Geron Corp (GERN) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the third-quarter 2007 Geron earnings conference call. My name is Rob and I will be your coordinator for today. At this time, all participants are in a listen-only mode, but we will facilitate a question-and-answer session toward the end of this conference. (OPERATOR INSTRUCTIONS). At this time, I would now like to turn the presentation over to your host for today's call, Mr. David Greenwood, Executive Vice President and Chief Financial Officer. You have the floor.

Good morning and welcome to Geron's earnings call. I am Dave Greenwood. With me is Tom Okarma, CEO and Alan Colowick, President of Oncology.

This is an earnings-related conference call and we will begin with a summary of operating results for the quarter. Our agenda then includes an overview of recent operating highlights at the Company and a summary of our operating plans for the remainder of '07 and into 2008. Following that presentation by Tom, we will have a general question-and-answer session.

First, two informational items. In the event any forward-looking statements are made during this call, please understand those comments are made subject to the Safe Harbor provisions of the Securities Reform Act of '95. Any forward-looking statement involves uncertainty and we refer you to the risk factors detailed in our filings with the SEC.

Secondly, as mentioned by the operator, all participants are in a listen-only mode. The lines will open for the Q&A. The call will be available for webcast replay until November 30 and more information on our website.

As you can see from the condensed income statement attached to last night's announcement, revenues were up for the comparable three and nine month periods in 2006, but royalty and license fee income amounts to only $1 million a quarter. Other cash inflows to the Company during the quarter included $2.8 million of interest income. Third-quarter R&D expenses increased 15% period-to-period. The increased investment is to fund expanded clinical trials in the 163 program, hiring of clinical development personnel and non-cash expense related to equity compensation.

The G&A line item also increased quarter-over-quarter, which is comprised of again non-cash expense related to stock options and ever increasing costs of compliance.

We ended the quarter with $209 million cash on the balance sheet. Our net cash burn for '07 will be approximately $38 million. We will end the year with $200 million in cash. Our burn in 2008, which will be significantly higher, will be driven by the funding of a number of trials with our telomerase inhibitor drug, which you will hear more about, the AML trial with our vaccine and the initiation of a trial in spinal cord injury with our first anticipated human embryonic stem cell platform drive cell therapy. At this point, I will turn it over to Tom Okarma.

Thank you, David and good morning, everyone. Thank you for calling in this morning. I will first summarize our presentations in the quarter. We announced my presentation at UBS, and Alan Colowick stood in for me at the BIO Investor Forum and next week, I will be presenting at the Rodman conference on the 5th in New York City.

We also participate in quite a few scientific conferences, which we routinely do not press release, so I thought I would just quickly summarize some of those. These are important for the Company to maintain scientific contacts and to also keep our ear to the ground on what is going on out there at the abstract level and at the presentation level before work gets published.

So we did two talks on our diabetes embryonic stem cell islet program at the International Pancreas and Islet Transplantation Association and another one in Europe. We did two talks speaking to the manufacturability and scalability of our master working cell bank systems at the ISCT, Annual Somatic Cell Therapy Symposium at the American Association for Blood Banks.

We gave two talks on 163L, both by our collaborator Bill Matsui at Johns Hopkins describing his work of 163 impacting the biology of multiple myeloma stem cells, both from stem cell lines, as well as primary samples from patients with multiple myeloma. Those were at the ISEH meeting in late September and the AACR-NCI-EORTC meeting in San Francisco in October. And we gave one talk on our embryonic stem cell cardiomyocytes at the NIH Symposium on cardiovascular regenerative medicine.

There were four major press releases of moment during the quarter. The first one in July. We announced the initiation of the first combination trial of 163L in patients with non-small cell lung cancer combined with a standard paclitaxel carboplatin regimen. This, as I said, is the first time that we are using 163L in a combination setting. We chose the disease and that particular combination to reflect, first of all, the biology of 163L in non-small cell lung cancer models, as well as the common paclitaxel carboplatin combination, which sets us up to begin thinking about using this drug with that combination in other disease settings.

Joan Schiller at UT Southwest is the lead investigator and as you may remember, we started our dose in this trial at a dose that is equivalent to that in the fourth cohort of the two solid tumor [NCLL] trials.

