Roth Capital Partners initiated coverage of Epizyme (NASDAQ:EPZM) with a “buy” rating and $24 price target. The stock closed at $16.15 on Jan. 31.
Analyst Jotin Marango writes that during the past five years in the public eye, Epizyme has navigated tricky waters at the overlap of oncology and epigenetics.
“Yet, we believe that by now its lead agent, tazemetostat, an inhibitor of the histone methyltransferase, EZH2, has laid out a sufficiently wide clinical footprint, and is sufficiently close to an NDA in several indications, that even our conservative approach of ranking its clinical programs shows that the company still remains undervalued,” he added.
Mr. Marango said it is possible to reach a conservative yet attractive valuation of Epizyme by only focusing on programs that are closest to realizable value, instead of focusing on top value-drivers.
To that end, he bases his valuation of tazemetostat solely on its prospects in mutant follicular lymphoma (FL EZH2-MUT) and genomically-defined solid tumors (INI-).
“We believe that based on the quality of the data relative to the larger non-Hodgkin lymphoma field, the mutant follicular program is fileable, approvable, and commercially viable (we will wait for FL overall response rate to hold steady in 2018, as more patients accrue),” he added.
On the other hand, he pointed to DLBCL EZH2-MUT, which “at this time, we view as probably fileable, possibly approvable, but commercially challenged (we will wait for DLBCL data to improve in 2018, as more patients accrue, before incorporating it into our value thesis).”
Meanwhile, he sees no regulatory and commercial obstacles to the INI- program, due to the quality of the data so far and the high unmet need in this small patient population.
