Geron Corp (GERN) 2010 Q4 法說會逐字稿

Good day and welcome to the fourth quarter 2010 Geron earnings conference call. (Operator Instructions.)I will now turn the presentation over to your host for today's conference, President and Chief Executive Officer, Mr. David Greenwood. Sir, you may proceed.

Thank you. Good morning, and welcome to the earnings call. Hoyoung Huh, Executive Chairman, Steve Kelsey, Executive Vice President and Chief Medical Officer for Oncology, and Jane Lebkowski, Senior Vice President and Chief Science Officer for our Cell Therapy Programs, are also on the line for the Q&A. We will begin with a summary of operating results for the quarter and the year. Our agenda then includes a recap of operating highlights and our goals for 2011. Following that we will have a Q&A session.

First, two necessary 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 Act of 1995. Any forward-looking statements involve uncertainty, and we refer you to the risk factors detailed in our filings with the SEC.

Secondly this call will be available for webcast replay until the end of March. And there are access instructions on our Web site.

Overall results for the Company reflected higher revenues and operating expenses, which includes an expense for the in license of the oncology compound in December. Revenues for the comparable three and 12 months period attributable to royalty and license fee income were higher in 2010 due to funding under the GE Healthcare agreement and a milestone payment. Other cash inflows to the Company included $2 million of interest and other income during the year, and $104 million proceeds from -- net proceeds from financings.

The increase in annual R&D expense reflected higher drug purchases, and the cost of initiating expanded clinical trials for Phase II testing of Imetelstat and the reinitiation of the Phase I trial for OPC1. The G&A line item was up in 2010 due to noncash compensation expense and consulting costs.

We ended the year with $221 million cash on the balance sheet. Our net use of cash for 2010 was $46 million. Our use of cash in 2011 will be significantly higher, driven by the funding of four Phase II trials with our telomerase inhibitor along with the related drug purchases, continuation of our spinal cord injury trial with OPC1, and initiation of a Phase II program for the in license compound GRN1005.

There were no issues with the year-end audit. And our investment portfolio remains free of any troubled securities.

2010 was an important year for Geron. Our goal in 2010 for our telomerase inhibitor drug, Imetelstat, was to launch the Phase II clinical program to demonstrate clinical activity in cancer. The Phase II program includes four clinical trials and four different cancers. Two are large, randomized trials, one in breast and one in non-small cell lung. And two are smaller single-arm studies in myeloma and essential thrombocythemia. We have begun dosing patients in three of the trials, in each of the randomized trials and in the ET study. The fourth trial in multiple myeloma is open to patient enrollment and is screening.

In addition to our own Phase II clinical programs, several investigator-sponsored trials of Imetelstat are planned for 2011 including in Per2-positive breast cans, glioblastoma, and pediatric solid and liquid tumors. Our goal for the Imetelstat program in 2011 is to ramp enrollment of these Phase II clinical trials. This will be key to enablingtimely reporting of the patient results which we are targeting for the fourth quarter of 2012..

During 2010 we presented data on Imetelstat at several major oncology conferences, including clinical data from the Phase I trials at ASCO and EORTC annual meetings. These data support and have informed the design of our Phase II clinical program for Imetelstat. At the AACR annual meeting and at the AACR special conference on the role of telomeres and telomerase in cancer, we presented data from a number of nonclinical studies including presentations on the activity of Imetelstat against cancer stem cells which we have now shown in all nine of nine tumor types tested. And these tumor types span adult, pediatric, solid and liquid cancers.

The 2010 goal for VAC1, our autologous dendritic cell based cancer immunotherapy, also targeting telomerase, and the Phase II trial we conducted in AML was to complete the followup with the patients to assess the impact of vaccination on disease-free survival. We presented those results at ASH in December. The data showed that 12 months post vaccination with VAC1 estimated disease free survival was 81% for patients who were at high risk for relapse. This is nearly double the rate compared to historical controlled data.

We now have sufficient clinical rationale to move our cancer immunotherapy efforts from the autologous setting of VAC1, to VAC2, our allogeneic platform, to derive dendritic cells from human embryonic stem cells. Our goal for 2011 is to finance that program and develop the platform. It is also worth noting that an hESC derived dendritic cell platform could also be used to target other tumor antigens and for non-cancer applications, infection disease, for instance.

