Geron Corporation — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015. Geron is a clinical-stage biopharmaceutical company focused on imetelstat, its sole product candidate. Janssen holds exclusive worldwide development and commercialization rights and is responsible for execution of the program.
Financial performance and position
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $0.251M | $0.341M | $0.788M | $0.815M |
| Research and development | $4.812M | $5.151M | $9.799M | $10.362M |
| Restructuring charges | $0.941M | — | $1.347M | — |
| General and administrative | $3.977M | $3.853M | $8.577M | $7.847M |
| Operating loss | $9.479M | $8.663M | $18.935M | $17.394M |
| Net loss | $9.356M | $8.734M | $18.671M | $17.174M |
| Basic and diluted loss per share | $0.06 | $0.06 | $0.12 | $0.11 |
At June 30, cash and cash equivalents were $15.8M, restricted cash $0.3M, and marketable securities $140.9M, totaling approximately $157.0M in cash resources. This compares with $170.6M at December 31, 2014. Total assets were $159.1M; current liabilities were $40.7M, including $35.0M of deferred revenue. Stockholders’ equity was $118.4M. The filing does not report borrowings or provide a debt balance.
For the six months, operating cash use was $14.0M, investing cash use $14.5M, and financing cash inflow $1.6M. Cash and cash equivalents declined by $27.0M, to $15.8M; marketable-security purchases and maturities account for much of the distinction between the cash decline and total liquid resources. The filing does not present a gross margin measure.
Changes versus the prior comparable period
- Q2 revenue fell 26% year over year, while six-month revenue was down 3%. Revenue remained primarily license fees and royalties; Geron recognized no Janssen collaboration revenue in the period.
- Q2 and six-month net losses increased by $0.6M and $1.5M, respectively. Lower R&D costs were more than offset by restructuring costs and higher G&A.
- R&D declined 7% for the quarter and 5% for the half year, principally from lower personnel costs after the workforce resizing. G&A rose 3% and 9%, respectively, reflecting stock compensation and business-development consulting.
- Operating cash use improved by $0.6M year over year, while financing inflows fell sharply from $97.7M in first-half 2014, which included a public offering, to $1.6M in first-half 2015.
Outlook, significant developments, and risks
- Management estimated existing capital resources and future interest income would fund the current operating level for at least 12 months, while warning that resources could be used faster than expected. Geron expects continued negative cash flow and does not expect imetelstat to be commercially available for many years, if at all.
- Geron expected to complete technology-transfer activities by September 30, 2015 and then recognize the $35M Janssen upfront payment as collaboration revenue. The payment remained deferred at June 30.
- The Janssen collaboration includes two initial Phase 2 studies, in myelofibrosis (IMbark) and myelodysplastic syndrome. IMbark opened to enrollment in July 2015; Geron expected the MDS study to begin by year-end 2015. The FDA granted imetelstat orphan-drug designation for myelofibrosis in June; designation is not marketing approval.
- Under the collaboration, Geron shares costs 50/50 for the initial studies and specified patent work. If Janssen makes a continuation election, Geron may opt into U.S. development and promotion costs for a $65M fee and potentially higher milestone and royalty economics, or decline and receive a further $70M U.S.-rights fee, subject to contractual terms. These prospective payments are contingent, not assured.
- The March 2015 resizing reduced planned staffing from 39 to 21 positions and was substantially complete by June 30. Geron expected approximately $1.4M total restructuring charges, about $1.1M cash expenditures, and roughly $5.0M in annualized personnel-cost reductions. Completion was expected by September 2015.
- Key risks include dependence on Janssen and one unapproved product candidate; imetelstat safety concerns, including liver-function abnormalities and severe blood-count suppression, with a reported patient death in the MF Pilot Study assessed by the investigator as possibly related; clinical, regulatory, manufacturing, and commercialization uncertainty; and potential need for additional or dilutive financing.
- Three securities lawsuits and three derivative lawsuits relate to alleged disclosures concerning earlier imetelstat trials. The court dismissed some, but not all, challenged statements; the company said it could not estimate potential costs and had recorded no reserve. Outcomes and defense costs remain uncertain.
Important facts for investors to verify
- Whether the technology transfer was completed and the $35M upfront payment recognized as expected, and how subsequent cash burn affects the stated runway.
- Janssen’s progress, enrollment, safety findings, and results for IMbark, the MF Pilot Study, and the planned MDS study, including any effect on Janssen’s continuation decision.
- Whether imetelstat’s liver and hematologic safety profile permits continued development and whether regulators impose further holds or requirements.
- Actual restructuring completion, cash costs, and realized personnel-cost savings; also whether G&A and direct R&D spending develop as management expected.
- Developments and potential financial exposure in the securities and derivative litigation, and any financing or business-development actions that could affect liquidity or shareholder dilution.