Geron Corporation — Q2 2013 Form 10-Q
Reporting period: Three and six months ended June 30, 2013. Unaudited results; financial amounts below are in U.S. dollars unless noted.
Business context
Geron was a clinical-stage biopharmaceutical company with no product revenue, focused on imetelstat, an investigational telomerase inhibitor for hematologic myeloid malignancies. In April 2013, it discontinued discovery research and its telomere-length companion diagnostics program, closed its Menlo Park research laboratory, and reduced its workforce by 20 positions (about 31%). The company also planned to contribute its stem-cell assets to Asterias, subject to closing conditions.
Financial results and liquidity
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $112,000 | $130,000 | $877,000 | $1.384 million |
| Research and development | $4.807 million | $12.777 million | $12.728 million | $27.884 million |
| Restructuring charges | $838,000 | — | $916,000 | — |
| General and administrative | $3.432 million | $5.832 million | $8.183 million | $10.897 million |
| Net loss | $8.947 million | $18.326 million | $20.844 million | $37.065 million |
| Basic and diluted loss per share | $0.07 | $0.14 | $0.16 | $0.29 |
Gross margin is not meaningful because Geron had no product sales and reported only license fees and royalties. Losses narrowed year over year, principally as clinical programs were wound down and research, personnel, and other costs declined.
For the first half, operating cash use was $24.154 million, versus $30.348 million in 2012. Investing activities provided $10.865 million, mainly reflecting maturities of marketable securities; financing provided $60,000. Cash and cash equivalents declined to $8.834 million from $22.063 million at year-end 2012.
At June 30, cash, restricted cash, cash equivalents, and marketable securities totaled $71.6 million, down from $96.3 million at December 31, 2012. Current assets were $72.431 million and current liabilities $5.004 million. Stockholders’ equity was $68.407 million; accumulated deficit was $875.228 million. The filing reports no debt balance; approximately $500,000 remained available under the equipment financing facility. No off-balance-sheet arrangements were reported.
Material changes, outlook, and risks
- Geron said existing capital resources, available equipment financing, and future interest income were expected to fund its then-current operating level for at least the next 12 months. It also cautioned that capital needs could be substantial and funding could be required sooner than expected.
- Management expected 2013 R&D expense to be lower than in 2012 as resources shifted to imetelstat in hematologic myeloid malignancies. The filing gives no quantified earnings or revenue guidance.
- In the investigator-sponsored myelofibrosis trial, two cohorts of 11 patients had completed enrollment. Each cohort met the protocol’s minimum response criterion to permit expanded enrollment. The investigator was considering further cohorts, and a cohort for myelofibrosis transformed into AML had been approved. Data were expected to be submitted for the December 2013 ASH meeting; these were interim trial updates, not proof of efficacy.
- The April restructuring was expected to result in approximately $1.5 million of aggregate charges, including about $1.25 million in cash expenditures, with remaining facility-related charges expected in the second half of 2013. The filing’s restructuring note reports $824,000 recorded for the April action in Q2; the income statement reports total Q2 restructuring charges of $838,000.
- The planned stem-cell asset contribution to Asterias was expected to close by September 30, 2013, but depended on closing conditions, including effectiveness of registration statements. Geron expected to receive approximately 6.5 million Asterias Series A shares for distribution to its stockholders and could potentially receive royalties.
- Principal risks included reliance on a single early-stage candidate, uncertain clinical results and toxicity (including thrombocytopenia and neutropenia), trial and manufacturing execution, patent protection, ongoing losses, and the need for future financing. Geron noted that it had no commercially available products and did not expect imetelstat to be commercially available for many years, if at all.
Important facts for investors to verify
- Updated safety, efficacy, and response data from the myelofibrosis investigator-sponsored trial, including the planned ASH presentation and any implications for Geron-sponsored trials.
- Actual cash burn and whether the stated 12-month funding estimate remains reasonable as trial plans and restructuring costs evolve.
- Completion and final terms of the Asterias stem-cell asset transaction, including the share distribution and any related obligations.
- Additional financing, equity issuance, or dilution: the $50 million at-the-market agreement had not been used as of the filing, and Geron also had a $200 million shelf registration statement.
- Reconciliation of reported common shares outstanding: the filing gives 129,895,878 shares at June 30 and 128,649,378 at August 1, 2013.