Later that month in July, we announced the initiation of our telomerase vaccine clinical trial in patients with AML. This is led by John DiPersio at Washington University of St. Louis and there will be five other sites coming on board. This is an important study for us in that it is the first to document what we hope to show in terms of immune responses in the prime boost regimen.

We have talked about work done under an investigator IND at Duke wherein prostate cancer and in some hematologic malignancies, we demonstrated that the prime, the six weekly injections, actually prepares this patient's immune system to respond in an anamnestic manner. In other words, a recall response when the patient once again is boosted many months after the prime regimen.

This is important because it enables us to maintain a very high, anti-telomerase T-cell response virtually indefinitely. So we now have the opportunity to look at the impact of disease-related endpoints in AML given our expectation that the immune response will be durable and long lasting.

A major paper came out in the September issue of Nature Biotech, which was published online at the very end of August on our embryonic stem cell derived cardiomyocytes and this is really the second proof of concept in an animal model of disease that these cells derived from embryonic stem cells survive and function in the context of a disease. This is actually the first study ever to show survival of cells in an infarct zone in an animal. Not only did the cells survive in the infarct zone, but they showed statistically improved heart function as measured by a decrease in end systolic and end diastolic diameters of the treated animals, improved fractional shortening and improving left ventricular ejection fraction and those variables were determined by both MRI and echo, as well as extensive histology of the animals after sacrifice.

We also in that paper documented the scalable production of these cells. They are made with the same kind of efficiency and direct differentiation process as that which is characterized by our OPC1 product for spinal cord injury.

We also in that paper disclosed a pro-survival cocktail, which is a fairly complex combination of reagents, each individually determined to be important for the survival of these cells in the hostile environment of a myocardial scar.

We also showed in the paper, frankly to our surprise, that the injection of these cells induces post-angiogenesis, new blood vessel formation, that is of rat origin, not of human origin. There are no angiogenic cells to our knowledge in the cardiomyocyte prep and clearly the improved vascularity in combination with the durable survival of human functioning cardiomyocytes combined to produce the hoped-for significant effects in function.

And lastly, in early September, we announced a victory in the European patent office. Pharmexa lost their appeal to obtain broad claims to telomerase-based cancer vaccines. So this decision affirmed a prior decision made in 2003 by the European patent office to revoke the claims of Pharmexa's patent that purported to claim broadly telomerase-based cancer vaccines.

At this particular decision, the patent office also rejected claims of 16 alternative claim sets that Pharmexa had submitted along with this appeal. So their patent estate is now limited to five specific small peptides. Pharmexa has therefore failed to obtain broad claims to telomerase cancer vaccines. They are not licensed by us and we have prevailed in protecting our own technology, as well as that which is licensed to Merck. And with that, I think we will open up to questions.

(OPERATOR INSTRUCTIONS). Joel Sendek, Lazard Capital Markets.

Actually I have three questions. First, on the burn rate, you mentioned a significantly higher burn in '08. Can you quantify that or will we learn about that later?

Both. I will try, Joel, now, but that is going to be wait and see because in large part it is data-driven and Alan can comment further specifically on the sort of the cascade of 163L trials that we have underway now and might anticipate, which is the primary driver of the number. It is not going to double next year, but it is going to -- the burn is going to go up a lot and it could go up 50% as kind of a ballpark guess today.

Yes, from the perspective of what David was talking about, Joel, in terms of major drivers for that being clinical program with the major driver of our clinical program in general from an expense perspective being the GRN163L program. You are aware that we are about to initiate -- or I should say about to initiate and start to enroll into a multiple myeloma study in which GRN163L will be administered as a single agent.

If we see activity as a single agent in that study, we expect by the end of 2008 to potentially initiate what could be a pivotal trial in that disease. So that is obviously a very data-driven decision as David alluded to.

We also will use data from that study to look at other multiple myeloma studies, those being in combination with generally administered agents, which we expect to also begin towards the end of 2008.

The non-small cell lung cancer study, which Tom had alluded to that we announced that we initiated this summer, will also in a data-driven way we hope lead to initiation of a study in non-small cell lung cancer, which would be a randomized Phase II study.

If I could stop you right there because that was actually my second question on the lung study. When might we get the data for the current study that is ongoing now and where would we see it?

Well, the guidance that we gave and will continue to give around that is that we expect that in the second half of the year we will have the data from that study. The exact time --.

