Geron Corp (GERN) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2011 Geron Corporation Earnings Call. My name is Modesta and I will be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions)

I would now like to turn the conference over to your host for today, Mr. David Greenwood, President and Chief Executive Officer.

Good morning and welcome to the Geron second-quarter earnings call. Steve Kelsey, Executive Vice President, head of R&D, and Chief Medical Officer, and Jane Lebkowski, Senior Vice President and Chief Scientific Officer, are with me for the Q&A session.

This is an earnings-related conference call, and we will begin with a summary for the quarter. Our agenda then includes an overview of recent operating highlights at the Company and following that update, we will have a general Q&A session.

First, 2 necessary informational items. In the event 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 statement involves uncertainty, and we refer you to the risk factors detailed in our filings with the SEC.

Secondly, as mentioned, we are currently in listen-only mode. The lines will open for the Q&A and the call will be available for webcast replay on our website until the end of August.

Financial results. License fee and royalty revenues were lower in the second quarter than the comparable 3-month 2010 period, due only to timing of receipt of royalty payments. For the 6-month year-to-date period, license fee and royalty revenues of $2 million are comparable to the 2 '10 period. Other cash inflows to the Company during the quarter included $287,000 of interest income.

The increase in R&D expense for the second quarter and the 6-month year-to-date period compared to the 2010 periods is a result of higher drug product purchases and increased clinical trial expenses related to initiation and enrollment of the 4 oncology Phase II clinical trials of Imetelstat and the Phase I clinical trial with OPC1 in patients with spinal cord injury.

The Company expects R&D expenses to increase in the future, with the continued enrollment with the Phase II Imetelstat trials, and the initiation of Phase II clinical trials with GRN1005 in patients with brain metastases.

The G & A line item increased for the second quarter and the 6-month period compared to the 2010 period, which reflects non-cash, stock-based compensation expense.

The Company ends the quarter with $192 million cash on the balance sheet. This number does not include the $25 million funding announced in May from the California Institute for Regenerative Medicine to support clinical development of OPC1 in spinal cord injury. The CIRM funding is structured as a non-recourse product back loan, which means repayment is subject to a successful product on the market.

I would like to remind everyone that we have no other debt, no lease obligations and no off-balance sheet liabilities.

Our use of balance sheet cash in 2 '11 will be driven by the funding of the clinical trials with OPC1, Imetelstat and GRN1005.

Our marketable securities investment portfolio is clean of any troubled instruments, and there were no issues raised by our auditors during the second-quarter review.

I would now like to turn to the Company highlights for the second quarter, focusing on our clinical programs. The Phase II clinical program for Imetelstat includes 2 larger randomized clinical trials in non-small-cell lung cancer and breast cancer that were initiated in 2010, and 2 smaller single-arm Phase II studies in multiple myeloma essential thrombocythemia initiated in the fist quarter of this year.

We are pleased that the enrollment in the 2 randomized trials in lung and breast is currently ahead of projections. Our goal is to enroll these clinical trials to enable reporting of patient data in 2012.

I would like to highlight an important session at this year's ASCO meeting in June. The joint ASCO/AACR session this year was titled Telomeres and Telomerase in Cancer, and highlighted the importance as Telomerase as a target for developing novel cancer therapies. The session included a presentation by Liz Blackburn, who was joint winner of the 2009 Nobel Prize for her discoveries in the field of telomere biology and telomerase, and early academic collaborator of Geron.

Our drug Imetelstat, the only telomerase inhibitor in clinical trials, was featured during the special session in the presentation by Kathy Miller at the Indiana University Melvin and Bren Simon Cancer Center. Kathy was a lead investigator in our Phase I program with Imetelstat, and is now lead investor of our ongoing Phase II study in patients with breast cancer. She is also conducting an investigator/sponsor trial with Imetelstat in her 2 positive breast cancer patients that is complementary to our Phase II trial, which is in her 2 negative patients.

The interest in telomerase and Imetelstat by oncologists is reflected in the enrollment numbers and the complementary investigator/sponsor trials. I mentioned the breast cancer study, but as of today, there is also an ongoing study in pediatric solid tumors and leukemias and a planned study in glioblastoma.

