Epizyme Execs Share the Secret to a Successful IPO: PowerBars

Xconomy Boston — 

The IPO that set the biotech world afire hit the Nasdaq in May, but it really began way back in April 2012. Cambridge, MA-based Epizyme (NASDAQ: EPZM) had already spent five years building itself brick by brick when it faced the decision that looms for every startup biotech: whether to groom itself for a sale to Big Pharma, or chart a course for an IPO, and ultimately, independence.

“[That was] really the significant fork in the road for us,” says Jason Rhodes, the company’s president and chief financial officer.

Epizyme had every reason to consider getting dressed up for a sale. The IPO market for biotechs had been in the dumps for a decade. Large pharmaceutical companies, battling a combination of patent losses and thinning late-stage pipelines, were (and still are) on the prowl for drug acquisitions to bolster their portfolios. And Epizyme still hadn’t churned out any data from clinical trials that could boost its value in the eyes of public investors.

But rather than simply take those drugs into early clinical trials, generate some promising data, and sell out, Epizyme gambled on its independence. It struck a broad, early-stage partnership with Summit, NJ-based Celgene (NASDAQ: CELG) surrounding a group of drugs being developed to treat certain genetically-defined forms of the blood cancer mixed lineage leukemia (MLL). The deal gave Epizyme a fat, $90 million check up front, but it also enabled Epizyme to retain the U.S. rights to all of the drugs in the partnership—and thus, control its future.

That decision paid off big-time on May 30. Epizyme sold about 5.9 million shares to public investors at $15 apiece, up significantly from the 5 million shares it initially planned to sell. Shares soared 50 percent in Epizyme’s first day on the Nasdaq, to $22.99, giving it first-day market capitalization of more than $400 million. The stock now trades at close to $33, more than double the IPO price. And Epizyme, today, is worth close to $1 billion.

Just as significantly, Epizyme’s success helped generate investor interest in several more companies that were in line to go public, including Bluebird Bio (NASDAQ: BLUE), Agios Pharmaceuticals (NASDAQ: AGIO), and Intrexon (NASDAQ: XON).

While Epizyme’s biggest challenge now awaits—shepherding its drug candidates through clinical trials, and becoming a commercial-stage company—the key 2012 decision to stay independent is looking pretty good in hindsight. I recently caught up with the guys that made it happen, Rhodes and CEO Robert Gould (pictured above), and talked with them at length about their path to an IPO, and the mechanics of preparing for, and running a successful road show—the grueling set of wall-to-wall meetings when companies pitch themselves to potential investors.

Xconomy: Epizyme could have ended up as acquisition fodder for Big Pharma. What led you towards an IPO?

Jason Rhodes: If we rewind this slightly to the foundation of the company and the business strategy, we’ve recognized essentially from the beginning that given the size of the target space that we’re going after—96 histone methyltransferases—and the fact that we’re going after genetically-defined cancers, which can potentially lead to a relatively abbreviated clinical development plan, there really was the potential to build a business. That observation, and that goal of really building an independent pharma company, sprang from that initial set of circumstances. That has driven our research and development strategy, and it has also driven our partnership strategy, and ultimately it led us to the IPO.

X: How did the partnership with Celgene catalyze that decision?

JR: At that point, as we were heading towards the clinic with two programs. We recognized that we could continue to be a venture-backed company and really build towards a sale— meaning we would generate early clinical data and then conceivably the company would be bought—or, we could … Next Page »

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