lines and in combination regimens with the data to support this expanded use; building on TAZVERIK’s pipeline-in-a-drug potential; and expanding our pipeline and evolving oncology portfolio, including with SET-101, our first-in-human Phase 1/1b trial of EZM0414, our novel, first-in-class, oral SETD2 inhibitor. We are leveraging our drug discovery platform and expertise as a leader in epigenetics, as well as our team’s deep experience across clinical development and commercialization to execute on our strategy.

 

In January 2020, the FDA granted accelerated approval of TAZVERIK (tazemetostat), an oral, first in class, selective small molecule inhibitor of the EZH2 histone methyltransferase, or HMT, for the treatment of adult and pediatric patients aged 16 years and older with metastatic or locally advanced ES not eligible for complete resection. This approval was based on overall response rate and duration of response data shown in the ES cohort of our Phase 2 trial in patients with INI1-negative tumors. We continue to make TAZVERIK available to eligible patients and their physicians in the United States.

 

As part of the accelerated approval for ES, continued approval for this indication is contingent upon verification and description of clinical benefit in a confirmatory trial. To provide this confirmatory evidence to support a full approval of TAZVERIK for this indication, we are conducting a single, randomized, controlled Phase 1b/3 confirmatory trial in the United States (EZH-301) assessing tazemetostat in combination with doxorubicin compared with doxorubicin plus placebo as a front-line treatment for ES. The trial is expected to enroll approximately 152 patients. We have completed the planned enrollment in the Phase 1b safety run-in portion of the trial and the Phase 3 efficacy portion of the trial is open for accrual. We reported safety and preliminary activity data from the patients in the safety run-in portion of the EZH-301 trial at the American Society of Clinical Oncology, or ASCO, Annual Meeting in June 2021.

 

In June 2020, the FDA approved a supplemental New Drug Application, or sNDA, for TAZVERIK for adult patients with relapsed or refractory, or R/R, FL whose tumors are positive for an EZH2 mutation as detected by an FDA-approved test and who have received at least two prior systemic therapies, and adult patients with relapsed or refractory FL who have no satisfactory alternative treatment options. These indications were approved under accelerated approval with a priority review, based on overall response rate and duration of response data shown in the FL cohorts of our Phase 2 clinical trial in patients with EZH2 mutations and wild-type EZH2. We continue to make TAZVERIK available to eligible patients and their physicians in the United States.

 

As part of the accelerated approval for FL, continued approval for these R/R FL indications is contingent upon verification and description of clinical benefit in a confirmatory trial. To provide this confirmatory evidence to support a full approval of TAZVERIK for these indications, we are conducting a single global, randomized, adaptive Phase 1b/3 confirmatory trial (EZH-302, SYMPHONY-1) assessing the combination of tazemetostat with “R2” (lenalidomide and rituximab), an approved chemotherapy-free treatment regimen, compared with R2 plus placebo for R/R FL patients in the second-line or later treatment setting. We plan to seek to leverage the confirmatory trial and also conduct post-marketing commitments to expand the TAZVERIK label into the second-line treatment setting.

 

In December 2021 we presented updated safety and activity data from the Phase 1b safety run-in portion of the SYMPHONY-1 confirmatory trial at the 2021 American Society of Hematology, or ASH, Annual Meeting. In June 2022, we presented updated safety and activity data from the Phase 1b at the ASCO Annual Meeting in Chicago. We continue to follow the 40 patients in the Phase 1b safety run-in portion of the trial, and we anticipate providing longer term follow-up data from the Phase 1b portion of the trial at a medical conference later in 2022.

 

We expect that the Phase 3 portion of the SYMPHONY-1 trial will be a global, randomized and adaptive confirmatory trial in 500 patients. Based on the Phase 1b safety run-in results, in December 2021 we submitted a protocol amendment to the FDA with 800 mg twice-daily as the recommended tazemetostat dose, or RP3D, for the Phase 3 portion of the trial and have completed the 30-day voluntary waiting period following submission of the protocol amendment for 800 mg RP3D without any objection from the FDA. In March 2022, we dosed the first patient in the randomized Phase 3 portion of the SYMPHONY-1 trial. The SYMPHONY-1 trial is open globally and is actively screening and enrolling patients. The primary endpoint for the Phase 3 portion of the trial will be based on progression free survival as determined by investigator. Based on discussions with the FDA, this portion of the trial will include two interim analyses, the first of which is for futility only and the second of which will be conducted for futility, and if 65% of progression free survival events have occurred, the trial will also include an efficacy evaluation. In July 2021 China’s Center for Drug Evaluation, or CDE, approved the Investigational New Drug Application, or IND, we filed in China for SYMPHONY-1.

 

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Through our planned development efforts, our intention is to eventually make TAZVERIK available in all lines of treatment for patients with FL. In collaboration with The Lymphoma Study Association, or LYSA, and based on clinical activity observed with tazemetostat in combination with R-CHOP (rituximab, cyclophosphamide, doxorubicin, vincristine and prednisolone) as a front-line treatment for patients with high risk diffuse large B-cell lymphoma, or DLBCL, LYSA is conducting a Phase 1b/2 clinical trial to evaluate this combination as a front-line treatment for high-risk patients with FL and DLBCL. The Phase 1b portion of the trial has completed, and patient enrollment in the Phase 2 portion of this trial is complete. In collaboration with LYSA, we expect that top-line results from the Phase 2 portion of this trial will be shared in the second half of 2022. We are also finalizing plans for investigator-sponsored studies to evaluate tazemetostat in combination with venetoclax or BTK inhibitors for the treatment of patients with FL in the third-line or later treatment settings.

 

We are also developing tazemetostat for the treatment of a broad range of other cancer types in multiple treatment settings. Tazemetostat has shown meaningful clinical activity as an investigational monotherapy in multiple cancer indications and has been generally well-tolerated across clinical trials to date. We believe tazemetostat is a “pipeline in a product” opportunity and plan to explore its potential utility in additional indications and combinations.

 

There are four areas where we see the greatest potential for tazemetostat, all of which are based on a strong scientific hypothesis and are for patients suffering from diseases that would benefit from a new effective and safe treatment option, including:
 

Lymphomas and B-cell malignancies, such as DLBCL, mantle cell lymphoma, or MCL, multiple myeloma and others;
 
Molecularly defined solid tumors, such as chordoma, melanoma, mesothelioma, and tumors harboring an EZH2 or SWI/SNF alteration;
 
PARPi-resistant tumors, such as castration-resistant prostate cancer, small cell lung cancer, and others; and
Immuno-oncology sensitive tumors, such as small cell lung cancer, prostate cancer and others.
 

 

As part of these broader tazemetostat development efforts, we are conducting a global, multi-center, open-label randomized Phase 1b/2 trial (EZH-1101, CELLO-1). The Phase 2 efficacy portion of the CELLO-1 trial, which is evaluating tazemetostat plus enzalutamide compared to enzalutamide monotherapy in patients with metastatic castration-resistant prostate cancer, or mCRPC, has completed enrollment with a total of 80 patients. We expect to present updated data from the safety run-in portion of the trial later in 2022.

 

To efficiently evaluate tazemetostat’s potential safety and efficacy across multiple types of hematological malignancies, we initiated a signal-finding Phase 1b/2 basket study (ARIA, EZH-1501) evaluating tazemetostat with multiple combinations in hematological malignancies in December 2021. We continue to screen patients for enrollment in this study.

 

We own the global development and commercialization rights to tazemetostat outside of Japan and greater China. Eisai holds the rights to develop and commercialize tazemetostat in Japan, and Hutchmed Group Investment Limited (formerly known as Hutchison China MediTech Investment Limited), or Hutchmed, holds certain rights to develop and commercialize tazemetostat in greater China.

 

TAZVERIK is available to eligible patients in the United States via a specialty distribution network. Through this specialty distribution network, we sell TAZVERIK principally to a limited number of specialty pharmacies, which dispense the product directly to patients, and specialty distributors, which in turn sell the product to hospital pharmacies and community practice pharmacies for the treatment of patients. To commercialize TAZVERIK for the approved ES and FL indications in the United States, we have built a focused field presence and marketing capabilities.
 

 

On August 7, 2021, we entered into a strategic collaboration pursuant to a license agreement with HutchMed, or the HutchMed License Agreement, through which we granted a license to HutchMed for the co-exclusive (with us) development and exclusive commercialization of tazemetostat, either as monotherapy or as a part of combinations with other therapies, including HutchMed proprietary compounds, agreed by us and HutchMed for the treatment of ES, FL and DLBCL in humans, and any additional indications agreed to by us and HutchMed in mainland China, Taiwan, Hong Kong and Macau, or the HutchMed Territory. On May 6, 2022, we agreed with HutchMed to amend the terms of the HutchMed License Agreement to clarify certain development and regulatory responsibilities of the parties in the HutchMed Territory, among other things.

 

36


 

For other geographies outside the United States, we are evaluating the most efficient path to obtain marketing approval, commercialize and distribute TAZVERIK to reach patients, including pursuing potential strategic collaborations.

 

Beyond tazemetostat, we are utilizing our drug discovery platform to progress preclinical efforts and discover and identify additional product candidates to expand our pipeline of inhibitors against several classes of chromatin modifying proteins, or CMPs, including HMTs, histone acetyltransferases, or HATs, and helicases.

 

Our most advanced product candidate, EZM0414, is a novel first-in-class oral inhibitor of the SETD2 HMT. SETD2 is an HMT that plays multiple important roles in oncogenesis. Based on the potential of SETD2 inhibition demonstrated in multiple preclinical settings, including multiple myeloma, and in particular high risk t(4;14) multiple myeloma and in other B-cell malignancies such as DLBCL, as well as in combination with existing and emerging therapies including tazemetostat, we submitted an IND for EZM0414 to the FDA in July 2021. We received “study may proceed” from the FDA with respect to our IND for EZM0414 in July 2021. In October 2021, EZM0414 was granted Fast Track designation by the FDA in adult patients with relapsed or refractory DLBCL and in January 2022 we received orphan drug designation from the FDA for EZM0414 for the treatment of multiple myeloma. In the fourth quarter of 2021, we initiated a Phase 1/1b trial (SET-101) intended to evaluate the safety and optimize the dose and schedule of EZM0414 in R/R multiple myeloma and DLBCL patients. The Phase 1 portion of our SET-101 trial is a Bayesian optimal interval dose escalation design and includes six planned dose levels ranging from 100 mg to 900 mg once daily. Once we have optimized the dose, we then expect to expand the trial to two patient cohorts in multiple myeloma: t(4;14) multiple myeloma and non t(4;14) multiple myeloma. Based on dose optimization data from the trial, we may add a third patient cohort in DLBCL. In June 2022, dosing of the first patient in the Phase 1 portion of the SET-101 trial was completed. We continue to screen patients for enrollment for the Phase 1 dose escalation portion of the SET-101 trial, which we expect will enroll between 30-36 patients.

 

Through June 30, 2022, in addition to revenues from product sales, we have raised an aggregate of $1,650.2 million to fund our operations. This includes $268.8 million of non-equity funding through our collaboration agreements, $368.1 million of funding, consisting of $150.0 million in equity funding received through agreements with RPI, and $218.1 million in debt financing received through a loan agreement with BioPharma Credit Investments V (Master) LP and BPCR Limited Partnership (as transferee of BioPharma Credit Investments V (Master) LP’s interest as a lender), or the Lenders, $937.3 million from the sale of common stock and Series A Preferred Stock in our public and at-the-market offerings and $76.0 million from the sale of redeemable convertible preferred stock in private financings prior to our initial public offering in May 2013.

 

As of June 30, 2022, we had $144.4 million in cash, cash equivalents and marketable securities. In January 2022, we raised approximately $79.5 million in net proceeds (after deducting underwriting discounts and commissions and estimated offering costs) from the sale of 56,666,667 shares of its common stock in a public offering at a price of $1.50 per share.

 

We commenced active operations in early 2008, and since inception, have incurred significant operating losses. Our net loss was $92.3 million for the six months ended June 30, 2022. As of June 30, 2022, our accumulated deficit totaled $1,331.1 million. Notwithstanding our sales of TAZVERIK, we expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect our expenses to increase in connection with our ongoing activities, particularly as we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In addition, we expect our expenses to increase as we fund our tazemetostat development program; make any milestone and royalty payments provided for and achieved under the amended and restated collaboration and license agreement with Eisai; pay interest and principal associated with our amended and restated loan agreement with BioPharma Credit Investments V (Master) LP, BPCR Limited Partnership and BioPharma Credit PLC, or the Amended and Restated Loan Agreement; and continue research and development and initiate clinical trials of, and seek regulatory approval for, any future product candidates.

 

Funding Agreements with BioPharma Credit Investments V (Master) LP, BPCR Limited Partnership, BioPharma Credit PLC and RPI Finance Trust

 

We executed the RPI Purchase Agreement on November 4, 2019. Pursuant to the RPI Purchase Agreement, we sold to RPI 6,666,667 shares of our common stock and a warrant to purchase up to 2,500,000 shares of our common stock at an exercise price of $20.00 per share, or the Common Stock Warrant. We also sold our rights to receive royalties from Eisai with respect to net sales by Eisai of tazemetostat products in Japan, or the Japan Royalty, pursuant to the amended and restated collaboration and license agreement between us and Eisai, dated as of March 12, 2015, or the Eisai License Agreement. In consideration for the sale of shares of our common stock, the Common Stock Warrant and the Japan Royalty, RPI paid us $100.0 million upon the closing of the RPI Purchase Agreement in November 2019. In addition, RPI agreed, in connection with RPI’s acquisition from Eisai of the right to receive royalties from us under the Eisai License Agreement, to reduce our royalty obligation by low single digits upon the achievement of specified annual net sales levels. We also had the option to sell to RPI $50.0 million of shares of common stock for an 18-month

37


 

period beginning November 4, 2019, or the Put Option. On February 11, 2020, we sold 2,500,000 shares of common stock to RPI for an aggregate of $50.0 million in proceeds at a sale price of $20.00 per share of common stock pursuant to the Put Option.

 

On November 4, 2019, we also entered into a Loan Agreement with BioPharma Credit PLC, or the Collateral Agent, and the Lenders, providing for up to $70.0 million in secured term loans to be advanced in up to three tranches, or the Loan Agreement. We borrowed $70.0 million in the aggregate under the three tranches pursuant to the Loan Agreement.

 

On November 3, 2020, we, the Collateral Agent and the Lenders amended and restated the Loan Agreement, or, as amended and restated, the Amended and Restated Loan Agreement. The Amended and Restated Loan Agreement provides for, among other things, an additional secured term loan facility of $150.0 million, or the Tranche D Loan. On November 18, 2020, we borrowed the Tranche D Loan.

 

The obligations under the Amended and Restated Loan Agreement remain secured by a first priority security interest that was granted at the time of the Loan Agreement in and a lien on substantially all of our assets, subject to certain exceptions.

 

The Amended and Restated Loan Agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default applicable to us and our subsidiaries. If an event of default occurs and is continuing, the Collateral Agent under the Amended and Restated Loan Agreement may, among other things, accelerate the loans and foreclose on the collateral. The Company has agreed to terminate all commitments under the Amended and Restated Loan Agreement and repay the loans in connection with the closing of the Merger. See Note 14, Long-Term Debt, of the notes to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of the key terms of the Amended and Restated Loan Agreement.

Results of Operations

Revenues

The following is a comparison of total revenues for the three and six months ended June 30, 2022 and 2021:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

 

 

(In millions)

 

 

(In millions)

 

Product revenues, net

 

$

11.0

 

 

$

8.0

 

 

$

3.0

 

 

$

19.7

 

 

$

14.2

 

 

$

5.5

 

Collaboration and other revenue

 

 

16.5

 

 

 

5.0

 

 

 

11.5

 

 

 

16.5

 

 

 

6.5

 

 

 

10.0

 

Total revenues

 

$

27.5

 

 

$

13.0

 

 

$

14.5

 

 

$

36.2

 

 

$

20.7

 

 

$

15.5

 

 

Product Revenues, net

 

Net product revenues represent U.S. sales from our sole commercial product, TAZVERIK, which was first approved by the FDA on January 23, 2020, less allowances and discounts. During the three months ended June 30, 2022 and 2021, net product revenues were $11.0 million and $8.0 million, respectively. The $3.0 million increase reflects the increase in TAZVERIK product sales. During the six months ended June 30, 2022 and 2021, net product revenues were $19.7 million and $14.2 million, respectively. The $5.5 million increase reflects an increase in TAZVERIK product sales. Sales allowances and discounts consisted of patient financial assistance, distribution fees, discounts, and chargebacks. Net product revenues in the three months ended June 30, 2022 and 2021 included $2.1 million and $3.2 million, respectively, of sale of commercial product by one of our customers to a third-party pharmaceutical company for use in its clinical trials.

 

Collaboration and Other Revenue

 

Our collaboration and other revenue during the periods included amounts recognized from deferred revenue related to upfront payments for licenses or options to obtain licenses in the future, research and development services revenue earned, milestone payments earned under collaboration and license agreements with our collaboration partners and revenue from the sale of tazemetostat active pharmaceutical ingredient (API) and drug product to our licensees and collaborators.

 

In the three and six months ended June 30, 2022, we recognized $16.5 and $16.5 million, respectively, in collaboration and other revenue. This collaboration revenue was recognized as part of the HutchMed License Agreement for the supply of tazemetostat drug substance, the manufacture and supply of tazemetostat and development services. Prior to the May 6, 2022, amendment to the HutchMed License Agreement, the agreement provided that if the EZH-302 global trial not been deemed a confirmatory trial for

38


 

purposes of regulatory approval in China, we would have been responsible for reimbursing HutchMed for the costs of the portion of the EZH-302 global trial that would be performed in China. We had previously concluded that this potential repayment provision represented variable consideration under the arrangement. Due to the uncertainty of potential repayment, which was based solely on the decision of a regulatory authority, we could not assert that it was probable that a significant reversal of revenue would not occur. As a result, we determined that the transaction price should be fully constrained. Pursuant to the May 6, 2022, amendment to the HutchMed License Agreement, this potential repayment provision was removed and we concluded that the full upfront fee and reimbursement of research and development services should be included in the transaction price and recognized as revenue. The collaboration and other revenue in the three and six months ended June 30, 2022 includes less than $0.1 million of non-cash royalties from net sales of tazemetostat in Japan. The collaboration and other revenue of $5.0 million and $6.5 million in the three and six months ended June 30, 2021, respectively, was recognized as part of our supply agreement with Eisai for the waiver of its exclusive right to its manufacturer for the supply of tazemetostat drug substance, the manufacture and supply of tazemetostat and technical support services.

