Geron Corp (GERN) 2012 Q2 法說會逐字稿

Welcome to the Geron Q2 2012 earnings conference call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Dr. Anna Krassowska, Head of Investor Relations. Dr. Krassowska, you may begin.

Thank you. Good morning, and welcome to the Geron second quarter earnings call. With me on the call this morning are Dr. John Scarlett, our Chief Executive Officer; Graham Cooper, Chief Financial Officer, and Olivia Bloom, our Chief Accounting Officer.

Today's call is being webcast live on the Company's website and will be available for replay until August 30. I would like to remind listeners that except for statements of historical facts, the statements in this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These include, without limitations, statements regarding the timelines and plans to Geron's research and product candidates, including anticipated timelines for clinical trial enrollment, results, and data, the therapeutic potential of Geron's product candidates and financial or operational protections or requirements including spending guidance, the sufficiency of Geron's cash resources and statements regarding the potential divestiture of Geron's stem cell business.

These statements involve risks and uncertainties that can cause actual statements to differ materially from those in such forward-looking statements. Information concerning factors that could cause the actual results to differ materially from those in the forward-looking statements is contained in Geron's periodic reports filed with the Securities and Exchange Commission under the heading Risk Factors, including Geron's quarterly report for the quarter ended March 31, 2012.

Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made, and the facts and assumptions underlying the forward-looking statements may change. Except as required by law, Geron disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances.

I'll now hand the call over to Graham Cooper, our CFO to cover the second quarter financial results.

Thank you, Anna. Good morning, everyone. We will begin the call with a summary of the operating results for the quarter and six months ended June 30, 2012. Our agenda then includes an update on our clinical programs from Chip Scarlett. Following that update, we'll be pleased to take your questions.

For the second quarter of 2012, Geron reported a net loss of $18.3 million, or $0.14 per share compared to $21.1 million, or $0.17 per share for the comparable 2011 period. Net loss for the first six months of 2012 was $37.1 million, or $0.29 per share compared to $45.5 million, or $0.37 per share for the first six months of 2011.

Revenues were $130,000 in the second quarter of 2012 compared to $462,000 for the second quarter of 2011. Revenues for the first six months of 2012 were $1.4 million compared to $2.0 million for the comparable 2011 period. Revenues for the second quarter and first six months of 2012 and 2011 included funding from collaboration agreements, as well as royalty and license fee agreements, royalty and license fee revenues under various agreements.

Total operating expenses for the second quarter of 2012 were $18.6 million compared to $21.9 million for the second quarter of 2011. Total operating expenses for the first six months of 2012 were $38.8 million compared to $47.7 million for the comparable 2011 period.

In terms of R&D, R&D expenses for the 2012 second quarter were $12.8 million, which compares to $16.5 million during the same period in 2011. R&D expenses for the first six months of 2012 were $27.9 million compared to $33.3 million for the comparable 2011 period. The decrease in R&D expenditures for the three and six month periods of 2012 compared to the same periods in 2011 reflect reduced personnel-related costs and lower scientific supply expenses resulting from the discontinuation of the stem cell programs, partially offset by increased clinical trial expenses for the enrollment of our Phase 2 clinical trials of imetelstat and GRN1005.

G&A expenses for the 2012 second quarter were $5.8 million compared to $5.3 million for the same period in 2011. G&A expenses for the first six months of 2012 were $10.9 million compared to $14.4 million for the comparable 2011 period. The increase in G&A expenses in the second quarter of 2012 was primarily a result of higher personnel-related expenses and increased legal fees associated with our IP portfolio, partially offset by reduced stock-based compensation expense.

The decrease in G&A expenses for the six months ended June 30, 2012 compared to the same period in 2011 reflected primarily a decline in personnel-related expenses associated with management transition, including non-cash stock-based compensation expense.

In terms of non-cash operating expenses, which primarily included stock-based compensation and expenses for stock issued for services were approximately $2.1 million and $4.4 million for the second quarter and year-to-date 2012 periods, compared to $5.8 million and $15.6 million for the comparable periods in 2011.