Second half of '08?

Yes, the second half of '08. And what -- as we approach that, I think we can give more clarity around when that might be and at what venue that might be, but right now, that would be premature.

Okay. I'm sorry I interrupted you.

So I think that those are two major swings in terms of potential expense that will be data-driven. We are assuming success in both of those studies and are planning for that spend, but I think that is what David was alluding to in terms of being exact about it.

The other studies for 163L that we have discussed I think are the ongoing studies, which obviously I think we have a better handle on in terms of exactly what we would expect then spend would be for 2008.

Okay. Thanks. And my third question has to do with if you can give us a feel for what we might see at the ASH meeting this year?

Yes, as we have previously discussed, we are not planning on presenting data from our clinical studies at ASH this year. We expect to, by the end of this year, define the single agent dose to take forward in our broad Phase II program for GRN163L, but that won't be data, which would be presented at ASH this year.

Okay. Thanks a lot.

Ren Benjamin, Rodman & Renshaw.

Hi, good morning and thanks for taking the call. This may be a question more for you, Alan, but in the -- or Tom, you can jump in. At the ACR conference when Dr. Matsui was talking about the inhibitor, he defined the melanoma stem cells I think somewhat differently than how it is either normally defined or maybe we don't know enough about the multiple myeloma stem cell, but can you talk to us a little bit about those results, how exactly the stem cell was defined and how the inhibitor seems to be affecting the cancer stem cell in multiple myeloma?

Sure, Ren. I will take a stab at that. Thank you for the question. And it is an important attribute of the drug to highlight here, which we have done. So the conventional wisdom, generally speaking, particularly amongst the liquid tumors, is that the spectrum of cancer cell types is not homogeneous. There are mature tumor cells and there are rare non-mitotic tumor stem cells and the difference between them has to do with the fact that the tumor stem cell is generally chemotherapy resistant, is the cell that will transfer the tumor to another animal and generate in that animal a genotype of the tumor identical to that from which the tumor was transplanted in the first place. So they breed true and they are generally thought to be responsible for relapse again because they are quiescent and are quite resistant to traditional chemotherapy.

I am not aware frankly, Ren, that the definition that he used is any different from what I am aware of in the past and the criteria are predominately to a particular cell surface marker, which is empirically defined so that when you separate the myeloma cells by means of that marker, you get a phenotype of cells that are mature and do not transplant or transmit the tumor in an animal and a less mature cell type that does. And that work has been done in his lab and has been repeated by others. So that is the functional and the practical definition.

The significance of our data is that 163L is the only compound that we are aware of in the literature anywhere that affects -- that hits both the mature myeloma cell, as well as the myeloma stem cell. Revlimid and Velcade in Bill's lab do not and they are, of course, commercialized for that indication.

So what we have evidence for now using patient samples, not just myeloma lines that you can buy in a catalog, is that this drug may actually hit the root of the tumor, as well as the weed that you see above the ground and that is one of the reasons we are really putting a lot of energy behind the single agent myeloma trial for 163L. I mean we would have been in that disease, Ren, a lot earlier had we known that this data a couple years ago when we started all this stuff.

So we are continuing to try and expand upon that bit of information. We have a number of collaborations with lead investigators in this country who are, like Bill, in myeloma studying cancer stem cells in other important diseases where again we like to find a foothold that is mechanistic that points in a positive way to the likely clinical outcome for the drug.

Okay, great. Another couple of questions. The first one, can you give us an update on what is happening with the WARF patents and the appeal and the re-appeal and everything like that?

Well, I do have to be pretty close to the chest here. I do have information, but it is not in the public domain. We are pretty optimistic about the outcome of this re-examination. That is about all that I can really tell you. I can say that we do expect a decision certainly by end of this year.

Okay. Can you talk to us a little bit about the milestones that are upcoming for Geron, not only through the end of the year, but also into 2008?

Okay. Well, I will speak to the ones on the stem cell side and Alan can speak to the ones on the cancer side. The main event obviously on the stem cell side is the filing of the IND for OPC1. And frankly more importantly the FDA's concurrence with that application and our initiation of the world's first embryonic stem cell human trial.