 

Cost of Revenue

The following is a comparison of cost of revenue for the three and six months ended June 30, 2022 and 2021:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

 

 

(In millions)

 

 

(In millions)

 

Cost of product revenue

 

$

2.9

 

 

$

2.5

 

 

$

0.4

 

 

$

5.5

 

 

$

4.5

 

 

$

1.0

 

Cost of other revenue

 

 

2.3

 

 

 

 

 

 

2.3

 

 

 

2.3

 

 

 

0.8

 

 

 

1.5

 

Total cost of revenue

 

$

5.2

 

 

$

2.5

 

 

$

2.7

 

 

$

7.8

 

 

$

5.3

 

 

$

2.5

 

 

Cost of revenue primarily consists of costs related to our product revenue for the sales of TAZVERIK and sales of tazemetostat API and finished goods to our collaborators or licensors. Cost of product revenue includes materials, labor, manufacturing overhead, amortization of milestone payments, and royalties payable on net sales of TAZVERIK, while cost of other revenue includes materials, labor and manufacturing overhead. During the three months ended June 30, 2022 and 2021, the cost of product revenue was $2.9 million and $2.5 million, respectively, and consisted of $0.5 million and $0.3 million, respectively, in costs associated with manufacturing TAZVERIK, $1.0 million and $1.0 million, respectively, in amortization expense related to the two $25.0 million milestone payments we paid under our agreement with Eisai upon regulatory approval of TAZVERIK for ES and upon regulatory approval of TAZVERIK for FL, and $1.3 million and $1.2 million, respectively, in worldwide royalties due under the Eisai License Agreement on net sales of TAZVERIK. Cost of other revenue during the three months ended June 30, 2022 consisted of $2.3 million of costs related to the sale of tazemetostat drug substance to HutchMed. We did not have cost of other revenues in the three months ended June 30, 2021.

 

During the six months ended June 30, 2022 and 2021, cost of product revenue was $5.5 million and $4.5 million, respectively, and consisted of $0.8 million and $0.3 million, respectively, in costs associated with manufacturing TAZVERIK, $2.1 million and $2.1 million, respectively, in amortization expense related to the two $25.0 million milestone payments we paid under the Eisai License Agreement upon regulatory approval of TAZVERIK for ES and upon regulatory approval of TAZVERIK for FL, and $2.6 million and $2.1 million, respectively, in worldwide royalties due under the Eisai License Agreement on net sales of TAZVERIK. Cost of other revenue during the six months ended June 30, 2022 consisted of $2.3 million of costs related to the sale of tazemetostat drug substance to HutchMed. Cost of other revenue during the six months ended June 30, 2021 consisted of $0.8 million of costs related to the sales of tazemetostat drug product to Eisai.

 

Research and Development

 

Research and development expenses consist of expenses incurred in performing research and development activities, including clinical trials and related clinical manufacturing expenses, fees paid to external providers of research and development services, third-party clinical research organizations, or CROs, compensation and benefits for full-time research and development employees, facilities expenses, overhead expenses, and other outside expenses. Most of our research and development costs are external costs, which we track on a program-by-program basis. Our internal research and development costs are primarily compensation expenses for our full-time research and development employees, including stock-based compensation expense.

 

The following is a comparison of research and development expenses for the three and six months ended June 30, 2022 and 2021:

39


 

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

 

 

(In millions)

 

 

(In millions)

 

Research and development

 

$

28.1

 

 

$

34.9

 

 

$

(6.8

)

 

$

57.8

 

 

$

67.6

 

 

$

(9.8

)

 

During the three and six months ended June 30, 2022, total research and development expenses decreased by $6.8 million and $9.8 million, respectively, compared to the three and six months ended June 30, 2021. The decrease related to decreases in our clinical trial expenses and discovery research activities related to tazemetostat in other indications as well as discovery and preclinical stage product programs, which were offset by increases in clinical trial expenses and discovery research activities related to EZM0414, our SETD2 inhibitor program. Additionally, severance and termination-related costs totaling $0.8 million were recorded in the first quarter of 2022 and included in the six months ended June 30, 2022 related to the March 2022 operating expense reductions. There were no such severance and termination related costs incurred during the three months ended June 30, 2022.

 

The following table illustrates the components of our research and development expenses:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

Product Program

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

 

 

(In millions)

 

 

(In millions)

 

External research and development expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tazemetostat and related EZH2 programs

 

$

11.7

 

 

$

15.3

 

 

$

(3.6

)

 

$

23.8

 

 

$

27.0

 

 

$

(3.2

)

 SETD2 inhibitor EZM0414 program

 

 

1.3

 

 

 

 

 

 

1.3

 

 

 

2.5

 

 

 

 

 

 

2.5

 

Discovery and preclinical stage product programs, collectively

 

 

1.4

 

 

 

5.9

 

 

 

(4.5

)

 

 

3.1

 

 

 

11.7

 

 

 

(8.6

)

Unallocated personnel and other expenses

 

 

13.7

 

 

 

13.7

 

 

 

0.0

 

 

 

28.4

 

 

 

28.9

 

 

 

(0.5

)

Total research and development expenses

 

$

28.1

 

 

$

34.9

 

 

$

(6.8

)

 

$

57.8

 

 

$

67.6

 

 

$

(9.8

)

 

External research and development expenses include external manufacturing costs related to the acquisition of active pharmaceutical ingredient and manufacturing of clinical drug supply, ongoing clinical trial costs, discovery and preclinical research in support of the tazemetostat, EZM0414 program, and other pipeline preclinical programs and expenses associated with our companion diagnostic program.

40


 

 

External research and development expenses for tazemetostat and related EZH2 programs decreased $3.6 million and $3.2 million, respectively, for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021. The decrease for the three and six months ended June 30, 2022 relates to decreases in clinical trial expenses related to tazemetostat in other indications.

 

External research and development expenses for EZM0414 increased $1.3 million and $2.5 million, respectively, for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021. We designated the program as a clinical development program in the third quarter of 2021. Prior to the designation of the program as a clinical development program, we allocated costs related to EZM0414 to external research and development expenses for discovery and preclinical stage product programs.

 

External research and development expenses for discovery and preclinical stage product programs decreased by $4.5 million and $8.6 million, respectively, for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021. The decrease is primarily related to a decrease in spending for discovery research activities combined with reduced preclinical costs in connection with EZM0414 as a result of the designation of EZM0414 as a clinical development program in the third quarter of 2021.

 

Unallocated personnel and other expenses are comprised of compensation expenses for our full-time research and development employees and other general research and development expenses. Unallocated personnel and other expenses during the three and six months ended June 30, 2022 decreased $0.1 million and $0.5 million, respectively, compared to the three and six months ended June 30, 2021. The decrease was a result of decreases in facilities and equipment related expenses and in unallocated personnel costs and an increase in the allocation of expenses to projects.

 

We expect that research and development expenses will decrease through 2022, as we continue to implement our operating expense reductions and re-prioritize our investment of company resources in important clinical trials and programs, including our SYMPHONY-1 (EZH-302), CELLO-1 (EZH-1101), ARIA (EZH-1501) and SET-101 trials.

 

Selling, General and Administrative

 

Selling, general and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, intellectual property, business development and support functions. Other selling, general and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses, travel expenses and professional fees for auditing, tax and legal services, including intellectual property and general legal services.

 

The following is a comparison of selling, general and administrative expenses for the three and six months ended June 30, 2022 and 2021:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

 

 

(In millions)

 

 

(In millions)

 

Selling, general and administrative

 

$

24.1

 

 

$

33.9

 

 

$

(9.8

)

 

$

51.3

 

 

$

70.3

 

 

$

(19.0

)

 

For the three and six months ended June 30, 2022, our selling, general and administrative expenses decreased $9.8 million and $19.0 million, respectively, compared to the three and six months ended June 30, 2021. The decrease for the three and six months ended June 30, 2022 compared to the three months ended June 30, 2021 is due to the cross-functional expense reductions starting in August of 2021 and the related decrease in external expenses and personnel related expenses across our selling, general and administrative departments. The decrease was partially offset by severance and termination-related costs totaling $1.7 million which were recorded in the first quarter of 2022 and included in the six months ended June 30, 2022, related to the March 2022 cost reduction plan. There were no such severance and termination related costs incurred during the three months ended June 30, 2022.

 

We expect that selling, general and administrative expenses will decrease through 2022, as we implement changes to our commercial strategy and organization in an effort to accelerate commercial adoption of TAZVERIK in appropriate patients as well as an operational cost reduction across general and administrative functions as part of our prioritization of our investment of company resources in what we believe to be our most important value-driving clinical trials and programs.

 

Other (Expense) Income, Net

 

The following is a comparison of other (expense) income, net for the three and six months ended June 30, 2022 and 2021:

41


 

 

 

 

Three Months Ended
June 30,

 

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

 

2022

 

 

2021

 

 

Change

 

 

 

(In millions)

 

 

 

(In millions)

 

Other (expense) income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

0.2

 

 

$

 

 

$

0.2

 

 

 

$

0.3

 

 

$

0.1

 

 

$

0.2

 

Interest expense

 

 

(5.6

)

 

 

(5.6

)

 

 

0.0

 

 

 

 

(11.2

)

 

 

(11.1

)

 

 

(0.1

)

Other expense, net

 

 

(0.1

)

 

 

 

 

 

(0.1

)

 

 

 

(0.2

)

 

 

(0.1

)

 

 

(0.1

)

Change in fair value of warrants to purchase common stock

 

 

 

 

 

 

 

 

0.0

 

 

-

 

 

1.4

 

 

 

 

 

 

1.4

 

Non-cash interest expense related to sale of future royalties

 

 

(0.4

)

 

 

(0.5

)

 

 

0.1

 

 

 

 

(0.8

)

 

 

(1.0

)

 

 

0.2

 

Other (expense) income, net

 

$

(5.9

)

 

$

(6.1

)

 

$

0.2

 

 

 

$

(10.5

)

 

$

(12.1

)

 

$

1.6

 

 

Other (expense) income, net consists of interest income earned on our cash equivalents and marketable securities, interest expense related to our long-term debt obligations, non-cash changes in the fair value of warrant liabilities and non-cash interest expense related to the sale of future royalties. There was a $0.2 million decrease in other expense for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, principally due to interest income of $0.2 million earned on cash equivalents and marketable securities. The decrease in other expense for the six months ended June 30, 2022 is principally due to income recognized for the $1.4 million decrease in fair value of warrant liability.

 

Income Tax Expense

 

We recorded a federal and state income tax provision for the three and six months ended June 30, 2022 of less than $0.1 million due to the expected and known loss before income taxes to be incurred, or incurred, as applicable, for the year ended December 31, 2022, as well as our continued maintenance of a full valuation allowance against our net deferred tax assets, with the exception of the deferred tax asset related to alternative minimum tax credit. We did not record a federal or state income tax provision or benefit for the three or six months ended June 30, 2021 due to the expected and known loss before income taxes to be incurred, or incurred, as applicable, for the year ended December 31, 2021, as well as our continued maintenance of a full valuation allowance against our net deferred tax assets, with the exception of the deferred tax asset related to alternative minimum tax credit.

Liquidity and Capital Resources

 

Through June 30, 2022, in addition to revenues from product sales, we have raised an aggregate of $1,650.2 million to fund our operations. This includes $268.8 million of non-equity funding through our collaboration agreements, including the $25.0 million upfront payment received from HutchMed in September 2021, $368.1 million of funding, consisting of $150.0 million in equity funding received through agreements with RPI and $218.1 million in debt financing received through a loan agreement with BioPharma Credit Investments V (Master) LP and BPCR Limited Partnership (as transferee of BioPharma Credit Investments V (Master) LP’s interest as a lender), $937.3 million from the sale of common stock and Series A Preferred Stock in our public offerings and at-the-market offerings and $76.0 million from the sale of redeemable convertible preferred stock in private financings prior to our initial public offering in May 2013. As of June 30, 2022, we had $144.4 million in cash, cash equivalents and marketable securities.

 

In January 2022, we raised approximately $79.5 million in net proceeds (after deducting underwriting discounts and commissions and estimated offering costs, but excluding any expenses and other costs reimbursed by the underwriters) from the sale of 56,666,667 shares of our common stock in a public offering at a price of $1.50 per share.

 

On May 6, 2021, we entered into the ATM Sale Agreement with Jefferies to sell, from time to time, shares of our common stock having an aggregate offering price of up to $200,000,000 through an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, under which Jefferies would act as sales agent. The shares that may be sold under the ATM Sale Agreement, if any, are issued and sold pursuant to our shelf registration statement on Form S-3 that was declared effective by the SEC on May 13, 2021. From the initiation of the ATM Offering through June 30, 2022, we have issued and sold 5,314,135 shares under the ATM Sale Agreement, resulting in aggregate net proceeds of $18.3 million after deducting issuance costs of $0.6 million. There were no shares issued or sold under the ATM Sale Agreement during the three months ended June 30, 2022.

 

In addition to our existing cash, cash equivalents and marketable securities, we are eligible to earn milestone payments under our collaboration agreement with HutchMed. Our ability to earn these payments and the timing of earning these payments is dependent upon the outcome of our research and development activities and is uncertain at this time.

 

42


 

On July 12, 2022, we received a letter of determination of compliance from the Nasdaq Listing Qualifications Department staff notifying us that the staff had determined that for 10 consecutive business days, from June 27, 2022 to July 11, 2022, the closing bid price of our common stock had been at $1.00 per share or greater. Accordingly, the Nasdaq Listing Qualification Department staff notified us that we have regained compliance with Listing Rule 5450(a)(1) and the matter is now closed.

 

As of June 30, 2022, we had cash and cash equivalents of $71.1 million. We believe that our existing cash and cash equivalents will not enable us to fund our operating expenses and capital expenditure requirements for 12 months from the date the financial statements are issued. After considering various risks and uncertainties as prescribed by Accounting Standards Update No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we concluded that there is substantial doubt about our ability to continue as a going concern as of the date of issuance of the financial statements without additional capital.

 

Funding Requirements

 

Our primary uses of capital are clinical trial costs, third-party research and development services, expenses related to commercialization, debt service obligations, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses and general overhead costs.

 

Because the continued approval of TAZVERIK in the approved indications is contingent upon verification and description of clinical benefit in confirmatory trials, and because we are developing tazemetostat for other indications, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of TAZVERIK for the approved indications or the indications that we are exploring or that we may plan to explore. Because EZM0414 is an early clinical product candidate and any future product candidates are in various stages of preclinical development with uncertain outcomes, we also cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EZM0414 or future product candidates. Because of these uncertainties, we also cannot estimate whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements. Except for any obligations of our collaborators to make license, milestone or royalty payments under our agreements with them, we do not have any committed external sources of liquidity. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise any additional funds that may be needed through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

Outlook

 

Based on our current operating plan, we expect that our existing cash, cash equivalents and marketable securities as of June 30, 2022, will be sufficient to fund our planned operating expenses and capital expenditure requirements and pay our debt service obligations as they become due into the third quarter of 2023, without giving effect to any potential milestone payments we may receive under our collaboration agreements. However, we do not believe this is sufficient to conclude that we have sufficient funding to continue as a going concern through at least 12 months past the filing date of this Form 10-Q with the SEC and have consequently concluded there is substantial doubt to our ability to continue as a going concern. We have based this estimate on assumptions that may prove to be wrong, such as the revenue that we expect to generate from the sale of our products, or as to our clinical development costs, particularly as the process of testing drug candidates in clinical trials is costly and the timing of progress in these trials is uncertain. As a result, we could use our capital resources sooner than we expect.

 

Cash Flows

 

The following is a summary of cash flows for the six months ended June 30, 2022 and 2021:

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

Change

 

 

 

(In millions)

 

Net cash (used in) operating activities

 

$

(114.0

)

 

$

(132.2

)

 

$

18.2

 

Net cash provided by investing activities

 

 

4.5

 

 

 

40.7

 

 

 

(36.2

)

Net cash provided by financing activities

 

 

82.2

 

 

 

3.5

 

 

 

78.7

 

 

43


 

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities was $114.0 million during the six months ended June 30, 2022 compared to $132.2 million during the six months ended June 30, 2021. The decrease in net cash used in operating activities primarily relates to our net loss of $91.2 million, changes in working capital of $35.1 million, and the $1.4 million change in fair value of warrants, partially offset by net depreciation and amortization of $3.3 million, non-cash stock-based compensation of $9.7 million, and non-cash interest expense associated with the sale of future royalties of $0.7 million.

 

Net cash used in operating activities during the six months ended June 30, 2021 primarily relates to our net loss of $134.6 million, changes in working capital of $16.0 million, partially offset by net depreciation and amortization of $3.6 million, non-cash stock-based compensation of $13.7 million, and non-cash interest expense associated with the sale of future royalties of $0.9 million.

 

Net Cash Provided by Investing Activities

 

Net cash used in investing activities during the six months ended June 30, 2022 reflects maturities of available-for-sale securities of $102.0 million, offset by $97.4 million of purchases of available-for-sale securities, and less than $0.1 million of purchases of property and equipment.

 

Net cash provided by investing activities during the six months ended June 30, 2021 reflects maturities of available-for-sale securities of $211.5 million, offset by $170.7 million of purchases of available-for-sale securities, and $0.2 million of purchases of property and equipment.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities of $82.5 million during the six months ended June 30, 2022 primarily reflects net proceeds from the sale of common stock through a public offering and under the ATM Sale Agreement of $82.3 million, and the purchases of shares under our employee stock purchase plan of $0.4 million, partially offset by the payment of offering costs of $0.4 million related to the public offering.

 

Net cash provided by financing activities of $3.5 million during the six months ended June 30, 2021 reflects net proceeds from the sale of common stock under the ATM Sale Agreement of $1.5 million, the purchases of shares under our employee stock purchase plan of $1.2 million and stock option exercises of $0.9 million.

 

Critical Accounting Estimates

 

Our management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheets and the reported amounts of collaboration revenue, inventory and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time such estimates are made. Actual results and outcomes may differ materially from our estimates, judgments and assumptions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the consolidated financial statements prospectively from the date of the change in estimate.

 

We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. Management has determined that our most critical accounting policies are those relating to revenue recognition, research and development expenses, including our accounting for clinical trial expense and accruals, inventory and going concern. As our clinical development plan for tazemetostat and EZM0414 progresses, we expect research and development expenses and, in particular, our accounting for clinical trial accruals to be an increasingly important critical accounting policy.

 

During the six months ended June 30, 2022, there have been no material changes with respect to our critical accounting estimates disclosed in our Annual Report on Form 10-K for our fiscal year ended December 31, 2021.

 

Recently Adopted Accounting Pronouncements

 

44


 

For detailed information regarding recently issued accounting pronouncements and the expected impact on our condensed consolidated financial statements, see Note 2, Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements, in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

45


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of June 30, 2022, we had cash, cash equivalents and marketable securities of $144.4 million, consisting of money market funds, corporate bonds, commercial paper and government-related obligations. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. We estimate that a hypothetical 100-basis point change in market interest rates would impact the fair value of our investment portfolio as of June 30, 2022 by $0.2 million.

We contract with contract research organizations and manufacturers globally. Transactions with these providers are predominantly settled in U.S. dollars and, therefore, we believe that we have only minimal exposure to foreign currency exchange risks. We do not hedge against foreign currency risks.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosure.