In December, we in licensed an interesting clinical stage compound to our oncology product pipeline. This compound, GRN1005, is a novel derivative of paclitaxel that uses proprietary receptor targeting peptide technology across the blood brain barrier for the treatment of tumors in the brain, both primary tumors and cancers that have metastasized to the brain.

The compound has completed two Phase I clinical trials, one in patients with primary brain tumors and another in patients with brain mets, withencouraging preliminary response rates. An interesting characteristic of 1005 is the anti tumor activity observed in the Phase I brain mets trial inside but also outside the brain. And this may enable treatment of cancer metastases in peripheral organs. Currently there are no approved drugs with this property.

Our goal this year for 1005 is to initiate our Phase II clinical trial program in patients with brain mets from lung and breast cancer. We will outline the details of this clinical program once they are finalized.

And as you would presume, we are also exploring the use of the receptor targeting peptide to transport a telomerase inhibitor to the brain.

Turning now to the cell therapy programs, as you are all aware in October we enrolled the first patient in our Phase I clinical trial to assess safety of OPC1 in spinal cord injury. This was a milestone for the Company and the human embryonic stem cell field generally. As of today we have three clinical sites open to patient enrollment. We will be bringing online up to four additional medical centers that will participate in this initial clinical trial and in follow-on cohorts as we expand from complete thoracic to complete cervical patients and to patients assessed as having incomplete injuries.

Our objective for 2011 is to report preliminary results from the current clinical trial in patients with complete thoracic injuries. Our clinical development plan is to progress to a higher-dose cohort in thoracic and to complete the preclinical package to support expansion into patients with complete cervical injuries.

On the research side, as the functional properties of OPC1 were examined in the animal and in vitro studies for spinal cord injury, properties were discovered that we believe may be applicable in other CNS indications. So with academic collaborators we are exploring three indications now, possibly others down the pipe, including multiple sclerosis, Alzheimer's and Canavan disease. We look forward to reporting the progress in those studies.

GRNCM1, our ES derived cardiomyocytes for post MI left ventricle repair, we announced important data showing that the cells do not cause cardiac arrhythmias in a small animal model of chronic heart damage. We have transitioned from small animal studies to a large animal model, a large pig infarct model, to show proof of concept of CM1 in a cardiovascular system of similar size and structure to humans. We will be reporting the data in the near-term.

We've also locked down the manufacturing process for CM1 which is reproducible with high cell yields and is scaled for initial clinical trial requirements.

In the UK, a team of collaborators is working with chondrocytes from the ES platform targeting repair of cartilage damage due to injury or OA. The group has shown that injecting the cells into an injured rat knee produced cartilage that was well integrated and fully repaired the lesion. Now we have transitioned to a large animal model in sheep to assess cartilage repair and function in a model that resembles the human knee. And our goal is to report that data by the end of 2011. And we are also very pleased that this program continues to attract funding from the UK stem cell foundation and other grant agencies in the UK.

Turning finally to our telomerase activator program, in 2010 we reported data using our small molecule compound, GRN510, showing an impact on fibrotic disease progression in a model of idiopathic pulmonary fibrosis. Administering 510 led to increased telomerase activity in the lung tissue, reduced inflammation and preserved functional lung tissue, slowed the disease progression and attenuated loss of pulmonary function. This is an unmet clinical need. Our goal now for 2011 is to complete the preclinical testing of the compound to determine whether or not 510 is an IND candidate.

Finally and importantly we added three new members to our board of directors in 2010, Thomas Hofstaetter, Hoyoung Huh, and Bob Spiegel. Each of these directors brings extensive pharmaceutical industry and medical experience, and we are very pleased that they joined our board.

Key milestones for 2011. The oncology programs are to enroll patients in all of our Phase II clinical trials in Imetelstat to enable fourth quarter 2012 reporting of trial results and to initiate the Phase II clinical program with our end licensed compound 1005 in brain mets.

In our cell therapy programs for OPC1, our objectives are to report the preliminary safety data from the Phase I spinal cord trial, to complete the -- in thoracic completes -- to complete the cervical injury preclinical regulatory package and to continue to explore the therapeutic potential of the cells in other CNS indications.

