Geron Corp (GERN) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2009 Geron Earnings Conference Call. My name is Angela, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

And now, I would like to turn the presentation over to your host for today's conference, Mr. David Greenwood, Executive Vice President, Chief Financial Officer. Please proceed sir.

Good morning and welcome to the Geron earnings call. I am David Greenwood. With me is Tom Okarma. This is an earnings-related conference call, and we will begin with a summary of operating results for the first quarter. Our agenda then includes an overview of recent operating highlights of the Company, and a summary of our operating plans for the remainder of 2009. Following that presentation by Tom, we will have a general question/answer session.

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

Secondly, all participants are currently in a listen-only mode. The lines will open for the Q&A and this call will be available for webcast replay until May 29. Please go to our website for further information.

Revenues from license fees and royalties were up over the comparable three-month period in 2008, although that is primarily related to timing differences, and the amounts are not material. The revenue number for Q1, 2008, that you see in the condensed P&L attached to the earnings release included a milestone payment.

Other cash inflows to the company during the quarter included $525,000 of interest income, down substantially from the 2008 period, which reflects the difference in yield curves only. Our marketable securities portfolio remains intact, with no write downs or provisions for write downs.

First quarter R&D expenses were essentially flat, period to period, G&A expenses were down. This is not coincidence -- rather the result of conscious cost management and conducting clinical trials and controlling internal costs. We work with all the teams these days to do more with less.

In February, you will recall we completed the stock offering for $46 million in net proceeds. We ended the quarter with just over $200 million cash on the balance sheet. Our gross burn in '09 will be driven primarily by costs of clinical trials, which depends on the number of trials, number of sites, numbers of patients, drugs, materials costs, CRO regulatory costs and the like. Our first quarter expense line is probably a good indicator for the year.

Our net burn will depend on recurring revenues, returns on the portfolio, cash-saving trends, cash-saving transactions, financings, and so on. I would bracket that number at $45 million to $50 million. The company is obviously funded for the near term.

At this point, I will turn it over to Tom Okarma.

Thanks, David. Good morning, everyone, and thank you for dialing in. As you know, there were two material events in the first quarter of this year. We received clearance from the FDA to begin the world's first embryonic stem cell trial in acute spinal cord injury and, following that announcement, we completed a public offering of 7.25 million shares of stock.

The PR campaign at the time of the FDA clearance was extensive. We received extraordinary global coverage of the news, and much of the material information remains on our website at the current time. So, rather than spend time on this call going over what I hope you already know about the background of the trial, I thought I would spend a few moments speaking to the activities that we've been undertaking since we received clearance, to give you sense of progress toward the actual initiation of the trial and enrollment of patients.

So we have brought on three people, CRAs to help us with the blocking and tackling of getting the sites up. We have completed and submitted to the agency our response to the non-hold issues. These are non-material questions the agency had that are sort of to the right and to the left of the main event of the trial. That's all finished. We have sent the clinical packets, which include the clinical protocols, the informed consent forms, investigative brochures, the escrow letters, and so on, to six U.S. sites, which we are managing in parallel.

The case report forms, which are substantial, are nearing completion, and will be sent to the sites shortly. There are a number of other manuals and documents that are now finished or in final draft.

There are two manuals actually for how the cells are prepared at the site, to be ready for injection when the patient enters the O.R. There is a surgeon's manual. There is an instruction for use for the syringe positioning device. There is an overall study manual, and a radiology manual for the MRIs and multiple X-rays that are taken during the course of follow-up. And in addition, there are a number of algorithms that are guidelines for what to do under certain circumstances after cells are injected.

We've completed all of our contractual manufacturing obligations for the syringe positioning device. We have ample devices ready on hand for all of the sites. We're now engaged in a series of training and meetings. We have already completed the first surgeon training practice, which is an exercise where the surgeons use the syringe positioning device on cadaveric material, to sort of wet lab through the procedure of injecting the cells. We've completed the first formal surgeon training exercise on the 27th in Chicago. The prep training, how to bring the cells up, and under the hood, is on-going now. We will have a full investigators' meeting early in May in Atlanta.