I can give you a little bit of color on the application. Most of the data is now in and there are no showstoppers. Particularly in the long-term tumorigenesis study, the cell prep is absolutely clean and that, as you know, has been the biggest issue for the agency, the so-called teratoma risk, which when it comes to the literature from the academic world who, for various legitimate reasons, do not purify their cell preps the way we do and whose academic interest is in the biology of differentiation, not in the production of a product therapy. So we have distinguished our preparation from that in the literature pretty dramatically.

That said, there is a lot of material that is coming in from all of the CROs doing all of these animal studies. The slides and the reports all have to be reviewed by us because we are responsible for the accuracy. So that is in process, but again we have gone over at first blush all the data and we are pretty pleased with how that has turned out.

So we, in parallel, have marched down the track with the data safety monitoring board, with the clinicians in generating the protocol and in trying to push the clinical trial site contracts in parallel to the degree we can and that is clearly limited. So all systems are go on that initiative and I think there will be a substantially changed view of Geron's embryonic stem cell program when that clinical actually begins.

I think there is a moderate amount of skepticism that we can actually pull this off and we are optimistic because we have obviously been generating all of these reams of data that we have seen and we will not publish that, but we will allude to it as the IND goes in, that give us confidence that we have traversed all of the issues that the FDA has rightly put in front of us and I can tell you we are the only company on the planet that has done that.

And just regarding the timing of the IND and also will you announce when you file the IND or when you plan on beginning clinical studies?

Yes, we are not going to announce the filing and that is to minimize any kind of pressure on the agency. As we've said before, this is an enormous submission. It will be 25,000 pages and it is all primary data. There are no summaries and the agency want every single pixel of data in primary form. It is almost without precedent for an initial IND. So it is going to be a big tour de force to submit it. It is going to be a huge issue for them to review it and we are not optimistic they can get it done in the canonical 30 days just because of the extent of it and also remember, it is a combined IND for the cell and IDE for the injection device that we had to develop and validate along with the cells, which is another reason why this is a large application. So the milestone that we will talk about will be initiation of the trial.

And when do you think that will happen?

We are projecting sometime between the first and second quarter of next year. There are a lot of hurdles that have to be traversed post-FDA concurrence with the IND. There is a whole new level of review, the so-called ESCRO Committee -- embryonic stem cell research oversight committee. At each site, they have to review the whole protocol and I can tell you they are not prepared to review a clinical trial. They think they are being formed to look at research protocols, literally pre-clinically, in the institution that formed them. So it is a real hurdle and we are prepared for it, but it is another block in the road that will add time between FDA concurrence and initiation.

Right. And then on the oncology side?

Yes, this is Alan. On the oncology side, milestones for the rest of this year and then into 2008 include the following. First of all, we do expect to imminently announce the enrollment of the first patient for the single agent multiple myeloma trial. That study is administratively ready to go and we are very actively screening patients as we speak, so we expect that to be imminent and that will obviously have large implications for the indication for myeloma, but for the drug as well as we have already alluded to.

I think very important in terms of thinking and keeping the big picture in mind in terms of the development of 163L itself is that by the end of this year, we very much expect to have identified the single agent dose to be taken forward in the broad Phase II program, as well as in combination studies in other tumor types and we will expect to have the final data from both the CLL study and the solid tumor study in hand and able to discuss publicly in the first half of next year.

In addition, as we have said, we expect that we will have data in the second half of next year from the ongoing non-small cell lung cancer study, which would then, if positive, lead to the initiation of a randomized Phase II study in combination therapy in non-small cell lung cancer, as well as we expect that the multiple myeloma study will give us sufficient data by second half of next year to make a call about whether or not there is sufficient activity to think about taking forward and potentially even initiating by the end of next year a registration study of the single agent in that setting. Clearly, we intend to proceed with combination therapy in multiple myeloma patients and expect to initiate those studies by the end of next year as well.

On the vaccine side of the program, we announced over the summer the initiation of the clinical trial in patients with AML. We are enrolling patients into that trial. We have said publicly that we expect that enrollment to continue throughout the year, essentially for 2008 and depending on the pace of the enrollment in that trial, may have by the end of the year some preliminary data, not from a hard clinical endpoint perspective per se, but certainly with respect to a lot of the questions that we are trying to get answered in this study in terms of immunological responses and early signs of activity. So I think for both the Geron 163L program, as well as the vaccine program, we expect a fairly constant news flow through 2008.