Our management, under the supervision and with the participation of the principal executive officer (our President and Chief Executive Officer) and the principal financial officer (our President and Chief Executive Officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on such evaluation, our President and Chief Executive Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2022.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

 

 

As of August 9, 2022, eight complaints have been filed in federal court by purported stockholders of the Company regarding the Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Ipsen Pharma SAS, a French société par actions simplifiée (the “Parent”), and Hibernia Merger Sub, Inc., a Delaware corporation (the “Purchaser”) and a wholly owned subsidiary of Ipsen Biopharmaceuticals, Inc., a Delaware corporation, dated as of June 27, 2022. On July 12, 2022, a putative stockholder complaint was filed in the United States (U.S.) District Court for the Southern District of New York (S.D.N.Y.), captioned Stein v. Epizyme, Inc., et al., No. 1:22-cv-5934. On July 14, 2022, a second putative stockholder complaint was filed against the same parties in the U.S. District Court for the S.D.N.Y., captioned Calimer v. Epizyme, Inc., et al., No. 1:22-cv-06027. The same day, a third putative stockholder complaint was filed against the same parties in the U.S. District Court for the S.D.N.Y., captioned Wang v. Epizyme, Inc., et al., No. 1:22-cv-06031. On July 18, 2022, a fourth putative stockholder complaint was filed against the same parties in the U.S. District Court for the S.D.N.Y., captioned Nguyen v. Epizyme, Inc., et al., No. 1:22-cv-06091. On July 20, 2022, a fifth putative stockholder complaint was filed against the same parties in the U.S. District Court for the S.D.N.Y., captioned Savage v. Epizyme, Inc., et al., No. 1:22-cv-06165 (the "Savage Complaint"). On July 22, 2022, a sixth putative stockholder complaint was filed against the same parties in the U.S. District Court for the District of Delaware, captioned Wilson v. Epizyme, Inc., et al., No. 1:22-cv-00961-UNA. On July 25, 2022, a seventh putative stockholder complaint was filed in the U.S. District Court for the S.D.N.Y., captioned Johnson v. Epizyme, et al., No. 1:22-cv-06294. On July 28, 2022, an eighth putative stockholder complaint was filed in the U.S. District Court for the S.D.N.Y., captioned Chbani v. Epizyme, et al., No. 1:22-cv-06432 (collectively, the “Complaints”). The Complaints name as defendants the Company and each member of our board of directors. The Complaints allege, among other things, that the Company and each member of our board of directors violated federal securities laws and regulations through a Solicitation Statement intended to induce them to tender their shares in connection with the transaction that purportedly omits material facts necessary to make the statements therein not false or misleading. The Complaints seek, among other relief, (i) injunctive relief

46


 

preventing the consummation of the transaction contemplated by the Merger Agreement; (ii) rescission or rescissory damages in the event the Merger Agreement is implemented; (iii) other damages purportedly incurred on account of defendants’ alleged misstatements or omissions; (iv) dissemination of an Amendment to the Schedule 14D-9 that discloses certain information requested by the plaintiffs; (v) declaratory relief stating defendants violated the Exchange Act of 1934, as amended; and (vi) an award of plaintiffs’ expenses and attorneys’ fees. The Company believes that the allegations asserted in the Complaints are without merit. The Savage Complaint was voluntarily dismissed by the plaintiff on August 7, 2022. Additional lawsuits arising out of or relating to the Merger Agreement may be filed in the future.

 

Item 1A. Risk Factors

 

The following information updates, and should be read in conjunction with, the risk factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, or the 2021 10-K. Any of the risk factors contained in the 2021 10-K and in this Quarterly Report on Form 10-Q could materially affect our business, financial condition or future results, and such risk factors may not be the only risks we face. The COVID-19 pandemic has heightened, and in some cases manifested, certain of the risks we normally face in operating our business, including those disclosed in the 2021 10-K, and the risk factor disclosure in the 2021 10-K is qualified by the information relating to COVID-19 that is described in this Quarterly Report on Form 10-Q. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

 

Risks Related to Pending Transaction with Ipsen Pharma SAS

 

We may not complete the pending transaction with Ipsen Pharma SAS within the time frame we anticipate or at all, which could have an adverse effect on our business, financial results and/or operations.
 

 

On June 27, 2022, we entered into the Merger Agreement. The Merger Agreement provides for, among other things and on the terms and subject to the conditions set forth therein, a two-step transaction in which the first step is a tender offer (the “Offer”) by the Purchaser to acquire all of the Company’s outstanding shares of common stock for (i) $1.45 per share of common stock, net to the seller in cash, without interest (the “Cash Consideration”) and (ii) one (1) contractual contingent value right (a “CVR”) per share of common stock (the “CVR Consideration”; the Cash Consideration and the CVR Consideration are collectively referred to as the “Offer Price”), pursuant to the terms of the Contingent Value Right Agreement in substantially the form attached as Exhibit C to the Merger Agreement (the “CVR Agreement”). The Merger Agreement provides that, among other things, as soon as practicable after the consummation of the tender offer, and subject to the satisfaction or waiver of the conditions to the merger, and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), the Purchaser will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and a wholly owned subsidiary of the Parent. Because the Merger will be governed by Section 251(h) of the DGCL, assuming the requirements of Section 251(h) of the DGCL are met, no stockholder vote by our stockholders will be required to consummate the Merger. We currently expect the Offer and the Merger to be completed in the third quarter of 2022.
 

 

If the transaction is not completed within the expected time frame or at all, we may be subject to a number of material risks in addition to the risks of continuing to operate our business. The price of our common stock may decline to the extent that current market prices of our common stock reflect a market assumption that the Merger will be completed on a timely basis. We could be required to pay the Parent a termination fee of $9.9 million if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement. The failure to complete the transaction also may result in negative publicity and negatively affect our relationship with our stockholders, employees, strategic partners, suppliers, and lenders. We may also be required to devote significant time and resources to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against us to perform our obligations under the Merger Agreement.

 

The Company’s ability to complete the Merger is subject to certain closing conditions and the receipt of consents and approvals from government entities that may impose conditions that could adversely affect the Company or cause the Merger to be abandoned.
 

 

The Merger Agreement contains certain closing conditions, including, among others, (i) that the number of shares of common stock validly tendered and not validly withdrawn, together with any shares of common stock beneficially owned by the Parent or any subsidiary of the Parent, equals at least one share more than one-half of all shares of common stock then outstanding, (ii) the absence of any legal impediment that has the effect of preventing or prohibiting or making illegal the consummation of the Offer or the Merger; (iii) compliance in all material respects by the Company with its covenants and obligations required to be performed or

47


 

complied with by it under the Merger Agreement at or prior to the time at which the Purchaser irrevocably accepts for purchase all shares of common stock validly tendered (and not validly withdrawn) pursuant to the Offer; (iv) the continued accuracy of representations and warranties made by the Company in the Merger Agreement, except as permitted by the Merger Agreement; (v) that any waiting period (and any extensions thereof) and any approvals or clearances applicable to the Offer or the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), shall have expired, been terminated or obtained, as applicable; and (vi) other customary conditions. The Company cannot provide any assurance that the conditions to the consummation of the Merger will be satisfied or waived, or will not result in the abandonment or delay of the Merger.
 

 

The granting of regulatory approvals pursuant to the HSR Act could involve the imposition of additional conditions on the closing of the Merger. The imposition of such conditions or the failure or delay to obtain regulatory approvals could have the effect of delaying completion of the Merger or of imposing additional costs or limitations on the Company or may result in the failure to close the Merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, or may contain conditions on the completion of the Merger.

 

The pendency of the transaction with the Parent and the Purchaser could adversely affect our business, financial results and/or operations.

 

Our efforts to complete the transaction with the Parent and the Purchaser could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the transaction will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following consummation of the transaction. A substantial amount of our management’s and employees’ attention is being directed toward the completion of the transaction and thus is being diverted from our day-to-day operations. Uncertainty as to our future could adversely affect our business and our relationship with strategic partners, suppliers, and lenders. Changes to or termination of existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.


 

We are and may continue to be targets of securities class action and derivative lawsuits which could result in
substantial costs and may delay or prevent the Merger from being completed.


 

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered
into merger agreements. To date, eight putative stockholder class action lawsuits have been filed against us, our board of directors and others in connection with the transactions contemplated by the Merger Agreement. We and the other defendants believe the lawsuits are without merit; however, the outcome of all litigation is uncertain and we may not be successful in defending against these claims or any other lawsuits brought against us even if they are without merit. Regardless of the outcome of these lawsuits or any other lawsuits brought against us, such lawsuits could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business, result in substantial costs and otherwise adversely affect us financially. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, that injunction may delay or prevent the Merger from being completed, or from being completed within the expected timeframe, which may adversely affect our business, financial position and results of operations.


 

If the Merger occurs, our stockholders will not be able to participate in any financial upside to our business after the Merger other than through the CVRs; if the required milestones under the CVRs are not achieved, stockholders will not realize any value from the CVRs.
 

 

Upon consummation of the Merger, each issued and outstanding share will be converted into the right to receive the Offer Price. Each CVR represents the right to receive contingent payments of cash, payable to a rights agent for the benefit of the holders of the CVRs, of up to $1.00 in the aggregate, if the following milestones are achieved:

 

48


 

The first achievement of regulatory approval by the U.S. Food and Drug Administration (the “FDA”) (including for the avoidance of doubt, accelerated approval), on or prior to January 1, 2028, necessary for the commercial marketing and sale of tazemetostat in the United States as a second line treatment for relapsed or refractory follicular lymphoma in combination with lenalidomide and rituximab; provided, that the Company’s existing accelerated approvals of tazemetostat monotherapy, even if they become full monotherapy approvals, will not satisfy the foregoing requirements (the “FDA Approval Milestone”). Any regulatory approval by the FDA for the commercial marketing and sale of tazemetostat that allows for second line treatment in follicular lymphoma in combination with one or more products that contain lenalidomide and rituximab (including a generic or biosimilar thereof) will be included, regardless of the precise language used in the FDA approval or full prescribing information.


 

The first achievement of at least $250,000,000 in aggregate Net Sales (as defined in the CVR Agreement) by the Parent, any of its affiliates (including the Company (including in its capacity as the surviving corporation in the Merger) or any of its or their licensees (each, a “Selling Party”) to third parties (that are not Selling Parties) for any sales of tazemetostat worldwide (except in, with respect to, or for sale in Japan, the People’s Republic of China, Taiwan, the Hong Kong Special Administrative Region and the Macau Special Administrative Region), during any period of four consecutive calendar quarters ending on or prior to December 31, 2026 (the “Net Sales Milestone” and, together with the FDA Approval Milestone, the “Milestones”).


 

Following the consummation of the Merger, the Parent has agreed to use commercially reasonable efforts to achieve the Milestones. However, there is no guarantee that either of the Milestones will be achieved and the CVRs may expire valueless.

 

The tax treatment of the CVRs is unclear.

 

The U.S. federal income tax treatment of the CVRs is unclear. There is no legal authority directly addressing the
U.S. federal income tax treatment of the receipt of, and payments (if any) under, the CVRs, and there can be no assurance that the Internal Revenue Service would not assert, or that a court would not sustain, a position that could result in adverse U.S. federal income tax consequences to holders of the CVRs.

 

 

In certain instances, the Merger Agreement requires us to pay a termination fee to the Parent, which could require us to use available cash that would have otherwise been available for general corporate purposes.
 

 

Under the terms of the Merger Agreement, we may be required to pay the Parent a termination fee of $9.9 million if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement, including, but not limited to, our entry into an agreement with respect to a superior proposal or a change in the recommendation of our board of directors. If the Merger Agreement is terminated under such circumstances, the termination fee we may be required to pay under the Merger Agreement may require us to use available cash that would have otherwise been available for general corporate purposes and other uses. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. There can be no assurance that our business, our relationships or financial condition will not be materially adversely affected, as compared to our condition prior to the announcement of the transaction, if the transaction is not consummated. For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business operations and financial condition, which in turn would materially and adversely affect the price of our common stock.
 

 

We have incurred, and will continue to incur, direct and indirect costs as a result of the pending transaction with the Parent.

 

We have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs, in connection with the pending transaction. We must pay substantially all of these costs and expenses whether or not the transaction is completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.

 

49


 

The Merger Agreement limits our ability to pursue alternative transactions, which could deter a third party from proposing an alternative transaction.
 

 

The Merger Agreement contains provisions that, subject to certain exceptions, limit our ability to (i) solicit or initiate any inquiries or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, any Acquisition Proposal (as defined in the Merger Agreement); (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any non-public information for the purpose of encouraging or facilitating, any Acquisition Proposal; or (iii) amend, fail to enforce or grant any waiver or release under any standstill or similar agreement with respect to any securities of the Company or any of its Subsidiaries, except to the extent our board of directors (after consultation with outside counsel and financial advisors) determines that the failure to do so would reasonably be expected to be inconsistent with its fiduciary duties under applicable law. It is possible that these or other provisions in the Merger Agreement might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the outstanding shares of our common stock from considering or proposing an acquisition or might result in a potential competing acquirer proposing to pay a lower per share price to acquire our common stock than it might otherwise have proposed to pay.

 

50


 

Item 6. Exhibits

The exhibits filed as part of this Quarterly Report on Form 10-Q are as follows:

 

Exhibit

Number

 

Description of the Exhibit

 

 

 

     2.1

Agreement and Plan of Merger, dated as of June 27, 2022, by and among the Parent, the Purchaser and the Company (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-35945) filed with the Securities and Exchange Commission on June 27, 2022)

 

 

    3.1

Amended and Restated By-laws of the Company (incorporated by reference to the Registration Statement on Form S-1/A (File No. 333-187892) filed with the Securities and Exchange Commission on April 26, 2013)

 

 

    3.2

Amendment to Amended and Restated By-laws of the Company, dated June 26, 2022 (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-35945) filed with the Securities and Exchange Commission on June 27, 2022)

 

 

    3.3

Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to the Registration Statement on Form S-8 (File No. 333-266521) filed with the Securities and Exchange Commission on August 4, 2022)

 

 

  10.1†

Consulting Agreement by and among Epizyme, Inc., BioStrategy, LLC, and Shefali Agarwal dated April 6, 2022 (1)

 

 

  10.2†

Amendment No. 1 to License Agreement between the Company and HUTCHMED Group Investment Limited (formerly known as Hutchison China MediTech Investment Limited) (1)

 

 


  10.3

Form of Support Agreement (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-35945) filed with the Securities and Exchange Commission on June 27, 2022)

 

 


  10.4

Form of Contingent Value Rights Agreement (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-35945) filed with the Securities and Exchange Commission on June 27, 2022)

 

 


  10.5

Severance and Change in Control Plan of the Company (as amended through May 25, 2022) (incorporated by reference to the Company’s Solicitation/Recommendation Statement on Schedule 14D-9 (File No. 005-87481) filed with the Securities and Exchange Commission on July 12, 2022)

 

 


  10.6

Epizyme, Inc. 2022 Equity Incentive Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-35945) filed with the Securities and Exchange Commission on May 19, 2022)

 

 


  10.7

Epizyme, Inc. 2013 Employee Stock Purchase Plan, as amended and effective September 1, 2022 (incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 001-35945) filed with the Securities and Exchange Commission on May 19, 2022)

 

 

   10.8

Form of Option Agreement under the 2022 Equity Incentive Plan (1)

 

 

  31.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)

 

 

  32.1

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, by Grant Bogle, President, Chief Executive Officer, Principal Executive Officer and Principal Financial Officer of the Company (1) (2)

 

 

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

101.SCH

Inline XBRL Schema Document.

 

 

101.CAL

Inline XBRL Calculation Linkbase Document.

 

 

101.LAB

Inline XBRL Labels Linkbase Document.

 

 

101.PRE

Inline XBRL Presentation Linkbase Document.

 

 

101.DEF

Inline XBRL Definition Linkbase Document.

 

 

104

Cover Page Interactive Data (embedded within the Inline XBRL document).

 

51


 

 

† Certain portions of this exhibit have been omitted because they are not material and they are the type of information that the registrant treats as private or confidential.

 

(1)
Filed with this Form 10-Q.

 

(2)
This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 9, 2022

 

 

EPIZYME, INC.

 

 

 

 

By:

/s/ Grant Bogle

 

 

Grant Bogle

 

 

President and Chief Executive Officer

 

 

(Principal Executive Officer and Principal Financial Officer)

 

53



EX-10.1

Exhibit 10.1

 

 

Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Double asterisks denote omissions.

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (the “Agreement”) is entered into as of April 6, 2022 by and among Epizyme, Inc. (the “Company”), BioStrategy, LLC, a Massachusetts limited liability company (“Consultant”), and Shefali Agarwal (“Dr. Agarwal” or “you”).

WHEREAS, Dr. Agarwal is the sole member of Consultant and has delivered to the Company her resignation from her position as Executive Vice President, Chief Medical and Development Officer of the Company, effective April 6, 2022 (the “Resignation Date”);

WHEREAS, the Company desires to engage Consultant as a consultant to provide consulting services to and for the Company following the effectiveness of Dr. Agarwal’s resignation; and

WHEREAS, Consultant has agreed to provide such services pursuant to the terms and conditions set forth in this Agreement.