The 2011 goal for both cardiac and cartilage cell therapy programs is to report data from the proof of concept studies in large animal models. And we will decide by year end whether to take the small molecule activator, GRN510, to an IND.

And with that we welcome your questions.

(Operator Instructions). Our first question is from the line of Mark Monane of Needham & Company.

Good morning and thank you, David, for the comprehensive review. It's raining in New York City. An umbrella is needed. And speaking of umbrellas, I was hoping you could tell us or give us your thoughts, please, on the umbrella of programs under Geron being developed at this time. Are they all equal spokes in the umbrella? Or in your opinion, how would you prior -- is there a priority program or programs that rise above all of the rest?

Yes. They all have to progress on their merits, Mark. And that's reflected in where you have seen emphasis and prioritization of funding of program to program. But the trials, we had to complete a Phase I program with Imetelstat, and we had to do that correctly to adequately inform a Phase II program. And we accomplished that. And we like the design of the Phase II program. And we are going to finance that program. And we believe that will in turn inform us for registration trial. So merit earned and fully resourced.

We in-licensed the compound from AngioChem because we think it has very interesting prospects for the clinic. So again, merit based, and that Phase II program will also be fully resourced.

An example of a priority decision making, if you will, is in VAC1, VAC2. And as you know, the AML study was a small study, about three dozen patients, and we were looking for HPOC. And we may have that from the data out of that study. But we needed the data first before we could make a priority resourcing decision for VAC2. And now in 2011 we will find a way to resource the development of ES-derived dendritic cells as a platform again to support immunotherapies, not just ours targeting telomerase, but for other antigens as well and even non-cancer apps. So that shows again the progression. You have to earn the next step.

On the cell therapy side, much the same. The OPC1 cells proved themselves in our preclinical program and earned their way to the regulatory agency first. The CM1 team has made substantial progress, and that program has been reasonably well resourced in the last couple of years.

We have a much smaller team on the IC1 program. We think we have the therapu -- which is the islet-like cells. And we think we have a therapeutic cell there. But the cell prep hasn't -- doesn't meet our requirements yet. So we continue to work on that. That requires a lesser amount of resources. And so we fund it accordingly.

So on the chondrocyte program, we like that a lot. And it's progressing. We have a terrific PI in the UK. And he doesn't act like an academic scientist if you will excuse that. He acts like an industrial scientist and he pushes the team. And so we will find, in a combination of UK-sourced financing and our own, a way to fully resource that program.

In TA as you know we made a prioritization decision some years ago and financed that program off balance sheet with a JV company on the ground in Hong Kong. We've since repatriated that program, and we will first determine whether or not that compound has life as an IND candidate, and we will -- and then we will find a way to adequately resource that program.

It's case-by-case. It's situation-specific, and it is merit-based. Having said all that, that's a big umbrella. And there are a lot of programs under that umbrella.

So one thing we must -- and the cost of success we are all familiar with. You spend more money. And so we may have $200 million plus in the bank, but we have to manage that available capital very carefully. And we have to think about collaborative relationships which may make sense in -- across the programs and allow us to fully, not just adequately, but fully resource the programs.

There is nothing we want to put on the shelf. There is nothing we want to divest. And certainly nothing that we will abandon. So hopefully that gives you some picture of how we're viewing the whole of the portfolio.

I appreciate that big picture orientation. Quick followup question, OPC1 in spinal cord, any comment on enrollment? And also discussion with regulators to allow you to enroll faster than originally planned?

Yes. I'm not going to help -- I can't help you very much because as you know we're constrained to comment on enrollment. But in my earlier comments I mentioned this progression of cohorts which you're quite familiar with from complete thoracic and the lower-dose volume of cells to a higher-dose volume of cells in complete thoracic. But then moving up to cervical completes, and then hopefully thoracic incomplete, cervical incomplete. So there's a half a dozen cohorts there. What we obviously don't want to do is sequence them all with a stagger between patients and so on. And these are just constraints that we're subject to now. So your intuition is correct. We will take the safety data from this first cohort as we generate it. And we will have conversations with the agency in order to accelerate our progress through these cohorts. I mean, frankly we have to earn our way, right? So we do have to -- there's a reason for this progression of cohorts to safety studies, and we will have to demonstrate safety to step progress from one cohort to the next. But that is a dialogue that we have ongoing with the agency.

