Geron Corporation — FY 2017 Form 10-K
Reporting period: Year ended December 31, 2017; filed March 16, 2018. Geron is a clinical-stage biopharmaceutical company whose sole product candidate, imetelstat, is licensed exclusively to Janssen for development and commercialization. Geron shares 50% of development costs for Janssen’s IMbark and IMerge trials.
Financial performance and liquidity
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $1.1 million | $6.2 million |
| Research and development expense | $11.0 million | $18.0 million |
| General and administrative expense | $19.3 million | $18.8 million |
| Operating loss | $29.3 million | $30.6 million |
| Net loss | $27.9 million ($0.18 per share) | $29.5 million ($0.19 per share) |
| Net cash used in operating activities | $20.6 million | $18.4 million |
| Cash, restricted cash, cash equivalents and marketable securities at year-end | $109.2 million | $129.1 million |
| Working capital at year-end | $89.5 million | $108.2 million |
Revenue consisted of license fees and royalties; Geron recorded no collaboration revenue from Janssen in 2017. The 2016 revenue included a $5.0 million upfront payment from Janssen Pharmaceuticals. The 2017 revenue decline primarily reflects the absence of that payment and lower royalties. Operating expenses declined 17.6%, largely as Geron’s share of imetelstat clinical costs and personnel-related R&D costs fell. G&A increased modestly. The company reported no product revenue and no funded debt on the presented balance sheet; current liabilities were $6.5 million. Profit margins are not meaningful given the company’s development-stage losses.
Cash and investments declined by $19.9 million during 2017. Management estimated existing capital resources and future interest income would fund the company’s then-current operating level for at least 12 months, but noted that acquisitions, in-licensing, increased development costs, or a decision to continue imetelstat independently could require additional financing. The company had $47.2 million remaining under its at-the-market sales agreement as of March 16, 2018. It sold shares for approximately $1.1 million net in December 2017 and approximately $1.6 million net in January 2018.
Clinical development, changes and outlook
- IMbark (myelofibrosis): New enrollment was suspended in October 2016 after too few patients met protocol-defined interim efficacy criteria. In March 2018, Janssen said the trial would close to new enrollment, with more than 100 patients enrolled. Median overall survival had not been reached at approximately 19 months’ median follow-up; the primary analysis, including overall survival, was expected by the end of Q2 2018. Janssen’s continuation decision was expected by the end of Q3 2018.
- IMerge (lower-risk MDS): Preliminary Part 1 results from 32 patients showed about one-third achieved at least eight weeks of red-blood-cell transfusion independence and nearly two-thirds achieved hematologic improvement. A 13-patient subgroup without prior hypomethylating-agent or lenalidomide treatment and without del(5q) showed higher rates and durability of transfusion independence. Janssen expanded Part 1 to enroll approximately 20 additional patients in this subgroup; enrollment was completed in February 2018. FDA granted imetelstat Fast Track designation in October 2017. Janssen had not committed to start Part 2.
- The IMerge findings were preliminary and based on a small subgroup; the filing cautions that final data may differ. Cytopenias, including severe neutropenia and thrombocytopenia, were among the common adverse events. Prior studies also reported serious toxicities, including bleeding, liver-test abnormalities and a possibly treatment-related death.
- Janssen may discontinue development or terminate the collaboration at any time. If it does not make an affirmative continuation decision, rights to imetelstat revert to Geron; pursuing development independently would require substantial capital and operational resources. Geron’s potential collaboration milestones and royalties are contingent and are not assured.
Other notable matters and risks
- Geron reported an accumulated deficit of $985.8 million and expected ongoing operating losses and negative cash flow. Management expected G&A expense in 2018 to remain consistent with 2017.
- Revenue from legacy telomerase-technology licenses was expected to decline significantly and end by 2019 as relevant patents expire.
- The 2014 securities class actions were settled and dismissed with prejudice in July 2017. Geron paid $250,000 and insurers paid $6.0 million into the settlement escrow; the company expected no further payment related to that settlement, while acknowledging possible future litigation.
- Contractual cash obligations disclosed for year-end 2017 totaled $1.7 million, principally office lease and license fees. The office lease was extended through January 2020. No off-balance-sheet arrangements were reported.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls were effective.
Key facts for investors to verify
- Whether IMbark’s final overall-survival results supported Janssen’s continuation decision, and the resulting effect on the collaboration and potential payments.
- Updated, adequately powered IMerge data for the expanded non-del(5q) subgroup, and whether Janssen proceeds to the planned Phase 3 Part 2.
- Current cash, cash burn and financing needs, including any additional at-the-market share sales or business-development spending.
- Whether safety findings, manufacturing capacity and costs, regulatory requirements, competition, or reimbursement prospects change imetelstat’s benefit-risk or commercial outlook.
- The timing and financial impact of legacy license revenue declines and adoption of new accounting standards described in the filing.