So, we are marching along really according to schedule. We now have three IRB approvals and, as I mentioned, most of the paperwork is now completed, including clinical trial agreements. All of the sites are being quite co-operative. We expect that we will initiate them in a rolling fashion. And so, the bottom-line is that we are really on track to initiate the trial, as we've predicted, sometime in the summer. We have finalized a number of CRO contracts. As you can imagine, there is a lot of data that needs to be centrally managed. So, there is an overall study CRO, there is a separate CRO to coordinate the Asia exam training. This is the standardized American Spinal Injury Association physical exam instrument that will be applied by both physicians and physiatrists over the course of the one-year follow-up. There is a third CRO that deals with all the radiology data, and assures uniform interpretation of the MRIs, and other CROs that deal with collecting blood and analyzing labs.

So, a lot of work -- this is a complicated trial, and is obviously an important one for both the field and for the company. So, we are sparing no quarter in order to do this correctly. So with that update, I think we'll now open for Q&A

Thank you, sir. (Operator Instructions). And sir, your first question will come from the line of Mark Monane with Needham & Company. Please proceed sir.

Hi. Thank you. Good morning, David. Good morning, Tom. And thank you for reviewing the information, and congratulations on the progress in starting the clinical trial. I have a question for you regarding the outcomes of the study. Can you go over, please, the understanding of the protocol, and what you think might be the outcomes of the study that might be available sooner rather than later? What kind of time course will you be [valuing] patients?

Well, we are limited to enrolling one patient per month by the FDA. We would hope to be able to lift that limitation after the first few patients are injected assuming we have no untoward consequences. So the initial enrollment rate is fixed at a maximum of one per month by the agency. As you know, the primary outcomes of this study are safety and feasibility. So the bulk of the exercise in collecting data is directed towards safety. Obviously, these are patients with complete thoracic injuries, so the only manifestation of toxicity that is feasible or possible under those circumstances is cephalea towards the head.

So that's where all of the energy is being applied, so in other words, we would not want to see symptoms of allodynia, an increase in neuropathic pain, or altered sensation or locomotion occurring towards the head above the last intact segment. There will be multiple follow up MRIs to look for evidence of filling of the lesions which as you remember is what we see in the animal studies, as an indirect measure of engraftment of the cells, and of their proliferation, and filling in the lesion. Now, despite the fact that all of the physical exams and radiographic and blood work is designed for assessing safety, obviously, the same parameters will be useful for assessing any efficacy, and that's important to emphasize, in terms of our agreed upon calculus of the risk-benefit ratio. These are living cells, which we know are mitotic when they are injected. They will amplify numerically and they migrate up and down from the injection site within the lesion site. Once they see a normal myelin, they stop migrating.

So that means that, even though this is a relatively low dose of cells in terms of our assessment of the required dose, based on allometric scaling from mouse to man, it is quite conceivable that we would see possible return of neurologic function, either sensory or locomotor, bowel or bladder control, in these early subjects. And because of the very rigid entry criteria and exclusion criteria, any such return of function would be very likely due to the cells, as opposed to any sort of spontaneous recovery in these ASIA A complete injury patients. So, again, we are not predicting response. We are hopeful that we see some, and our main objective here is to document safety.

Now, in terms of time frame of release of data, this is going to be a very highly watched exercise. So we are going to be very conservative in the way in which we announced data, and all of it would be analyzed by the Data Safety Monitoring Board, and by the Investigator Committees, before any public announcements are made. So I don't expect it will have much to say before 2010, in terms of numbers of patients, the accrual rates, and any responses or safety concerns that occur.

Now, as you know, the overall plan is to treat up to ten patients in this first leg of the trial, and then, do dose escalation, incomplete thoracics, and then, move to the complete cervicals which, as you recall, are the more common classification of complete injuries, because of automobile air bags. That is still the intended plan, which is why we are going through all of the work to qualify and set up six to seven sites. We obviously don't need that many sites for the first ten patients, but these sites are the premiere neuro-trauma centers in North America, which -- who will be with us for each leg of the trial, as we dose escalate, and move to other sites of injury.

