Business context and reporting period
Geron Corporation’s unaudited Form 10-Q covers the quarter ended March 31, 2013. Geron was a clinical-stage biotechnology company with no commercial products; its principal focus was developing imetelstat, a telomerase inhibitor, for hematologic myeloid malignancies. The company reported an accumulated deficit of $866.3 million.
Financial results and liquidity
Amounts below are in U.S. dollars; financial statement figures are in millions except per-share data.
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| License fees and royalties | $0.765 | $1.254 |
| Research and development expense | $7.999 | $15.107 |
| General and administrative expense | $4.751 | $5.065 |
| Operating loss | $11.985 | $18.918 |
| Net loss | $11.897 | $18.739 |
| Basic and diluted loss per share | $0.09 | $0.15 |
| Net cash used in operating activities | $16.227 | $16.585 |
- License-fee revenue was $0.645 million, up from $0.393 million; royalty revenue was $0.120 million, down from $0.861 million. The filing attributes the royalty decline mainly to the assignment of telomerase activation technology and termination of a license agreement in December 2012.
- R&D expense fell approximately 47%, principally because of discontinued or winding-down clinical programs and workforce reductions. G&A declined modestly. The filing does not present a gross margin; product revenue had not begun.
- Cash, cash equivalents, restricted cash and marketable securities totaled $79.8 million at March 31, 2013, versus $96.3 million at December 31, 2012. Operating cash use was partly offset by $9.7 million of net investing cash inflow, primarily securities maturities. Cash and cash equivalents alone were $15.5 million.
- Total assets were $82.9 million, current liabilities $6.8 million and stockholders’ equity $76.1 million. No borrowings or funded debt are reported; approximately $0.5 million remained available under the equipment financing facility. Contractual cash obligations totaled $3.3 million, including operating leases and license fees.
Material changes, outlook and risks
- Geron said existing capital resources, available equipment financing and future interest income were expected to fund its then-current operating level for at least 12 months. It also cautioned that future capital needs would be substantial and additional financing might be unavailable or dilutive. The company had an at-the-market sales agreement permitting up to $50 million of stock sales but had made no sales under it as of the filing.
- Management expected 2013 R&D expense to be lower than in 2012, reflecting a focus on imetelstat in hematologic myeloid malignancies. It could not reliably estimate the time or investment needed to commercialize imetelstat and did not expect commercial availability for many years, if ever.
- The investigator-sponsored myelofibrosis trial completed its first cohort of 11 patients; the investigator reported that the pre-specified threshold of at least two responders was met, permitting expanded enrollment. This was preliminary investigator-reported information, not a disclosed final trial result. Data were expected to be submitted for presentation in December 2013.
- After quarter-end, on April 25, Geron announced it would discontinue discovery research and companion diagnostics, close its Menlo Park research laboratory, eliminate 20 positions (about 31% of the workforce), and concentrate resources on imetelstat in hematologic myeloid malignancies. It also discontinued imetelstat development in certain solid-tumor settings and essential thrombocythemia. It projected approximately $1.86 million in restructuring charges, most expected in Q2 2013, including about $1.27 million expected to be paid in cash during 2013.
- Key risks include dependence on one early-stage candidate; uncertain clinical efficacy and safety, including potential liver and blood-cell toxicities; manufacturing cost and supply risks; reliance on investigator-sponsored trials and third parties; need for additional capital; patent challenges; and completion of the planned stem-cell asset contribution to Asterias. The filing reports no legal proceedings in the specified legal-proceedings section, while describing patent-related disputes and contingencies elsewhere.
Important facts for investors to verify
- Subsequent myelofibrosis trial data, including response durability, safety and the expanded-cohort results.
- Whether the post-quarter restructuring is completed as planned and whether actual charges and cash costs match estimates.
- Cash burn and runway after the strategic reductions, including whether management’s at-least-12-month funding estimate remains valid.
- Progress, conditions and expected timing of the stem-cell asset contribution to Asterias, anticipated by September 30, 2013.
- Future financing needs and potential dilution, as well as imetelstat manufacturing, clinical supply and toxicity developments.