Geron Corp (GERN) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q3 2018 Geron Earnings Conference Call. (Operator Instructions) I would now like to introduce your host for today's conference, Suzanne Messere, Investor Relations. You may begin.

Thank you, Sarah, and good afternoon, everyone. Thank you for joining us for today's conference call. I am joined today by Dr. John Scarlett, Geron's President and Chief Executive Officer; and Olivia Bloom, the company's Chief Financial Officer.

Please find a copy of our third quarter financial press release as well as the press release announcing the upcoming oral presentations at ASH on data from IMbark and part 1 of IMerge on our website under www.geron.com/investors. The abstracts are available on www.hematology.org.

On today's call, management will review financial results from the quarter, highlight recent company events, and then we will open it up for questions. A live webcast of the call is also available on our website and will be archived for 30 days. Before we begin, please note that, except for statements of historical fact, the statements during this conference call and question and answer are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These include, without limitation, statements regarding the expectations, plans, timelines and prospects for imetelstat and Geron, including, without limitation, the timely transition of the entire imetelstat program from Janssen to Geron; the IMbark and IMerge will continue Geron's plans to initiate the Phase III portion of IMerge in mid-2019; the potential for the success of imetelstat; and financial or operating projections or requirements of Geron. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. These risks and uncertainties include, without limitation, whether contingencies delay or prevent the start of a Phase III portion of IMerge by midyear 2019; whether regulatory authorities permit any further development of imetelstat on a timely basis or at all; whether efficacy and safety result cause the benefit risk profile of imetelstat to become unacceptable; whether any circumstances arise that prevent a timely transition of the imetelstat program from Janssen; and whether Geron can obtain sufficient funding to support further development of imetelstat. Additional information and factors that could cause actual results to differ materially from those in the forward-looking statements are contained in Geron's periodic reports filed with the SEC under the heading Risk Factors, including Geron's quarterly report on Form 10-Q for the quarter ending September 30, 2018. 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 will now turn the call over to Dr. John Scarlett, Geron's President and CEO. Chip?

Thanks, Suzanne. I'd like to welcome everyone to our third quarter conference call. I like to begin by summarizing where Geron stands today. As many of you know, we once again own 100% of imetelstat, which is a first-in-class molecule with a unique mechanism of action as a telomerase inhibitor. It has demonstrated broad clinical activity in 3 separate myeloid hematologic malignancies: essential thrombocytopenia, relapsed/refractory Intermediate-2 in high-risk MF and low-risk MF. As we announced this morning, abstracts reporting results from Phase II studies in 2 of these indications, relapsed/refractory MF and lower risk MDS, have been accepted for oral presentations. This underscores the potential for imetelstat to address the unmet medical need in these indications.

As a company, we're in the process of transitioning into a late-stage clinical development. We are expanding our development staff and plan to start screening and enrollment for our Phase III clinical trial in lower risk MDS by midyear 2019. In parallel with the start-up of that trial, we'll also explore the potential future development of imetelstat in relapsed/refractory MF with both key opinion leaders and regulatory authorities and use the feedback from those discussions to make a decision whether to proceed to Phase III in this patient population. And as a result of our fundraising efforts earlier this year, we're in a strong cash position with approximately $185 million in the bank as of the end of the third quarter. We believe Geron has a bright future, and we're very excited to be moving to this next development chapter for the company.

On the call today, Olivia will review our third quarter financial results, including our balance sheet and how that positions us to support further development of imetelstat. Next, I'll highlight some important observations in the data from the ASH abstracts that we published this -- that were published this morning. These observations provide further evidence into imetelstat's broad clinical activity and how its unique mechanism of action could enhance its potential benefit for the treatment of hematologic myeloid malignancies, especially in difficult-to-treat patients. Then I'll review the potential market for lower risk MDS and our plans for a Phase III clinical trial in this indication. I'll finish with an update on the status of the imetelstat program transition back to Geron.

So now I'd like to turn the call over to Olivia, our CFO, who will provide details about our third quarter financial results and expectations around future development cost. Olivia?