I would now like to update you on our plans to initiate clinical trials of GRN1005, the compound that we in-licensed in December last year. 1005 is a novel peptide-drug conjugate that uses proprietary receptor targeting peptide technology to transport a chemotherap agent, in this case paclitaxel, across the blood-brain barrier.

Based on compelling results from 2 completed Phase I clinical trials in 119 patients presented at ASCO, we believe the compound will deliver drug to tumors in the brain including primary tumors and cancers that have metastacizes to the brain at therapeutic concentrations.

We are planning for our 1005 Phase II program to initiate in the fourth quarter in patients with brain metastases from lung and breast. We have been working closely with clinical experts in the field to develop protocols for the clinical trials, as well as to recruit investigators to participate in the trial.

We are pleased at the positive response. This highlights the unmet medical need that we are addressing with GRN1005. Nearly 300,000 patients each year in the US have cancers that metastasize to the brain, and the vast majority of these are lung and breast cancer metastases.

We're also pleased with the progress by our product development and manufacturing team scaling up the manufacturing process for the drug. The manufacture of 1005 includes 4 steps -- the manufacture of the peptide, sourcing the paclitaxel, conjugating the paclitaxel molecules to the peptide, and finally formulating and packaging, or fill-finish of the drug product. Each step involves a different vendor or contract manufacturer.

I would like to provide an update on GRNOPC1, our oligodendro-site progenitor, self-therapy in the clinic for spinal cord injury. As I mentioned in May, we announced the award to Geron of $25 million by the California Institute for Regenerative Medicine to support the clinical development of OPC1 in spinal cord injury. CIRM funding will support direct clinical trial costs, the manufacture of OPC1 sell product, non-clinical studies that support expansion to the next clinical patient cohort, and analytical assay development.

This funding to Geron is the first-ever awarded by CIRM to support clinical trial testing of stem cell derived therapy since the bond issue was approved by California voters.

In June, at 2 medical conferences, the 2011 International Conference on Spinal Cord Medicine and Rehabilitation, and the 2011 Spine Symposium, we presented data from the first 2 patients to receive GRNOPC1. At the time of the presentations, the 2 patients in the trial had reached a 7 (technical difficulty) and day 180 follow-up assessments and with no serious adverse events. There were no safety concerns regarding the OPC1 product or the injection procedure.

Today, we are pleased to announce that there have not been any assays through the 270-day follow-up on the first patient and the day 60 follow-up on the second patient. This is a very good safety profile.

We announced in June that based on the safety data from the first 2 patients to receive OPC1, we were successful in a discussion with FDA in relaxing certain eligibility criteria for patient enrollment in the trial. We have expanded the criteria to allow patients with injuries at a neurological level of t11 to enter the study, which is in addition to injuries between t3 and t10. We have also been allowed by FDA to reduce the stagger period between patients.

In the second quarter, we opened the final clinical sites. All 7 sites are now open for enrollment, which gives us a wide catchment area of trauma centers for patient referral. Today we have enrolled 2 patients in this trial. The clinical sites are actively screening patients. Pre-screening and screening volumes have increased with the additional sites opening, and we expect this result to increase enrollment in the trial.

We are focused on enrolling this first cohort of patients with complete injuries to the thoracic region of the spinal cord. This first cohort of patients will provide the safety data that we will present to FDA to enable expansion of the trial and progression to the subsequent patient cohorts. As we have described previously, these cohorts include cervical patients and patients with less severe or incomplete injuries. Patients with cervical or incomplete injuries are a much larger portion of the patient population.

Our purpose in this Phase I trial is to demonstrate safety. Each patient, however, will be evaluated by attending neurologists using accepted examinations, including the Spinal Cord Independence Measure, the International Standards for Neuroclassification of Spinal Cord Injury, the University of Alabama Index of Motor Recovery, the International Spinal Cord Injury Pain Basic Data Set, the International Spinal Cord Injury Bowel and Bladder Data Set, all standard tools used in the field.

The data from each cohort as we progress the studies will be analyzed against historical controls by both treating and independent physicians, and reported by the Company and our principal investigators.