NOW, THEREFORE in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties agree as follows:

1.
Services To Be Performed. Commencing upon April 6, 2022 (the “Effective Date”), and continuing for the duration of the Consultation Period (as defined below), Consultant agrees to perform such consulting, advisory and related services to and for the Company as may be reasonably requested from time to time by the Company (the “Services”), through the end of the Consultation Period. The Services shall be provided on behalf of Consultant solely by Dr. Agarwal. Consultant and Dr. Agarwal agree to use their best efforts in the performance of the Services and agree to cooperate with the Company’s personnel, not to interfere with the conduct of the Company’s business, and to observe all Company rules, regulations and security requirements with respect to the safety and safeguarding of persons and property.
2.
Term. This Agreement shall commence upon the Effective Date and shall continue until the first anniversary of the Effective Date (such period, as it may be extended and modified upon good faith discussions by and subject to mutual agreement of the Company and Consultant, being referred to as the “Consultation Period”), unless sooner terminated in accordance with the provisions of Section 5.
3.
Consulting Benefits. The Company will provide Consultant with the payments and benefits set forth below during the Consultation Period (the “Consulting Benefits”). Notwithstanding the foregoing, the Company shall not pay or provide any Consulting Benefits to Consultant or Dr. Agarwal (or be obligated to pay or provide any such Consulting Benefits) earlier than the date eight (8) days after Dr. Agarwal’s timely execution, return and non-revocation of the Release of Claims attached hereto as Exhibit A (the “Release of Claims”).
a.
Advance. Within seven (7) days of the execution, return and non-revocation of the Release of Claims, the Company will pay Consultant a lump sum payment of $250,000, which shall be reduced by all applicable taxes and withholdings as determined by the Company in its sole discretion (the “Advance”) provided, however, that the Company shall inform the Consultant in advance and the Company and Consultant shall mutually discuss prior to any amounts being withheld by the Company. If Consultant voluntarily terminates this Agreement pursuant to Section 5(c) of this Agreement prior to the first anniversary of the Effective Date, then Consultant shall repay to the Company a prorated portion of the Advance based on the number of full months Consultant provided Services hereunder, with such repayment being made within ten (10) days of the effectiveness of such termination. Consultant and Dr. Agarwal hereby authorize the Company to deduct and offset any amount owed by Consultant

 

 

 


 

 

hereunder from any and all amounts owed by the Company to Consultant or Dr. Agarwal. Consultant and Dr. Agarwal agree that each will be responsible for paying the Company’s costs of collection, if any (including attorneys’ fees and other expenses), should the Company be required to resort to legal action to collect any amounts owed hereunder.
b.
Base Retainer. The Company will pay Consultant during the Consultation Period a consulting fee of $20,833 per month (the “Fees”), which Fees shall be (i) reduced by all applicable taxes and withholdings as determined by the Company in its sole discretion in discussion with the consultant provided, however, that the Company shall inform the Consultant in advance and the Company and Consultant shall mutually discuss prior to any amounts being withheld by the Company and (ii) subject to a pro rata adjustment for any partial calendar month. The Consultant shall submit to the Company on a monthly basis an invoice, in a form satisfactory to the Company, setting out the Fees owed for the previous month, the hours spent in the performance of the Services during such previous month and a description of such Services. The Company shall pay to the Consultant the Fees shown on each such invoice within thirty (30) days after receipt thereof.
c.
Discretionary Performance Bonus. Following the first anniversary of the Effective Date and provided this Agreement has not been earlier terminated in accordance with the provisions of Section 5, Consultant may be eligible for a performance bonus of up to Five Hundred Thousand Dollars ($500,000), based on Consultant’s performance, her support for the transactions contemplated by Sections 3(c) and (d) and the achievement by the Company in 2022 of the goals set forth on Exhibit B attached hereto and as may be modified by the Company’s Board of Directors (the “Board”) from time to time (collectively, the “Performance”) during such period, as determined by the Company in its sole discretion based on its good faith assessment of the Performance. The Company shall use reasonable efforts to pay the Performance Bonus within thirty days following the one-year anniversary of the Effective Date
d.
Financing Bonus. If, during the Consultation Period, the Company issues and sells in one financing or in a series of related financings equity or equity-linked securities of the Company for which the Company receives aggregate gross proceeds of at least [**] Dollars ($[**]), Consultant shall be entitled to receive a one-time cash bonus of [**] Dollars ($[**]) (the “Financing Bonus”). The Company shall use reasonable efforts to pay Financing Bonus within thirty (30) days following the closing of the financing transaction.
e.
Transaction Bonus. If, during the Consultation Period, the Company enters into a definitive agreement with a third party providing for a Change in Control (as defined in the Company’s Executive Severance and Change in Control Plan), then, upon the consummation of such Change in Control with such third party pursuant to such definitive agreement, Consultant shall be entitled to receive a one-time cash bonus of [**] Dollars ($[**]) (the “Transaction Bonus”), provided that the holders of the common stock of the Company each receive consideration in connection with such Change in Control (as defined in the Company’s Executive Severance and Change in Control Plan) valued at (or if such holders do not receive consideration due to the structure of the Change in Control (as defined in the Company’s Executive Severance and Change in Control Plan), the common stock of the Company is valued in the transaction at) at least $[**] per share (subject to appropriate adjustment for stock splits, stock dividends, reclassifications and similar events affecting the common stock) as determined by the Board in good faith (a “Qualified Change in Control”). In the event that a Qualified Change in Control occurs prior to a Qualified Financing, then Consultant shall be entitled to the Transaction Bonus plus the Financing Bonus (i.e., Two Million Dollars ($2,000,000)). The Company shall use reasonable efforts to pay Transaction Bonus or Transaction Bonus plus the Financing Bonus if applicable within thirty (30) days following the closing of the transaction.
f.
Stock Options and Restricted Stock Units. Consultant, Dr. Agarwal and the Company hereby agree that (i) the stock options and restricted stock units held by Dr. Agarwal as of the date hereof (including the agreements pursuant to which such awards were granted, the “Options” and the “Restricted Stock Units”, respectively) shall continue to vest in accordance with their terms for so long as this Agreement continues to remain in effect, such that any Options or Restricted Stock Units that are not vested as of the date of termination or expiration of this Agreement shall be terminated and cancelled as of such date and (ii) Dr. Agarwal’s right to exercise the Options will terminate three months after the date Dr. Agarwal ceases to be an “Eligible Participant” (as defined in the Options), provided that in the case of clause (ii) hereof the Options may not be exercised after the Final Exercise Date (as defined in the Options) or at all if, under the terms of the Options, Dr. Agarwal’s rights to exercise the Options would have otherwise terminated immediately. Notwithstanding the foregoing, if, upon or

2

 


 

 

within twelve (12) months following a Change in Control (as defined under the respective Severance and Change In Control Plan), this Agreement is terminated by the Company under Section 5(c), and provided the Release Condition (as defined below) is met, any Options or Restricted Stock Units that are not then vested as of the termination date shall immediately vest and, if applicable, become exercisable in full, provided that (x) no Options that have vested as a result of this provision may be exercised and no shares of Common Stock that have issued under Restricted Stock Units that have vested as a result of this provision may be transferred until the Release Condition has been met and (y) if the Release Condition is not met, the portion of the Options that has vested as a result of this provision shall be cancelled and the shares of Common Stock so issued shall be forfeited. For purposes of this Section 3(f), the “Release Condition” shall mean Consultant’s execution and non-revocation of a release of claims agreement in a form that is substantially similar to the Release of Claims and otherwise satisfactory to the Company, which release must become binding and enforceable within 60 calendar days after the date of termination (or such shorter period as the Company may direct).
g.
Reimbursement of Expenses. The Company shall reimburse Consultant for all reasonable and necessary travel expenses incurred or paid by Consultant in connection with, or related to, the performance of the Services under this Agreement. Consultant shall submit to the Company itemized monthly statements, in a form satisfactory to the Company, of such expenses incurred in the previous month. The Company shall pay to Consultant undisputed amounts shown on each such statement within 30 days after receipt thereof. Notwithstanding the foregoing, Consultant shall not incur total expenses in excess of $500 per month without the prior written approval of the Company.
h.
COBRA. Dr. Agarwal’s current coverage under the Company’s group medical insurance plan will end on the Resignation Date. Provided that Dr. Agarwal elects to continue receiving group medical insurance pursuant to the federal “COBRA” law, 29 U.S.C. § 1161 et seq., the Company shall continue to pay the share of the premium for such coverage that is paid by the Company for active and similarly-situated employees who receive the same type of coverage until the earlier of (i) the end of the Consultation Period and (ii) June 30, 2022. The remaining balance of any premium costs, and all premium costs after the termination of the Company’s payment obligation hereunder shall be paid by Dr. Agarwal on a monthly basis for as long as, and to the extent that, she remains eligible for and chooses to continue coverage under COBRA continuation.
i.
No Additional Consulting Benefits. Consultant agrees that Consultant shall provide the Services in exchange for the Consulting Benefits described in this Section 3 and that neither Consultant nor Dr. Agarwal is otherwise entitled to any benefits, coverages or privileges, including, without limitation, social security, unemployment, medical, COBRA or pension payments, made available to employees of the Company or any other consideration or benefits from the Company for the performance of the Services.
4.
Independent Contractor. It is the express intention of the parties to this Agreement that Consultant shall be an independent contractor and not an employee, agent, joint venturer or partner of the Company for any purposes whatsoever.
a.
Performance of Services. Consultant shall have the right to control and determine the methods, manner and means of performing the Services. In performing the Services, the amount of time devoted by Consultant on any given day will be entirely within Consultant’s control, and the Company will rely on Consultant to put in the amount of time as is necessary to fulfill the requirements of this Agreement. However, the Services contemplated by this Agreement must meet the Company’s standards and approval and shall be subject to the Company’s general right of inspection and supervision to secure their satisfactory completion. Consultant will provide all equipment and supplies required to perform the Services.
b.
Non-Exclusivity. Consultant retains the right to contract with other companies or entities for its consulting services without restriction, and Dr. Agarwal retains the right to maintain employment with other entities throughout the Consultant Period provided, however, that Dr. Agarwal remains in compliance with the terms of the Invention and Non-Disclosure Agreement dated June 19, 2018 that she previously executed for the benefit of the Company and which remains in full force and effect (the “Restrictive Covenant Agreement”). Likewise, the Company retains a reciprocal right to contract with other companies and/or individuals for consulting services without restriction.

3

 


 

 

c.
Scope of Authority. Consultant is not authorized to transact business, incur obligations, sell goods, receive payments, solicit orders or assign or create any obligation of any kind, express or implied, on behalf of the Company or any of the Company's related or affiliated entities, or to bind in any way whatsoever, or to make any promise, warranty or representation on behalf of the Company or any of the Company's related or affiliated entities with respect to any matter, except as directed by the Chief Executive Officer of the Company. Consultant shall not use the Company's trade names, trademarks, service names or servicemarks without the prior written approval of the Company.
5.
Termination. This Agreement may be terminated prior to the end of the Consultation Period in the following manner: (a) by the Company at any time immediately upon written notice if Consultant has materially breached this Agreement, the Release of Claims or the Restrictive Covenant Agreement and, to the extent curable, has not cured such breach within thirty (30) days following written notice of the breach from the Company; (b) by Consultant at any time immediately upon written notice if the Company has materially breached this Agreement and, to the extent curable, has not cured such breach within thirty (30) days following written notice of the breach from Consultant; (c) by either party upon not less than thirty (30) days’ prior written notice for any reason; or (d) at any time upon the mutual written consent of the parties hereto. Notwithstanding the foregoing, and for the avoidance of doubt, the Company may terminate this Agreement effective immediately by giving written notice to Consultant if Dr. Agarwal fails to sign the Release of Claims by April 14, 2022 or revokes the Release of Claims within seven (7) days after signing it as set forth in the Release of Claims. In the event of any termination, Consultant shall be entitled (1) any amounts owed for Services rendered to the Company prior to the termination date (including pro rata adjustments for any Services performed during a partial calendar month), and (2) only to reimbursements for expenses incurred in accordance with Section 3(g) prior to termination, and no further payments of any kind will be due; provided, however, that if the Company terminates this Agreement under Section 5(c) following a Change In Control (as defined in the Company’s Executive Severance and Change in Control Plan) and prior to the first anniversary of the Effective Date, then, subject to Consultant’s satisfaction of the Release Condition, Consultant shall continue to receive the Fees provided for under Section 3(a) until the first anniversary of the Effective Date and shall be paid the performance bonus provided for under Section 3(b). In addition, vesting of Dr. Agarwal’s equity awards will cease immediately upon termination. Any written notice under this Section 5 shall explain the reason for the termination.
6.
Proprietary Information and Inventions.

6.1 Proprietary Information.

a.
Consultant and Dr. Agarwal acknowledge that Consultant's and Dr. Agarwal’s relationship with the Company is one of high trust and confidence and that in the course of their service to the Company, Consultant and Dr. Agarwal will have access to and contact with Proprietary Information. Consultant and Dr. Agarwal will not disclose any Proprietary Information to any person or entity other than employees of the Company or use the same for any purposes (other than in the performance of the Services) without written approval by an officer of the Company, either during or after the Consultation Period, unless and until such Proprietary Information has become public knowledge without fault by Consultant or Dr. Agarwal.
b.
For purposes of this Agreement, Proprietary Information shall mean, by way of illustration and not limitation, all information, whether or not in writing, whether or not patentable and whether or not copyrightable, of a private, secret or confidential nature, owned, possessed or used by the Company, concerning the Company’s business, business relationships or financial affairs, including, without limitation, any Invention, formula, vendor information, customer information, apparatus, equipment, trade secret, process, research, report, technical or research data, clinical data, know-how, computer program, software, software documentation, hardware design, technology, product, processes, methods, techniques, formulas, compounds, projects, developments, marketing or business plan, forecast, unpublished financial statement, budget, license, price, cost, customer, supplier or personnel information or employee list that is communicated to, learned of, developed or otherwise acquired by Consultant or Dr. Agarwal in the course of Consultant’s or Dr. Agarwal’s service as a consultant to the Company.
c.
Consultant and Dr. Agarwal agree that all files, documents, letters, memoranda, reports, records, data sketches, drawings, models, laboratory notebooks, program listings, computer equipment or devices, computer programs or other written, photographic, or other tangible material containing Proprietary Information, whether

4

 


 

 

created by Consultant, Dr. Agarwal or others, which shall come into Consultant’s or Dr. Agarwal’s custody or possession, shall be and are the exclusive property of the Company to be used by Consultant or Dr. Agarwal only in the performance of Consultant’s or Dr. Agarwal’s duties for the Company and shall not be copied or removed from the Company premises except in the pursuit of the business of the Company. All such materials or copies thereof and all tangible property of the Company in the custody or possession of Consultant or Dr. Agarwal shall be delivered to the Company, upon the earlier of (i) a request by the Company or (ii) the termination of this Agreement. After such delivery, Consultant and Dr. Agarwal shall not retain any such materials or copies thereof or any such tangible property.
d.
Consultant and Dr. Agarwal agree that the obligation not to disclose or to use information and materials of the types set forth in paragraphs (b) and (c) above, and Consultant’s and Dr. Agarwal’s obligation to return materials and tangible property set forth in paragraph (c) above extends to such types of information, materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company, Consultant or Dr. Agarwal.
e.
Consultant acknowledges that the Company from time to time may have agreements with other persons or with the United States Government, or agencies thereof, that impose obligations or restrictions on the Company regarding inventions made during the course of work under such agreements or regarding the confidential nature of such work. Consultant and Dr. Agarwal agree to be bound by all such obligations and restrictions that are known to Consultant and Dr. Agarwal and to take all action necessary to discharge the obligations of the Company under such agreements.
f.
Consultant’s and Dr. Agarwal’s obligations under this Section 6.1 shall not apply to any information that (i) is or becomes known to the general public under circumstances involving no breach by Consultant or Dr. Agarwal or others of the terms of this Section 6.1, (ii) is generally disclosed to third parties by the Company without restriction on such third parties, or (iii) is approved for release by written authorization of an officer of the Company. Further, nothing herein prohibits Consultant or Dr. Agarwal from communicating with government agencies about possible violations of federal, state, or local laws or otherwise providing information to government agencies or participating in government agency investigations or proceedings. In addition, notwithstanding Consultant’s or Dr. Agarwal’s confidentiality and nondisclosure obligations, Consultant and Dr. Agarwal are hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”

6.2 Inventions.

a.
Consultant and Dr. Agarwal will make full and prompt disclosure to the Company of all inventions, creations, improvements, enhancements, designs, innovations, discoveries, processes, methods, techniques, developments, software, computer programs, and works of authorship, whether or not patentable and whether or not copyrightable, that are created, made, conceived or reduced to practice by Consultant or Dr. Agarwal or under Consultant’s or Dr. Agarwal’s direction or jointly with others (i) during the Consultation Period if made for the Company in the course of the performance of the Services hereunder or (ii) during or after the Consultation Period if resulting or derived from Proprietary Information, whether or not during normal working hours or on the premises of the Company (all of which are collectively referred to in this Agreement as “Inventions”). Consultant and Dr. Agarwal agree to assign and do hereby assign to the Company (or any person or entity designated by the Company) all of Consultant’s and Dr. Agarwal’s right, title and interest in and to all Inventions and all related patents, patent applications, copyrights created in the work(s) of authorship, trademarks, trade names, and other industrial and intellectual property rights and applications therefor in the United States and elsewhere. Consultant and Dr. Agarwal further acknowledge that each original work of authorship that is made by Consultant or Dr. Agarwal

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(solely or jointly with others) within the scope of the Agreement and which is protectable by copyright is a “work made for hire,” as that term is defined in the United States Copyright Act. Consultant and Dr. Agarwal hereby waive all claims to moral rights in any Inventions.
b.
Consultant and Dr. Agarwal agree that if, in the course of performing the Services, Consultant or Dr. Agarwal incorporates into any Invention developed under this Agreement any preexisting invention, improvement, development, concept, discovery or other proprietary information owned by Consultant or in which Consultant or Dr. Agarwal has an interest (“Prior Inventions”), (i) Consultant or Dr. Agarwal will inform the Company, in writing before incorporating such Prior Inventions into any Invention, and (ii) the Company is hereby granted a nonexclusive, royalty-free, perpetual, irrevocable, transferable worldwide license with the right to grant and authorize sublicenses, to make, have made, modify, use, import, offer for sale, sell, reproduce, distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Prior Inventions, without restriction, including, without limitation, as part of or in connection with such Invention, and to practice any method related thereto. Neither Consultant nor Dr. Agarwal will incorporate any invention, improvement, development, concept, discovery or other proprietary information owned by any third party into any Invention without the Company’s prior written permission.
c.
Consultant and Dr. Agarwal agree to cooperate fully with the Company, both during and after the Consultation Period, with respect to the procurement, maintenance, and enforcement of copyrights, patents and other intellectual property rights (both in the United States and foreign countries) relating to Inventions. Consultant and Dr. Agarwal shall sign all papers, including, without limitation, copyright applications, patent applications, declarations, oaths, formal assignments, assignments of priority rights, and powers of attorney, which the Company may deem necessary or desirable in order to protect its rights and interests in any Invention. Consultant and Dr. Agarwal further agree that if the Company is unable, after reasonable effort, to secure the signature of Consultant or Dr. Agarwal on any such papers, any executive officer of the Company shall be entitled to execute any such papers as the agent and the attorney-in-fact of Consultant or Dr. Agarwal, as applicable, and Consultant and Dr. Agarwal hereby irrevocably designate and appoint each executive officer of the Company as Consultant’s and Dr. Agarwal’s agent and attorney-in-fact to execute any such papers on Consultant’s and Dr. Agarwal’s behalf, respectively, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Invention, under the conditions described in this sentence.
d.
Consultant and Dr. Agarwal shall maintain adequate and current written records (in the form of notes, sketches, drawings and as may be specified by the Company) to document the conception and/or first actual reduction to practice of any Invention. Such written records shall be available to and remain the sole property of the Company at all times.
7.
Other Agreements. Consultant hereby represents that, except as Consultant has disclosed in writing to the Company, neither Consultant nor Dr. Agarwal is bound by the terms of any agreement with any third party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of the consultancy with the Company, to refrain from competing, directly or indirectly, with the business of such third party or to refrain from soliciting employees, customers or suppliers of such third party. Consultant further represents that the performance of all the terms of this Agreement and the performance of the Services as a consultant of the Company do not and will not breach any agreement with any third party to which Consultant or Dr. Agarwal is a party (including without limitation any nondisclosure or non-competition agreement), that neither Consultant nor Dr. Agarwal shall enter into any agreement with a third party that would be breached by the performance of the terms of this Agreement and the performance of the Services as a consultant to the Company hereunder, and that neither Consultant nor Dr. Agarwal shall disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any current or previous employer or others.
8.
Warranties. Consultant will assume sole responsibility for Consultant’s compliance with applicable federal, state and foreign laws and regulations and shall rely exclusively upon Consultant’s own determination, or that of Consultant’s legal advisers, that the performance of the Services and the receipt of the Consulting Benefits hereunder comply with such laws and regulations. Consultant shall be solely responsible for all state, federal, and foreign income taxes, unemployment insurance and social security taxes in connection with this Agreement and for maintaining adequate workers’ compensation insurance coverage. Consultant hereby represents and warrants that it

