Geron Corporation (Nasdaq: GERN) — Q1 2021 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2021. Geron is a clinical-stage biopharmaceutical company focused on imetelstat, its sole product candidate, for hematologic malignancies. It had no product sales.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $137,000 | $52,000 |
| Research and development expense | $21.1 million | $10.8 million |
| General and administrative expense | $7.5 million | $6.1 million |
| Operating loss | $28.5 million | $16.9 million |
| Net loss | $27.8 million; $0.09 per share | $16.4 million; $0.08 per share |
| Net cash used in operations | $32.7 million | $26.2 million |
- Revenue was primarily royalties from divested stem-cell assets. The remaining oligonucleotide-chemistry license was terminated effective April 2021. Geron expected 2021 revenue to be lower than 2020 as licenses expired and COVID-19 weighed on research-product sales.
- R&D expense rose 95%, mainly from Phase 3 trial costs, manufacturing validation batches, and additional development staff. G&A increased, primarily due to pre-commercial preparations and higher legal costs. No meaningful product gross margin is reported because there are no product sales.
- At March 31, cash, cash equivalents, restricted cash and current and noncurrent marketable securities totaled approximately $244.7 million, versus $260.0 million at December 31, 2020. Total assets were $258.6 million; stockholders’ equity was $201.2 million.
- Operating cash outflow was partly offset by $38.1 million of investing cash inflow, principally marketable-security maturities, and $16.3 million of financing cash inflow. ATM share sales generated $16.2 million net from 7.95 million shares. The net cash-flow increase should not be mistaken for an increase in total liquid resources, which declined over the quarter.
- Long-term debt principal was $25.0 million; the balance-sheet carrying amount was $24.2 million. Debt bears interest and includes restrictive covenants and a minimum-cash covenant beginning June 2022. A further $10 million Tranche A draw was available until June 15, 2021, subject to the agreement’s terms.
- Weighted-average shares used for loss per share increased to 323.6 million from 200.2 million. Common shares outstanding were 318.5 million at March 31 and 318.6 million as of May 4, 2021.
Material changes, outlook and risks
- Management said existing capital resources and future interest income were expected to fund the then-current operating level until the end of 2022. It nevertheless expected substantial additional funding would be needed to advance imetelstat, and said additional capital would be required to reach IMerge top-line results if they were delayed beyond 2022. Further financing may be unavailable or dilutive.
- IMerge Phase 3 in lower-risk MDS was 75% enrolled at the end of April 2021. Management expected full enrollment in the second half of 2021 and top-line results from late 2022 through the first half of 2023, depending on enrollment timing and other factors. It anticipated possible U.S. and European applications in 2023 if results supported submission, with potential launches in 2024 if approved.
- IMpactMF in refractory myelofibrosis began enrolling in December 2020, with its first patient dosed in April 2021. Management’s then-current assumptions placed interim analysis in 2024 and final analysis in 2025; both are event-driven and timing may change.
- COVID-19 and constrained clinical-site resources were delaying site initiation and patient enrollment, and could disrupt trials, regulatory work and drug supply. Geron also reported manufacturing schedule delays at a contractor associated with government-prioritized COVID-19 vaccine production, which it anticipated could continue during 2021.
- Geron sold its entire BARD1 equity investment during Q1, recognizing an approximately $1.2 million net gain included in other income; no investment value remained at quarter-end.
- Two securities class actions and six shareholder derivative actions related to allegations concerning the earlier IMbark trial were pending. On April 12, 2021, the court granted in part and denied in part Geron’s motion to dismiss the amended class-action complaint. Geron had not established a reserve and said potential costs could not be estimated.
- Key risks include imetelstat’s uncertain clinical efficacy and safety, reliance on one product candidate and third-party manufacturers/CROs, future financing needs and potential shareholder dilution, competition, and possible litigation costs. Management reported disclosure controls were effective at a reasonable-assurance level and no material change in internal control during the quarter.
Important facts for investors to verify
- Whether IMerge enrollment and the projected top-line results remain on schedule, and whether results support regulatory submissions.
- Current IMpactMF enrollment, event timing, and any material safety or efficacy updates.
- Cash burn, total liquid resources, financing runway, ATM usage, and compliance with debt covenants and tranche conditions.
- Whether COVID-related clinical and manufacturing delays persist, and whether adequate imetelstat supply is available.
- Developments in the securities and derivative lawsuits, including potential financial exposure.
- Post-quarter status of the April 2021 license termination and its effect on future royalty and license revenue.