Before we start the Q&A, I would like to just let you know that in September we will be presenting at investor conferences in New York and Boston -- Stifel Nicolas, Rodman Renshaw and UBS. We look forward to seeing you there. Your questions, please.

(Operator Instructions)

Your first question today comes to the line of Brian Klein with Lazard Capital Markets. Please proceed.

Great. Thanks for taking my questions. In terms of your planned Phase II trial for GRN1005, can you give us a little bit more color on how many patients you plan to enroll? If it's going to be split evenly between the breast metastases and the lung metastases, and any other details you can provide?

Brian this is Steve Kelsey. It will be split evenly between 3 cohorts, but 2 of them are breast cancer cohorts. So there will be approximately 50 patients in each cohort; so 50 patients who have brain metastases from non-small cell lung cancer, 50 patients who have brain metastases from Her-2 negative breast cancer, and then another 50 patients who have brain metastases from her-2 positive breast cancer.

The reason we've had to split the breast cancer cohorts into 2 separate cohorts is because the standard of care is very different. The her-2 positive patients require ongoing her-2 directed therapy with an agent such as trastuzumab, or Herceptin.

With regard to the other details, we can provide -- we actually have been pretty forthcoming in our investor presentations with regards to the specific details of the clinical trial, but I think the most important thing for you to know today is that the primary end-point for both studies will be tumor response. Both tumor response of the metastases inside the brain and the tumor response of any ongoing metastatic disease that is outside the brain, as well.

Great. Thanks. In terms of the Imetelstat program, since you're seeing enrollment projections, which are faster than you previously anticipated, do you still maintain a fourth-quarter 2012 data readout or might it come earlier?

There's always a possibility it might come earlier, irrespective of the rate of enrollment, because the analysis is an event-driven analysis. So what we will do is wait until the requisite number of events have matured, and then we will then plot out the Kaplan-Meire progression free survival curves and make an assessment of efficacy at that point. Right now, we are, I think, reasonably continuing to project that the fourth quarter of next year is when the number of events is going to mature.

Great, thanks. One final question, in terms of my model, I'm just wondering how you guys are going to book the $25 million grant from CIRM. Is that going to lead to a decrease in your R&D spend quarterly, and are you going to amortize that amount?

Well it is cash, and it is a cash match. It's a one-to-one cash match to what we spend. And it's actually funded in advance and there's a subsequent reconciliation.

Okay. Thank you.

Your next question comes from the line of Mark Monane with Needham and Company. Please proceed.

Thank you and good morning from the east. We're waiting for it to be a sunny day, but I don't know if it's going to actually happen, which makes me think of my next question regarding the OPC1 program. 270 days sounds like a very robust level of follow-up. I was wondering what your thoughts were or what you were able to share concerning efficacy. Is it possible that we could see efficacy in these patients at that time period? And is it potentially the goal for OPC1 that it may actually prevent further decline, therefore even the stabilization may be considered a victory for the patient?

Mark, I'll let Jane, who's with us, elaborate, but what we know today is what I mentioned earlier, that we will assess these patients. So if we project today what we will see patient-by-patient, we're guessing. And, as you also know, a sample of one is not the appropriate reporting format. So what we really need to do is collect a cohort and follow the patients for a critical period of time to assess the safety criteria.

This is Jane Lebkowski. I want to just concur with what David has just indicated. Again, a sample size of 1 is really too early to tell and make any judgments with regards to efficacy or not. From our animal models, basically, we can see some efficacy. It time points that are approximately, 2 to 3 months after injection, but these improvements continue out for a long period of time. So I think it's really too early to say anything really about efficacy at this moment.

Mark, as you know, the whole trial includes a progression through cohorts from thoracic completes to cervicals to incompletes, as well as dose escalation, which in this case is literally cell volumes administered to patients. By the time we have completed that progression, we will have treated a number of patients, perhaps 40 or 50 patients. By then, I do believe we'll have a data set from which we can conclude efficacy end points.

I think one other thing to remember is that, the degree of injuries here, we're talking with individuals with complete spinal cord injuries. Basically, our animal models to date, we're using animals that had incomplete injuries. So in this particular case, I think we have to look at all of the particular cohorts before we can make any real assessment of efficacy.

