Small Cap Cancer Stock Epizyme Inc (EPZM) Surges: Now What? CELG, DNDN & GERN

On Tuesday, small cap biopharmaceutical company Epizyme Inc (NASDAQ: EPZM) surged 75.56% after the company announced that its EPZ-5676, a DOT1L inhibitor for acute leukemias, had reached its proof-of-concept milestone, meaning its worth taking a closer look at the stock as well as look at the share performance of cancer stocks like large cap Celgene Corporation (NASDAQ: CELG) and small caps Dendreon Corporation (NASDAQ: DNDN) and Geron Corporation (NASDAQ: GERN).

What is Epizyme Inc?

Small cap Epizyme Inc is a clinical stage biopharmaceutical company that discovers, develops and plans to commercialize innovative personalized therapeutics for patients with genetically defined cancers. Epizyme Inc says its therapeutic strategy is based on the systematic identification of genetic alterations that create oncogenes (cancer causing genes), selecting patients where a genetic alteration is found using a companion diagnostic and then designing small molecule therapeutics to inhibit the oncogene so that the company's targeted science can match the right medicines with the right patients for a personalized approach to cancer treatment.

As for potential cancer stock peers, large cap Celgene Corporation is focused on the discovery, the development and the commercialization of products for the treatment of cancer and other severe, immune, inflammatory conditions; small cap Dendreon Corporation targets cancer and transforms lives through the discovery, development, commercialization and manufacturing of novel therapeutics; and small cap Geron Corporation is a clinical stage biopharmaceutical company developing a first-in-class telomerase inhibitor, imetelstat, in hematologic myeloid malignancies.

What You Need to Know or Be Warned About Epizyme Inc

On Monday after the market closed, Epizyme Inc announced the achievement of the proof of concept milestone in the EPZ-5676 DOT1L inhibitor clinical program, earning a $25 million payment under the company's collaboration with Celgene Corporation. Moreover, the European Medicines Agency's Committee for Orphan Medicinal Products has recommended orphan drug designation for EPZ-5676 to the European Commission in December 2013 plus it was granted orphan drug designation by the FDA in May 2013. It was also announced in the same press release that a development candidate milestone has been achieved for one of the three histone methyltransferase (HMT) targets included in the company's collaboration with GlaxoSmithKline plc (NYSE: GSK) for another $4 million payment.

However, serious investors might want to wait for the data to appear and be digested. Then again, Celgene Corporation's $25 million payment is not exactly small change either – meaning the data must be at least pretty good or good enough for them.

On the other hand, investors in Epizyme Inc got crushed by more than 40% in one day back in November when the company issued a press release entitled: Epizyme's EPZ-5676 DOT1L Inhibitor Demonstrates Encouraging Initial Findings in an Ongoing Phase 1 Dose Escalation Study. Apparently, the results were positive enough to warrant further study, but not positive enough for investors to not overreact and see them dump shares.

Otherwise and looking over the financials, Epizyme Inc has reported revenues of $45.22M (2012) and $6.94M (2011) and net losses of $0.70M (2012) and $20.96M (2011); while for 2012, the company has reported revenues of $8.44M (3 months ending 2013-09-30), $14.84M (3 months ending 2013-06-30) and $8.88M (3 months ending 2013-03-31) and net losses of $9.70M (3 months ending 2013-09-30), $2.21M (3 months ending 2013-06-30) and $7.50M (3 months ending 2013-03-31). The company had $139.57M in cash and short term investments at the end of September to $30.46M in current liabilities and $29.60M in other liabilities – meaning the company is not endanger of running out of money any time soon.   

Share Performance: Epizyme Inc vs. CELG, DNDN & GERN

On Tuesday, small cap Epizyme Inc surged 75.56% to $35.99 (EPZM has a 52 week trading range of $18.10 to $45.72 a share) for a market cap of $1.02 billion plus the stock is up 56.55% since last June. Here is a look at the long term performance of Epizyme Inc verses that of cancer stocks Celgene Corporation, Dendreon Corporation and Geron Corporation:

As you can see from the above charts, the performance of small caps Dendreon Corporation and Geron Corporation have been all over the place while large cap Celgene Corporation has delivered a more smother upward ride for investors.

Finally, here is a look at the latest technical charts for all four cancer stocks:

The Bottom Line. Although we don't have all the data, the $25 million payment from Celgene Corporation to Epizyme Inc is certainly meaningful. However and given how shares tanked back in November on what was otherwise positive data, investors need to remember that other investors can be very fickle – meaning existing investors should rejoice at getting back any losses while new investors might want to remain cautious about jumping aboard given the 75.56% run up yesterday.