Thanks for that information. I'll step back into the queue.

Our next question will come from the line of Joe Pantginis of Roth Capital Partners. You may proceed.

Good morning, David, and thanks for the details also. Maybe just a little followup or color on the VAC2 platform. You did mention about financing the platform but also you certainly alluded to the real broad flexibility of the program. Since this is a non-patient specific platform, do you have the potential then to internally pursue some indications while also looking to out license to other firms either for oncology or non-oncology applications as you mentioned and that could potentially offset the costs of your internal programs? So I'm just wondering if you could add some more color on the flexibility. And then I just have a quick followup.

You're right. It has very broad potential. So it's sort of exciting in that respect and we can't ignore it. I think that we're obliged to at least allocate some resourcing to that program internally to get it going. And that's what we've done. So I don't know that we can adequately resource it internally as a priority in this umbrella of our portfolio as we were discussing a minute ago. And that's a challenge. So I think we'll be looking sooner rather than later to augment what the priority we can give it with an alliance with a partner that also appreciates that very potential broad upside potential.

Okay, great. Thank you. And then just a quick followup on one of your non-core when you look at the royalty revenue, I wanted to get a sense of any details you could provide of what kind of traction GE might be seeing with regard to their cardiomyocyte program.

Yes. Well, it's not just that. As you know, there are other cell types --

Sure.

-- in the queue too, hepatocytes and so on. A number of cell types have utility for --in different assays, for metabolism tox screening. And GE is thorough. That's why we picked them as a partner, right? And they completed the -- they did the soft launch in sort of Q4 and we're coming up to what they call a hard launch, I guess,in the days ahead. And they've been working with a number of pharmaceutical companies on a beta testing basis with the cells. So they want a bit of a data package around the commercial hard launch of these cells. And we support all that. I hope they're right with their sizing of the market opportunity. It's very interesting numbers. And their marketing people -- they have marketing people and we don't. So I will run with their numbers. And if it turns out to be the case and they get the penetration that they hope for, our royalty streams will be material to us. And it won't fund the Company but they'll be noticeable numbers and we'll report them.

Great. Thanks a lot, David.

Our next question will come from the line of Ren Benjamin of Rodman. You may proceed.

Hi. Good morning and thanks for taking the questions. I guess just going back to the spinal cord trial real quick, is it possible, David, for you to give us some sort of color as to -- even though it's an early read, are you learning anything new from the first patient that's been enrolled? Are there any lessons that you've learned that might help with enrollment going forward? Has the patient already been released to go home? Can you give us any sort of color as to how things are progressing?

Ren, I fully appreciate your curiosity. And everyone else is just as anxious to learn what we're finding. I can't tell you anything specific about this patient. That's as you know against the rules. What I can answer one part of your question is, has it caused us to -- have we had surprises that we did not anticipate which causes us to have to rethink the protocol or something of that nature. Absolutely not. So we are screening at the sites. We've added the third site. We think we're about to add the fourth. And we should have as many as all seven of our targeted sites up over the next couple of months. And there is no change to our site setup, plans or the protocol.

Okay. And then just switching gears to data presentations, several -- obviously several scientific meetings are coming up. Any chance that we'll be seeing some data either preclinical or clinical from any of the ongoing programs?

Steve and Jane, I'll let you give a look forward on the scientific conferences.

So I'll just speak briefly to oncology. The Phase I program for Imetelstat is pretty much complete now and all the data has been presented already in the last presentation at the ORTC meeting in Berlin of November of last year. So we don't have any plans to present any additional data from the Phase I program. And it's highly unlikely that we will have anything very tangible from the Phase II program as really it only got going in the second half of last year. We may -- we reserve the right to submit any preliminary and exciting data on our single-agent trials in myeloma or essential thrombocythemia to the December meeting of the American Society for Hematology. But that of course will depend entirely on the flow of data from those studies. We do have a number of collaborators working preclinically with Imetelstat. And we don't keep a regular track of their plans to submit to scientific conferences. So we'll keep an eye on what they plan to generate through the year, although we do anticipate a fairly steady flow of preclinical data coming out of various meetings throughout the year.