That was very good, deep background. In my reading, I found that T11 and T12 actually were the most common thoracic injuries. Also, I saw C4 and C5 for cervical injuries. Did I get that right? And therefore, is the plan to ask the FDA to move into these areas sooner rather than later?

The answer is yes, we already have permission from the FDA to include patients with T11 injuries. T12, we're getting down to the base of the spinal cord, and there's actually fairly little room to inject under those circumstances, so we don't anticipate at this moment in time going further, coddling the injury to T11. Eventually, we are looking to expand the trial to individuals with cervical injuries.

We're collecting the data sets -- the pre-clinical data sets right now to enable that. Data from this current cohort, the safety established in our current cohort, will help us request and get permission from the agency to move into patients with cervical injuries.

Got it. And with regard to the money spent, could you -- is it fair to ask or would you nicely review for us, how you're spending the monies among the different programs? Does that suggest a priority within the Company?

I'm not sure we've gone to segment reporting or program-by-program reporting, and so let's just -- we have made a clear distinction mark in prioritizing the balance sheet to the clinical programs that we've been discussing for the last 20 minutes. Obviously, that's first call on the balance sheet, and that does mean that we need to ration capital to the research programs. That's a financial management exercise that we all go through in the budgeting process.

Okay. That was helpful. And I thank you very much for that added information. We'll look forward to hearing more about the programs.

Your next question comes from the line of Karen Jay with JPMorgan. Please proceed.

Good morning. Karen Jay for [Craig Azamav]. I just have 2 questions. One, quick confirmation on the Imetelstat accrual rates. Since the last update in June, are they still on that same trajectory to continue enrolling faster than anticipated?

Yes.

And would you consider your projection for accrual on the conservative side?

No.

And then -- I'm sorry, go ahead.

I just think we have generated a lot more interest than we had expected when we made the original enrollment projections.

Okay, great.

In fact, those enrollment projections, with respect to goals in the Company were, if anything, arguably aggressive.

Good to know, thank you. Also, my last question is on -- any updates with potential partnering activities? Is this something we might be able to see this year or next?

Conversation's in progress. As you know, it takes some period of time to progress to a possible transaction. Stay tuned is the answer.

Thank you.

Your next question comes from the line of Steve Brozak with WBB Securities. Please proceed.

Hey, good morning. I'm just basically looking at the newest ruling here on the government funding reaffirmation and saying to myself that you pretty much are, how should I put it, the benchmark for stem cell research. Now, this ruling pretty much gives clear sailing, or the opinion is it gives clear sailing.

One of the things that, obviously, you've been doing in the past is you've been sponsoring a lot of external work. Are you going to expect, in the future, additional collaborations, not just potentially other academics, but potentially other pharmaceutical companies, given the fact that you're now on the verge of providing data? Would that be something we could start to think about into the future in terms of modeling? What are your thoughts on that? You can be as general or as specific as you'd like. Then I have one follow-up after that.

Thanks, Steve. I think there's probably 2 different questions in there. One, the recent judge's ruling, which is a positive, obviously, particularly for academia, because the funding spigot that was opened with the President's executive order, was challenged and was effectively turned off again during the period of litigation. This allows NIH again to support HESC research, which will, obviously, benefit academic researchers and patients and new companies that may enter the field.

As you know, we were not able to rely on federal funding to advance our programs. At the time we were investing in the science and the platforms, the federal funding was unavailable. Given the timing to secure a grant, we must necessarily continue to support our ongoing trial, again, with capital off of our balance sheet, but it's obviously a positive development for the field.

CIRM in California got a jump start because the bond issue was passed some while ago and they were organized. That results in the $25 million award, which is a very substantial funding behind the trial. The academic collaborations that we have supported over the years, in many cases, managed to supplement our funding with local sources of funding for their labs, and that was a help. The research was also quite directed, which means on a critical path for each pre-clinical program that we were working on, and I think that will characterize our academic collaborations going forward. They are very specific, and they are very targeted to our pre-clinical packaging.