Great. And then just one last question. Tom, you had mentioned that you go to these scientific conferences to see what is going on out there and to get a better feel. What is going on out there in the spinal cord field and in the cancer stem cell field? Is there anyone else working on therapeutics that are similar, that are close, know can you give us a feel of that?

Yes, sure. The stem cell -- the spinal cord answer is easy. There is no one. There's always chatter about drugs that, in animal models, may improve healing rates with moderate and transient improvements in animals' locomotion, but there is nothing that even comes close to what we are showing.

To illustrate that, in part of the IND, we now have nine-month data that shows the cells are absolutely stable over nine months in the animal spinal cord and when you compare the control animals, which have a huge hole in their spinal cords, with the nine-month data set of our treated animals, we actually regenerated the injury. So there is human myelin and rat axons traversing what is a hole in the control animals. So this is important data to show the durability of a single injection of these cells in this animal model. So there is no one on the planet that is even close to this.

There are lots of people working on cancer stem cells mostly with a view toward trying to characterize them and confirm that this phenomenon has clinical significance and that would be one of the next shoes to drop with our collaborator at JHU who has some pretty interesting animal model data that is not yet ready to be discussed that extends the in vitro activity we have shown with 163L. And again we are collaborating with a number of other people in the stem cell arena to try to demonstrate that 163L has broader anticancer stem cell activity than just myeloma.

Terrific. Thank you very much.

Ren, I just want to add one comment to that as well, which is that we continuously scan the horizon for telomerase inhibitors, other agents which are putative telomerase inhibitors and I think it is safe to say -- it's absolutely safe to say that there are no other telomerase inhibitors in the clinic today and in fact, as we scan the horizon, we continue to see lots of interest, lots of preclinical type of work, but nothing that progresses past the point of really exploratory animal data. So we think that from the perspective of telomerase inhibition, which has therapeutic implications for cancer stem cells since it is a universal property of cancer stem cells, that we really have a, not only leadership position, but quite frankly we seem to be playing by ourselves in this field and it looks like it will be that way for a long time to come.

One other addition, Ren, to your question on the ear to the ground, we also have very good feedback now on the cardiovascular opportunity and this is kind of interesting. I mean you have heard me rail about the use of bone marrow into people's hearts post MI and my issue there is that there is hardly any evidence that any cell in bone marrow turns into a cardiac muscle cell and that is true.

The rationale for these trials is some sort of what our people call the peanut butter effect, that these cells somehow alter remodeling of the scar after the infarct. Although, there is clearly no evidence of any cells that survive the injection and in the few studies where there is modest benefit demonstrated, the patients always get a second intervention along with their bone marrow. So it is really hard to tease out what is affecting the outcome.

What is important though is that the cardiovascular community has now given up on the notion of using those adult cells to repair the heart. The notion that these cells can transdifferentiate either under some signal that they get in vivo or some signal they are given in the manufacturing process has now been completely disproven.

Also, through all of these studies, the delivery mechanism of how to place these cells correctly into the infarct in humans has been worked out, the so-called NOGA catheter, and that is precisely the device that we are using now in our large animal studies in sheep. So we do not have to invent that wheel when we take the second cell type into the clinic.

So the feedback we are getting now from the cardiac surgeon community is we are really hot to try your cells. So I think, unlike the spinal cord scenario where there is no precedent and we are really plowing new ground, in the cardiovascular application, there is now a demand that we can palpate amongst both the academics and perhaps even among potential large company partners.

Terrific. Thank you guys very much.

[Greg Silvanovich], UBS.

Hey, good morning, guys and thanks for taking my call. Just a -- good segue actually on potential partnerships and I jumped on the call late, my apologies. Could you just provide us an update on what is happening with potential discussions with Merck right now?

Sure. As we've said, their option to license-in our dendritic cell platform expired in July of this year and we granted them an extension to continue the negotiation for reupping that option until the end of this calendar year of '07. So those conversations are ongoing and are active.

We have demonstrated in-house and have presented to them, although we have never shown the data publicly, but I have disclosed it, that our second-generation vaccine based on dendritic cells we make from human embryonic stem cells, the characteristics of those ES-derived DCs are exactly identical to those that we are currently producing from the peripheral blood of cancer patients and most importantly, these ES DCs present antigen in vitro just like the monocyte-derived DCs from individual cancer patients.