That was very helpful review. Thank you very much. And then, on the GRN163L program, can we expect any data at ASCO, or maybe even on the cancer stem cell vaccine. Is there any update we expect from the cancer programs?

I think the Imetelstat's next major presentation will be at ASH at the end of the year. We are accruing well in all six studies. There has been a very appreciated resurgence of investigator interest, particularly based on our demonstrating, hitting the target, and on all three of our single agent studies, and the fact that we are now dose escalating well beyond the doses in each of those studies, where we saw telomeres in addition. Even in the solid tumor study, we're now up to almost 12 milligrams per kilo, which is really getting to be where we expect to see some activity.

The investigator enthusiasm has also been increased by the last ASH in December presentation, where we demonstrated not only hitting the target in the bulk fraction of the myeloma patients in the single agent study, but also, in the myeloma stem cell fraction in their marrow. That observation presented at ASH has been confirmed in additional patients in the myeloma trial. So we are quite comfortable that it's real and, in that study, we are also looking at doses above that at which we first saw in addition. The investigator enthusiasm, I think, has also been catalyzed by the AACR publication that was just a few weeks ago, where we've now extended the observation of cancerous stem cell activity from myeloma to five other tumor types -- non-small cell lung, prostate, breast, glioma and pancreatic.

So, it does appear that the drug Imetelstat, in addition to having broad activity in the bulk tumor fraction of most human cancers, appears to be a broad, anti-cancer stem cell reagent, and that is the only compound that we know in development with those characteristics. So it's a very exciting time and obviously that kind of data is what led to our ability to retract people like Steve Kelsey from Genentech, and Hassan Movahhed, the two recent additions to the oncology team.

On the vaccine, we are in the midst of a major review. I will probably present an update on that program at the Needham conference, Mark, in June. We continue to see the two patients who are responding, continue to respond, and I will be presenting, in June, more details on the immune responses on the patients, and an update on the queue of subjects that are now in the process of being vaccinated.

Thanks very much for the added information. Congratulations on your progress.

And your next question will come from the line of Steve Brozak with WBB Securities. Please proceed.

Hi. Good morning, gentlemen, and that was a quick round up here. I'd like to go back to the AACR, because obviously, you presented quite a bit. What kind of a tenor did you set there, because you were talking about multiple presentations? What kind of a response, and also I'd like you to, if it's possible compare, what kind response -- Dendreon just came out with their vaccine therapy, and obviously, it's been fairly well- received. How is your vaccine program being received since that informational release by Dendreon?

I'll take the second question first, Steve. The whole field of cancer immunotherapy has really received a shot in the arm from the Dendreon results, and although one could say that adding four months of survival is a meager result, it's still a major step forward for that form of immunotherapy. I remember during my days as a faculty member in Immunology at Stanford, when many of my colleagues didn't believe they were such a thing as a tumor antigen, let alone a modality mediated through the immune system to attack malignant progression. So the field has certainly moved a lot in the past twenty years.

I think, obviously, the Dendreon data is from multiple Phase III studies, so they have a much greater clinical subject experience to call upon. So, it's a little difficult to make direct comparisons between what we're seeing in the current Phase II in AML, and the already completed and published investigator trial on prostate, because the numbers are really quite different. But I think what I would say is that the sophistication of our approach is obviously quite a bit greater than the Dendreon one, and that implies a much more aggressive immune response in the patients that are vaccinated with the Geron approach, compared to the Dendreon one. And, as you know, that's always been a criticism, that the correlation in the Dendreon work between immune response and clinical response have been somewhat weak.

We obviously also have the drawback that Dendreon does, that this is patient-specific and the process that Dendreon uses will be expensive. That is an issue with our current Phase II in AML, but as you know, this is simply to position us for the next part of our Immunology Program, which will be Vac-2, that's based on human embryonic stem cells. And all of the work that we've done on patient-specific dendritic cells, loaded with plasmids, containing the telomerase antigen, will be directly applicable to the Vac-2 platform, which does not have the cost of goods, and complexity of manufacturing drawbacks that our current vaccine, and the Dendreon one have.