Okay. Along those same lines, obviously, you guys started out as a telomerase/telomere type of Company. Obviously, a lot has grown from that with the same prestigious institutions. Given the fact that you've been methodical, as far as going down that route, and that you're starting to see the investigators coming back with data, could we assume the same type of snowballing effect, switching over on the embryonic stem cell side? What would you think about a comparison like that?

Well, I think we have to earn our recognition, and that's what we will do. The first stake in the ground, you're right, was in telomerase and in telomerase for cancer. But you also know there is a flip side to the telomerase coin. Arguably, the Nobel prize was awarded for the potential for telomerase activation in normal cells to address senescent-related conditions and injuries. And we're working on that. As you know, we didn't have time to talk about it this morning, but we have a compound that may be an IND candidate. So we're focused there, as well.

We branched into stem cells more than a dozen years ago for reasons that we're all familiar with and its potential to develop cell therapies, targeted specific therapeutic cells for targeted specific indications. As we demonstrate, pre-clinically with our pre-clinical research and our first cell therapy in the market, yes, I think there will be increase receptivity to the potential of the technology to impact or change medicine, in some cases. But again, we need to demonstrate that.

We touched briefly on the partnering discussions earlier, and partnering discussions that we had with pharmaceutical companies about stem cell therapies 2 and 3 years ago were science-based, and today, there's a larger interest in strategic-level discussions which could possibly result in a collaborative partnering. We shall see.

Finally, the 1005 cancer compound is not targeting telomerase, but leverages the clinical development team that we've built here, or that Steve has assembled at Geron. It's a terrific clinical oncology team. We thought the peptide technology was very interesting, potentially breakthrough, and so we acquired it. That was opportunistic. It requires an allocation of our balance sheet capital, but that's a strategic decision that we thought made a lot of sense, to report Phase II data again in a 2 '12 timeframe.

So that's how we strategize the Company historically, I think it all has promise. Interestingly enough, we'll know a whole lot more for each platform in the next 12 and 18 months.

I look forward to hearing about it. Right now, I would guess you guys are on the crux of basically going out there and being in a position to dictate to large pharma which desperately needs new product, a new generation of product. Would that be a fair statement in closing?

We think what we're working on is very interesting and we're having conversations.

Politically correct. Thank you gentlemen, and ladies.

Your next question comes from the line of Ren Benjamin with Rodman. Please proceed.

Hi, good morning and thanks for taking the questions. Did I hear correctly with the Imetelstat program that both the lung and breast were ahead of projections but does that include multiple myeloma and ET as well, or are those behind projections? Going according to schedule? Can you give us an idea as to what's happening there?

Myeloma program is behind. There have been a number of issues that we've been working through with our single investigational site, which is the Johns Hopkins in Baltimore. Most of those pertain to the shifting patterns of care in multiple myeloma.

The ET program is slightly behind schedule. It is not statistically significantly behind schedule. I think we have a reasonable chance of continuing to a rollout program along the same basic pattern that we had planned to at the beginning of the study. We have just opened up 5 additional sites in Germany to enroll patients into that study. They're really just getting going.

The issues that you talked about just with multiple myeloma. How are you guys trying to handle the shifting landscape?

It's a fair question. Probably the biggest change that -- we knew that patients were going to remain on Revlimid maintenance after their initial induction or after their salvaged therapy. What we were not quite prepared for was the impact of Revlimid maintenance. Probably the most substantive change that we have made is to allow patients to enroll in the study even if they are receiving concomitant Revlimid.

The second, I think, maybe a more substantive change that we have been working with the site to resolve, is the sheer practical problem that one of the important end-points that we're trying to measure, which is actually the number of myeloma stem cells in the marrow, is an assay that requires the bone marrow from the patient to hit the lab within a matter of hours of being taken, otherwise, the assay has been, hitherto, unreliable.

We've been working very hard with Bill Matsuey to extend the window for transfer of the marrow to the site. I think we may be close there. So it may be possible to allow additional sites to participate in this study, even if they are not physically located within the geographic area of Baltimore.

Okay, great. Shifting gears to 1005, clearly you want to move forward in clinical development with the program, but can you tell me, can we envision the program as more of a platform? For example, can it only be conjugated for pacilitaxel? Is it possible to maybe attach Imetelstat to the peptide conjugate?

Yes. That is an excellent question. In fact, let me answer the second part of you question first. Which is -- we believe that it is possible to conjugate Imetelstat to the peptide, to the angiopep 2, and it is also possible to conjugate other telomerase inhibitors or disruptors of telomere to angiopep 2. In fact, the license that we secured from AngioChem, at the end of last year, actually has in it an option to do just that, which we have now exercised. We do have an active, although it's only been active for a few months, but we do have an active research-stage program to do exactly that.

With regards to the broader context, it's clearly possible to conjugate all sorts of warheads to the angiopep family of peptides, but that is something that is being pursued outside of the oncology therapeutic area by AngioChem, which are a small privately-held company in Montreal, and is not within the existing license agreement that was secured by Geron.

Okay. And just one final question on the OPC1. When do you think that we can move to the next cohort? I guess I just need a refresher on how long do you have to follow the patients after the final patient in this first cohort is enrolled? When do you think we can get to a more, maybe therapeutic cellular dose level to then be able to evaluate efficacy and safety better?

Okay. There are 2 parallel activities that are going on at Geron to really enable, again, 2 additional cohorts to be enrolled in the clinical trials. The first activity are pre-clinical studies that are taking place in models of cervical injury. That data, together with data from our first clinical cohort, which we expect to be getting data in by the end of the year, can be used to support the extension of the clinical trial into patients with cervical injury.

In addition, as we complete data from the first clinical trial, we're also going to be looking to the FDA to expand the clinical trial so that we can do dose escalation. Looking at 2 to 3 additional dose escalation cohorts to get to the levels of cells that we expect might have a better chance of seeing efficacy.

Perfect. Thank you very much and thanks for answering my daughter's questions as well. (laughter) Sorry.

Your next question comes from the line of Joe Pantginis with ROTH Capital Partners. Please proceed.

Hi guys, thanks for the updates. Couple questions. If you just focus on the cell therapy programs for a second. At your Analyst Day for cell therapies, one of the things that Geron has discussed is your desire to do what you can to accelerate the various programs. So I was just wondering if you could maybe provide a current-day update with regard to some of your behind-the-scenes BD activities? Then my second question is can you provide an update with how things are going with GE Healthcare?

Sure. So in reverse order, perhaps, GE Healthcare has launched on a number of fronts, on both the product side and the service side. We anticipate that there will be take-up, an enthusiastic take-up of using the cells as drug discovery tools.

The CM1 program, which, as you know, is (inaudible - technical difficulty) for left ventricle repair in a AMI setting or CHS setting, our IC1 program, which is a insulin-secreting, glucose-responsive pancreatic beta pilot cell for Type 1, perhaps Type 2. The CHMD1 program, which is contra sites that we're developing in the UK for cartilage repair, are all very important. And by the way, dendritic cells sourced from ES cells which could well present a platform opportunity, are all important.

As I said earlier, in response to another question, there's an element of balance sheet management here, and prioritization of clinical trials. Frankly, management of balance sheet cash to extend a runway for the Company well past and by that, we mean through 2013 and into 2014. The patient data reporting time lines that we've been discussing. So the reason we would like to talk to potential collaborating partners is to bring additional resources to bear, and progress -- ramp-up and progress, the stem cell therapy programs that I just mentioned.

There's a brute force equation here. The more resourcing that we can add, the more progress we will make. There's a second reason for -- as we've discussed before, for partnering discussions now, and that is to get strategic assistance in the different fields that we've mentioned. We actually built here, as you know, a capability in spinal cord injury, so we can conduct that trial. That's not a realistic expectation for us to do in cardiovascular disease, metabolic disease tissue repair and so on. So a second reason to align ourselves strategically.

So from a timing standpoint, any background on how any potential discussions are going, or is that too granular at this point?

That's obviously premature.

Thanks a lot for the info.

Ladies and gentlemen, that does conclude our Q&A portion of the call. I would now like to turn it back over to Mr. David Greenwood for final remarks.

Again, thank you for joining us on a Friday morning in the summer, and we will see you at 3 investor conferences, hopefully, in September. Thanks very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.