The additional advantage in addition to obviously scalability and multiple dose lots and manufacturing, we have early data that shows the ES DCs will also present antigen even after irradiation, which means the cells are alive, but they cannot divide and that is important for some of the FDA regulatory issues that we would otherwise have to include in an IND package for the second generation. So Merck is looking at that data as we speak.

And then thirdly, I have also mentioned this as far back as July, part of the relationship of Merck is a collaboration, which is done in their laboratories on their nickel to look at, in animal systems, possibly combining their platform, which is adenovirus and plasmid, with our dendritic cell platform and that work has been completed in the summer and shows striking synergy between the two platforms. And this is not a subtle finding and the synergy is manifest in two important ways.

First, the magnitude, the actual number of T-cells that are specifically directed toward telomerase that the combination generates in the animal, but more importantly is the characteristic of the T-cell anti-telomerase response. With either platform alone, the T-cells that are generated recognize what is called the immune dominant portions of the protein. We now assay this by three overlapping buckets of short telomerase peptides. So we are actually now able to determine with some precision what part of the telomerase molecule these T-cells are recognizing.

And the take-home message is that with either platform alone is a clear, very restricted set of peptides that the T-cells recognize. In contrast, when we combine the two platforms, the T-cells are of a family that literally recognize the entire length of the protein peptides in every one of the buckets. And that is really important because clearly this is an allogeneic vaccine and we clearly will be testing it in patients who may have different kinds of peptides presented on the tumor cell surface. So the ability of an ES vaccine that could in fact have broad reactivity to the whole molecule is really quite a major advance in the whole field of cancer immunotherapy.

So all those pieces are on the table in our current conversation and we do expect to come to a conclusion by end of year and we will obviously announce that first quarter of next year.

Tom, do you know where they stand on potentially filing an IND for what they are doing?

Yes. That is imminent if it hasn't already happened. They have scheduled by end of October for a submission. That is a milestone payment to Geron and we expect that to happen any day now. We are -- our information is that they are on track with that filing.

Great. And if I could just follow up with one more question? Any sense on looking into more the tumor license syndrome that you saw with 163L?

Well, I mean that was just an observation and again, as we have said, we are not sure if that is drug related or not and we would like it to be, we hope it is, but we don't have direct evidence for that and I think the answer to your question would turn on whether we see repeated examples of that as we continue to escalate. So we are in Cohort 5 now of both of those trials.

Yes, just as a follow-up to that, Greg, it's a great question. I don't think there is anything more that we can do retrospectively to understand that patient, but going forward, one of the key things that we have learned from looking at both the solid tumor study and the CLL is that a two-hour infusion, which is being used in the solid tumor study, as opposed to the six-hour infusion, which is being used in the CLL study, that dose for dose, the two-hour infusion is more potent and at least thus far, looks to be just as safe.

Based on that, we are converting the entire program to a two-hour infusion. We recently submitted an amendment to the CLL study to convert that study to a two-hour infusion and one of the possibilities, and obviously none of us know what will happen in the future, but one of the possibilities is that, as we make that conversion in the CLL study, we will now be achieving the exposure levels, which if this drug is going to be active as a single agent in that population, we would expect to have the exposure levels necessary to see that.

So I think that we can't really do anything more retrospectively, but forward-looking, we are all quite interested to see with the two-hour infusion what we observe in the CLL study.

Yes, Alan makes a really important point here both specifically in the context of his answer to your question, but also more generally. I mean we have to recognize here that we are defining for the first time telomerase biology in man and all of the animal modeling and all of the in vitro work done by us and others to date, which is of course guiding what we are doing, is really only an approximation of the reality that we are seeing in human beings.

So the PK modeling of this drug with and without the context of the PD correlation is hugely important and has to be done with elegance before we are able rationally to move on to other clinical trial settings. How to use this drug in humans is a complete unknown and that is why the emphasis has been on these two first trials in solid tumor and in CLL, in PK/PD modeling, not in terms of impact on disease progression and I can't overestimate that enough. We have learned an enormous amount of important PK information about how to use this drug that we could not glean from all the monkey studies in the world that we did before the IND was submitted. So that is the value of our being able to define the Phase II dose by year's end because it is based on a lot of very sophisticated modeling that is coming from the primary data on those two trials.