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is and will remain in compliance with its tax, insurance and social security tax obligations and that it will make from time to time all the declarations, registrations, affiliations, formalities and payments required in order to perform its Services under this Agreement without liability accruing to the Company. The Consultant acknowledges that Consultant is not relying upon the advice or representation of the Company with respect to the tax treatment of the Consulting Benefits.
9.
Non-Assignability of Contract. This Agreement shall be binding upon, and inure to the benefit of, both parties and their respective successors and assigns, including any entity with which, or into which, the Company may be merged or which may succeed to its assets or business, provided, however, that the obligations of Consultant are personal and shall not be assigned by Consultant.
10.
Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon personal delivery, upon email transmission or upon deposit for delivery by overnight international courier addressed to the other party at such address or addresses as the parties shall designate to each other.
11.
Complete Agreement. Dr. Agarwal and Consultant acknowledge that this Agreement, together with the Release of Claims, the Restrictive Covenant Agreement, the Options and the Restricted Stock Units, contains the entire understanding between the parties and supersedes, replaces and takes precedence over any prior understanding or oral or written agreement between the parties respecting the subject matter of this Agreement, the Release of Claims, the Options or the Restricted Stock Units. Dr. Agarwal further acknowledges that neither she nor Consultant is eligible to receive any payments or benefits under the terms of the offer letter with Dr. Agarwal dated June 18, 2018 or the Company’s Executive Severance and Change in Control Plan. There are no representations, agreements, arrangements, nor understandings, oral or written, between the parties relating to the subject matter of this Agreement that are not fully expressed herein or in the Release of Claims.
12.
Severability. In the event any provision of this Agreement shall be held invalid, the same shall not invalidate or otherwise affect in any respect any other term or terms of this Agreement, which term or terms shall remain in full force and effect.
13.
Non-Waiver. No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar to or waiver of any right on any other occasion.
14.
Amendment. This Agreement may be amended or modified only by a written instrument executed by each of the parties hereto.
15.
Counterparts. This Agreement may be executed in two (2) signed counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument.
16.
Interpretation. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa. The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
17.
Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction) that would cause the application of laws of any jurisdictions other than those of the Commonwealth of Massachusetts.

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

EPIZYME, INC.


By:
_/s/ Grant Bogle___________________

Name: Grant Bogle

Title: President and Chief Executive Officer

 

BIOSTRATEGY, LLC

 

/s/ Shefali Agarwal____________________

Name: Shefali Agarwal

Title: Member

 

SHEFALI AGARWAL

 

/s/Shefali Agarwal____________________

 

 

 

 

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EXHIBIT A

 

RELEASE OF CLAIMS

 

1.
Release of Claims. In exchange for the Consulting Benefits described in Section 3 of the Consulting Agreement, which you acknowledge you would not otherwise be entitled to receive, you, unless excluded by this Release of Claims or by law, hereby fully, forever, irrevocably and unconditionally release, remise and discharge the Company, its affiliates, subsidiaries, parent companies, predecessors, and successors, and all of its and their respective past and present officers, directors, stockholders, partners, members, employees, agents, representatives, plan administrators, attorneys, insurers and fiduciaries (each in their individual and corporate capacities) (collectively, the “Released Parties”) from any and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys’ fees and costs), of every kind and nature that you ever had or now have against any or all of the Released Parties, whether known or unknown, including, but not limited to, any and all claims arising out of or relating to your employment with and/or service as an officer and/or director of and/or separation from the Company or any affiliate, including, but not limited to, all claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the Americans With Disabilities Act of 1990, 42 U.S.C. § 12101 et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., the Genetic Information Nondiscrimination Act of 2008, 42 U.S.C. § 2000ff et seq., the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq., the Worker Adjustment and Retraining Notification Act (“WARN”), 29 U.S.C. § 2101 et seq., the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., Executive Order 11246, Executive Order 11141, the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., all as amended; all claims arising out of the Massachusetts Fair Employment Practices Act, Mass. Gen. Laws ch. 151B, § 1 et seq., the Massachusetts Civil Rights Act, Mass. Gen. Laws ch. 12, §§ 11H and 11I, the Massachusetts Equal Rights Act, Mass. Gen. Laws. ch. 93, § 102, Mass. Gen. Laws ch. 214, § 1C (Massachusetts right to be free from sexual harassment law), the Massachusetts Labor and Industries Act, Mass. Gen. Laws ch. 149, § 1 et seq., Mass. Gen. Laws ch. 214, § 1B (Massachusetts right of privacy law), the Massachusetts Maternity Leave Act, Mass. Gen. Laws ch. 149, § 105D, and the Massachusetts Small Necessities Leave Act, Mass. Gen. Laws ch. 149, § 52D, all as amended; all rights and claims under the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148 et seq., as amended (Massachusetts law regarding payment of wages and overtime), including any rights or claims thereunder to unpaid wages, including overtime, bonuses, commissions, and accrued, unused vacation time); all common law claims including, but not limited to, actions in defamation, intentional infliction of emotional distress, misrepresentation, fraud, wrongful discharge, and breach of contract; all claims to any non-vested ownership interest in the Company, contractual or otherwise; all state and federal whistleblower claims to the maximum extent permitted by law; and any claim or damage arising out of your employment with and/or separation from the Company (including a claim for retaliation) under any common law theory or any federal, state or local statute or ordinance not expressly referenced above; provided, however, that this release of claims does not prevent you from filing a charge with, cooperating with, or participating in any investigation or proceeding before, the Equal Employment Opportunity Commission or a state fair employment practices agency (except that you acknowledge that you may not recover any monetary benefits in connection with any such charge, investigation, or proceeding, and you further waive any rights or claims to any payment, benefit, attorneys’ fees or other remedial relief in connection with any such charge, investigation or proceeding). Further, this release does not release your rights to vested benefits under any 401(k) plan or other ERISA-covered benefit plan (excluding severance) provided by the Company, vested equity and/or your rights to indemnification and defense, if any.
2.
Continuing Obligations. You acknowledge and reaffirm your obligations set forth in the Invention and Non-Disclosure Agreement dated June 19, 2018 that you previously executed for the benefit of the Company, which survive your separation from employment as an employee of the Company.
3.
Nondisparagement. You understand and agree that, to the extent permitted by law and except as otherwise permitted by paragraph 8 below, you will not, in public or private, make any false, disparaging, derogatory or defamatory statements, online (including, without limitation, on any social media, networking, or employer review site) or otherwise, to any person or entity, including, but not limited to, any media outlet, industry

9

 

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group, financial institution or current or former employee, board member, consultant, client or customer of the Company, regarding the Company or any of the other Released Parties, or regarding the Company’s business affairs, business prospects, or financial condition. The Company agrees that its Board members and executive officers will not, in public or private, make any false, disparaging, derogatory or defamatory statements, online (including, without limitation, on any social media, networking, or employer review site) or otherwise, to any person or entity, including, but not limited to, any media outlet, industry group, financial institution or current or former employee, Board member, consultant, client or customer of the Company, regarding you; provided, however, that nothing in this Section 3 shall restrict or otherwise limit such Board members or executive officers from disclosing events or circumstances in such manner as they or the Company deem necessary to comply with or satisfy their or the Company’s disclosure, reporting or other obligations under applicable law.
4.
Acknowledgments. You acknowledge that you have been given at least twenty-one (21) days to consider this Release of Claims, and that the Company is hereby advising you to consult with an attorney of your own choosing prior to signing this Release of Claims. You understand that you may revoke this Release of Claims for a period of seven (7) days after you sign this Release of Claims by notifying the Company in writing, and the Release of Claims shall not be effective or enforceable until the expiration of this seven (7) day revocation period. You understand and agree that by entering into this Release of Claims, you are waiving any and all rights or claims you might have under the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, and that you have received consideration beyond that to which you were previously entitled.
5.
Return of Company Property. You confirm that (a) you have returned to the Company all keys, files, records (and copies thereof), equipment (including, but not limited to, computer hardware, software, printers, flash drives and other storage devices, wireless handheld devices, cellular phones, tablets, etc.), Company identification, and any other Company owned property in your possession or control, that the Company has requested be returned as of the date of your separation from employment with the Company and that you will return to the Company any and all other such items within five (5) business days after the Company has requested their return, (b) you have left intact all, and have otherwise not destroyed, deleted, or made inaccessible to the Company any, electronic Company documents, including, but not limited to, those that you developed or helped to develop during your employment, and (c) you have not and will not (i) retain any copies in any form or media; (ii) maintain access to any copies in any form, media, or location; (iii) store any copies in any physical or electronic locations that are not readily accessible or not known to the Company or that remain accessible to you; or (iv) send, give or make accessible any copies to any persons or entities that the Company has not authorized to receive such electronic or hard copies; provided, however, that notwithstanding the foregoing, you may retain the laptop computer provided to you by the Company and the files contained on the laptop computer until the earlier of (x) the end of the Consultation Period under the Consulting Agreement and (y) five (5) business days after the Company has requested its return. You further confirm that you have cancelled all accounts for your benefit, if any, in the Company’s name, including but not limited to, credit cards, telephone charge cards, cellular phone accounts, and computer accounts.
6.
Business Expenses and Final Compensation. You acknowledge that you have been reimbursed by the Company for all business expenses incurred in conjunction with the performance of your employment and that no other reimbursements are owed to you. You further acknowledge that you have received payment in full for all services rendered in conjunction with your employment by the Company, including payment for all wages, bonuses, commissions, and accrued, unused vacation time, and that no other compensation is owed to you except as provided herein.
7.
Nature of Agreement. You understand and agree that this Release of Claims is a separation agreement and does not constitute an admission of liability or wrongdoing on the part of the Company or you.
8.
Scope of Disclosure Restrictions. Nothing in this Release of Claims prohibits you from communicating with government agencies about possible violations of federal, state, or local laws or otherwise providing information to government agencies, filing a complaint with government agencies, or participating in government agency investigations or proceedings. You are not required to notify the Company of any such communications; provided, however, that nothing herein authorizes the disclosure of information you obtained through a communication that was subject to the attorney-client privilege. Further, notwithstanding your confidentiality and

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nondisclosure obligations, you are hereby advised as follows pursuant to the Defend Trade Secrets Act: “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”
9.
Cooperation. You agree that, to the extent permitted by law, you shall cooperate fully with the Company in the investigation, defense or prosecution of any claims or actions which already have been brought, are currently pending, or which may be brought in the future against the Company by a third party or by or on behalf of the Company against any third party, whether before a state or federal court, any state or federal government agency, or a mediator or arbitrator. Your full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with the Company’s counsel, at reasonable times and locations designated by the Company, to investigate or prepare the Company’s claims or defenses, to prepare for trial or discovery or an administrative hearing, mediation, arbitration or other proceeding and to act as a witness when requested by the Company. You further agree that, to the extent permitted by law, you will notify the Company promptly in the event that you are served with a subpoena (other than a subpoena issued by a government agency), or in the event that you are asked to provide a third party (other than a government agency) with information concerning any actual or potential complaint or claim against the Company. The Company will pay for your reasonable and documented expenses for your compliance with this obligation.
10.
Amendment and Waiver. This Release of Claims shall be binding upon the parties and may not be modified in any manner, except by an instrument in writing of concurrent or subsequent date signed by duly authorized representatives of the parties hereto. This Release of Claims is binding upon and shall inure to the benefit of the parties and their respective agents, assigns, heirs, executors, successors and administrators. No delay or omission by the Company in exercising any right under this Release of Claims shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar to or waiver of any right on any other occasion.
11.
Validity. Should any provision of this Release of Claims be declared or be determined by any court of competent jurisdiction to be illegal or invalid, the validity of the remaining parts, terms or provisions shall not be affected thereby and said illegal or invalid part, term or provision shall be deemed not to be a part of this Release of Claims.
12.
Voluntary Assent. You affirm that no other promises or agreements of any kind have been made to or with you by any person or entity whatsoever to cause you to sign this Release of Claims, and that you fully understand the meaning and intent of this Release of Claims. You further state and represent that you have carefully read this Release of Claims, understand the contents herein, freely and voluntarily assent to all of the terms and conditions hereof, and sign your name of your own free act.
13.
Applicable Law. This Release of Claims shall be interpreted and construed by the laws of the Commonwealth of Massachusetts, without regard to conflict of laws provisions. You hereby irrevocably submit to and acknowledge and recognize the jurisdiction of the courts of the Commonwealth of Massachusetts, or if appropriate, a federal court located in the Commonwealth of Massachusetts (which courts, for purposes of this Release of Claims, are the only courts of competent jurisdiction), over any suit, action or other proceeding arising out of, under or in connection with this Release of Claims or the subject matter hereof.
14.
Entire Agreement. This Release of Claims, along with the Consulting Agreement, contains and constitutes the entire understanding and agreement between the parties hereto with respect to your severance benefits and the settlement of claims against the Company and cancels all previous oral and written negotiations, agreements, and commitments in connection therewith.

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15.
Counterparts. This Release of Claims may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original, but all of which together shall constitute one and the same document. Facsimile and PDF signatures shall be deemed to be of equal force and effect as originals.

 

[remainder of page intentionally omitted]

 

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IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this Release of Claims on the date(s) indicated below.

EPIZYME, INC.

/s/ Grant Bogle___________ 06 April 2022__________________________

Date

 

 

TO BE SIGNED ON OR BEFORE April 14, 2022.

I hereby agree to the terms and conditions set forth above. I have been given at least twenty-one (21) days to consider this Release of Claims and I have chosen to execute this on the date below. I intend that this Release of Claims will become a binding agreement between me and the Company if I do not revoke my acceptance in writing to Grant Bogle, the Company’s Chief Executive Officer within seven (7) days.

 

/s/ Shefali Agarwal________ _06 April 2022_______________________

Shefali Agarwal Date

 

 

 

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EX-10.2

Exhibit 10.2

 

Execution Version

Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Double asterisks denote omissions.

 

AMENDMENT NO. 1 TO LICENSE AGREEMENT

 

THIS AMENDMENT No. 1 (this “Amendment No. 1”) is made and entered into as of May 6, 2022 (“Amendment No. 1 Effective Date”) between Epizyme, Inc., a corporation organized and existing under the laws of the State of Delaware, with a principal place of business at 400 Technology Square, Cambridge, Massachusetts 02139 U.S. (“Epizyme”), and HUTCHMED Group Investment Limited (formerly known as Hutchison China MediTech Investment Limited), a company organized and existing under the laws of the British Virgin Islands, with company number 2031179 and its registered office being Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands (“Hutchmed”).

 

WHEREAS, Epizyme and Hutchmed are parties to that certain License Agreement dated as of August 7, 2021 (“Agreement”) and desire to amend certain terms of the Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1. The Parties agree that the definition of Hutchmed is hereby deleted in its entirety and replaced with the following: “HUTCHMED Group Investment Limited (formerly known as Hutchison China MediTech Investment Limited), a company organized and existing under the laws of the British Virgin Islands, with company number 2031179 and its registered office being Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.”

 

The Parties further agree that the definition of Hutchmed China in Section 1.90 of the Agreement is hereby deleted in its entirety and replaced with the following:

 

1.90 “Hutchmed China” means HUTCHMED Limited (formerly known as Hutchison MediPharma Limited (和记黄埔医药(上海)有限公司)), a Chinese company, organized and existing under the laws of the People’s Republic of China, having a place of business at Building 4, 720 Cai Lun Road, ZJ Hi-Tech Park, Shanghai, People’s Republic of China.

 

2. The Parties agree that Section 1.14 of the Agreement is hereby deleted in its entirety and replaced with the following:

 

1.14 “Authorized Regulatory Agent” means the entity designated by, and acting on the behalf of, the Regulatory Filing holder or Regulatory Approval holder in accordance with Section 5.1 to manage the work associated with preparing, obtaining, and maintaining any Regulatory Filings or Regulatory Approvals in the Territory and which possesses and maintains valid licenses or permits in the Territory if such licenses or permits are required for such local entity to engage in the relevant activities in the Territory.

 

3. The Parties agree that Section 1.145(b) of the Agreement is hereby deleted in its entirety and replaced with the following:

 

(b) any Third Party contract manufacturing organization engaged by Hutchmed in the Territory (following selection by Hutchmed and approval by the JMC, such approval not to be unreasonably withheld, conditioned, or delayed) that provides Manufacturing services with respect to Drug Substance or Drug Product in accordance with this Agreement (each, a “Permitted Subcontractor CMO”); or

 

4. The Parties agree that the following terms shall have the following meanings and are hereby added to the end of Article 1 of the Agreement:

 


 

 

Approved Indication” means any indication for which a Regulatory Authority outside the Territory has granted Regulatory Approval for use of a Licensed Product.

 

Confirmatory Joint Global Trial” means any Joint Global Trial in an indication where such clinical trial is the confirmatory study required to be conducted as part of an accelerated Regulatory Approval by the FDA or other Regulatory Authority outside the Territory for such indication. For clarity, the 301 Global Trial and the 302 Global Trial are Confirmatory Joint Global Trials.

 

CPP” means a certificate entitled “Certificate of a Pharmaceutical Product–Approved Drug Product” issued by the FDA for an Approved Indication for the Licensed Product manufactured by the specified manufacturer.

 

Imported Drug” means Drug Product Manufactured by or on behalf of an Epizyme Entity outside of a Jurisdiction and imported into such Jurisdiction as permitted by the relevant Regulatory Authorities.

 

Imported Drug Trial” means any Local Trial or Joint Global Trial conducted in the Territory using Imported Drug. For clarity, an Imported Drug Trial may be a Confirmatory Joint Global Trial.

 

Local Drug” means Drug Product Manufactured in the Territory by a Hutchmed Entity or Permitted Subcontractor CMO for use, as permitted by the relevant Regulatory Authorities, in a Jurisdiction.

 

Local Drug Trial” means any Local Trial conducted in the Territory using Local Drug or any Joint Global Trial conducted in the Territory that the Parties agree in writing will use Local Drug.

 

Local Hutchmed Entity” means any Hutchmed Entity based in Mainland China.

 

Non-Local Hutchmed Entity” means any Hutchmed Entity that is based outside of Mainland China. For clarity, any Hutchmed entity located in Hong Kong, including Hutchmed (Hong Kong) Limited, a limited company incorporated under the laws of Hong Kong, having a registered business address at Level 18 The Metropolis Tower, 10 Metropolis Drive, Hung Hom, Hong Kong (“Hutchmed HK”), is a Non-Local Hutchmed Entity.

