Geron Corporation — Q3 2012 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2012. Geron was a clinical-stage biopharmaceutical company focused on oncology. Its lead candidates were GRN1005, in Phase 2 trials for brain metastases, and imetelstat, in Phase 2 trials for blood cancers. The company had discontinued development of its stem-cell programs and was seeking to divest those assets.
Financial results and liquidity
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Total revenue | $0.636 million | $0.220 million | $2.020 million | $2.187 million |
| Research and development | $11.684 million | $16.345 million | $39.568 million | $49.644 million |
| General and administrative | $4.829 million | $3.811 million | $15.726 million | $18.251 million |
| Net loss | $15.953 million | $19.522 million | $53.018 million | $64.999 million |
| Net loss per share | $0.13 | $0.16 | $0.42 | $0.52 |
- Revenue was primarily license fees and royalties; there were no Q3 collaboration revenues. Product revenue and gross margin are not meaningful at this development stage.
- At September 30, cash, cash equivalents, restricted cash and marketable securities totaled $107.0 million, down from $154.2 million at December 31, 2011. Current assets were $103.0 million and current liabilities $11.3 million.
- Operating cash use was $44.7 million for the first nine months, compared with $41.0 million in 2011. Cash and cash equivalents alone were $16.0 million at September 30.
- No long-term debt was reported on the balance sheet. Approximately $0.5 million remained available under the equipment financing facility; the CIRM loan had been repaid in November 2011.
- Management estimated existing resources, equipment financing availability, interest income and potential stock sales would fund operations at then-current levels for at least 12 months. The company reported an accumulated deficit of $838.5 million.
Material changes and management commentary
- Net loss narrowed year over year, mainly due to lower R&D spending after discontinuing stem-cell development and lower stock-based compensation. R&D fell, although spending on GRN1005 increased as its Phase 2 trials progressed.
- Q3 G&A increased year over year, primarily because of legal and consulting costs related to intellectual property and efforts to divest stem-cell assets. Nine-month G&A decreased from 2011.
- In September, Geron discontinued the imetelstat Phase 2 trial in metastatic HER2-negative breast cancer after an unplanned interim analysis found shorter median progression-free survival in the treatment arm than the comparator arm. The filing said reduced paclitaxel dose intensity in the imetelstat arm likely contributed to the difference.
- The imetelstat Phase 2 advanced NSCLC study continued, but the prespecified success criteria were not met; Geron said it had no plans for a Phase 3 study in that indication. Results from the ET and multiple myeloma Phase 2 trials were expected in Q4 2012. Interim GRN1005 breast-cancer brain-metastasis data were expected in December 2012.
- Management expected R&D spending for the rest of 2012 to remain consistent with current levels. It cautioned that future capital needs depend on trial plans, progress, manufacturing costs and other factors, and additional financing might be required.
Outlook, risks and unusual items
- On October 8, 2012, Geron entered an at-the-market sales agreement allowing it, at its discretion, to sell up to $50 million of common stock through MLV; no shares had been sold under the agreement as of the filing. Sales could dilute existing shareholders.
- Geron sold its ViaGen interest and cancelled its outstanding loan in September in exchange for potential commercial milestones of up to $2.4 million and a share of certain proceeds from a future sale of a ViaGen investment. These payments were contingent, and no gain was recognized.
- Geron appealed two patent-interference rulings awarding claims related to stem-cell technology to ViaCyte; ViaCyte counterclaimed. The dispute, licensing obligations and other intellectual-property issues could impair or reduce the value of a stem-cell divestiture. BioTime had made an unsolicited proposal to acquire Geron’s stem-cell programs; the board was reviewing it.
- Key risks include clinical-trial efficacy and safety, slow enrollment, dependence on outside manufacturers and service providers, ability to secure financing, regulatory and intellectual-property uncertainty, and the possibility that product candidates will never be commercialized. The filing also disclosed possible future restructuring costs related to exiting leased space.
- Contractual cash obligations totaled $4.312 million, excluding contingent milestones and royalties. Potential license-agreement development milestones could aggregate up to $59.9 million and commercial milestones up to $95.0 million if achieved.
Important facts for investors to verify
- Subsequent imetelstat trial results, particularly in essential thrombocythemia and multiple myeloma, and progress in the GRN1005 trials.
- Actual cash burn and remaining liquidity relative to management’s at-least-12-month funding estimate.
- Whether Geron uses the $50 million ATM facility and the resulting dilution.
- Outcome and timing of the ViaCyte patent litigation, the BioTime proposal and any stem-cell asset divestiture proceeds.
- Clinical safety, enrollment, manufacturing capacity and cost, and the impact of the discontinued breast-cancer and NSCLC imetelstat programs.