So on the stem cell side, this is Jane Lebkowski, we do have some plans for presenting later on in the year. Actually this week, this coming week, we're going to be presenting some updates on our cardiomyocyte program and some data in some of our animal models for the cardiomyocyte work. With regards to the other programs, we're looking at presentations at the American Spinal Injury Association this summer, and also at the American Heart Association meeting and at the IPITA meeting, which is the International Society for Pancreas and Islet Transplantation. And they will be coming up later this year.

Okay great. And then just one final question regarding partnering. Clearly with the changes at the board level it seems that seeking partners and working towards more collaborative efforts is a key focus for Geron. And I think you've talked about that in the past as well, David. Can you just talk to us a little bit about how that's progressing, if it is progressing, and just sort of what the game plan is for Geron regarding partners in 2011?

Yes. So let's frame this appropriately. Two comments, what would we prefer to do and then what is the reality of the market place. What we would prefer to do with the partnering of any program is to find and structure a true collaborative effort. And that's almost a necessary criteria. We're working with novel science and medicine here.

There aren't -- years ago there were pharmaceutical companies screening for telomerase inhibitors but they were looking for small molecules and they've moved on. So there's not a huge repository of knowledge in pharmaceutical companies about telomerase and cancer at least with respect to specific chemistries and specific compounds. So it wouldn't make sense for to us necessarily hand that off in any classic out-licensing which is effectively divestiture of the program pending future results and some royalty stream. We'd rather not do that.

And our overall goal for oncology as we've described in the past, is certainly not to sell off assets. Quite the contrary. We have a terrific clinical team that Steve has assembled, and they are highly capable and our objective is to grow that portfolio. So it will require creativeness on our side, on both in licensing and out licensing or partnering arrangements that we put in place. Clearly the oncology community is fully aware or telomerase as a target for cancer, so there is very definite curiosity and interest and people track what we're doing. So we'll have conversations. But again, we're not going to sell all of the upside in that program because that just wouldn't make sense.

On the cell therapy side, as you can fully appreciate, it would be impossible to hand off those programs to another company. There isn't any other company who can leverage what we know about working with the ES platform and differentiating therapeutic cells, the manufacturing and scale up of those therapeutic cells, our knowledge of the regulatory regime.

On the other hand, our knowledge of human embryonic stem cells and the therapeutic cells that we're differentiating does not make us an expert across a number of CNS diseases or cardiovascular medicine or diabetes. So we would be well advantaged sooner rather than later to align ourselves with people, companies, that have a big stake in the ground in those fields. They can bring their expertise and we will bring our knowledge of the platform. And we'll put that together. Again our objective is to not divest. We will keep our skin in the game and hopefully enhance the funding of the respective programs.

So second issue is the reality of the market place. I can't sit here today and tell you that we're going to close one deal or four deals in 2011, or for that matter 2012. These are all early programs at Geron. There's some pretty -- I think we have some pretty good data that we've generated for early programs in a relative sense. So I think we have stories to tell. And you won't be surprised to know that we have ongoing dialogue with pharmaceutical companies about our different programs, and we do that as a matter of course. So we know that there's clear -- again I'll use the word curiosity. Whether or not that converts to strategic interest and an investment proposition for them, we shall see. It certainly in our view an investment proposition and our job is to articulate that and be persuasive.

Perfect. Congratulations and good luck in 2011.

Thanks.

This concludes the question and answer portion of today's conference. I will turn the call back to Mr. Greenwood for any closing remarks. Sir?

Well, first thank you for joining us. Secondly we have investor conferences about one a month going forward. And two other important dates that please put on your calendar. For two analyst lunches in New York City. One focused on the oncology side of the Company, that is scheduled for March 29. And on the cell therapy side of the Company, that is scheduled for April 19. Please write those dates down. We'd love to see you there for a 90-minute opportunity to drill down. Steve and his team will be there, Jane and her team will be there, and those will be very informative sessions. Thanks again.

Thank you, sir. And thank you for your participation in today's conference. You may now disconnect. Have a great day.