Thank you, Chip, and good afternoon, everyone. For the third quarter of 2018, we reported a net loss of $5.6 million or $0.03 per share compared to $6.9 million or $0.04 per share for the comparable 2017 period. For the first 9 months of 2018, we reported a net loss of $19.7 million or $0.11 per share compared to $20.5 million or $0.13 per share for the comparable 2017 period.

Revenues for the 3 and 9 months ended September 30, 2018, were $165,000 and $691,000, respectively, compared to $163,000 and $874,000 for the comparable 2017 period. Revenues in 2018 and 2017 included royalty and license fees under various non-imetelstat license agreements. We adopted the new revenue recognition accounting standard as of January 1, 2018, using the modified retrospective transition method. As a result, 2018 revenues are reported under the new accounting standard, but prior period amounts have not been adjusted and continue to be reported under accounting standards used historically. Therefore, there is a lack of comparability between the 2018 and 2017 revenue amounts being presented. As a result, the decrease in revenues for the 9 months ended September 30, 2018, compared to the same period in 2017 reflects not only a reduction in the number of active non-imetelstat license agreements but also change in the method of accounting. However, we do not expect the adoption of the new revenue recognition accounting standard to have a material impact to our financial statements on an ongoing basis.

Total operating expenses for the 3 and 9 months ended September 30, 2018, were $7 million and $22.2 million, respectively, compared to $7.4 million and $22.3 million for the comparable 2017 period. Research and development expenses for the 3 and 9 months ended September 30, 2018, were $2.7 million and $8.4 million, respectively, compared to $2.6 million and $8.5 million for the comparable 2017 period. The changes in research and development expenses for the 3 and 9 months ended September 30, 2018, compared to the same period in 2017 primarily reflect the net results of higher personnel-related expenses, partially offset by lower cost for our 50% share of clinical development expenses under the former imetelstat collaboration with Janssen. We expect research and development expenses to increase in the future as our share of imetelstat development costs increases from the previous 50% shared with Janssen to being 100% responsible for all costs as of the termination date of the collaboration agreement. In addition, we expect research and development cost to increase as we add personnel, consultants and a global contract research organization to support the ongoing clinical trials and future development plans for imetelstat. Costs related to program transition activities are being borne by each company.

General and administrative expenses for the 3 and 9 months ended September 30, 2018, were $4.3 million and $13.8 million, respectively, compared to $4.8 million and $13.8 million for the comparable 2017 period. The decrease in general and administrative expenses for the 3 months ended September 30, 2018, compared to the same period in 2017 primarily reflects the net results of reduced personnel-related expenses, including lower stock-based compensation expense, partially offset by higher consulting expenses. We expect general and administrative expenses to increase in the future with the elimination of the 50% cost-sharing with Janssen as of the termination date of the collaboration agreement for imetelstat patent prosecution expenses and as we add additional personnel to support the expansion of our internal research and development function.

Interest and other income for the 3 and 9 months ended September 30, 2018, was $1.1 million and $2.2 million, respectively, compared to $363,000 and $1 million for the comparable 2017 period. The increase in interest and other income for the 3 and 9 months ended September 30, 2018, compared to the same period in 2017, primarily reflects higher yield on our increased marketable securities portfolio. We ended the third quarter with $184.8 million in cash, cash equivalents, restricted cash and current and noncurrent marketable securities. We estimate, based upon current modeling assumption, that the cost to run part 2 or the Phase III portion of IMerge will be approximately $50 million. This includes the cost of the trial, including the services of our CRO, and imetelstat drug supply. As the program transition continues and we gain full responsibility for IMerge, we will have a better view of the time line and enrollment expectations for the Phase III portion. As such assumptions were to change, then we would provide an updated estimate for the costs associated with the trial. Although our current financial resources are sufficient to pay for the external costs of the Phase III portion of IMerge, they will not be enough to support the entire company for the next 3.5 years, which is when the readout is expected to occur for the Phase III portion of IMerge. In addition, we expect supplemental financial resources will be needed if we pursue additional indications until late-stage development, including relapsed/refractory MF.

