Geron Corporation — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; unaudited. Geron is a clinical-stage biopharmaceutical company whose sole product candidate, imetelstat, is exclusively licensed to Janssen for worldwide development and commercialization. Geron has no product revenue and depends on Janssen and licensing arrangements for potential future revenue.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 | Change / context |
|---|---|---|---|
| Revenue | $318,000 | $537,000 | Down 41%; license fees were $248,000 and royalties $70,000. No imetelstat collaboration revenue was reported. |
| Research and development | $2.440 million | $3.374 million | Down 28%, mainly due to lower Janssen clinical-development cost share and stock compensation. |
| General and administrative | $5.315 million | $4.657 million | Up 14%, primarily higher legal and consulting costs for business-development activity. |
| Total operating expenses | $7.755 million | $8.031 million | Down 3%. |
| Operating loss | $7.437 million | $7.494 million | Slightly narrower. |
| Net loss | $7.186 million | $7.183 million | Essentially unchanged; loss per share was $0.04 versus $0.05. |
| Operating cash used | $7.368 million | $7.307 million | Cash use was broadly stable. |
No gross margin measure is presented, and it is not meaningful to infer one from the filing. Interest and other income was $394,000, versus $332,000; Q1 2018 also included a $125,000 loss from remeasuring Geron’s Sienna Cancer Diagnostics equity investment.
At March 31, cash, cash equivalents, restricted cash and current and noncurrent marketable securities totaled approximately $103.2 million, down from $109.2 million at December 31, 2017. Current assets were $91.1 million and current liabilities $4.4 million. The filing reports no debt balance. Management estimated existing capital resources and future interest income would fund the current level of operations for at least 12 months, while warning that spending or business-development transactions could use cash sooner.
Q1 financing generated $1.553 million net from issuing 776,788 shares under the 2015 at-the-market sales agreement. In April, after quarter-end, Geron sold 12,418,318 additional shares for approximately $46.1 million net. The agreement was completed, with no further shares available under it. Common shares outstanding were 173,080,653 as of May 3, 2018.
Material changes and management commentary
- License-fee revenue fell because fewer hTERT research-license agreements were active; royalties declined with lower licensee product sales and a change in recognition under Topic 606. Geron expects hTERT license and royalty revenue to be lower in 2018 and to end by the close of 2019 as patents expire.
- Geron adopted Topic 606 and new fair-value accounting for equity investments on January 1, 2018. Topic 606 added $204,000 to opening receivables and accumulated deficit for estimated royalties on 2017 sales; prior-period revenue was not restated, reducing comparability. Management does not expect a material ongoing revenue impact from the standard.
- Management expects negative cash flow for the foreseeable future and operating losses as imetelstat development continues. It plans to pursue possible oncology acquisitions or in-licenses, which could materially affect liquidity and require additional financing.
Imetelstat, outlook and key risks
- IMbark (myelofibrosis): Janssen closed enrollment in March 2018 after enrollment had previously been suspended in both dose arms. The protocol-specified primary analysis, including overall survival, was expected to begin by the end of Q2 2018, using an April 26 cutoff. Geron expected Janssen’s decision on whether to continue the program by the end of Q3 2018. The filing states that an inadequate survival improvement, as judged by Janssen, would likely lead Janssen to discontinue imetelstat and terminate the collaboration.
- IMerge (lower-risk MDS): Janssen completed expanded enrollment in Part 1 in February 2018, adding about 20 patients to evaluate a refined patient group. Preliminary results previously disclosed for a 13-patient subset showed approximately half achieved at least 8 weeks of red-blood-cell transfusion independence and nearly one-third at least 24 weeks. These are preliminary, small-subgroup findings; Janssen had not committed to starting Part 2.
- Collaboration economics: Janssen bears responsibility for imetelstat development, manufacturing, regulatory approval and commercialization; Geron and Janssen share costs for IMbark and IMerge 50/50. If Janssen continues, Geron’s options include a $65 million continuation payment and either opting into U.S. development and promotion costs for higher potential royalties and milestones, or retaining no opt-in and receiving a $70 million full-U.S.-rights fee. These amounts are contingent and no milestone payments were considered probable or recognized at quarter-end.
- Major risks: Janssen may terminate at its discretion; clinical results may fail to show adequate benefit or safety, and adverse events include cytopenias and potential serious toxicities. Further development could require substantial capital, especially if Geron assumes development or elects to share U.S. costs. Manufacturing, regulatory, competition, reimbursement, patent and financing risks also remain. Imetelstat was not expected to be commercially available for many years, if at all.
- Geron reported no legal proceedings and no material changes in contractual obligations. Disclosure controls were assessed as effective at a reasonable-assurance level.
Investor verification priorities
- Review Janssen’s IMbark primary analysis and continuation decision, including the survival data and timing.
- Verify updated IMerge Part 1 results and whether Janssen proceeds with Part 2.
- Track cash burn, runway, and the use of the April financing proceeds, including any acquisition or in-licensing spending.
- Assess dilution from the April share issuance and other outstanding options, warrants and equity awards.
- Confirm the pace of hTERT revenue decline and any changes to collaboration milestones, cost-sharing obligations or potential opt-in economics.