Thanks, guys. It has been very, very helpful.

Mark Monane, Needham & Co.

Good morning. Thank you. A lot of material discussed already, so I will ask a couple of other questions. With regard to the 163L program, it is relatively unusual to have a drug that is being tested or works on solid and liquid tumors. Do you expect that the extent of telomerase inhibition will vary according to the different tumor type across liquid and solid tumors or do you have a sense that the MTD might be different? How you are thinking about learnings from one trial to another?

Yes, Mark, that's a great question and I think that to answer your question specifically, we don't expect there to be a difference in MTD between different patient populations, but your question is a great one in terms of -- that is a safety question. Your question about activity or ultimately we hope efficacy is a great one, which is will there be differences in tumor types in terms of either the exposure level that will be necessary or importantly and I think this may be even more important, the duration of exposure that will be necessary to achieve an effect and there I think we can say qualitatively the answer is probably and I think that that is not any different than virtually any other drug that one might think about in some ways, which is all a matter of distribution properties, as well as access to the tumors themselves.

So for example, we know this drug is highly, highly concentrated in the bone marrow. Therefore, our expectation is that for hematologic malignancies or quite frankly for metastatic disease to the bone marrow, the duration of exposure and maybe even the exposure levels may be lower than would be necessary for a body cavity solid tumor that has all the issues that every chemotherapeutic agent has with delivery and access to the tumor.

I think the other variable to keep in mind here that you are probably thinking of as well, which is already at the tumor level, what is the distribution of telomere length and here, we are really focusing on the idea that we firmly believe in that essentially within a tumor cell, there is a distribution of telomere lengths amongst the chromosomes and what is important is not some mean or average, but the presence of a critically short telomere. And in the presence of a critically short telomere, we think inhibition will tip that cell over into apoptosis or necrosis. And obviously that has to happen at a tumor level and so we know that there is a -- that, in general, virtually all cancers have short telomere length compared to normal cells, but that, in general, there are certain tumor types with on average very short telomeres where we might expect to see more rapid activity and tumor types where the telomere length is, on a relative basis, greater than the extremely short telomeres where it may take a longer duration of exposure for the drug to have an effect.

So I realize that is a slightly long-winded answer to your question, but I think what it essentially says is what we have been saying and believe, which is this is a target telomerase, which is almost universally found in cancers. The quantification of that may differ amongst cancers and therefore, it wouldn't surprise us to see that it may require different durations of exposure for the drug to have an effect in a given tumor type.

All that is true and just one added variable and that is the stem cell story. So we don't yet know whether the exposure level or duration of the drug for the stem cell compartment is the same or different for the mature cancer cell compartment. And that is going to be very important as we move down the combination studies route where you are using the non-163 drug as a debulker and the 163 drug as a possible mechanism for a cure affecting relapse kinetics. So that is another variable that we have to work through in the coming year.

That was helpful. And speaking of the stem cell program, in terms of the activity that Alan outlined in looking for activity, given that the protocol no doubt in clinical patients will not be traditional where you give the drug X and you get result Y, what kind of lag time or what kind of clinical trial design would you have two assess the outcome, which may take a while as the stem cells need to mature and get integrated into the body cavity?

You are speaking of the myeloma trial?

No, no. I'm sorry. I am moving on to the embryonic stem cells.

I'm sorry. I didn't get your question.

Okay. So the embryonic stem cell trial, in looking at spinal cord patients versus -- in comparison to other trials where we give drug X and we get outcome Y in a relatively short period of time, here, you have the added complexity where you need some time for the cells to almost like mature, differentiate in the given compartment before they can even be expected to look for a therapeutic effect. How should we think about -- how are you thinking about that?

Well, your thinking and ours I think should be guided by the kinetics of engraftment and responsiveness that we see in the animal models. So in the case of spinal cord injury, it is a very reproducible blow that we give to these animals and there certainly is some spontaneous recovery without any intervention, but a greater degree of sustained recovery when we give the cells. And those differences are apparent to a blinded observer, blinded to the treatment, within weeks of injecting the cells and that correlates with the histology when we sacrifice the animals in that period of time when the cells are, as you correctly say, terminally differentiating, dividing and in this case remyelinating.

