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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


☐	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.

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.

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.

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.

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

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.

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

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.

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.

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.

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

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

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.

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

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	$	—

Fair Value as of December 31, 2021

Total

Level 1

Level 2

Epizyme, Inc. 10-Q