Geron Corporation (10-Q) — Q1 2014
Reporting period: Three months ended March 31, 2014; unaudited interim results. Geron is a clinical-stage biopharmaceutical company whose sole product candidate is imetelstat, under development for hematologic myeloid malignancies. It has no product revenue and has recorded operating losses every year since 1990.
Financial results and liquidity
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Revenue | $0.474 million | $0.765 million |
| Research and development | $5.211 million | $7.999 million |
| General and administrative | $3.994 million | $4.751 million |
| Operating loss | $8.731 million | $11.985 million |
| Net loss | $8.440 million; $0.06 per share | $11.897 million; $0.09 per share |
| Cash used in operations | $9.505 million | $16.227 million |
| Cash, restricted cash and marketable securities | $153.5 million at March 31 | $66.0 million at December 31, 2013 |
Revenue comprised $350,000 in license fees and $124,000 in royalties. No product sales or gross margin were reported. Net loss improved primarily because of lower R&D and G&A costs. R&D reductions reflected discontinued or wound-down programs and prior restructuring; imetelstat manufacturing costs partly offset the decrease. G&A fell in part because 2013 included stem-cell-divestiture transaction costs.
The February public offering of 25.875 million shares at $4.00 per share generated approximately $96.8 million net proceeds. Q1 financing cash inflow was $97.620 million; investing cash outflow was $89.781 million, primarily as proceeds were invested in marketable securities. Total liabilities were $4.516 million, principally current liabilities; the filing reports no material debt balance. Approximately $500,000 remained available under the equipment financing facility. Stockholders’ equity was $150.892 million, and accumulated deficit was $901.203 million.
Material developments, outlook and risks
- Regulatory and clinical: In March 2014, the FDA placed Geron’s imetelstat IND on full clinical hold, citing unresolved liver-toxicity concerns, including insufficient evidence of reversibility and follow-up. Geron stopped treatment in its Phase 2 ET and multiple-myeloma trials. The FDA required additional patient follow-up and animal data before considering the hold.
- Investigator-sponsored trial: The FDA placed the Mayo Clinic myelofibrosis trial on partial hold, barring new enrollment while allowing certain patients benefiting from treatment to continue. Mayo had already closed enrollment. Geron said it was compiling data and intended to work with the FDA; it could not predict when, or whether, development could resume.
- Management outlook: Geron estimated existing resources, available equipment financing and future interest income would fund the current operating level for at least 12 months. It expected R&D expense to remain around current levels unless new trials were permitted. A U.S. myelofibrosis trial as early as Q1 2015 was conditional on favorable data and regulatory action; delay or indefinite suspension remained possible. Management warned future capital needs would be substantial.
- Safety and clinical uncertainty: The filing discusses persistent LFT abnormalities and potential chronic liver injury. It also reports that a patient in the myelofibrosis trial died following prolonged myelosuppression and intracranial hemorrhage; the investigator assessed the event as possibly related to imetelstat.
- Litigation: Two securities class actions filed in March allege misleading statements about imetelstat safety. A stockholder derivative action followed on April 21. Geron intended to defend the claims, could not estimate potential costs or damages, and had recorded no litigation reserve.
- Other items: Geron’s stem-cell asset divestiture to Asterias was completed in October 2013, but the planned distribution of Asterias shares to Geron stockholders had not occurred by March 31 because registration requirements were outstanding. The office lease was extended through January 2016, with $1.382 million in future minimum payments for the extended term.
Important facts for investors to verify
- Subsequent FDA decisions on Geron’s full clinical hold and the investigator trial’s partial hold, including requirements and timing for any resumption.
- Updated, auditable safety data on liver abnormalities, reversibility and myelosuppression, alongside the trial’s efficacy data.
- Cash burn, operating costs and financing needs relative to the stated minimum 12-month funding estimate.
- Progress and potential costs of the securities and derivative lawsuits, and whether the Asterias distribution is completed and on what terms.
- Share-count and dilution implications: 156,938,288 common shares were outstanding at April 25, 2014, following the February offering.