Geron Corporation — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Financial statement amounts below are in millions of dollars unless otherwise noted. Geron is a clinical-stage biotechnology company focused on imetelstat; it had no product sales.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0.131 | $0.165 | $0.289 | $0.691 |
| Research and development expense | $11.109 | $2.707 | $27.149 | $8.351 |
| General and administrative expense | $4.994 | $4.263 | $15.637 | $13.824 |
| Net loss | $(15.180) | $(5.597) | $(39.478) | $(19.717) |
| Net loss per share | $(0.08) | $(0.03) | $(0.21) | $(0.11) |
| Cash used in operating activities | Not presented by quarter | $(33.463) | $(17.999) |
Operating expenses substantially exceeded revenue; gross margin is not meaningful because the company had no product revenue. R&D costs rose sharply, principally due to taking full responsibility for imetelstat development, transition costs, Phase 3 IMerge start-up, and added development personnel. G&A also increased, reflecting higher legal and patent costs and added personnel.
At September 30, 2019, cash and cash equivalents were $20.751 million, restricted cash was $0.270 million, and current and noncurrent marketable securities totaled $138.264 million. Combined, these resources were approximately $159.3 million, compared with $182.1 million at December 31, 2018. Current assets were $142.1 million and current liabilities were $11.9 million. Stockholders’ equity was $152.4 million; accumulated deficit was approximately $1.05 billion. The filing reports no debt balance.
Cash provided by investing activities was $34.4 million for the first nine months, mainly reflecting maturities of marketable securities exceeding purchases. Financing activities provided $9.2 million, primarily from at-the-market stock sales. Management estimated existing capital resources and future interest income would fund the current level of operations for at least 12 months, while warning that substantial additional capital will be needed to advance imetelstat. No specific margin guidance was provided.
Material changes and business developments
- Geron completed the transition of the imetelstat program from Janssen by the end of September 2019 and assumed full responsibility for development costs. Janssen’s collaboration termination means Geron will receive no further imetelstat milestones or royalties from Janssen.
- The Phase 3 portion of IMerge in lower-risk MDS opened for screening and enrollment in August 2019; the first patient was dosed in October, after quarter-end. The trial is designed to enroll about 170 patients. Geron projected top-line results by mid-2022, subject to change.
- IMbark, a Phase 2 trial in relapsed/refractory myelofibrosis, was closed to enrollment; no patients remained in treatment, though follow-up continued. FDA granted imetelstat Fast Track designation for this indication in September 2019. Geron planned an FDA End-of-Phase-2 meeting by the end of Q1 2020 before deciding on potential late-stage development.
- Geron sold 6.3 million shares under its 2018 at-the-market agreement during the first nine months, raising $9.1 million net. It reported an additional $10.2 million net from October sales; approximately $40.8 million remained available under the agreement as of October 31, 2019. These sales dilute existing shareholders.
Outlook, risks, and unusual items
- The company’s only product candidate is imetelstat, which remains in clinical development and may never receive regulatory approval. Geron stated that commercialization is not expected for many years, if at all.
- Key uncertainties include Phase 3 IMerge enrollment, duration and results; imetelstat’s safety and benefit-risk profile; regulatory requirements; manufacturing capacity, quality and cost; and reliance on CROs, other vendors, and Janssen for certain matters after the transition.
- Geron expects ongoing negative cash flow and higher expenses as it funds development alone. If additional financing or collaboration arrangements are unavailable on acceptable terms, development could be delayed, changed, or abandoned. Equity financing may materially dilute shareholders.
- Under its Janssen 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 delivery; payments were expected in Q1 2020.
- Leases include the New Jersey office lease, which commenced October 1, 2019, with approximately $3.7 million of minimum payments over its initial term, and a Foster City lease entered into in October with approximately $4.4 million of minimum payments over its initial term. The Foster City lease was expected to commence by the end of Q1 2020.
- Management reported effective disclosure controls as of quarter-end and no material change in internal control over financial reporting. The filing reported no legal proceedings.
Investor facts to verify
- Whether IMerge enrolls and progresses on schedule, and whether the projected mid-2022 top-line timing changes.
- Updates from the planned FDA meeting on a potential regulatory path for imetelstat in relapsed/refractory myelofibrosis.
- Clinical safety and efficacy data as follow-up matures, including whether results support continued development.
- Cash burn, financing needs, remaining ATM capacity, and resulting share dilution.
- Timely delivery and testing of Janssen-supplied materials, and the establishment of a reliable, cost-effective manufacturing supply chain.
- Actual lease commencement costs and payment timing under the Janssen supply agreement and new office leases.