Geron Corporation (Nasdaq: GERN) — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; financial statements are unaudited. Geron is a clinical-stage biopharmaceutical company developing imetelstat for hematologic myeloid malignancies. It has no product sales and reports no operating segments other than therapeutic product development.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $43,000 | $101,000 | $95,000 | $158,000 |
| Research and development expense | $10.8 million | $10.1 million | $21.6 million | $16.0 million |
| General and administrative expense | $6.0 million | $5.2 million | $12.1 million | $10.6 million |
| Operating loss | $16.8 million | $15.2 million | $33.6 million | $26.5 million |
| Net loss | $15.8 million | $14.2 million | $32.2 million | $24.3 million |
| Basic and diluted net loss per share | $0.06 | $0.08 | $0.14 | $0.13 |
- Q2 revenue consisted of $5,000 in license fees and $38,000 in royalties. Revenue remains small and is not product revenue.
- Six-month operating cash use was $38.6 million, versus $21.5 million in 2019. Cash provided by financing was $145.0 million, principally from the May offering; investing cash use was $97.0 million, largely reflecting marketable-security purchases.
- At June 30, cash, cash equivalents, restricted cash and marketable securities totaled approximately $265.3 million, compared with $159.2 million at December 31, 2019. Stockholders’ equity was $250.7 million; accumulated deficit was $1.112 billion.
- No borrowings or interest-bearing debt are reported. Operating lease liabilities totaled $5.847 million, including $856,000 current and $4.991 million noncurrent. Current assets were $220.7 million and current liabilities $19.1 million.
- Margins are not meaningful indicators for this pre-commercial company: revenue is minimal and operating expenses substantially exceed revenue.
Material changes versus the prior comparable period
- Six-month net loss increased by $7.9 million year over year, while operating expenses rose $7.0 million. R&D growth reflected Phase 3 IMerge development, manufacturing-process validation and higher development headcount. G&A increased with personnel and expanded operations.
- Operating cash use rose $17.1 million, including higher R&D payments and development staffing costs.
- The May 2020 public offering generated approximately $140.2 million net proceeds. Geron issued 107.0 million common shares, a pre-funded warrant for 8.3 million shares and warrants for 57.7 million shares. None of the warrants had been exercised by June 30. The offering materially increased the share count.
- Geron paid Janssen the $14.269 million remaining under the imetelstat supply agreement in Q1 2020; no amounts remained due at quarter-end. The transition of the imetelstat program from Janssen was completed in 2019, and Janssen no longer funds or shares costs of its development.
Outlook, clinical program and risks
- Management estimated existing resources and future interest income would fund the current level of operations for at least 12 months. It also said substantial additional capital would be needed to advance imetelstat, particularly the planned Phase 3 myelofibrosis trial and potential commercialization. Additional financing may be unavailable or dilutive.
- For Phase 3 IMerge in lower-risk MDS, enrollment was expected to finish by the end of Q1 2021, later than the prior end-of-2020 plan; top-line results were expected in the second half of 2022, later than the prior mid-2022 estimate. COVID-19 disruptions affected site initiation and enrollment. The company planned to expand sites from about 90 to about 130.
- Geron expected to open a Phase 3 trial in refractory myelofibrosis for screening and enrollment in Q1 2021, subject to pandemic conditions, regulatory clearances and additional capital. The approximately 320-patient trial is designed to assess overall survival. The FDA suggested considering a third dose arm; Geron elected not to add one and disclosed that this decision could increase the risk of delay, trial failure or impaired approval prospects. Management’s trial timeline assumed enrollment completion in the second half of 2022, an interim analysis in the first half of 2023 and a final analysis in the first half of 2024.
- The company postponed a planned proof-of-concept study in high-risk MDS and AML and said it would reconsider timing later. It also planned spending controls, including limiting discretionary spending, travel and hiring.
- Phase 2 IMerge data reported for 38 patients showed an 8-week red-blood-cell transfusion-independence rate of 42% and a 24-week rate of 32%. Grade 3/4 thrombocytopenia and neutropenia occurred in 61% and 55%, respectively. These are Phase 2 results; they do not establish Phase 3 efficacy or regulatory approval.
- COVID-19 could further delay trials, disrupt clinical supply or operations, increase cybersecurity exposure from remote work, and impair access to capital. Imetelstat is Geron’s sole product candidate, and management does not expect it to be commercially available for many years, if at all.
- Two consolidated securities class actions and a related shareholder derivative action concern alleged statements about the IMbark trial. Geron said it intends to defend the cases, but could not estimate potential costs or damages and had recorded no reserve.
Important facts for investors to verify
- Whether IMerge enrollment and data timelines remain achievable amid COVID-19 disruptions, and whether Phase 3 results support the Phase 2 findings.
- Cash burn, actual runway and the amount and timing of financing needed for the refractory-MF trial; assess potential dilution from further equity issuance and outstanding warrants.
- Regulatory clearance, startup timing and funding for the MF trial, including the implications of not adopting the FDA-suggested additional dose arm.
- Clinical-trial safety, manufacturing capacity and supply continuity, and the development impact of any further pandemic disruption.
- Developments in the securities and derivative lawsuits, including potential defense costs, damages or settlement exposure.