Interest and other income for the second quarter of 2012 amounted to $165,000 compared to $287,000 for the comparable 2011 period. Interest and other income for the first six months of 2012 was $341,000 compared to $583,000 for the comparable 2011 period. The decline in interest and other income primarily reflects the decrease in cash and investment balances. The Company has not incurred any impairment charges on its investment portfolio.

We ended the quarter with $122.3 million in cash and investments. We've provided guidance of cash spend of approximately $65 million for 2012 and we continue to support that estimate. Given our balance sheet and our projected spend for 2012, we continue to expect that we will be adequately funded through and beyond the data readouts for all six of our ongoing Phase 2 clinical trials, which are expected to occur between next quarter and mid-2013.

Our projections do not depend on any proceeds gains from the potential divestiture of the stem cell programs, since we do not yet have an outcome of that process.

With that, I would like to now hand the call over to Chip to provide an update on the clinical program.

Thank you, Graham. Good morning, everyone, and thanks to all of you for dialing in to our second quarter earnings call. It's an exciting time for Geron as we get closer to several of our imetelstat Phase 2 data readouts beginning in the fourth quarter of this year. We expect these data readouts will give us important insight into whether inhibiting the [ambivalent] telomerase leads to an important clinical benefit for patients with cancer.

As many of our long-term stockholders know telomerase was first recognized in the mid-1990s as a fundamental molecular target in oncology present in approximately 90% of human tumors and required for the immortalization of tumor cells. Many companies, including Geron, tried and failed to develop effective small molecule inhibitors of telomerase.

So far as we're aware, none of the small molecule candidates resulting from these efforts have sufficient potency or bioavailability to advance into the clinic. Instead Geron continued to pursue a highly innovative approach to drug in telomerase that employed a novel and proprietary nucleic acid chemistry platform and that was used to develop imetelstat, which is a potent and specific first-in-class telomerase inhibitor.

Non-clinical studies have shown that imetelstat leads to the inhibition of tumor growth in the in vitro and in xenografts. In these non-clinical studies, imetelstat also appears to be an effective inhibitor of cancer progenitor cell proliferation, which is believed to be the driver for many tumors progression and relapse.

Imetelstat Phase 1 study has established a dosing schedule that was tolerable, achieved target exposures that were consistent with those required for efficacy in non-cancer -- non-clinical cancer models, and demonstrated the telomerase inhibition occurred at the doses now being used in Phase 2 program.

Based on these and other data, Geron designed a Phase 2 imetelstat program in both solid and hematologic tumors. The tumors chosen to be studied were those for which we had supportive non-clinical data, evidence that the disease was driven by cancer progenitor cell proliferation, and in which imetelstat could be tested either a single agent treatment or in combination with cytotoxic chemotherapy.

Two solid tumors and two liquid or hematologic tumors were selected for this Phase 2 program. The two solid tumors were advanced non-small cell lung cancer and metastatic HER2 negative breast cancer. Lung cancer with non-small cell was the most common type is the leading cause of cancer deaths among both men and women, while breast cancer remains the second most common cause of cancer death among women today.

So, Geron has utilized randomized controlled trial designs in both our Phase 2 solid tumor studies. In our non-small cell lung cancer study, we're evaluating whether imetelstat can extend the duration of response achieved by conventional chemotherapy. In this study, imetelstat is administered as maintenance therapy for patients who have achieved stable disease after treatment with the platinum containing doublet chemotherapeutic regimen. This study was fully enrolled with 116 patients in May and was randomized 2 to 1 in favor of imetelstat.

As we have commented before, the primary objective is an estimate of progression-free survival, or PFS, in patients receiving imetelstat following chemotherapy. Since PFS is event driven, analysis and release of top line data will occur after pre-specified number of progression events have accrued.

