Geron Corporation — Q1 2019 Form 10-Q
Business context and reporting period. Unaudited results for the three months ended March 31, 2019, compared with Q1 2018. Geron is a clinical-stage biopharmaceutical company focused on imetelstat, its sole product candidate, for hematologic malignancies. Janssen terminated its imetelstat collaboration effective September 28, 2018; Geron regained global rights and is transitioning the program in-house.
Financial performance and position
| Metric | Q1 2019 / March 31, 2019 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $57,000 | $318,000 in Q1 2018 |
| Research and development | $5.906 million | $2.440 million in Q1 2018 |
| General and administrative | $5.452 million | $5.315 million in Q1 2018 |
| Total operating expenses | $11.358 million | $7.755 million in Q1 2018 |
| Operating loss | $11.301 million | $7.437 million in Q1 2018 |
| Net loss / loss per share | $10.059 million / $0.05 | $7.186 million / $0.04 in Q1 2018 |
| Cash used in operating activities | $12.738 million | $7.368 million in Q1 2018 |
| Cash, restricted cash and marketable securities | $170.1 million | $182.1 million at December 31, 2018 |
| Total assets / stockholders’ equity | $175.7 million / $169.4 million | $185.3 million / $177.7 million at December 31, 2018 |
Q1 2019 comprehensive loss was $9.777 million, including a $282,000 unrealized gain on marketable securities. Revenue consists of license fees and royalties; the filing reports no product revenue. Product gross margin is therefore not applicable, and the filing does not present an operating margin measure. Interest and other income was $1.162 million, versus $394,000 a year earlier.
Current assets were $155.949 million and current liabilities were $6.253 million. No borrowings or debt balance are disclosed. Current liabilities principally include amounts due to Janssen ($2.071 million), accrued compensation, accounts payable and the $571,000 operating lease liability. Cash, cash equivalents and restricted cash alone totaled $7.070 million; most reported liquidity was held in marketable securities.
Material changes versus Q1 2018
- Net loss increased by $2.873 million. R&D expense rose $3.466 million, primarily reflecting Geron’s responsibility for 100% of imetelstat development costs after the Janssen agreement ended, transition support and added development headcount.
- Revenue declined $261,000: Q1 2019 included $57,000 of royalties and no license-fee revenue, versus $248,000 of license fees and $70,000 of royalties in Q1 2018. Geron attributed the decline to patent expirations and expired licenses.
- Operating cash use increased $5.370 million, primarily due to higher imetelstat development payments and staffing. There were no financing proceeds in Q1 2019, compared with $1.553 million of net proceeds from stock issuance in Q1 2018.
- Weighted-average shares rose to 186.4 million from 160.5 million in Q1 2018. The company reported 186.5 million shares outstanding on April 29, 2019.
Outlook, management commentary and risks
- Management estimated existing capital resources and future interest income would fund the current level of operations for at least 12 months. It also said substantial additional capital or new collaboration arrangements would be required to advance imetelstat, and expected negative cash flow and increased operating losses.
- Geron planned to begin screening and enrollment for Part 2 of the Phase 3 IMerge trial by mid-2019, and expected transfer of the U.S. IND sponsorship by the end of Q2 2019. The overall transition from Janssen was expected through September 2019; Janssen was expected to supply imetelstat through September 2020 at its cost plus a premium.
- Geron reported Phase 2 IMerge results from a 38-patient combined cohort: 37% achieved at least 8 consecutive weeks of red blood cell transfusion independence and 26% achieved at least 24 weeks. These are reported clinical results, not evidence of regulatory approval or commercial success; the company expected more mature data during 2019.
- For myelofibrosis, management cited median overall survival of 29.9 months in the 9.4 mg/kg IMbark arm, based on an October 2018 data cutoff. It planned expert and regulatory discussions and expected to decide whether to continue late-stage development in MF by the end of Q3 2019.
- Geron cautioned that imetelstat is its only product candidate, clinical results may not be replicated, and prior trials observed serious risks including cytopenias, bleeding, liver-test abnormalities, infections and a reported patient death possibly related to treatment. Trial, regulatory, manufacturing, transition and financing setbacks could delay or halt development.
- Geron had approximately $60.5 million remaining under its 2018 at-the-market sales agreement at March 31, 2019; further equity financing could dilute shareholders. In April 2019, it signed an 11-year New Jersey office lease, with approximately $3.7 million in minimum payments for the initial term, net of a seven-month rent abatement; occupancy was expected by the end of Q3 2019.
- The existing Menlo Park office lease expires in January 2020. Adoption of the new lease accounting standard created a $571,000 lease liability at quarter-end and did not materially affect the income statement.
Important facts for investors to verify
- Whether the Janssen-to-Geron program and regulatory sponsorship transition completed on schedule, and whether Janssen’s clinical supply remains available as expected.
- Whether IMerge Phase 3 began as planned, enrollment and trial costs, and how mature clinical data compare with the reported Phase 2 results.
- The company’s cash burn, marketable-security balances and financing needs against its stated 12-month runway; the runway estimate applies to the current level of operations.
- Whether Geron can fund development without materially dilutive financing or a new collaboration, given the loss of Janssen funding and payments.
- Management’s Q3 2019 MF development decision, subsequent safety findings, and progress establishing an independent imetelstat manufacturing supply chain.