So the clinical or physiological impact does not take months to materialize. It takes weeks and a small number of weeks and the clinical observations correlate completely with the kinetics of maturation of the cells that we inject and that is equally true for the spinal cord injury model as it is for the heart failure model post infarction. So we think that the kinetics of response are -- you are right. They are not going to be manifest in the six hours after injection, but it is not in the take months for those cells to do their thing because of the way they are primed to rapidly terminally differentiate after thawing and injection.

So the clinical protocol in spinal cord injury is designed to apply over the first six months of post injection, very standard instruments of sensation and locomotion that we would expect to show impact in a period of a few weeks to a month or two.

That was helpful. And then the last question -- thanks for going over that, Tom. The last question was on the AML program. Given the fact that it is going after a blood cancer, these results may be available sooner than going after a solid tumor for example. Are there any measures that you are going to look at in the near term for efficacy that you might be able to see in this Phase I/II or Phase II trial in AML?

Yes, there certainly are. I will just remind you that in the study, coming into this study, these patients will be in complete remission. Although they may have evidence of minimum residual disease. And so clearly, recurrence of disease is something that we will be following and they will be relying on in this single arm study essentially comparisons to historical controls.

Having said that, I think that we fully expect that some of these patients will have, for example, abnormal circulating cells, which will be able to assay at baseline and follow over time. Clearing of those would certainly be a very strong signal of activity of the drug, as well as other measures of minimal residual disease, which we will be able to follow over time as well.

So I think that we will certainly get some hints along the way and it will be a data-driven sort of analysis depending on where patients come in at baseline, how much we are able to say about them short of very traditional clinical types of outcomes.

Thank you again for the added information.

[John Richard], Private Investor.

Hi, there. Hello? Hi, a couple of questions. One is I heard talk regarding stem cell therapy in human spinal cord. When are such tests expected to begin?

Well, we have discussed this many, many times, John. So the IND is in final stages of preparation. We are advising folks that the clinical trial would begin sometime between the first and second quarter of next year assuming FDA concurrence with the IND application and approval by each site's institutional review board, scientific review committee and ESCRO committee and the consummation of the financial contract with each of the institutions. Those are the specific gating items.

In terms of that, because I know it was in early '04 that it was stated that it would (inaudible) to have begun in '05, and so I am just wondering what has been holding it up over the last three to four years.

Well, first, you are exaggerating the period of time over which, in your words, held up. The reality of this is that the bar imposed upon us by the FDA is extraordinarily high and that comes from a number of reasons.

First, and uniquely, when the sponsor, in this case Geron, of an IND is the only entity on the planet publishing in peer reviewed literature, the characteristics of the product being submitted, the FDA has no external benchmarks with which to compare our claims to. So that means that the amount of animal data, not only in terms of the number of animals, but the length of time that the animals must be maintained alive carrying these cells becomes extraordinarily difficult and costly and time-consuming.

So for example, we have many hundreds of rats that are spinal cord injured, completely immune compromised who have to carry these cells in their spinal cords for nine to 12 months. That means that people in reverse isolation, because these animals have no immune system, have to manually express the urine of these animals three times a day just to keep them alive. For every animal that we want to survive for nine months, we have to injure and inject three to four because the mortality rate in this animal model is so high. These are not normal animals. They are spinal cord injured and they are immune compromised. So the length of the animal studies, the number of animals in each study is huge and as we have said many times, the size of this application will be precedent-setting for the agency.

In addition to the data supporting the safety of the cells, we have a whole other application that is an IDE that characterizes the utility of the injection device that we had to invent, develop and validate in order to inject these cells safely in the operating room. So this is a combined IND/IDE.

So the simple bottom-line answer to your question is we are functioning in a country that has a federal policy that has been crafted to slow this work down for religious and political reasons and we have suffered through that set of restrictions and it has cost us time. It has cost us money, but it has not cost us precision in demonstrating to ourselves, the agency and our investor community that we know what we are doing here and this application and this clinical trial is going to be groundbreaking in terms of what specifically we are able to do in spinal cord injury and more generally what this platform is going to do for other chronic diseases that cannot be attacked by traditional drugs.

Ladies and gentlemen, this concludes our question-and-answer session and I would like to turn it over to management for closing remarks.

Thank you very much for joining us this morning and have a happy Halloween.

Ladies and gentlemen, this concludes our presentation. Thank you for your participation in today's event and you may now disconnect at any time.