Based on the rate at which progression events have accrued, we continued to expect to release the top line data for the non-small cell lung cancer study in the fourth quarter of 2012. The other solid tumor in which we are evaluating the use of imetelstat is metastatic breast cancer. Here too, we have used a randomized controlled design. In this case, we're administering imetelstat in combination with paclitaxel chemotherapy. We believe that using imetelstat in combination with debulking chemotherapy may extend the duration of response and progression-free survival in patients by inhibiting subsequent proliferation of breast cancer progenitor cells. This study in which the imetelstat treatment and control arms are randomized 1 for 1, was fully enrolled with 166 patients by February.

Like the imetelstat non-small cell lung cancer study, the primary objective for this study is an estimate of PFS in patients receiving imetelstat in combination with paclitaxel, meaning again, the top line data will be reported after pre-specified number of progression events have accrued. Based on our latest analysis of the rate at which these events are accruing in the metastatic breast cancer study, we now expect to report top line data in the first quarter of 2013 rather than the fourth quarter of this year, as we previously guided.

In addition to these two solid tumors, we are also studying two hematologic malignancies in our Phase 2 program. Hematologic malignancies are blood cancers and the two being studied in our imetelstat Phase 2 program are essential thrombocythemia or ET and multiple myeloma. These are small mechanistic studies intended to evaluate imetelstat's effect on cancer progenitor cells. Both of these studies are caused by the proliferation of the abnormal cells made by a malignant progenitor cell clone in the bone marrow.

In the case of ET, the malignant progenitor cell clone results in the over production of platelets. Besides having too many platelets and being at risk of thrombotic events such as stroke, the platelets produced are often dysfunctional resulting in a higher potential for bleeding.

In the case of multiple myeloma, the malignant progenitor cell clone in the bone marrow makes too many plasma cells. In both ET and multiple myeloma, as in other hematologic malignancies such as myelofibrosis and myelodysplastic syndrome, to name only two, the malignant precursor cell clones produce too many abnormal cells and/or too much non-cellular material, which accumulates in the bone marrow resulting in interference with the production of normal blood cells.

To date, most available drug therapies for hematologic malignancies do not appear to selectively inhibit the proliferation of the malignant cells in the bone marrow, and therefore, are unlikely to affect the underlying cause of the disease.

Our non-clinical data suggest that telomerase is up regulated in various hematologic malignancies including ET and multiple myeloma. Ex vivo studies have shown that imetelstat exposure to human progenitor cells taken from patients with either ET or multiple myeloma can inhibit proliferation of the malignant clone responsible for these disorders. Our ongoing clinical studies in ET and multiple myeloma are therefore intended to evaluate our central thesis that inhibiting telomerase in hematologic malignancies may demonstrate the drug's ability to selectively inhibit the proliferation of the responsible malignant clone in patients.

So, to evaluate this in our ongoing ET Phase 2 clinical study, not only are we measuring the effect of imetelstat on platelet production, but we're also using a mutation in the JAK2 gene and circulating white blood cells as a biomarker of the malignant clone. The relative amount or allelic burden of the JAK2 mutation is measured in the patient's blood cells before and during treatment with imetelstat. If imetelstat is inhibiting the proliferation on the neoplastic progenitor cell responsible for the disease, we would expect to observe a decrease in the proportion of cells displaying the mutant JAK2 biomarker. Similarly, in the case of multiple myeloma, we are evaluating the effective treatment with imetelstat by measuring the number of myeloma progenitor cells circulating in the blood.

We continue to expect to have sufficient data in the fourth quarter based on the results of these studies to determine whether imetelstat can inhibit the malignant hematopoietic progenitor cells, and thus demonstrate a potential disease modifying effect. If that appears to be the case, we expect to consider further development of imetelstat in one or more hematologic malignancies.

I'm going to switch gears now and provide a brief update on our second clinical stage product candidate GRN1005. As you may recall, 1005 is a novel peptide-drug conjugate designed to treat cancer that has metastasized to the brain. [As been] known for some time, most anti-cancer agents do not pass through the blood-brain barrier making treatment of brain metastases very difficult. 1005 is designed to utilize the LRP-1 molecular transport mechanism to develop paclitaxel, a known effective anti-cancer agent across the blood-brain barrier. As we've reported previously, the Phase 1 data in solid tumor brain metastases for this compound showed encouraging single agent activity.