And with that, I will turn the discussion back to Chip.

Thanks, Olivia. This morning, we announced the date and time through the upcoming imetelstat presentation at ASH, and a press release is available on our website. In compliance with the embargo policies of ASH, we've limited our comments on this call to the data and information contained within the abstracts. More mature data from both trials is planned to be included in the oral presentation at ASH.

Within these parameters, I'd like to first highlight some observations about overall survival from the IMbark abstract, which encouraged us to explore the potential future development of imetelstat in this relapsed/refractory MF population. As a reminder, IMbark is a Phase II trial of 2 starting doses of imetelstat treatment in patients with Intermediate-2 or high-risk MF. All of them were relapsed and/or refractory to a JAK inhibitor. IMbark is the only study that's reported survival data for MF patient who met rigorous subjective criteria for being considered relapsed to refractory JAK inhibitors. We consider this important because this patient population has no approved therapies, and current unapproved salvage therapies are not very effective. For MF patients treated with ruxolitinib, the 5-year discontinuation rate is 75% as reported from the long-term follow-up from the COMFORT-I and II studies. The extension phase of IMbark is ongoing to allow the long-term treatment and follow-up of patients. Data collection during this phase consists of series adverse events and survival status. We expect updated data from longer-term follow-up to patients in the extension phase of IMbark to be presented at ASH, including an update on median overall survival.

The data in the ASH abstract were taken from a primary analysis that was initiated by Janssen in the second quarter of 2018. Since we already discussed the final data from the primary endpoint to spleen and symptoms on our last call, I won't take the time today to review those again.

Also discussed in our last conference call, we reported median overall survival, or OS, in the 9.4 milligram per kilogram dosing arm had not yet been reached after a median follow-up of 22.6 months. Now that the ASH abstract has been published, we can discuss other details from the primary analysis, which are included in the abstract.

So a total of 107 patients were enrolled in IMbark, 48 on the 4.7 milligram per kilogram dosing arm and 59 in the 9.4 milligram per kilogram dosing arm. In addition, the median time line of JAK inhibitor prior to imetelstat treatment is 23 months.

The safety profile for imetelstat was consistent with prior clinical trials of imetelstat in key malignancies, and no new safety signals were identified. At the time of the data cut for the ASH abstract, patients in IMbark had been followed for a median of 22.6 months. In the 4.7 dosing arm, the 18-month survival rate was 63% and the median OS was 19.9%. For the 9.4 milligram per kilogram dosing arm, the 18-month survival rate was 77%. And as reported previously, the median OS had not been reached. These OS data indicate a key differentiator for imetelstat. Based on analysis of third-party claims, databases and results reported in 3 independent single-center studies, after failure of or discontinuation of ruxolitinib, the median survival has been shown to be 7 to 16 months. Thus, imetelstat potentially could address a significant unmet medical need if the 9.4 milligram per kilogram dosing arm demonstrate survival that's meaningfully longer.

There were 3 additional observations included in the ASH abstract that we believe that are common. First, in a separate sensitivity analysis of a 9.4 milligram per kilogram arm, the median OS had still not been reached when patients who were subsequently treated with either a JAK inhibitor or alginate stem cell transplantation were excluded from that analysis. This indicates that the improvement in OS for the 9.4 milligram per kilogram arm does not appear to be due to post-imetelstat interventions with JAK inhibitors or stem cell transplants.

The second important observation relates to patients with triple negative MF. These patients comprise 25% of the patients enrolled in IMbark. Triple negative means that these patients do not have a classical JAK2 MPL or CALR mutation that is usually associated with MF. Triple negative patients have poor overall survival in an increased risk of leukemic transformation and do not respond well to existing therapies. In the abstract, the median OS to the triple negative patients of the 9.4 milligram per kilogram dosing arm had not been reached as of the data cutoff while the nontriple negative patients had a median OS of 23.6 months. Thus, imetelstat appears to have activity in the patient population that's particularly difficult to treat using current available therapy. The precise reason for this benefit of imetelstat is unknown, but we hypothesize that because imetelstat is designed to target proliferation of malignant progenitor cell clones regardless of a specific molecular mutation that's driving that proliferation, it may also have such an effect on any highly proliferative clones that are driving abnormal hematopoiesis through unknown mechanisms or drivers or unknown mutations. We expect additional data from the extension phase of IMbark, including median OS for the entire 9.4 milligram per kilogram dosing arm as well as the triple negative population to be presented at ASH.