In addition, our Vac-2 platform, because we are making these cells from our embryonic stem cell banks -- we have a number of directions that we can take this platform, straight forward into oncology, which is our first order of business, but also, we can go into autoimmune disease, because we can create immature dendritic cells, which are immune tolerance-generating, and that can be done in an antigen-restricted fashion in the same way we are directing the immune response against tumor antigens. And of course, there is the opportunity to use the immature DC for achieving tolerance for some of our later stage therapeutic programs, particularly in cardiology. We also have the opportunity to go after infectious diseases, and HIV is one of the possibilities. So I think that you can look at the Dendreon accomplishment as a spring board for companies like Geron, whose immunologic sophistication is probably a bit higher. And we obviously have solved all of the cost of goods and manufacturing difficulties associated with the patient-specific idiosyncratic vaccine.

So I think it's good news for the field, and good news for us, and I think there will be increased attention paid to our program as it matures.

Your first question on the stem cell story -- I think what's happening in the oncology community is there is a great deal of excitement, generally now, about the cancer stem cell biology. It has been an enigma for many decades as to why one can achieve significant tumor bulk reduction with cytotoxic agents, but still suffer the inevitable cancer recurrence. And now the number of tumor types for which cancer stem cells have been isolated, now each from multiple laboratories, the sophistication in characterizing the cancer stem cell, and the confidence that the cancer stem cell biology phenomenon is real and generalizable, I think, is quite high.

So this was a timely set of publications by our collaborators to show that, in non-small cell lung, breast, pancreatic, prostate and pediatric neural tumors, in each of the cases, the cancer stem cell is highly telomerase-positive. In one or two cases, there is more telomerase activity in the stem cell compartment than there is in the bulk tumor compartment. And in every case, Imetelstat was extremely effective at eliminating the tumor-initiating capacity of the cancer stem cell fraction from those five kinds of tumor types. So the significance of all of this is, of course, how we develop this drug clinically, and that underscores the bimodality that we are now doing in the clinic with three studies that are single-agent, and three studies that are combination.

We do expect clinical impact of our program to be measured more in progression-free survival and overall survival than in immediate shrinkage of tumors, which you would expect in more of a cytotoxic setting. And clearly, the opportunity for this compound, alone or in combination, buttressed by the AACR data, is to achieve cure, not only eradicating the bulk tumor population, but most fundamentally, eradicating the tumor stem cell compartment, which is chemotherapy-resistant, and is responsible for recurrence. So this is all really fundamental good news for the program, as it exits.

I appreciate the detailed answer, and I look forward to getting more data, I guess, in the conference call. Be well. Thank you.

Thanks, Steve.

Thank you. Gentlemen, your next question will come from the line of Ren Benjamin, with Rodman & Renshaw. Please proceed.

Hi. Good morning, and thanks for taking the question. Just very quickly, could we go into a little bit more detail, Tom, for the six studies that are ongoing with Imetelstat? You mentioned the solid tumors is at 12 mgs per K. Can you give us just a quick run down of the other five studies, and where we're at there?

Yes, I think the simple answer is that all of the six studies continue to dose escalate, and that's the first and important point, because what that means is, A, we are going beyond the dose where we first saw that we hit the target, and second, it means that we have successfully traversed some of the issues that we had to deal with in terms of toxicity of the compound. So, we have progressed from a six-hour infusion to a two- hour infusion, and that was all based on our concerns about the C-Max effect, and clearly, going from six to two hours is important for patient and physician convenience. So, all of the trials, all of the infusions, are now two-hour infusions. We've traversed the thrombocytopenia issue, by changing from weekly infusions, to two weeks on one week off. And, for example, we ran into thrombocytopenia in the solid tumor trials in the weekly infusion regimen at a dose as low as 3.2 mgs per kilo.

Well, by going to two weeks on, one week off, we're now up to nearly 12 mgs per kilo in that same patient population, evidence that the one-week rest has ameliorated the impact of thrombocytopenia.