 

[**]” means [**].

 

[**] CRO Agreement” means the Master Contract Services Agreement between Epizyme and [**] dated [**], and any work orders relevant to the 302 Global Trial, as may be amended from time to time.

 

Sponsor” means the entity identified as the sponsor on the protocol for a clinical trial who is responsible, itself or through a CRO, for conducting the clinical trial, including obtaining ethics committee (“EC”) and site approvals for the clinical trial, obtaining the approval, if required, of the Human Genetic Resources Administrative Authorities in Mainland China pursuant to the regulations regarding the administration of human genetic resources, and ensuring that clinical trial contracts are executed with the participating sites.

 

Supply Agreement” has the meaning set forth in Section 7.6(c) hereof.

 

[**]” means [**].

 

[**] 3-Party CRO Agreement” means the Master Contract Services Agreement and Work Order #1 effective as of [**] and executed by Hutchmed China, Epizyme, and [**] for services for the 302 Global Trial, as may be amended from time to time. For clarity, the [**] 3-Party CRO Agreement is a Joint Global CRO Agreement.

 

5. The Parties agree that Sections 3.10(a)(ii) and (iii) of the Agreement are hereby deleted in their entirety and replaced with the following:

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(ii) whether Hutchmed will participate in a proposed Joint Global Trial (other than the 301 Global Trial and 302 Global Trial) and, if Hutchmed does participate, except as provided in Section 3.10(b)(iv), Hutchmed will have final decision-making authority with respect to the conduct of any such Joint Global Trial in the Territory (including selection of clinical sites and whether to add clinical sites in additional Jurisdictions for the 301 Global Trial or 302 Global Trial); provided that (A) subject to Section 4.5(b)(i), in no event shall Hutchmed use its decision-making authority to amend the protocol for any Joint Global Trial without Epizyme’s prior approval; and (B) in no event shall Hutchmed use its decision-making authority to decrease the number of patients to be enrolled and treated by Hutchmed in any Joint Global Trial to less than twenty percent (20%) of the total number of patients to be treated at all sites globally;

 

(iii) any matter related to filing, obtaining, and maintaining Regulatory Approvals of Licensed Product in the Territory (other than as provided in Section 3.10(b)(iii) and (iv);

 

6. The Parties agree that the following is hereby added to the Agreement as a new Section 3.10(b)(iv):

 

(iv) any matter related to (A) filing, obtaining, and maintaining the IND in Mainland China for a Confirmatory Joint Global Trial and the IND in Taiwan for the 302 Global Trial, in each case including any regulatory activities or interactions related thereto, provided that subject to Section 4.5(b)(i), in no event shall Epizyme use its decision-making authority under this Section 3.10(b)(iv) to amend the protocol for any Joint Global Trial or in a manner that Hutchmed has notified Epizyme (including through the applicable Committee or Subcommittee) is reasonably expected to have a material adverse effect on Hutchmed’s preparation of any Regulatory Filings or obtaining and maintaining any Regulatory Approvals in the Territory, in each case, without Hutchmed’s prior approval, or (B) conducting the Epizyme Confirmatory Responsibilities for any Confirmatory Joint Global Trial in the Territory, provided that such decision-making shall be consistent with any Joint Global CRO Agreement.

 

7. The Parties agree that the following is hereby added to the end of the third (3rd) sentence of Section 4.1 of the Agreement:

 

and, unless otherwise agreed in writing by the Parties, such Commercially Reasonable Efforts shall be directed to both wild-type and EZH2-mutant patient populations for relevant indications (such as FL and DLBCL).

 

8. The Parties agree that Sections 4.4, 4.5 and 4.6 of the Agreement are hereby deleted in their entirety and replaced with the following:

 

4.4 Conduct of Local Trials. Hutchmed may conduct Local Trials of the Licensed Product (including, subject to Section 3.10(b)(ii), any Combination Therapy) in the Field (including, subject to Section 3.10(b)(i), any Additional Indication) and in the Territory. A Hutchmed Entity shall be the Sponsor of each Local Trial in the Territory, provided that a Local Hutchmed Entity shall be the Sponsor for each Local Trial in Mainland China. Each Local Trial conducted in the Territory shall be conducted in accordance with the Clinical Development Plan, the study protocol approved by any relevant Regulatory Authority, and Applicable Law in the Territory. Hutchmed shall be solely responsible for its performance in the Territory (except relevant Regulatory Filings for any Local Trials in the Territory shall be handled in accordance with Article 5). For each Local Trial, except to the extent prohibited by Applicable Law or any Regulatory Authority in the Territory, the Parties shall adhere to the Local Trial SOP attached hereto as Appendix A (the “Local Trial SOP”) (which is hereby attached to the Agreement as Exhibit F), including that Hutchmed shall provide Epizyme with a synopsis of each clinical trial protocol and specific sections of the protocol and informed consent form as reasonably requested by Epizyme, in English, and shall consider in good faith any comments to the protocol received from Epizyme during the relevant review period under the Local Trial SOP. Hutchmed will be responsible for ensuring that all informed consent forms for use in the Territory in any Local Trial: (i) allow Hutchmed to provide Epizyme and its Affiliates with access to and use of data and samples generated or obtained in such trials (and in no event less than the same use rights granted to Hutchmed to the extent not prohibited by Applicable Law and the relevant Regulatory Authority(ies) in the Territory), and (ii)

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comply with Applicable Law. Hutchmed shall use Commercially Reasonable Efforts to obtain any required permission or approval from the relevant Regulatory Authority(ies) in order to adhere to the Local Trial SOP and to provide Epizyme with access to and the use of data and samples generated or obtained in any such trial.

 

4.5 Conduct of Joint Global Trials.

 

(a) Potential Global Clinical Trials. Epizyme may present any potential clinical trial of the Licensed Product that includes clinical sites both in the Territory and outside the Territory, along with the plan for such global study, to Hutchmed via the JDC. Hutchmed may also present a potential global study of the Licensed Product to the JDC. The JDC shall discuss and decide in good faith whether the Parties will conduct such trial as a Joint Global Trial, subject to Epizyme’s final decision-making authority under Section 3.10(b); provided that Hutchmed shall have final decision-making authority regarding whether to participate in any such global study as provided in Section 3.10(a)(ii).

 

(b) Obligations of the Parties for Joint Global Trials.

 

(i) Generally. The Parties will be responsible for the performance of any Joint Global Trial as determined by the JDC. The conduct of any Joint Global Trial in the Territory shall be in accordance with the Clinical Development Plan, Epizyme’s study protocol (approved by any relevant Regulatory Authority), and Applicable Law in the Territory. Unless otherwise agreed by the Parties, for any Joint Global Trial (other than a Confirmatory Joint Global Trial), and subject to the other provisions in this Section 4.5, Epizyme shall, either by itself or through a Third Party contract research organization (the “Epizyme CRO”), at Epizyme’s sole cost and expense (subject to Section 9.3(c)(iii)), provide oversight of the clinical trial operations in the Territory to ensure consistency with the clinical trial operations outside the Territory. The JDC shall determine the timing of the inclusion of clinical sites in the Territory for each Joint Global Trial, with the understanding that Hutchmed will identify and manage clinical sites in the Territory for any Joint Global Trial. A copy of all clinical trial related documents for each Joint Global Trial, including protocols, informed consent forms, and safety data shall be provided to Epizyme in the language in which they were drafted; any such documents that are not received in English will be translated into English at Epizyme’s request by the Epizyme CRO, at Epizyme’s cost. Hutchmed will be responsible for ensuring that all informed consent forms for use in the Territory in any Joint Global Trial: (A) allow Hutchmed to provide Epizyme and its Affiliates with access to and use of data and samples generated or obtained in such trials (and in no event less than the same use rights granted to Hutchmed and with respect to samples to the extent permitted by Applicable Law), and (B) comply with Applicable Law. Unless otherwise mutually agreed by the Parties, a Hutchmed Entity shall be the Sponsor for all Joint Global Trials in the Territory, provided that a Local Hutchmed Entity shall be the Sponsor for all Joint Global Trials in Mainland China, and except that Epizyme is and shall continue to be the Sponsor for the 301 Global Trial and 302 Global Trial in Mainland China and Taiwan. To ensure consistency across all sites, all Joint Global Trials in the Territory will use Imported Drug, unless otherwise agreed by the Parties in writing. For any Joint Global Trial (other than a Confirmatory Joint Global Trial), Hutchmed may enter into an agreement with a Third Party contract research organization (a, “Hutchmed CRO”) to provide management and oversight services for the conduct of the Joint Global Trial in the Territory, at Hutchmed’s expense, subject to Section 9.3(c)(i).

 

The Parties acknowledge and agree on the need to conduct a Joint Global Trial both in and outside the Territory using the same protocol. To the extent an amendment to Epizyme’s study protocol is required to comply with Applicable Law or the requirements of any Regulatory Authority in or outside the Territory, then the Parties agree that (A) if the amendment is required due to Applicable Law or notice from a Regulatory Authority in the Territory, Hutchmed will provide prompt written notice to Epizyme, or if the amendment is required due to Applicable Law or notice from a Regulatory Authority outside the Territory, Epizyme will provide prompt written notice to Hutchmed, (B) the Parties will discuss the potential amendment and agree upon the strategy for interacting with the Regulatory Authorities in and outside the Territory, (C) each Party will use Commercially Reasonable Efforts to obtain the approval of the Regulatory Authorities in its respective territory to an amendment to the protocol that satisfies the Regulatory Authorities both in and outside the Territory and the protocol shall not be amended until such

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approvals have been obtained, and (D) if such approvals have not been obtained, the Parties shall discuss and mutually agree upon how each Party will proceed in its respective territory (which shall not be subject to decision-making under Section 3.10).

 

(ii) Additional Obligations of the Parties for Confirmatory Joint Global Trials. Notwithstanding subsection (i) above, the Parties shall enter into an agreement among Hutchmed, Epizyme, and a mutually agreed upon reputable contract research organization (a “Joint Global CRO”) to provide management and oversight services for the conduct of the Confirmatory Joint Global Trial in the Territory, which organization shall be the same contract research organization as the Epizyme CRO, unless otherwise agreed. The agreement among Hutchmed, Epizyme, and the Joint Global CRO (“Joint Global CRO Agreement”) shall: (A) provide that, except as provided in subsection (d) below, Hutchmed shall bear all costs and expenses associated with the conduct of the Confirmatory Joint Global Trial in the Territory, including any Joint Global CRO costs and any pass-through expenses to clinical sites, in accordance with Section 9.3, and (B) provide, in sufficient detail, the roles and responsibilities of Epizyme (such responsibilities, the “Epizyme Confirmatory Responsibilities”), Hutchmed, and the Joint Global CRO for the conduct of the Confirmatory Joint Global Trial, which roles and responsibilities shall be consistent with the terms of this Agreement, and will include that an Epizyme Entity will be the Sponsor of the Confirmatory Joint Global Trial in the Territory.

 

(iii) 302 Global Trial in Mainland China. Notwithstanding anything to the contrary in the foregoing, with respect to the 302 Global Trial in Mainland China, the Parties will have the responsibilities set forth in the [**] 3-Party CRO Agreement or, in the event of termination of the [**] 3-Party CRO Agreement, such other Joint Global CRO Agreement among Epizyme, Hutchmed and a Joint Global CRO that will contain substantially similar terms. Without limiting the foregoing:

 

(A) Except as set forth in clause (B) below, Hutchmed is responsible for study operationalization in the Territory and the supervision of [**] (and [**] subcontractors’) operationalization activities under the [**] 3-Party CRO Agreement ([**] subcontractors, as of the Amendment No. 1 Effective Date, include the subcontractors listed on Appendix E (which is hereby attached to the Agreement as Exhibit J)), and

 

(B) Epizyme is the Sponsor of the 302 Global Trial in Mainland China and Epizyme is responsible, itself or through [**], for the Epizyme Confirmatory Responsibilities which consist of the following: all regulatory activities and interactions with Regulatory Authorities in Mainland China (itself or through [**], in [**] capacity as Epizyme’s Authorized Regulatory Agent) including any activities or interactions regarding material or non-material changes to the clinical trial; medical monitoring; pharmacovigilance; any amendments to the Study protocol, investigator brochure, and manuals; global vendors involved in global activities (which, as of the Amendment No. 1 Effective Date, include the vendors on Appendix E and Epizyme will notify Hutchmed in writing of any change of vendors); clinical supply of Licensed Product (under the Supply Agreement) and placebo, rituximab, and lenalidomide pursuant to Section 7.6 of this Agreement; and data management, translational medicine, biostatistics, and medical writing. Epizyme will have oversight of the conduct of the Study in Mainland China to ensure consistency with the conduct of the Study globally. All drug unblinding discussions and decisions will be escalated to Epizyme for review and final approval prior to unblinding under the [**] 3-Party CRO Agreement. [**] will be responsible for negotiating contracts with the sites using the template agreement provided by Epizyme and Hutchmed. Any modifications to such template must be reviewed and approved by Hutchmed prior to execution; provided that any modification to the template that impacts safety or Epizyme’s liability, intellectual property rights, or use of study data must be reviewed and approved by Epizyme. If any clinical site will not begin negotiations with the template agreement provided by Epizyme and Hutchmed and requires that its own template agreement be used, [**] will submit such trial site’s template to Epizyme and Hutchmed for review and any modifications will reviewed and approved in the same manner as modifications to the Epizyme/Hutchmed template agreement. [**] will be responsible for drafting informed consent forms for review by approval by Hutchmed (and review by Epizyme to ensure conformance with global ICF). Hutchmed shall reimburse Epizyme’s costs and expenses for the 302 Global Trial in Mainland China in accordance with Sections 7.6 and 9.3(c) of this Agreement, and, with respect to Licensed Product for use in the 302 Global Trial in Mainland China, the

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Supply Agreement. In the event Hutchmed determines to expand the 302 Global Trial to include sites in Hong Kong and/or Macau, Hutchmed will notify Epizyme in writing and the Parties shall agree on a plan to implement the trial in these Jurisdictions, with the understanding that these Jurisdictions will be handled in the same manner as Mainland China.

 

(C) For clarity, the Parties agree that the 302 Global Trial is (1) a Confirmatory Joint Global Trial required to be conducted as part of the FDA’s accelerated Regulatory Approval of the Licensed Product, and (2) a confirmatory trial that will be used to support full Regulatory Approval by the Regulatory Authority in Mainland China. As a result, subject to Section 4.5(b)(i), neither Party will make any change to the Protocol for the 302 Global Trial or any other Confirmatory Joint Global Trial without the prior written approval of the other Party (which shall not be subject to decision-making under Section 3.10).

 

(iv) 302 Global Trial in Taiwan. Notwithstanding anything to the contrary in the foregoing, the Parties agree that with respect to the 302 Global Trial in Taiwan, Epizyme is and shall continue to be the Sponsor of the 302 Global Trial in Taiwan and shall be responsible, itself or through [**], for the Epizyme Confirmatory Responsibilities, which consist of all activities for the conduct of 302 Global Trial in Taiwan. Epizyme shall conduct the 302 Global Trial in consultation with Hutchmed and in accordance with the budget provided to Hutchmed as of the Amendment No. 1 Effective Date, and any updates or changes to such budget as approved by Hutchmed. Hutchmed shall reimburse Epizyme’s costs and expenses for the 302 Global Trial in Taiwan in accordance with Sections 7.6 and 9.3(c) of this Agreement, and, with respect to Licensed Product for use in the 302 Global Trial in Taiwan, the Supply Agreement.

 

(c) Hutchmed Minimum Patient Obligation. Hutchmed shall use Commercially Reasonable Efforts, either by itself, through any Hutchmed Entity or through the Joint Global CRO, to recruit, enroll, treat, and provide follow-up in a timely manner of twenty percent (20%) of the total number of patients to be treated under the protocol approved by the FDA and NMPA (or such increased or decreased total number of patients as may be required by a Regulatory Authority inside or outside the Territory) for the 301 Global Trial, the 302 Global Trial, and any other Joint Global Trial; provided that a Hutchmed Entity shall not enroll any patients in any clinical trial (other than the 302 Global Trial), and shall not be in breach of this Agreement for not having enrolled any such patients (so long as Hutchmed is using Commercially Reasonable Efforts to pass an in-person quality audit), until Hutchmed has passed, to Epizyme’s reasonable satisfaction, an in-person quality audit conducted by Epizyme or its designee. For clarity, once Hutchmed has passed such quality audit, then the proviso in the foregoing sentence shall not apply to any subsequent Joint Global Trial.

 

(d) [Section 4.5(d) intentionally omitted by the Parties]

 

(e) 301 Global Trial. Notwithstanding anything to the contrary in this Agreement, in the event Epizyme determines, after consultation with the FDA, to discontinue the 301 Global Trial outside the Territory, then (i) the 301 Global Trial shall no longer be a Joint Global Trial and Hutchmed shall no longer be obligated to participate in such clinical trial, and (ii) ES shall no longer be an Initial Indication for purposes of this Agreement.

 

4.6 Conduct of Rejected Global Trials. Epizyme may, itself or with or through any other Epizyme Entity, perform any Rejected Global Trial and include one or more clinical sites in the Territory; provided that the Parties shall discuss the inclusion of clinical sites in the Territory in such Rejected Global Trial and Epizyme shall reasonably consider any concerns raised by Hutchmed about the use of such clinical sites. Epizyme may engage a Third Party contract research organization to provide services in the Territory for any Rejected Global Trial and, if requested by Hutchmed, Epizyme shall consider using Hutchmed as a contract research organization in the Territory for such Rejected Global Trial (so long as the costs of using Hutchmed are not greater than the costs a reputable Third Party contract research organization would charge Epizyme for such work). The Parties agree that Section 9.3(d) shall apply with respect to such Rejected Global Trial.