The third observation was that there were a significant number of patients, 67%, who were considered high molecular risk. Meaning, patients have the presence of at least 1 mutation in high molecular risk genes, such as ASX01 (sic) [ASXL1], EZH2, IDH1/2 and SRSF2. According to the academic literature, these genes have been associated with the inferior prognosis, which further illustrate how ill this patient population was. We believe the activity of imetelstat in such high molecular risk patients is possibly due to its unique mechanism of action and certainly worthy of further evaluation.

Overall, the data from IMbark encourages us to explore the potential of imetelstat in this relapsed/refractory population. As such, we plan to initiate discussions regarding the results for the IMbark trial, including this assessment of overall survival as it compares to historical data, with experts in MF. We also plan to engage regulatory authorities to understand their expectations of what would be considered meaningful outcomes in a potential Phase III study. We expect these discussions to guide our future planning of imetelstat's clinical and regulatory strategy in relapsed/refractory MF, and we hope to be able to outline the potential path forward to imetelstat in this patient population by the end of the third quarter of 2019.

So let's turn to IMerge. As we've discussed previously, in the original Phase II portion of IMerge, 32 patients were enrolled, of which there were 13 patients who had not yet received prior treatment with either a hypomethylating agent, or HMA, or lenalidomide, and also did not have a del(5q) chromosomal abnormality. The primary endpoint for IMerge is the rate of red blood cell transfusion independence for at least 8 consecutive weeks or the 8-week TI rate. The initial cohort of 13 patients exhibited increased durability and rate of transfusion independence compared to the overall trial population. In order to confirm the benefit risk profile of imetelstat in this target patient population, an expansion cohort of 25 non-del(5q) lenalidomide and HMA-treatment naïve patients was enrolled earlier this year. The results in the ASH abstract represent combined data from both the initial 13-patient cohort and the 25-patient expansion cohort for a total of 38 patients. As reported in the past, the safety profile was consistent with prior clinical trials at imetelstat and heme malignancies and no new safety signals were identified.

So for this combined cohort, single agent imetelstat built in an 8-week TI rate of 37% compared to a range of 17% to 27% for currently available HMAs and lenalidomide. This data supports our rationale for moving to the Phase III portion of IMerge. Also included in the abstract and previously discussed on our last conference call, the baseline median red blood cell transfusion burden was higher for the expansion cohort. It was 8 weeks -- units for 8 weeks compared to the 6 units for the initial cohort. The transfusion burden in both cohorts range from 4 to 14 units, which we believe represents the range of patient transfusion burdens that we would expect to be enrolled in a planned Phase III portion of IMerge. The highlight -- sorry, the abstract highlights that in a combined cohort, similar 8-week TI response rates were observed between ring sideroblasts or RS-positive patients and RS-negative patients. Similarly, 8-week TI response rates were consistent among patients with baseline serum EPO levels less than or greater than 500 units per ml. The clinical activity across RS subtypes and EPO level suggests that imetelstat may be broadly applicable to patients with lower risk MDS.

