Geron Corporation (GERN) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited financial statements; dollar amounts below are in U.S. dollars unless noted. Geron is a clinical-stage biopharmaceutical company focused on imetelstat, its sole product candidate, for hematologic malignancies. It has no approved products or product revenue.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Revenue (royalties) | $0.123 million | $0.137 million |
| Research and development | $22.099 million | $21.113 million |
| General and administrative | $6.699 million | $7.478 million |
| Operating loss | $28.675 million | $28.454 million |
| Net loss | $30.098 million | $27.824 million |
| Basic and diluted loss per share | $0.09 | $0.09 |
| Net cash used in operating activities | $33.974 million | $32.734 million |
| Cash, restricted cash, cash equivalents and marketable securities | $178.0 million at March 31 | $212.7 million at December 31, 2021 |
| Debt principal | $50.0 million | $50.0 million at December 31, 2021 |
Operating expenses were $28.8 million, slightly above the prior-year quarter. R&D increased primarily with additional development and manufacturing personnel; G&A declined mainly due to lower consulting and legal costs. Interest expense rose to $1.5 million from $0.7 million. Q1 2021 other income included a $1.2 million gain on the sale of Geron’s BARD1 investment; no such investment remained at March 31, 2022. Net loss increased about 8% year over year. Operating margins are not meaningful given minimal royalty revenue and the absence of product sales.
Current assets were $175.9 million and current liabilities $46.6 million at quarter-end. Accumulated deficit was $1.302 billion. The loan facility carries a $30 million minimum cash covenant beginning June 1, 2022, subject to specified provisions; the company reported covenant compliance at March 31. Future minimum loan payments, including interest and end-of-term charge, totaled $62.2 million, with maturity in 2024. A further $25 million Tranche C was available through December 31, 2022, subject to lender investment committee approval.
Material changes and subsequent financing
- Cash and marketable securities declined $34.7 million from December 31, 2021, primarily reflecting operating cash use. Q1 operating cash use increased $1.2 million year over year.
- Unrealized losses on available-for-sale securities were attributed to interest-rate changes; management considered them temporary and reported no other-than-temporary impairment.
- On April 1, 2022, after quarter-end, Geron completed an offering of 53.3 million common shares, a pre-funded warrant for 18.1 million shares, and warrants for 35.7 million shares. Estimated net proceeds were approximately $69.7 million, excluding any future warrant exercise proceeds. The offering is a significant source of post-quarter liquidity and creates potential dilution. As of May 3, 2022, 377.4 million common shares were outstanding.
Outlook, commentary and key risks
- Clinical plans: Geron 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 an EU MAA in the second half of 2023. The filing said IMerge enrollment was complete. IMpactMF was expected to be fully enrolled in 2024, with an interim overall-survival analysis potentially in 2024 and final analysis in 2025; these are event-driven estimates. The company planned to start IMproveMF in the first half of 2022 and support investigator-led trials in AML and higher-risk MDS in the second half of 2022.
- Cash runway: Management estimated that resources, including April offering proceeds, could fund planned operations and potential U.S. launch preparation through the end of 2023 if up to $124.3 million in projected warrant exercise proceeds are received. Without those proceeds, the estimate was through the end of Q2 2023. These estimates depend on assumptions and do not fund all planned development through completion of IMpactMF and other programs; additional financing will be required.
- Development and operating risks: Imetelstat’s success depends on clinical efficacy and safety, regulatory approval, manufacturing and supply, and future financing. The filing identifies potential serious toxicities, including cytopenias, bleeding and hepatotoxicity. COVID-19 and the Russia-Ukraine conflict could disrupt trials, sites, enrollment, supply chains, operations or access to capital. Geron also reported manufacturing schedule delays at a contract manufacturer related to government-prioritized COVID-19 vaccine production.
- Legal contingencies: A securities class action related to statements about the IMbark trial was certified as a class on April 2, 2022. Trial was scheduled for October 31, 2022. Seven shareholder derivative actions were also pending or stayed. Geron said it could not estimate potential costs and had established no reserve.
- Other: The company expects R&D and G&A expenses to rise as clinical development and potential commercialization preparations expand. Management stated that the pandemic and conflict were not expected to affect the projected IMerge top-line timing, while also disclosing broader risks of delay. Disclosure controls were assessed as effective at a reasonable-assurance level.
Investor verification priorities
- Track IMerge Phase 3 data timing, completeness and outcomes, including the effect of the shortened 12-month follow-up window on the primary analysis.
- Check IMpactMF enrollment, event-driven analysis timing, and whether planned IMproveMF and investigator-led trials commenced as expected.
- Reconcile cash runway assumptions with actual cash burn, warrant exercises, the April offering proceeds, and any additional financing needs or dilution.
- Review debt covenant headroom, potential access to Tranche C, and the schedule and funding of debt repayments.
- Monitor manufacturing capacity and supply, trial disruptions, and the status and potential financial impact of the securities and derivative lawsuits.