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9. The Parties agree that Sections 5.1, 5.2, 5.3 and 5.4 of the Agreement are hereby deleted in their entirety and replaced with the following:

 

5.1
Regulatory Responsibilities.

(a) IND Applications. Subject to Sections 3.10, 4.1, and 5.2, Hutchmed shall use Commercially Reasonable Efforts to prepare, obtain (or cause to be obtained) and maintain INDs for the Licensed Product for each Local Trial or Joint Global Trial, at Hutchmed’s expense; provided that the Parties agree that:

(i) Epizyme shall file in Epizyme’s name and Epizyme shall be the IND applicant, and if such application is approved, the IND holder, for each Confirmatory Joint Global Trial in the Territory, including that Epizyme is and shall continue to be the IND holder for the 302 Global Trial in Mainland China and Taiwan;

(ii) a Local Hutchmed Entity shall file in Hutchmed’s name and Hutchmed shall be the IND applicant, and if such application is approved, the IND holder, for each Local Drug Trial (other than any Confirmatory Joint Global Trial) in Mainland China;

(iii) a Non-Local Hutchmed Entity shall file in Hutchmed’s name and Hutchmed shall be the IND applicant, and if such application is approved, the IND holder, for each Imported Drug Trial (other than any Confirmatory Joint Global Trial) in Mainland China; provided that to support such IND application, Epizyme and Hutchmed will sign a Letter of Explanation substantially in the form of the template attached hereto as Appendix C (which is hereby attached to the Agreement as Exhibit H) and submit such Letter of Explanation with a redacted copy of the License Agreement to the Regulatory Authorities in Mainland China with the IND application. If the relevant Regulatory Authorities in Mainland China will not accept the submission as described in the previous sentence and will not allow such IND application to be filed in Hutchmed’s name, then Hutchmed shall file in Epizyme’s name and Epizyme shall be the IND applicant, and if such application is approved, the IND holder for such Imported Drug Trial;

(iv) unless otherwise agreed by the Parties, a Hutchmed Entity shall be the IND applicant, and if such application is approved, the IND holder for any Local Trial or Joint Global Trial (other than any Confirmatory Joint Global Trial) in Taiwan, Hong Kong or Macau; and

(v) notwithstanding the foregoing subsections (i)-(iv), if the Regulatory Authorities in Mainland China do not permit Hutchmed to file for an IND for any Imported Drug Trial (other than any Confirmatory Joint Global Trial) for an Approved Indication as provided in subsection (iii) above, then a Hutchmed Entity shall file the IND in Epizyme’s name and Epizyme shall be the IND applicant, and if such application is approved, the IND holder, for any Imported Drug Trial (other than any Confirmatory Joint Global Trial) in Mainland China for an Approved Indication.

(vi) For any IND that is prepared and filed by Hutchmed in Epizyme’s name as described in subsection (iii) or (v) above, Epizyme shall execute (and notarize, if required) and provide the following documents to Hutchmed for Licensed Product no later than [**] after Hutchmed’s request, each in substantially the form attached hereto as Appendix D (which is hereby attached to the Agreement as Exhibit I): patent statement, limited power of attorney, GLP conformance statement, drug substance self-use statement, GMP compliance statement, letter of authorization, and any other statements required or specifically requested by the Regulatory Authorities in connection with such IND preparation and filing (collectively, the “IND Statements”). For clarity, IND Statements are not required from Epizyme for INDs where a Hutchmed Entity is the applicant filing in Hutchmed’s name. Epizyme shall also provide a CPP for the Licensed Product to Hutchmed as required and requested for any IND filing by Hutchmed, and Epizyme shall obtain an executed letter of authorization from its drug product manufacturer as necessary, in a form similar to the letter of authorization from Epizyme.

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The Parties acknowledge that, as of the Amendment No. 1 Effective Date, Hutchmed has filed, in Epizyme’s name, the IND for the bridging study of Tazemetostat in relapsed or refractory follicular lymphoma patients (2021-TAZ-00CH1) (the “Bridging Study”). For clarity, subject to Section 4.6, Epizyme may, without approval of the JDC, file an IND in the Territory for any Rejected Global Trial that includes clinical sites in the Territory; provided that Epizyme will provide a copy of such proposed IND to Hutchmed sufficiently in advance of the proposed filing of such IND and shall consider in good faith all comments made by Hutchmed with respect to such IND.

(b) Other Regulatory Filings. Other than INDs as set forth in subsection (a) above, and subject to Sections 3.10, 4.1 and 5.2, Hutchmed shall use Commercially Reasonable Efforts to prepare Regulatory Filings and obtain (or cause to be obtained) and maintain in Hutchmed’s name Regulatory Approval and, if applicable, Reimbursement Approval, for a Licensed Product in each Initial Indication and Additional Indication in each of (i) Mainland China, (ii) Taiwan and (iii) Hong Kong and Macau (with it being agreed that, if Regulatory Approval is obtained in Hong Kong, Hutchmed shall not also be required to separately obtain Regulatory Approval in Macau, or vice versa) at Hutchmed’s expense; provided that (A) to the extent required by the Regulatory Authorities in Mainland China as a result of only Imported Drug being available in Mainland China prior to the Manufacturing Technology Transfer Completion Date (as defined in the Supply Agreement), then the marketing authorization application for Regulatory Approval for Licensed Product in Mainland China will be filed by Hutchmed in Epizyme’s name (and Hutchmed will be Epizyme’s Authorized Regulatory Agent for the marketing authorization for Imported Drug), and thereafter Hutchmed shall file for marketing authorization in Hutchmed’s name and be the marketing authorization holder for Local Drug as soon as possible after the Manufacturing Technology Transfer Completion Date (as defined in the Supply Agreement), and Epizyme will withdraw or allow to lapse the Regulatory Approval in Epizyme’s name, and (B) all Drug Approval Applications for any Licensed Product in the Territory shall be filed only after review and comment by Epizyme (in accordance with Section 5.2(b)) and shall not require the approval of any Committee. All Regulatory Filings and communications with Regulatory Authorities in the Territory shall accurately reflect the datasets as presented by Epizyme in its Regulatory Filings outside of the Territory and provided to Hutchmed.

Epizyme acknowledges and understands that, if it is a holder of import drug license in respect of the Imported Drug in the Territory, it will have an obligation to make certain required filings with the relevant Regulatory Authority. Epizyme agrees that, so long as Epizyme holds a valid and effective import drug license in the Territory in respect of Imported Drug, it will provide Hutchmed with any documentation required under Applicable Law to be submitted to Regulatory Authorities by the holder of an import drug license, it being understood that Hutchmed, as Epizyme’s Authorized Regulatory Agent, will report such information to the relevant Regulatory Authorities for and on behalf of Epizyme for the purposes of satisfying Epizyme’s obligations as a holder of import drug license.

(c) Authorized Regulatory Agent.

(i) The Parties agree that [**] is and shall continue to be Epizyme’s Authorized Regulatory Agent for the 302 Global Trial in Mainland China, except that Epizyme shall provide written notice to [**] that [**] shall no longer be Epizyme’s Authorized Regulatory Agent under the [**] 3-Party CRO Agreement at such time as database lock has occurred for the 302 Global Trial and all regulatory interactions and communications in Mainland China with respect to the 302 Global Trial have occurred up to, but not including, preparing or submitting documents for, or meeting or interacting with Regulatory Authorities regarding, the Regulatory Approval in Mainland China for the use of Licensed Product in combination with lenalidomide and rituximab for R/R FL. At such time, (A) if Hutchmed or an Affiliate meets the criteria established by the Regulatory Authorities in Mainland China (such as having Local Drug available for use in Mainland China upon the Manufacturing Technology Transfer Completion Date (as defined in the Supply Agreement)) to submit such a Regulatory Approval application in the name of Hutchmed or an Affiliate in Mainland China, then Epizyme shall not engage a replacement Authorized Regulatory Agent and Hutchmed may appoint an Authorized Regulatory Agent in its discretion for such submission; or (B) if Hutchmed or an Affiliate does not meet the criteria established by the Regulatory Authorities in Mainland China (such not having Local Drug available for use in Mainland China) to

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submit such a Regulatory Approval application in the name of Hutchmed or an Affiliate in Mainland China, then Epizyme shall authorize Hutchmed to replace [**] as Epizyme’s Authorized Regulatory Agent (the “ARA Replacement”), and Hutchmed shall assume the responsibilities as Epizyme’s Authorized Regulatory Agent for such Regulatory Approval. Epizyme shall do and perform, or cause to be done and performed, all such further acts and things, and shall amend, execute and deliver all such documents and instruments (including amending the Work Order to the [**] 3-Party CRO Agreement) as Hutchmed may reasonably request in order to carry out the ARA Replacement. The Parties agree that [**] is and shall continue to be Epizyme’s Authorized Regulatory Agent for the 302 Global Trial in Taiwan. The engagement of an Authorized Regulatory Agent by Epizyme for any other Confirmatory Joint Global Trial in the Territory will be handled in a manner consistent with the foregoing.

(ii) Other than as provided in subsection (i) above, for any Imported Drug Trial in Mainland China for which Hutchmed files an IND in Hutchmed’s name, Hutchmed shall designate an Authorized Regulatory Agent, and for any Imported Drug Trial in Mainland China for which Hutchmed files an IND in Epizyme’s name, Epizyme shall designate a Local Hutchmed Entity as its Authorized Regulatory Agent. Hutchmed is and shall continue to be the Authorized Regulatory Agent for the IND for the Bridging Study.

5.2
Regulatory Documents.

(a) Epizyme Regulatory Documents. As of the Amendment No. 1 Effective Date, Epizyme has made available to Hutchmed copies of the Epizyme Regulatory Documents listed on Schedule 5.2. Subject to Section 9.3(d) and (e), throughout the Term, except to the extent prohibited by Applicable Law or any Regulatory Authority in the Territory, Epizyme shall provide Hutchmed with the material Regulatory Filings and Regulatory Documents from outside the Territory for Joint Global Trials and from inside the Territory for Confirmatory Joint Global Trials, as described in the table attached to this Amendment No. 1 as Appendix B (and hereby attached to the Agreement as Exhibit G) (the “Joint Global Trial Document Review”); provided that Epizyme shall, solely to the extent necessary to support Hutchmed’s preparation and filing of any IND or Drug Approval Application with respect to any Licensed Product in the Field in the Territory, make available to Hutchmed as soon as practicable copies of any other material Epizyme Regulatory Documents for the Licensed Product submitted to or received from the FDA after the Effective Date that are not part of the Joint Global Trial Document Review. Epizyme shall use Commercially Reasonable Efforts to obtain any required permission or approval from the relevant Regulatory Authority(ies) in order to adhere to the Joint Global Trial Document Review. Epizyme shall consider in good faith any comments received from Hutchmed during the relevant review period under the Joint Global Trial Document Review. In addition, at the time of submission, Epizyme will provide Hutchmed with a full and complete copy of any IND/CTA application filed by Epizyme inside the Territory for any Confirmatory Joint Global Trial in the language in which it was filed. All Regulatory Filings and Regulatory Approvals outside the Territory shall be prepared, filed, and maintained at Epizyme’s sole expense. Any Confidential Information of Hutchmed or any of its Affiliates that is incorporated into any Regulatory Documents filed in the name of or owned by any Epizyme Entity shall remain Confidential Information of Hutchmed or its applicable Affiliate(s). Subject to the terms and conditions of this Agreement, during the Term Epizyme hereby grants to Hutchmed a “right of reference,” as that term is defined in 21 C.F.R. § 314.3(b) and any non-U.S. counterpart to such regulation, pursuant to which the Hutchmed Entities shall be entitled at no cost to access, use, and reference the Epizyme Regulatory Documents for the Development, Manufacture or Commercialization of the Licensed Compound or Licensed Products in accordance with this Agreement. Upon request by Hutchmed, Epizyme shall provide a signed statement to this effect in accordance with 21 C.F.R. §314.50(g)(3) or any non-U.S. counterpart to such regulation. Hutchmed shall reimburse Epizyme for any reasonable Out-of-Pocket Costs incurred by Epizyme or any of its Affiliates in fulfilling Epizyme’s obligations under this Section 5.2(a) within [**] of receipt of an invoice therefor.

(b) Hutchmed Regulatory Documents. Throughout the Term, except to the extent prohibited by Applicable Law or any Regulatory Authority in the Territory, Hutchmed shall provide Epizyme with the material Hutchmed Regulatory Filings and Regulatory Documents in accordance with the Local Trial SOP (Exhibit F) and Joint Global Trial Document Review (Exhibit G). Hutchmed shall use

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Commercially Reasonable Efforts to obtain any required permission or approval from the relevant Regulatory Authority(ies) in order to adhere to the Local Trial SOP and Joint Global Trial Document Review. Hutchmed shall consider in good faith any comments received from Epizyme during the relevant review period under the Local Trial SOP or Joint Global Trial Document Review. In addition, at the time of submission, Hutchmed will provide Epizyme with a full and complete copy of any IND/CTA application filed by Hutchmed in Epizyme’s name and a full and complete copy of any Regulatory Approval application filed by Hutchmed in Epizyme’s name, in each case in the language in which it was filed. All Regulatory Filings and Regulatory Approvals in the Field in the Territory shall be prepared, filed, and maintained at Hutchmed’s sole expense. Any Confidential Information of Epizyme or any of its Affiliates that is incorporated into any Regulatory Documents filed in the name of or owned by any Hutchmed Entity shall remain Confidential Information of Epizyme or its applicable Affiliate(s). Subject to the terms and conditions of this Agreement, during the Term Hutchmed hereby grants to Epizyme a “right of reference,” as that term is defined in 21 C.F.R. § 314.3(b) and any non-U.S. counterpart to such regulation, pursuant to which the Epizyme Entities shall be entitled at no cost to access, use, and reference the Hutchmed Regulatory Documents for the Development, Manufacture or Commercialization of the Licensed Compound or Licensed Products in accordance with this Agreement or outside the Territory. Upon request by Epizyme, Hutchmed shall provide a signed statement to this effect in accordance with 21 C.F.R. §314.50(g)(3) or any non-U.S. counterpart to such regulation. Epizyme shall reimburse Hutchmed for any reasonable Out-of-Pocket Costs incurred by any Hutchmed Entities in fulfilling Hutchmed’s obligations under this Section 5.2(b) within [**] of receipt of an invoice therefor.

(c) Regulatory Liaisons. Promptly (but in no event later than [**]) following the Effective Date, the Parties shall each designate an employee with responsibility for regulatory activities to consult with the other Party’s representative with respect to the transfer of Regulatory Documents between the Parties (such representatives, the “Regulatory Liaisons”). The Regulatory Liaisons shall discuss and provide input to each other, at such times, places and frequencies as mutually agreed, on all material issues with respect to the sharing and transfer of Regulatory Documents; provided that all final decisions related to Regulatory Filings and Regulatory Approvals shall be made by the Party with the right to control such decision as set forth in Section 3.10.

5.3 Ownership of Regulatory Filings and Approvals. Except as provided elsewhere in this Article 5, all Regulatory Filings and resulting Regulatory Approvals for Licensed Product in the Territory (and all corresponding applications for marketing or regulatory exclusivity) applied for in the name of Hutchmed shall be exclusively owned by Hutchmed. If at the time of a Regulatory Filing, the Regulatory Authorities and Applicable Law in the Territory prohibit Hutchmed from filing in its name and owning such Regulatory Filings and Regulatory Approvals in the Territory, then (a) all such Regulatory Filings and Regulatory Approvals shall, subject to Section 5.1, be applied for by Hutchmed in the name of and exclusively owned by Epizyme, and (b) Epizyme will cooperate with Hutchmed, and provide necessary assistance to Hutchmed, to transfer such Regulatory Filings and Regulatory Approvals to Hutchmed at such time as Applicable Law no longer prohibits Hutchmed from filing and owning such Regulatory Filings and Regulatory Approvals in the Territory; provided that upon termination (but not expiration) of this Agreement for any reason all such Regulatory Filings and Regulatory Approvals will revert to the exclusive ownership of Epizyme, at no cost to Epizyme, and Hutchmed shall be obligated to take all actions and execute all documents as required by the Regulatory authority under Applicable Law to effect the transfer of such Regulatory Filings and Regulatory Approvals to Epizyme. All Regulatory Filings for any Rejected Global Trial that includes clinical sites in the Territory, if any, for the Development of Licensed Product in the Territory shall be applied for by Epizyme in the name of and exclusively owned by Epizyme unless and until Hutchmed makes a Buy-In Right Payment with respect to such Rejected Global Trial in which case the rest of this Section 5.3 will apply to such Regulatory Filings.

5.4 Meetings with Regulatory Authorities. To the extent practicable and permissible by Applicable Law and Regulatory Authorities, Hutchmed shall use good faith efforts to accommodate Epizyme so that Epizyme may have up to [**] employees or other representatives (who are bound by written obligations of nondisclosure and non-use no less stringent than those set forth in Article 10) participate

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at any material meetings with Regulatory Authorities in the Territory to discuss the Development or Commercialization of Licensed Products; provided that any exercise of such right by Epizyme shall not require Hutchmed to delay the Development or Commercialization of the Licensed Product, including by delaying in responding to Regulatory Authorities or in arranging any such meetings. Hutchmed shall provide Epizyme with reasonable notice prior to any such meetings. In addition, to the extent practicable and permissible by Applicable Law and Regulatory Authorities, Epizyme shall use good faith efforts to accommodate Hutchmed so that Hutchmed may have up to [**] employees or other representatives (who are bound by written obligations of nondisclosure and non-use no less stringent than those set forth in Article 10) participate at any material meetings with Regulatory Authorities in the Territory to discuss any Joint Global Trial for which Epizyme is the IND applicant or holder; provided that any exercise of such right by Hutchmed shall not require Epizyme to delay the Confirmatory Joint Global Trial, including by delaying in responding to Regulatory Authorities or in arranging any such meetings. Epizyme shall provide Hutchmed with reasonable notice prior to any such meetings.

10. Epizyme hereby approves (and such approval shall be recorded in the minutes of JMC) the engagement of [**] (at a facility in Mainland China) as Hutchmed’s Permitted Subcontractor CMO for DS, and the engagement of [**] (at a facility in Mainland China) as Hutchmed’s Permitted Subcontractor CMO for DP, which engagements shall be subject to the terms of the Supply Agreement (as defined below).

 

11. The Parties acknowledge that Sections 7.1 through 7.4 of the Agreement are superseded by the Supply Agreement. The Parties agree that Section 7.6 of the Agreement is hereby deleted in its entirety and replaced with the following:

7.6 Supply of Certain Other Combination Drugs and Placebo.

(a)
Epizyme Combination Therapies and Placebo.

(i) For any Joint Global Trial or Local Trial of an Epizyme Combination Therapy where any Other Combination Drug that is part of such Epizyme Combination Therapy is at the relevant time Controlled exclusively by Epizyme, Epizyme shall supply such Other Combination Drug to Hutchmed, at Hutchmed’s expense, for use in such Joint Global Trial or Local Trial in the Territory.

(ii) For any Joint Global Trial or Local Trial of an Epizyme Combination Therapy where any Other Combination Drug that is part of such Epizyme Combination Therapy is at the relevant time readily available from any Third Party, Hutchmed shall be responsible for obtaining such Other Combination Drug, at Hutchmed’s expense, for use in such Joint Global Trial or Local Trial in the Territory; provided that, notwithstanding the foregoing, (A) for the 302 Global Trial, Epizyme shall be responsible for supplying quantities of rituximab and lenalidomide for use in the 302 Global Trial in Mainland China and Taiwan, at Hutchmed’s expense, (B) for any Confirmatory Joint Global Trial (other than the 302 Global Trial), Epizyme shall be responsible for supplying the Other Combination Drugs that are readily available from any Third Party, at Hutchmed’s expense, and (C) for any Joint Global Trial (other than the 302 Global Trial or any other Confirmatory Joint Global Trial) where one or more of the relevant Other Combination Drugs that are readily available from any Third Party need, due to regulatory or consistency considerations, to be supplied for the Territory from the same source of supply that Epizyme uses outside the Territory, Epizyme shall be responsible for supplying such quantities of such Other Combination Drugs for such Joint Global Trial in the Territory, at Hutchmed’s expense.