The most recent issue, now that we are hitting higher doses, has been complement activation. So we've now instituted a pre-infusion, steroid/Benadryl infusion, which we documented completely, prevents the laboratory complement change that we're beginning to see. The program is responding to the issues as they occur successfully. Again, our investigators are very enthusiastic in both the single agent studies, and in the combination. We continue to add sites, and the enrollment kinetics are really improving.

And when we talk about milestones and presentations at ASH, from this program, which of the trials do you think is it most likely that we would get a clinical update?

Myeloma and CLD.

Okay. And then, just switching gears to the cancer vaccine program, very quickly, the Phase II in AML, I think you mentioned that you are going to talk about two patients in June, maybe I misheard it. Can you just comment on how enrollment is going there, and then regarding Vac-2 where are you in terms of development. And clearly, there is quite a few advantages here, but maybe just in terms of when IND could be filed. Could you give us some sense on that?

So there may be a little confusion in your mind, Ren, because the presentation that was last webcast was the Bio CEO conference. And we had to pull that in the wake of the offering, because of the quiet period. So the normal webcasted [tunnel/karma] talks were truncated because of that. But, at both the Bio CEO, and at the Future Leaders conference, earlier this month in New York, the data I presented on the vaccine were long-term follow up of four patients, two of whom had DTH responses at the site of injection, both of whom are enjoying extremely long, complete remissions.

One patient has a CR2 that now exceeds the length of her CR1 by over six months, and that's highly unusual that the CR2 is longer than the preceding CR. The second subject who responded is now in CR1 for over 24 months. That's also unusual because, remember, these are patients at a very high risk of relapse. They are older, they have severe cytogenic abnormalities in their tumor, and they have bad molecular markers. So that's a highly significant result particularly coupled with the fact that they are WT-1 level, which is the PCR assay for tumor recurrence is zero during all of this complete response period.

In contrast, two other patients that actually are as old, but had less severe cytogenetics in molecular markers, who went through the six primary injections, they did not, however, have a DTH response, and they have both relapsed, and their WT-1 levels skyrocketed. So its data is very consistent with what we saw in the prostate cancer trial, that when we generate an immune response to vaccination, that translates, in the case of prostate cancer, into clearing prostate cancer cells from blood, and significant prolongations of PSA doubling time. And, in the AML study, that translates into a durable complete remissions, and in this case, in the remission case in AML, that is an approvable endpoint. So that was the whole strategy, of segueing from prostate cancer to AML, to go to a disease where we would have a quicker clinical readout that was approvable. So that's what is now underway, and we've got about ten patients who are now in primary or boost vaccination, none of them are followed to the length of time of the four that I just mentioned, so we have to hold our breath and see how these patients do over time. We would hope to be able to give a clinical summary of these patients by year's end.

Okay. And then, regarding Vac-2 -- just the status?

So, the issue with Vac-2 is that it's in competition with our cardiomyocyte program, and we are resource-constrained in the number of cell types we can move into the clinic. The advantage of Vac-2, of course, is that we believe we can truncate a lot of the IND-enabling studies, because these cells are active after a radiation, which prevents them from dividing. Therefore, the whole cell prep is impossible to create teratomas, which enables us to avoid that costly 12-month in-life animal study to prove that our preps do not generate teratomas. So I think, we are not yet locked down in the final manufacturing process for Vac-2. We are prioritizing cardiomyocytes over Vac-2, and so, that's where the bulk of our resources are being applied today. I think we will ramp up the pre-clinical activities on Vac-2, once we are clearer about which direction we're taking Vac-2 into the clinic, which will turn on the results of the AML trial.

Okay. And I forgot to ask one other question that the program there, do you -- you are escalating quite nicely and usually, by now, you'd be getting a sense, I guess the question is -- do you have a sense as to whether or not you are near or approaching an MPD? I would have thought off-hand that you'd have reached it by now. Clearly, you are addressing some of the issues that are coming up. Do you have a sense as to how much further you could be dose-escalating, and do you see clinical responses right now?