In the fourth quarter of 2011, we initiated two 1005 clinical trials; one in patients with brain metastases from non-small cell lung cancer known as GRABM-L, and a second trial in patients with brain metastases from breast cancer known as GRABM-B. Both studies are single-arm trials. We are enrolling patients who have progressed after cranial radiation [where human] cranial radiation was not considered appropriate.

In the GRABM-L study, we expect to enroll 50 patients with brain metastases from non-small cell lung cancer. The primary endpoint is overall response rate, which includes both intra-cranial and extra-cranial disease assessment. In the GRABM-B study, we expect to enroll 100 patients with brain metastases from breast cancer; 50 patients with HER2 positive disease and 50 patients with HER2 negative disease. The patients with HER2 positive disease will also be treated with Herceptin. The primary endpoint for the trial is intra-cranial response rate. We expect to report top line data for both GRABM-L and GRABM-B by the end of the second quarter of 2013.

Finally, many of our shareholders are interested to hear about the status of the potential divestiture of our stem cell business. The process we put in place to divest these assets is still ongoing, and therefore, we do not yet have an outcome. As a consequence, we are not able to make further comments regarding the divestiture process on this call.

That concludes my prepared remarks. We'd be happy to take questions now.

Thank you. (Operator Instructions) Karen Jay, JPMorgan.

Hi, good morning. This is KJ in for Cory Kasimov. Thanks for taking our questions. I have a couple. First is probably for Stephen. I was wondering the imetelstat breast cancer trial, the number or percentage of Avastin patients, did you hit the 30% allowed for the trial, or if not, maybe you could give me qualitative description of what percentage that might be?

Good morning, KJ. Steve is not on the call this morning.

Oh, sorry.

No worries, but I'm fortunately able to answer that question. The answer is yes, we did hit the 30%. And so we have 30% -- roughly 30% in each of the two arms.

Okay, great. And then the second question actually for you Chip or Graham. On the [programs and] potential partnership, I understand that it makes sense to wait for the data for partnership to decide whether or not to go forward. But how feasible is it, from a financial standpoint, for you to begin maybe one trial on your own, one pivotal trial? And then, given the proximity of the 1005 data, would you wait for that dataset to decide which drug is your Phase 3 priority, if a partnership hasn't been signed at that point?

KJ, it's Graham. So, I think the answer to that question depends on what indication you're talking about. In particular, solid tumor trials tend to be larger more expensive Phase 3 programs and with current resources, I think it's not realistic to expect that we would launch it on the path of the Phase 3 program without a partner.

On the other hand, hem malignancies, hem programs can be more cost effective, can be run on smaller trials and are within the grasp of a smaller company with more limited resources. So I think at the end of the day, it's going to come down to the data and the decision on whether to pursue solid tumors, hem malignancies or both.

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

Well, yes, so 1005 is a -- brain mets in the salvage space is a smaller population that Phase 3 clinical program required for registration is likely to be smaller than, for example, non-small cell or metastatic breast cancer. And so the expectation is also that we could hold on to 1005 and pursue the 1005 development program all the way through the end as well. So we're going to have to look at the non-small cell data on imetelstat, the metastatic breast cancer data on imetelstat and that will be determinative of partnering strategy on imetelstat.

Okay, helpful then. Thank you.

Does that make sense?

Yes. It does. Thank you.

Chad Messer, Needham & Company.

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

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

Well. Can you share with us what you were expecting sort of based on historical data for the PFS in the [Taxol arm]?

Well, we've generally said that we expected in the control arm PFS of around seven months.

Okay. All right. And then just a quick financial question. Looking at your R&D expense for the quarter, there are layoffs. At the end of last year, there is a nice drop-off to 1Q and another one to 2Q. Where there any left over expenses related to the restructuring in the first quarter, or is the second quarter number more indicative of the run rate through the end of the year?

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

All right, great. Thanks. Thanks so much for taking my questions.

Sure. Thank you.

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

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

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