Geron Corporation (Nasdaq: GERN) — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Figures are unaudited; dollar amounts are in millions unless otherwise stated.
Business context and reporting period
Geron is a late-stage clinical biopharmaceutical company focused on imetelstat, its sole product candidate, for hematologic malignancies. It has no approved products or product revenue and depends on financing, investment income and limited legacy royalties. Its lead programs are the Phase 3 IMerge trial in lower-risk MDS and Phase 3 IMpactMF in refractory myelofibrosis (MF).
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0.073 | $0.107 | $0.196 | $0.244 |
| Research and development expense | $20.6 | $21.9 | $42.7 | $43.1 |
| General and administrative expense | $7.4 | $7.1 | $14.1 | $14.5 |
| Operating loss | $28.0 | $28.9 | $56.7 | $57.3 |
| Net loss | $28.1 | $29.6 | $58.2 | $57.4 |
| Net loss per share | $0.07 | $0.09 | $0.16 | $0.18 |
Cash from operations was negative $62.6 million in the first half of 2022, versus negative $50.5 million a year earlier. Investing activities provided $33.2 million and financing activities provided $70.6 million, principally reflecting the April equity offering. Cash, cash equivalents, restricted cash and marketable securities totaled $219.7 million at June 30, 2022, compared with $212.7 million at December 31, 2021. Current assets were $227.4 million and current liabilities $46.9 million.
Outstanding debt principal was $50.0 million; the balance sheet reported $5.2 million current debt and $45.3 million noncurrent debt. The company reported compliance with its loan covenants. Total stockholders’ equity was $142.0 million and accumulated deficit was $1.33 billion. No meaningful operating margin is indicated given negligible revenue and ongoing development spending.
Material changes versus the prior comparable period
- Q2 net loss narrowed by $1.5 million year over year, while first-half net loss increased by $0.8 million. Lower first-half R&D and G&A expense was more than offset by higher interest expense.
- First-half operating cash use rose by $12.1 million, primarily due to clinical-development spending and increased headcount.
- Interest expense doubled to $3.1 million for the first half, reflecting higher rates and a larger debt balance. Q2 included approximately $1.3 million of insurance reimbursement for certain legal expenses; first-quarter 2021 included a $1.2 million gain on sale of an equity investment.
- The April 2022 public offering generated $69.9 million net cash proceeds. It included 53.3 million common shares, a pre-funded warrant for 18.1 million shares and warrants for 35.7 million shares. None of these offering warrants had been exercised by June 30.
- The June loan amendment increased total facility capacity from $75 million to $125 million; $75 million remained available in conditional tranches, including a final $25 million tranche subject to lender investment-committee approval.
Outlook, risks and unusual items
- Management expected IMerge Phase 3 top-line results in early January 2023 and, if supportive, planned a U.S. NDA submission in the first half of 2023 and a European MAA submission in the second half of 2023. A July 2022 independent monitoring committee recommended that IMerge continue without modification.
- Management expected IMpactMF to be fully enrolled in 2024, with interim overall-survival analysis potentially in 2024 and final analysis in 2025; these are event-driven estimates and timing may vary. IMproveMF, a Phase 1 imetelstat-plus-ruxolitinib trial in frontline MF, opened its first site in May 2022.
- Management estimated existing resources could fund its projected operations, including stage-gated U.S. launch preparation, through the end of Q3 2023 without potential warrant proceeds or conditional debt drawdowns, or until mid-2024 if specified potential warrant proceeds and up to $50 million of conditional loan drawdowns become available. The company said it will require substantial additional funding for later-stage trials and potential commercialization; an unfavorable or inconclusive IMerge result could materially impair its ability to raise capital.
- Clinical, regulatory and commercial success is uncertain. Risks include imetelstat safety and efficacy, trial enrollment and retention, manufacturing and supply, competition, patent-term limitations, and reliance on third parties. COVID-19, the Ukraine-Russia conflict, inflation and rising interest rates may disrupt trials, supply chains and financing access.
- Two securities class-action lawsuits and seven shareholder derivative actions relate to allegations concerning IMbark disclosures. Class certification was granted; trial was scheduled for January 2023. The company could not estimate potential costs and had not recorded a reserve.
- Potential dilution includes outstanding warrants, equity-plan shares and possible future sales under the remaining $79.1 million capacity of the at-the-market program. The company also disclosed substantial stock-price volatility and Nasdaq minimum-bid-price risk.
Important facts for investors to verify
- Whether IMerge results were reported as planned, how the data compare with the trial’s endpoints and prior studies, and the resulting regulatory and financing implications.
- Actual cash burn and runway against management’s estimates, including whether conditional loan tranches and warrant proceeds are available or exercised.
- IMpactMF enrollment and event timing, IMproveMF progress, and any delays or changes to planned investigator-led trials.
- Current debt terms, covenant compliance, repayment requirements and any material changes in financing or share count.
- Developments in the securities litigation, any exposure not reserved in the accounts, and updates to clinical, manufacturing, regulatory or intellectual-property risks.