That's a good question. So the MPD is clearly a moving target, right? I mean, and the MPD probably will vary among different patients' subtypes, which is why we cast our net so broadly. Looking at heavily pre-treated solid tumor patients on one end, to CLV myeloma patients on the middle, and using the combination studies to expose patients at first or second line therapy to our compound. And the profiles of toxicity are going to be widely different amongst those six programs, and that, in fact, is what we are experiencing. I don't expect that we're going to go much higher than 12 to 14 mgs per kilo, in terms of the upper limit of the dose for all of these studies.

What's actually more relevant, and I forgot to mention this in my first answer to your question, is that the next step based on our pre-sophisticated PK/PD modeling is to make one change to the protocol, which we think is highly significant, and that's to go from one intravenous injection per week, two weeks on, one week off to two injections per week, two weeks on, one week off. We have a pretty good data, both from animal, and in vitro, and modeling kinetics, that that will dramatically increase our bang for the buck, if you will. In terms of achieving high level inhibition that is sustained, I mean, that is the molecular objective of the clinical trial. In order to translate inhibiting telomerase into reduction in tumor burden, we need to inhibit the enzyme, we think, by 75% to 85% in a sustained way, and the evidence is quite strong that going from once-a-week to twice-a-week will take us a long way in that direction. So that's what the trial continues to validate, so we're instituting those protocol changes in all three of the single agent studies, as we speak.

We will leave the combination studies where they are, because most of them are at doses a little bit lower than single agents, because those were more recently started, but we may segue to that same regimen in the combination trials later on, depending on how we do with the single agents. So, there's still work to be done there, Ren, and I mean, this is the simple question, but we are very excited by the fact that we have been able to traverse all of the issues that seem problematic earlier, and that we've hit the target, and now, the issue is to optimize hitting that target in a sustained way.

And you may not be able to answer, but I'll ask this anyway. Clinical response-wise, is there any particular indication -- is there something that is looking particularly promising right now, even at these stages?

Well, we won't speak to that until the data are in, they've been vetted by the investigators, and the Data Monitoring Safety Board, so we don't leak out the clinical response stuff until it's all vetted, so I can't answer that.

Okay. And then just one final question you mentioned that there are three IRB approvals with the embryonic stem cell protocol. Can you just, and I think you had mentioned once before that Emory was one of the first sites to be approved. Can you let us know what are the other sites that have been approved by the IRB?

No, we are not going announce any of the sites until we actually enroll the patients there. I mean, this has a high potential for turning into a circus, as you can well imagine, though we are being very conservative, and we're being very rigorous with the sites who, frankly, would also like to announce where they are, and when they are enrolling subjects. We really fear inappropriate attention being applied to this. This is a very rigorous scientific medical exercise, and we are going to conduct it in that manner, and not allow excessive speculation by the press or the media on any of the sites, or for any other subjects. We need to protect patient confidentiality, and to protect the rigor of this trial.

And you mentioned that you were already engaged in meetings and going over the procedures with surgeons and all the other players that are going to be involved. Can you characterize how that has gone? For example, do you think you might have to do multiple meetings where you are going over the procedures, or does it seem like it's fairly easy, and they are getting it, and are excited. Can you just give us some characteristics around that?

It's the latter. I mean, there is a lot to do. There are a lot of issues, but each one of the issues is pretty straight forward. So, the most complex one is training the surgeons on the use of the syringe positioning device. And so, that did have two rounds. First, a practice, and then, a second, more formal exercise, where we had to validate the surgeon's ability to use the device appropriately, in order to qualify them to use it in the clinical trial. That's the most rigorous, I guess, element of all this, and that's gone fine.

Great. Thank you, guys, very much for answering the questions, and good luck.

And ladies and gentlemen, that concludes the allotted time for our question-and-answer session today. I would now like to turn the call back over to management for any closing comments.

Thank you all for joining. Our next public investor forum is May 29, our annual general meeting. All shareholders are welcome. Thanks very much.

And ladies and gentlemen, this now concludes today's presentation. We thank you for your participation. Have a wonderful day.