Business context and reporting period
Geron Corporation’s unaudited Form 10-Q covers the quarter and six months ended June 30, 2019. Geron is a clinical-stage biopharmaceutical company focused on imetelstat, its sole product candidate; it had no product sales. Janssen terminated its imetelstat collaboration in September 2018, and Geron is resuming responsibility for the program, including its clinical development and related costs.
Financial performance and position
Amounts below are in millions, except per-share data. Margins are not meaningful given minimal licensing revenue and substantial research and development spending.
| Metric | Q2 2019 | Q2 2018 | H1 2019 | H1 2018 |
|---|---|---|---|---|
| Revenue | $0.101 | $0.208 | $0.158 | $0.526 |
| Research and development | $10.134 | $3.204 | $16.040 | $5.644 |
| General and administrative | $5.191 | $4.246 | $10.643 | $9.561 |
| Net loss | $(14.239) | $(6.934) | $(24.298) | $(14.120) |
| Net loss per share | $(0.08) | $(0.04) | $(0.13) | $(0.08) |
| Operating cash used | Not separately reported | Not separately reported | $21.483 | $11.863 |
- At June 30, 2019, cash, cash equivalents, restricted cash, and current and noncurrent marketable securities totaled approximately $162.3 million, down from $182.1 million at December 31, 2018. Cash, cash equivalents and restricted cash alone were $18.0 million.
- Total current assets were $154.8 million and current liabilities $9.2 million. Stockholders’ equity was $157.0 million; accumulated deficit was approximately $1.036 billion. The filing reports no debt balance.
- Six-month investing activities provided $28.4 million, mainly reflecting maturities of marketable securities exceeding purchases. Financing activities provided $0.2 million, compared with $83.9 million in H1 2018, when equity sales were substantially higher.
- Interest and other income was $2.3 million in H1 2019, up from $1.1 million, primarily due to higher yields and the investment portfolio. License and royalty revenue declined as certain hTERT licenses expired; the company expected such revenue to be eliminated by year-end 2019.
Material changes versus prior comparable periods
- H1 2019 net loss increased to $24.3 million from $14.1 million. R&D expense rose to $16.0 million from $5.6 million, mainly due to higher clinical development and transition costs, Phase 3 IMerge start-up, and additional development staff. G&A increased to $10.6 million from $9.6 million.
- Geron’s share of imetelstat development costs increased after Janssen’s termination of the collaboration: Geron became responsible for 100% of these costs rather than sharing them equally.
- In June, stockholders approved increasing authorized common shares from 300 million to 450 million. Shares outstanding were 186.6 million at June 30 and 188.4 million at July 26.
Outlook, clinical program, and key risks
- Management estimated existing resources and future interest income would fund the current level of operations for at least 12 months, but stated that substantial additional capital or new collaborations would be needed to advance imetelstat and pursue potential commercialization. Management expected negative cash flow and higher operating losses.
- Geron planned to open screening and enrollment for the Phase 3 portion of IMerge in August 2019, targeting approximately 170 patients with lower-risk MDS. This was a plan, not a completed milestone.
- Updated Phase 2 IMerge data for 38 patients showed an 8-week red-blood-cell transfusion-independence rate of 42% (16/38) and a 24-week rate of 29% (11/38). Grade 3/4 thrombocytopenia and neutropenia were reported in 61% and 55%, respectively; the company described these events as generally reversible and manageable. Phase 2 results do not establish Phase 3 success.
- For relapsed/refractory myelofibrosis, Geron planned an FDA End-of-Phase-2 meeting by the end of Q1 2020 before deciding whether to pursue late-stage development. A comparison of IMbark results with matched real-world data suggested longer survival with imetelstat, but the filing cautions that small samples, unmeasured differences and other biases limit interpretation; it is not a randomized comparison.
- The transition from Janssen, including remaining non-U.S. sponsorship approvals and transfer of clinical, manufacturing and regulatory responsibilities, was expected to finish by the end of September 2019. Delays, supply issues, clinical trial outcomes, safety findings, regulatory requirements, competition and the need for financing are material risks. Imetelstat may not be approved or commercially available for many years, if ever.
- Under a June 2019 supply agreement, Geron expected to pay about $7.5 million for drug product and up to about $6.7 million for drug substance and raw materials, subject to testing and specifications. A New Jersey office lease was expected to commence by Q3 2019 and carries approximately $3.7 million in minimum payments over its initial term, net of a rent-abatement period.
- July 2019 ATM sales raised approximately $2.5 million net, as reported in the subsequent event note. Management reported approximately $57.8 million remaining available under the $100 million ATM agreement as of July 31, 2019, subject to market conditions and potential dilution.
Most important facts for investors to verify
- Whether IMerge Phase 3 screening and enrollment began as planned, and how its enrollment, costs and timelines develop.
- Whether the Janssen transition and required country approvals were completed, and whether purchased drug materials met specifications and were delivered.
- Cash burn, investment balances and financing activity relative to management’s stated 12-month operating estimate; also verify actual ATM capacity remaining and shares issued.
- Updated IMerge efficacy and safety data, including durability of transfusion independence and severe cytopenias, and the FDA’s feedback on the myelofibrosis development path.
- Whether additional funding or partnerships are secured to support development, given the company’s sole product candidate, no product revenue and rising development costs.