Geron Corporation — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2018; financial statements are unaudited. Geron is a clinical-stage biopharmaceutical company focused on imetelstat for hematologic myeloid malignancies. It had no product sales.
Financial performance and position
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $165,000 | $163,000 | $691,000 | $874,000 |
| Research and development | $2.707 million | $2.637 million | $8.351 million | $8.510 million |
| General and administrative | $4.263 million | $4.770 million | $13.824 million | $13.833 million |
| Net loss | $5.597 million | $6.899 million | $19.717 million | $20.487 million |
| Basic and diluted loss per share | $0.03 | $0.04 | $0.11 | $0.13 |
- Q3 operating expenses were $6.970 million versus $7.407 million; nine-month operating expenses were $22.175 million versus $22.343 million. Operating margins are not meaningful given minimal revenue and continuing losses.
- Nine-month interest and other income was $2.171 million, up from $1.041 million, primarily due to higher portfolio yields and a larger securities portfolio. Q3 interest and other income was $1.060 million versus $363,000.
- At September 30, cash and cash equivalents were $12.729 million; restricted cash, $269,000; and current and noncurrent marketable securities, $171.765 million. Combined cash, restricted cash and marketable securities were approximately $184.8 million, versus $109.2 million at year-end 2017.
- Current assets were $168.874 million and current liabilities $4.467 million. Stockholders’ equity was $183.467 million; accumulated deficit was $1.004 billion. The filing reports no debt.
- Cash used in operating activities for the first nine months was $17.999 million, compared with $16.169 million a year earlier. Financing provided $92.960 million, primarily from stock sales and option exercises; investing used $78.566 million, largely reflecting purchases of marketable securities.
Material changes and business developments
- Janssen terminated the imetelstat collaboration effective September 28, 2018. Geron regained worldwide rights and is responsible for future development costs; it will receive no further Janssen milestones or royalties and Janssen no longer shares trial or patent costs.
- Janssen is expected to support transition of clinical, regulatory, manufacturing and related activities for approximately 12 months. It is expected to supply clinical imetelstat for up to 24 months at its cost plus a premium.
- Geron raised approximately $47.7 million net through the remaining capacity of its 2015 at-the-market agreement and approximately $38.4 million net under its 2018 agreement during 2018. About $60.5 million remained available under the 2018 agreement at quarter-end. Option exercises generated an additional approximately $6.9 million in Q3.
- Shares used in calculating nine-month loss per share increased to 173.2 million from 159.2 million. Common shares outstanding were 186.3 million as of October 25, 2018.
Outlook, clinical program and risks
- Management estimated existing resources and future interest income would fund the current operating level for at least 12 months. This estimate precedes the expected substantial increase in spending as Geron takes over imetelstat development. The company expects negative cash flow and higher losses, and says substantial additional capital or new collaboration arrangements will be needed to develop and potentially commercialize imetelstat.
- Geron expected screening and enrollment for Part 2, the Phase 3 portion of IMerge in lower-risk MDS, to begin by mid-2019 after transfer of trial sponsorship. It planned to consult myelofibrosis experts and regulators about whether IMbark results support a future trial.
- In IMbark’s 107 patients, the reported primary analysis showed spleen response rates of 0% at 4.7 mg/kg and 10.2% at 9.4 mg/kg; symptom response rates were 6% and 32%, respectively. Median overall survival was 19.9 months in the lower-dose arm and had not been reached in the higher-dose arm; 18-month survival rates were 62.9% and 76.7%. These results were reported from an analysis with median follow-up of 22.6 months and were not evidence of confirmatory Phase 3 benefit.
- For the IMerge target population, an early data snapshot showed an at-least-8-week red-cell transfusion-independence rate of 28% in the 25-patient expansion cohort and 37% across the combined 38 patients. The 24-week rate could not yet be assessed in the expansion cohort. Geron expected final Phase 2 data in 2019.
- Safety remains a central risk. The filing reports cytopenias, including severe neutropenia and thrombocytopenia; historical risks also include bleeding, liver-function abnormalities and a possibly treatment-related fatal event. The company warned that trial transfer, enrollment, manufacturing, regulatory review, efficacy, safety and financing could delay or prevent development. Imetelstat is Geron’s sole product candidate and is not expected to be commercially available for many years, if ever.
- Legacy hTERT license and royalty revenue was expected to decline and be eliminated by the end of 2019 as related patents expire. Geron also cautioned that equity financing could dilute shareholders. No legal proceedings were reported in this filing.
Investor verification points
- Confirm completion and timing of the Janssen-to-Geron transfer, including IND sponsorship, clinical data and manufacturing arrangements.
- Review mature IMerge results and the full IMbark data, including safety, survival follow-up and whether regulators consider the results sufficient to support further trials.
- Track post-transition operating burn, trial budgets, cash runway and the need and terms of additional financing or partnerships.
- Assess imetelstat manufacturing capacity, supply continuity and cost, as well as the ability to recruit experienced development personnel and execute Phase 3.
- Monitor dilution from the remaining at-the-market capacity and other potential equity issuance, and the decline of legacy licensing revenue.