(iii) Epizyme shall be responsible for supplying quantities of placebo for use in the Territory for Local Trials and Joint Global Trials, in each case, where Imported Drug is used in such clinical trial, at Hutchmed’s expense.

(iv) With respect to any Other Combination Drugs or placebo supplied by Epizyme under this Section 7.6(a), (A) the quantity shall be agreed upon at the JDC in advance on a [**] basis and Epizyme shall supply such quantity agreed upon by the JDC, (B) Hutchmed shall only use such Other Combination Drugs or placebo in the Territory in the Joint Global Trial or Local Trial for which they

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were intended, and (C) Hutchmed shall pay to Epizyme the Fully-Burdened Cost of any such quantity of such Other Combination Drugs or placebo within [**] of receipt of an invoice therefor, provided that on a [**] basis, Epizyme shall determine its actual Fully-Burdened Cost for the quantities of Other Combination Drugs or placebo supplied by Epizyme within [**] following the end of the applicable [**] and notify Hutchmed in writing with reasonable supporting information, and if the amount paid in advance by Hutchmed for such [**] exceeds the actual Fully-Burdened Cost, then Epizyme shall pay such difference to Hutchmed within [**] of receipt of an invoice therefor or if the amount paid in advance by Hutchmed for such [**] is less than the actual Fully-Burdened Cost, then Hutchmed shall pay such difference to Epizyme within [**] of receipt of an invoice therefor.

(b)
Joint Combination Therapies and Placebo. Hutchmed shall supply to Epizyme (i) the Other Combination Drugs that (A) are at the relevant time Controlled by Hutchmed, and (B) are part of any Joint Combination Therapy that is the subject of any Joint Global Trial or Rejected Global Trial of such Joint Combination Therapy, and (ii) all placebo for use in Local Trials and Joint Global Trials of Local Drug in the Territory, at Hutchmed’s expense. The quantity of such Other Combination Drugs and placebo to be supplied by Hutchmed hereunder shall be agreed upon at the JDC in advance on a [**] basis, and Epizyme shall only use such Other Combination Drugs and placebo outside the Territory in the performance of the intended Joint Global Trial or in and outside the Territory in the performance of the intended Rejected Global Trial. Epizyme shall pay to Hutchmed the Fully-Burdened Cost of any such quantity of such Other Combination Drugs and placebo in advance within [**] of receipt of an invoice therefor; provided that on a [**] basis, Hutchmed shall determine its actual Fully-Burdened Cost for the quantities of Other Combination Drugs or placebo supplied by Hutchmed within [**] following the end of the applicable [**] and notify Epizyme in writing with reasonable supporting information, and if the amount paid in advance by Epizyme for such [**] exceeds the actual Fully-Burdened Cost, then Hutchmed shall pay such difference to Epizyme within [**] of receipt of an invoice therefor or if the amount paid in advance by Epizyme for such [**] is less than the actual Fully-Burdened Cost, then Epizyme shall pay such difference to Hutchmed within [**] of receipt of an invoice therefor.
(c)
Licensed Product. For clarity, any quantity of Licensed Product to be supplied for any Local Trial or Joint Global Trial to be performed in the Territory will be manufactured and delivered to Hutchmed in accordance with the terms of the Manufacturing Technology Transfer and Supply Agreement made as of [**] among Epizyme, Hutchmed China, and Hutchmed HK (“Supply Agreement”).

12. The Parties agree that Section 9.3(c)(i) is deleted in its entirety and replaced with the following:

 

(i) Hutchmed shall be responsible for all costs, including the costs in the Territory of any Joint Global CRO, for patients enrolled and treated in any Joint Global Trial in the Territory for up to its twenty percent (20%) share of the total number of patients enrolled and treated globally in such Joint Global Trial. For all Joint Global Trials, Hutchmed shall be responsible for the Fully-Burdened Costs of any placebo or Other Combination Drugs included in a Combination Therapy for such patients in accordance with Section 7.6. Notwithstanding anything in the Agreement to the contrary, with respect to the 302 Global Trial:

 

(A) Hutchmed shall reimburse Epizyme for all costs incurred by Epizyme Entities in the performance of the 302 Global Trial from the Effective Date through the Amendment No. 1 Effective Date, including (1) the costs and pass-through expenses payable to [**] for the performance of the 302 Global Trial in Mainland China by [**] and its vendors, (2) the costs and pass-through expenses payable to [**] for the performance of the 302 Global Trial in Taiwan by [**] and its vendors, and (3) the costs and pass-through expenses payable to Epizyme vendors (which, as of the Amendment No. 1 Effective Date, include the vendors on Appendix E) that are directly attributable to the 302 Global Trial in Mainland China and Taiwan.

 

For the period commencing on the Effective Date and ending December 31, 2021, Epizyme shall invoice Hutchmed for such costs in the amount of [**] U.S. Dollars ($[**]) promptly following the Amendment No. 1 Effective Date. Epizyme will invoice Hutchmed for such costs for the period commencing on January 1, 2022 and ending on the Amendment No. 1 Effective Date within [**] after the Amendment

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No. 1 Effective Date. Hutchmed shall pay all undisputed amounts payable under such invoices within [**] after receipt of the invoice; and

 

(B) Commencing with the Amendment No. 1 Effective Date and continuing until the completion of the 302 Global Trial, Hutchmed shall (1) pay the costs and pass-through expenses payable to [**] for the performance of the 302 Global Trial in Mainland China by [**] and its vendors directly to [**] under the [**] 3-Party CRO Agreement, (2) reimburse Epizyme for all costs incurred by Epizyme Entities in the performance of the 302 Global Trial in Mainland China, and (3) reimburse Epizyme for all costs incurred by Epizyme Entities in the performance of the 302 Global Trial in Taiwan, including the costs payable to [**] and its vendors, or to Epizyme’s vendors (which as of the Amendment No. 1 Effective Date include the vendors on Appendix E) that are directly attributable to the 302 Global Trial in Taiwan. Epizyme shall invoice Hutchmed for such costs on a Calendar Quarter basis and Hutchmed shall pay all undisputed amounts payable under such invoices within [**] after receipt of the invoice.

 

For clarity, no cost or expense payable under Section 9.3(c)(iii) shall be due or payable under this Section.

 

13. The Parties agree that, pursuant to Section 9.3(c)(iii) of the Agreement, Hutchmed shall provide payment of [**] U.S. Dollars ($[**]) for its 20% share of global costs that are not territory-specific for the period commencing on the Effective Date of the Agreement and ending on December 31, 2021. The Quarterly Cost Report for such period has been provided to Hutchmed as of the Amendment No. 1 Effective Date.

 

14. The Parties agree that Sections 13.1 and 13.2 of the Agreement are hereby deleted and replaced with the following:

 

13.1 Indemnification by Epizyme. Epizyme shall indemnify, hold harmless and defend Hutchmed and its Affiliates, and their respective directors, officers, consultants, agents, contractors and employees (the “Hutchmed Indemnitees”) from and against any and all Third Party suits, claims, actions, demands, liabilities, expenses, costs, damages, deficiencies, obligations or losses (including reasonable attorneys’ fees, court costs, witness fees, damages, judgments, fines and amounts paid in settlement) (“Losses”) to the extent that such Losses arise out of (a) any breach of this Agreement by Epizyme, (b) any act or failure to act by any Epizyme Entity that causes a breach of any Epizyme In-License Agreement or Hutchmed In-License Agreement, (c) the Development, Manufacture or Commercialization of the Licensed Compound or any Licensed Product by or on behalf of any Epizyme Entity, (d) any act or omission by any Hutchmed Entity in its capacity as Authorized Regulatory Agent to the extent acting within the scope of authority expressly delegated by Epizyme, and in compliance with Epizyme’s written instructions with respect to the submission of regulatory materials to Regulatory Authorities, or (e) the gross negligence or willful misconduct of any Epizyme Indemnitee, except, in each case of clauses (a) through (e), for those Losses for which Hutchmed has an obligation to indemnify Epizyme pursuant to Section 13.2, as to which Losses each Party shall indemnify the other to the extent of their respective liability for the Losses.

 

13.2 Indemnification by Hutchmed. Hutchmed shall indemnify, hold harmless and defend Epizyme and its Affiliates, and their respective directors, officers, consultants, agents, contractors and employees (the “Epizyme Indemnitees”) from and against any and all Losses, to the extent that such Losses arise out of (a) any breach of this Agreement by Hutchmed, (b) any act or failure to act by any Hutchmed Entity that causes a breach of any Epizyme In-License Agreement or Hutchmed In-License, (c) the Development, Manufacture, or Commercialization of the Licensed Compound or any Licensed Product by or on behalf of any Hutchmed Entity (other than to the extent arising out of the practice of the Licensed IP, Epizyme Marks, or Epizyme Domains in accordance with this Agreement), including any act or omission with respect to Commercialization activities by or on behalf of any Hutchmed Entity under a Regulatory Approval filed by Hutchmed in Epizyme’s name under Article 5, (d) the gross negligence or willful misconduct of any Hutchmed Indemnitee, or (e) any act or omission by any Hutchmed Entity in its capacity as Authorized Regulatory Agent to the extent acting beyond the scope of authority expressly delegated by Epizyme, and failure to comply with Epizyme’s written instructions with respect to the submission of regulatory materials to Regulatory Authorities, except, in each case of clauses (a) through (e), for those Losses for which Epizyme

13

 


 

has an obligation to indemnify Hutchmed pursuant to Section 13.1, as to which Losses each Party shall indemnify the other to the extent of their respective liability for the Losses.

 

15. A new exhibit in the form of Appendix A to this Amendment No. 1 is hereby added to the Agreement as Exhibit F (Local Trial SOP).

 

16. A new exhibit in the form of Appendix B to this Amendment No. 1 is hereby added to the Agreement as Exhibit G (Joint Global Trial Document Review).

 

17. A new exhibit in the form of Appendix C to this Amendment No. 1 is hereby added to the Agreement as Exhibit H (Letter of Explanation).

 

18. A new exhibit in the form of Appendix D to this Amendment No. 1 is hereby added to the Agreement as Exhibit I (IND Statements).

 

19. A new exhibit in the form of Appendix E to this Amendment No. 1 is hereby added to the Agreement as Exhibit J (Vendors and Subcontractors as of Amendment No. 1 Effective Date).

 

20. Capitalized terms used in this Amendment No. 1 that are not otherwise defined herein shall have the meanings set forth in the Agreement. Except as amended by this Amendment No. 1, the terms and conditions of the Agreement shall remain in full force and effect. After the Amendment No. 1 Effective Date, every reference in the Agreement to the “Agreement” shall mean the Agreement as amended by this Amendment No. 1. This Amendment No. 1 shall be construed under and governed by the laws of the State of New York, exclusive of its conflicts of laws principles. This Amendment No. 1 may be executed in counterparts, all of which taken together shall be regarded as one and the same instrument.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the Parties have executed this Amendment No. 1 through their duly authorized representatives to be effective as of the Amendment No. 1 Effective Date.

EPIZYME, INC.

 

By: /s/ Grant Bogle

 

Name: Grant Bogle

Title: President & Chief Executive Officer

 

 

HUTCHMED GROUP INVESTMENT LIMITED (formerly known as Hutchison China MediTech Investment Limited)

 

By: /s/ Weiguo Su

 

Name: Weiguo Su

Title: Chief Executive Officer

 

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EX-10.8

 

 

 

Exhibit 10.8

 

 

EPIZYME, INC. STOCK OPTION AGREEMENT

 

Epizyme, Inc. (the “Company”) hereby grants the following stock option pursuant to its 2022 Equity Incentive Plan. The terms and conditions attached hereto are also a part hereof.

Notice of Grant

 

Name of optionee (the “Participant”):

 

Grant Date:

 

Incentive Stock Option or Nonstatutory Stock Option:

 

Number of shares of the Company’s Common Stock subject to this option (“Shares”):

 

Option exercise price per Share:1

 

Vesting Start Date:

 

Final Exercise Date: 2

 

Vesting Schedule:

 

All vesting is dependent on the Participant remaining an Eligible Participant, as provided herein.

 

Please confirm your acceptance of this stock option grant and of the terms and conditions of this stock option agreement by signing a copy of this agreement where indicated below or by accepting this grant electronically.

 

This option satisfies in full all commitments that the Company has to the Participant with respect to the issuance of stock, stock options or other equity securities.

Epizyme, Inc. By:

Name of Officer:

Title:

 

 

Signature of Participant Name of Participant Street Address City/State/Zip Code

 

 

 

1. This must be at least 100% of the Grant Date Fair Market Value (as defined in the Plan) of the Common Stock on the date of grant (110% in the case of a Participant that owns more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary (a “10% Shareholder”)) for the option to qualify as an incentive stock option (an “ISO”) under Section 422 of the Internal Revenue Code.

 

 

 


 

 

 

2. The Final Exercise Date must be no more than 10 years (5 years in the case of a 10% Shareholder) from the date of grant for the option to qualify as an ISO. The correct approach to calculate the final exercise date is to use the day immediately prior to the date ten years out from the date of the stock option award grant (5 years in the case of a 10% stockholder).

 

 

 


 

 

 

Epizyme, Inc.

 

Stock Option Agreement Incorporated Terms and Conditions

 

1.
Grant of Option.

 

This agreement evidences the grant by the Company, on the grant date (the “Grant Date”) set forth in the Notice of Grant that forms part of this agreement (the “Notice of Grant”), to the Participant of an option to purchase, in whole or in part, on the terms provided herein and in the Company’s 2022 Equity Incentive Plan (the “Plan”), the number of Shares set forth in the Notice of Grant of common stock, $0.0001 par value per share, of the Company (“Common Stock”), at the exercise price per Share set forth in the Notice of Grant. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on the Final Exercise Date set forth in the Notice of Grant (the “Final Exercise Date”).

 

The option evidenced by this agreement is intended to be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) to the maximum extent permitted by law, solely to the extent designated as an incentive stock option in the Notice of Grant. Except as otherwise indicated by the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.

 

2.
Vesting Schedule.

 

This option will become exercisable (“vest”) in accordance with the vesting schedule set forth in the Notice of Grant. Any fractional number resulting from the vesting schedule set forth in the Notice of Grant shall be rounded down to the nearest whole number except with respect to the last vesting period.

 

The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option under Section 3 hereof or the Plan.

 

3.
Exercise of Option.

 

(a)
Form of Exercise. Each election to exercise this option shall be in writing, in the form of the Stock Option Exercise Notice attached as Annex A, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, or in such other form (which may be electronic) as is approved by the Company, together with payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share.

 

(b)
Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee, director or officer of, or consultant or advisor to, the Company or any other entity the employees, officers, directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”).

 

(c)
Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such

cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the restrictive covenants (including, without limitation, the non-competition, non-solicitation, or confidentiality provisions) of any employment contract, any non-competition, non-solicitation, confidentiality or assignment agreement to which the Participant is a party, or any other agreement between the Participant and the Company, the right to exercise this option shall terminate immediately upon such violation.

 

 


 

 

 

 

(d)
Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee), provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.

 

(e)
Termination for Cause. If, prior to the Final Exercise Date, the Participant’s employment or other relationship is terminated by the Company for Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of such termination of employment or other relationship. If, prior to the Final Exercise Date, the Participant is given notice by the Company of the termination of his or her employment or other relationship by the Company for Cause, and the effective date of such employment or other termination is subsequent to the date of delivery of such notice, the right to exercise this option shall be suspended from the time of the delivery of such notice until the earlier of (i) such time as it is determined or otherwise agreed that the Participant’s employment or other relationship shall not be terminated for Cause as provided in such notice or (ii) the effective date of such termination of employment or other relationship (in which case the right to exercise this option shall, pursuant to the preceding sentence, terminate upon the effective date of such termination of employment or other relationship). If the Participant is subject to an individual employment, consulting or severance agreement with the Company or eligible to participate in a Company severance plan or arrangement, in any case which agreement, plan or arrangement contains a definition of “cause” for termination of employment or other relationship, “Cause” shall have the meaning ascribed to such term in such agreement, plan or arrangement. Otherwise, “Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant’s employment or other relationship shall be considered to have been terminated for Cause if the Company determines, within 30 days after the Participant’s resignation, that termination for Cause was warranted.

 

4.
Tax Matters.

 

(a)
Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option.

 

(b)
Disqualifying Disposition. If this option is an incentive stock option and the Participant disposes of Shares acquired upon exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition.

 

5.
Transfer Restrictions; Clawback.

 

(a) This option may not be sold, assigned, transferred, pledged, encumbered or otherwise disposed of by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by the Participant.

 

(b) In accepting this option, the Participant agrees to be bound by any clawback policy that the Company has in place or may adopt in the future.

 

6.
Provisions of the Plan.

 

This option is subject to the provisions of the Plan (including the provisions relating to amendments to the Plan), a copy of which is furnished to the Participant with this option.

 

 

 

 

 


 

 

 

ANNEX A

 

Epizyme, Inc.

 

Stock Option Exercise Notice

 

Epizyme, Inc.

400 Technology Square

Cambridge, MA 02139 Dear Sir or Madam:

I, (the “Participant”), hereby irrevocably exercise the right to purchase shares of the Common Stock, $0.0001 par value per share (the “Shares”), of Epizyme, Inc. (the “Company”) at $ per share pursuant to the Company’s 2022 Equity Incentive Plan and a stock option agreement with the Company dated (the “Option Agreement”). Enclosed herewith is a payment of $ , the aggregate purchase price for the Shares. The certificate for the Shares should be registered in my name as it appears below or, if so indicated below, jointly in my name and the name of the person designated below, with right of survivorship.

 

Dated:

 

 

Signature Print Name:

Address:

 

 

 

Name and address of persons in whose name the Shares are to be jointly registered (if applicable):

 

 

 

 

 

 



EX-31.1

 

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO

RULE 13a-14(a) / RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Grant Bogle, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Epizyme, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2022

 

/s/ Grant Bogle

Grant Bogle

President and Chief Executive Officer

(Principal Executive Officer and Principal Financial Officer)

 

 



EX-32.1

 

Exhibit 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report on Form 10-Q of Epizyme, Inc. (the “Company”) for the period ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Grant Bogle, President and Chief Executive Officer of the Company (Principal Executive Officer and Principal Financial Officer), hereby certifies, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to (section) 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2022

 

 

/s/ Grant Bogle

 

Grant Bogle

President and Chief Executive Officer

(Principal Executive Officer and Principal Financial Officer)

 

 

 

 

 



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Attachment: XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT


epzm-20220630_cal.xml
Attachment: XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT


epzm-20220630.xsd
Attachment: XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT


epzm-20220630_def.xml
Attachment: XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT


epzm-20220630_lab.xml
Attachment: XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT