Geron Corporation
Q2 2012 Earnings Call Transcript

Published: 31 Jul 2012

[Operator:]

Welcome to the Geron Q2 2012 Earnings Conference Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Dr. Anna Krassowska, Head of Investor Relations. Dr. Krassowska, you may begin.

[Anna Krassowska:]

Thank you. Good morning, and welcome to the Geron second quarter earnings call. With me on the call this morning are Dr. John Scarlett, our Chief Executive Officer; Graham Cooper, Chief Financial Officer; and Olivia Bloom, our Chief Accounting Officer. Today's call is being webcast live on the company's website and will be available for replay until August 30. I would like to remind listeners that except for statements of historical facts, the statements in this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These include, without limitation, statements regarding the timelines and plans for Geron's research and product candidates, including anticipated timelines for clinical trial enrollment, results and data, the therapeutic potential of Geron's product candidates and financial or operational protections or requirements, including spending guidance, the sufficiency of Geron's cash resources and statements regarding the potential divestiture of Geron's stem cell business. These statements involve risks and uncertainties that can cause actual statements to differ materially from those in such forward-looking statements. Information concerning factors that could cause the actual results to differ materially from those in the forward-looking statements is contained in Geron's periodic reports filed with the Securities and Exchange Commission under the heading, Risk Factors, including Geron's quarterly report for the quarter ended March 31, 2012. Undue reliance should not be placed on forward-looking statements that should speak only as of the date they are made, and the facts and assumptions underlying the forward-looking statements may change. Except as required by law, Geron disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. I will now hand the call over to Graham Cooper, our CFO, to cover the second quarter financial results.

[Graham K. Cooper:]

Thank you, Anna. Good morning, everyone. We will begin the call with a summary of the operating results for the quarter and the 6 months ended June 30, 2012. Our agenda then includes an update on our clinical programs from Chip Scarlett. Following that update, we'll be pleased to take your questions. For the second quarter of 2012, Geron reported a net loss of $18.3 million or $0.14 per share compared to $21.1 million or $0.17 per share for the comparable 2011 period. Net loss for the first 6 months of 2012 was $37.1 million or $0.29 per share compared to $45.5 million or $0.37 per share for the first 6 months of 2011. Revenues were $130,000 in the second quarter of 2012 compared to $462,000 for the second quarter of '11. Revenues for the first 6 months of 2012 were $1.4 million compared to $2.0 million for the comparable 2011 period. Revenues for the second quarter and first 6 months of 2012 and '11 included funding from collaboration agreements, as well as royalty and license fee agreements -- royalty and license fee revenues under various agreements. Total operating expenses for the second quarter of 2012 were $18.6 million compared to $21.9 million for the second quarter of 2011. Total operating expenses for the first 6 months of 2012 were $38.8 million compared to $47.7 million for the comparable 2011 period. In terms of R&D, R&D expenses for the 2012 second quarter were $12.8 million, which compares to $16.5 million during the same period in 2011. R&D expenses for the first 6 months of 2012 were $27.9 million compared to $33.3 million for the comparable 2011 period. The decrease in R&D expenditures for the 3- and 6-month periods of 2012 compared to the same periods in 2011 reflect reduced personnel related costs and lower scientific supply expenses, resulting from the discontinuation of the stem cell programs, partially offset by increased clinical trial expenses for the enrollment of our Phase II clinical trials of imetelstat and GRN1005. G&A expenses for the 2012 second quarter were $5.8 million compared to $5.3 million for the same period in 2011. G&A expenses for the first 6 months of 2012 were $10.9 million compared to $14.4 million for the comparable 2011 period. The increase in G&A expenses in the second quarter of 2012 was primarily a result of higher personnel-related expenses and increased legal fees associated with our IP portfolio, partially offset by reduced stock-based compensation expense. The decrease in G&A expenses for the 6 months ended June 30, 2012 compared to the same period in 2011 reflected primarily a decline in personnel-related expenses associated with management transition, including noncash stock-based compensation expense. In terms of noncash expenses, noncash operating expenses, which primarily included stock-based compensation and expenses for stock issued for services were approximately $2.1 million and $4.4 million for the second quarter and year-to-date 2012 periods compared to $5.8 million and $15.6 million for the comparable periods in 2011. Interest and other income for the second quarter of 2012 amounted to $165,000 compared to $287,000 for the comparable 2011 period. Interest and other income for the first 6 months of 2012 was $341,000 compared to $583,000 for the comparable 2011 period. The decline in interest and other income primarily reflects the decrease in cash and investment balances. The company has not incurred any impairment charges on its investment portfolio. We ended the quarter with $122.3 million in cash and investments. We have provided guidance of cash spend of approximately $65 million for 2012, and we continue to support that estimate. Given our balance sheet and our projected spend for 2012, we continue to expect that we will be adequately funded through and beyond the data readouts for all 6 of our ongoing Phase II clinical trials, which are expected to occur between next quarter and mid-2013. Our projections do not depend on any proceeds gained from the potential divestiture of the stem cell programs since we do not yet have an outcome of that process. With that, I would like to now hand the call over to Chip to provide an update on the clinical program.

[John A. Scarlett:]

Thank you, Graham. Good morning, everyone. And thanks to all of you for dialing into our second quarter earnings call. It's an exciting time for Geron as we get closer to several of our imetelstat Phase II data readouts beginning in the fourth quarter of this year. We expect these data readouts will give us important insight into whether inhibiting the enzyme telomerase leads to an important clinical benefit for patients with cancer. As many of our long-term stockholders know, telomerase was first recognized in the mid-1990s as a fundamental molecular target on oncology, present in approximately 90% of human tumors and required for the immortalization of tumor cells. Many companies, including Geron, tried and failed to develop effective small molecule inhibitors to telomerase. So far as we're aware, none of the small molecule candidates resulting from these efforts have sufficient potency or bioavailability to advance into the clinic. Instead, Geron continued to pursue a highly innovative approach to drugging telomerase that employed a novel and proprietary nucleic acid chemistry platform, and that was used to develop imetelstat, which is a potent and specific first-in-class telomerase inhibitor. Nonclinical studies have shown that imetelstat leads to the inhibition of tumor growth in the in vitro and in venographs. In these nonclinical studies, imetelstat also appears to be an effective inhibitor of cancer progenitor cell proliferation, which is believed to be the driver for many tumors' progression and relapse. Imetelstat Phase I studies established a dose and schedule that was tolerable, achieved target exposures that were consistent with those required for efficacy in non-cancer -- nonclinical cancer models and demonstrated that telomerase inhibition occurred at the doses now being used in Phase II program. Based on these and other data, Geron designed a Phase II imetelstat program in both solid and hematologic tumors. The tumors chosen to be studied were those for which we have supportive nonclinical data, evidence that the disease was driven by cancer progenitor cell proliferation and in which imetelstat could be tested either as single agent treatment or in combination with cytotoxic chemotherapy. 2 solid tumors and 2 liquid or hematologic tumors were selected for this Phase II program. The 2 solid tumors were advanced non-small cell lung cancer and metastatic HER2-negative breast cancer. Lung cancer, which non-small cell was the most common type, is the leading cause of cancer deaths among both men and women, while breast cancer remains the second most common cause of cancer death among women today. So Geron has utilized randomized, controlled trial designs in both our Phase II solid tumor studies. In our non-small cell lung cancer study, we're evaluating whether imetelstat can extend the duration of response achieved by conventional chemotherapy. In this study, imetelstat is administered as maintenance therapy for patients who have achieved stable disease after treatment with a platinum-containing doublet chemotherapeutic regimen. This study was fully enrolled with 116 patients in May and was randomized 2

[Operator:]

[Operator Instructions] And our first question comes from Karen Jay from JPMorgan.

[Karen E. Jay:]

This is KJ, in for Cory Kasimov. I have a couple. The first is probably for Stephen. I was wondering, the imetelstat breast cancer trial, the number, or percentage of Avastin patients, did you hit the 30% allowed for the trial? Or if not, maybe you could give me qualitative description of where -- what percentage that might be.

[John A. Scarlett:]

KJ, Steve is not on the call this morning. But I'm fortunately able to answer that question. The answer is yes, we did hit the 30%. And so we have 30% -- roughly 30% in each of the 2 arms.

[Karen E. Jay:]

Okay, great. And then the same question actually is for you, Chip, and -- or Graham. On the program and potential partnership, I understand that it makes sense to wait for the data for a partnership to decide whether or not to go forward, but how feasible is it from a financial standpoint for you to begin maybe 1 trial on your own, 1 pivotal trial? And then given the proximity of the 1005 data, would you wait for that data set to decide which drug is your Phase III priority, if a partnership hasn't been signed at that point?

[Graham K. Cooper:]

KJ, it's Graham. So I think the answer to that question depends on what indication you're talking about. In particular, solid tumor trials tend to be larger, more expensive Phase III programs. And with current resources, I think it's not realistic to expect that we would launch down the path of the Phase III program without a partner. On the other hand, hem -- malignancies hem programs can be more cost-effective, can be run on smaller trials and are within the grasp of a smaller company with more limited resources. So I think at the end of the day, it's going to come down to the data. And the decision on whether to pursue solid tumors, hem malignancies, or both.

[Karen E. Jay:]

Okay. I was actually more talking imetelstat versus 1005 just because the data are now -- could be around 6 months apart.

[Graham K. Cooper:]

Well, yes. So 1005 is a brain mets in the salvage space, it is a smaller population. The Phase III clinical program required for registration is likely to be smaller than, for example, non-small cell or metastatic breast cancer. And so the expectation is also that we could hold onto 1005 and pursue the 1005 development program all the way through the end as well. So we're going to have to look at the non-small cell data on imetelstat, the metastatic breast cancer data on imetelstat and that will be determinative of partnering strategy on imetelstat. Does that make sense?

[Karen E. Jay:]

Yes, it does.

[Operator:]

Our next question comes from Chad Messer from Needham & Company.

[Chad J. Messer:]

Yes. Have you guys ever disclosed the number of events we're waiting for in the breast cancer trial?

[John A. Scarlett:]

Chad, it's Chip. No, we have not disclosed the precise number. We've just talked about accrual rates and the projections that we're able to make in terms of when the top line data will be available. And as you saw, we have changed our guidance on that. For the imetelstat metastatic breast cancer study, we have changed our guidance based on the actual accrual rates that we're seeing of events from the fourth quarter of this year to the first quarter of next year.

[Chad J. Messer:]

Well, can you share with us what you were expecting sort of based on historical data for the PFS and the taxol arm?

[John A. Scarlett:]

Well, we have generally -- we generally said that we expected, in the control arm, PFS of around 7 months.

[Chad J. Messer:]

Okay. All right. And then just a quick financial question. I'm looking at your R&D expense for the quarter, there are layoffs -- at the end of last year, there's a nice dropoff to 1Q and another one to 2Q. Were there any leftover expenses related to the restructuring in the first quarter? Or is the second quarter number more indicative of the run rate through the end of the year?

[Graham K. Cooper:]

The second quarter number should be pretty indicative of the run rate through the end of the year. There was a little bit in there related to some legal costs but not material. So I would say yes, if you try to -- if you're trying to project out for Q3 and Q4, the second quarter would be the place to start.

[Operator:]

This concludes the question-and-answer session. I will now turn the call over to Dr. John Scarlett for closing remarks.

[John A. Scarlett:]

Well, thanks very much everyone for listening in today. We tried to give a little bit of a background, if you could tell, for any new folks listening. And we look forward to the remainder of this year, it's -- as I said before, it'll be very exciting times coming at the end of the year. So thanks very much, everyone, have a good day.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.