Next, I'd like to discuss the potential markets for lower risk MDS and why we believe there's an opportunity for imetelstat to be sequenced ahead of both HMAs and lenalidomide. There's a large unmet need in lower risk MDS as current treatment options are inadequate. There's a prevalence of approximately 60,000 MDS patients in the U.S. today. In addition, there's an incidence of approximately 16,000 newly diagnosed patients each year. It's estimated that lower risk MDS currently represents approximately 70% of the total MDS patient population. We've also made a conscious decision to focus on the 85% of the market that is non-del(5q) knowing that lenalidomide is quite effective for those patients that have the del(5q) chromosomal abnormality. So this presents us with an approximate target patient population of 35,000 lower risk non-del(5q) MDS patients and about 10,000 newly diagnosed patients each year. A majority of the 45,000 lower risk non-del(5q) MDS patients become transfusion-dependent by the time they reach second-line treatment, which is when HMAs and lenalidomide are frequently used. We believe the combined results of the initial and expansion cohorts from the Phase II portion of IMerge suggest that imetelstat could offer lower risk MDS patients a much-needed alternative prior to proceeding to HMAs and/or lenalidomide treatment. As I mentioned earlier, in comparison to the 37% 8-week TI rate observed for imetelstat, much lower rates of approximately 17% for azacytidine and HMA or 27% for lenalidomide have been previously reported in a similar lower risk MDS patient population. As such, we expect that targeting a lower risk MDS population who are naïve to lenalidomide and HMAs and who are not del(5q) would potentially sequenced imetelstat ahead of HMAs and lenalidomide in the treatment paradigm.

We believe we have a clear path forward from a clinical and regulatory perspective as we pursue our first potential indication for imetelstat in lower risk MDS. Based on what we know today and according to our current plan, we are targeting first patient screening and enrollment for the Phase III portion of IMerge to begin by midyear 2019. Assuming that enrollment takes a year to complete, and the study runs for another 2 years for sufficient follow-up, we estimate top line results from the Phase III portion of IMerge to be available around mid-2022. From there, we believe preparation and submission of both New Drug Application or an MAA within the European Union would need approximately 6 to 9 months. After that, it would take approximately 12 months to gain an FDA approval and 24 months to gain an EU approval. With these assumptions, the estimated time line for imetelstat's first potential approval is approximately the end of 2023.

In order to begin the Phase III portion of IMerge by midyear 2019, we need to have a number of items fully transferred back to Geron, including sponsorship of the IND and ongoing clinical trials. Our transition plans, which have already begun, also include transferring contractual commitments, patient databases, drug inventory and manufacturing, preclinical information, biometrics and regulatory filings. We expect the transition of the entire imetelstat program to be completed by the end of the third quarter of 2019. We're also working together closely with Janssen to ensure that the treatment and follow-up of all patients currently enrolled in both the IMerge and IMbark studies continue without interruption.

As mentioned on our last call, we've engaged the services of a global CRO, who has the resources and expertise to assume responsibilities to conducting our 2 active global trials as well as conducting future imetelstat clinical trials and is also actively involved in the transition of the imetelstat development program back to Geron. We've also engaged additional subject matter experts in clinical science, biometrics, clinical operations, pharmacovigilance, quality systems, manufacturing and regulatory affairs. In addition, we started the process of hiring a number of senior personnel to restaff our internal drug development group. You may have noticed the key postings on the new Careers section of our website.

In summary, today, Geron has a novel drug with compelling data that supports future development. We're rebuilding our clinical development functions through the services of a CRO and by selectively adding key roles as we transition the imetelstat program back to Geron. And we have the cash and a plan to move imetelstat forward, including commencing enrollment of Phase III portion of IMerge by mid-2019. As a result, we're very encouraged by what the future Geron could create for all stakeholders. I'd also like to thank our long-term shareholders who've been loyal to us since we've been thoughtfully creating potential opportunities to advance imetelstat through the clinical process.

So with that, I'd like to now answer your questions, and so let's turn the call back to our operator.

(Operator Instructions) Our first question comes from the line of George Zavoico with B. Riley FBR.

Chip, abstracts absolutely look very, very interesting. I'm -- my question has to do with myelofibrosis. It seems to me -- and MDS in terms of prioritizing. The data for both look really, really good, I think, and in terms of providing a rationale to move forward into a Phase III. But it sounds like the MF trial is -- it needs a little bit more thought before proceeding. Is that probably due to the resources available? Or is there anything else that's involved in that question?

Yes, it's a good question, George. Thank you. Well, I think, first of all, we actually feel really comfortable with the MDS status, the protocol. We've studied now a fair number of patients, and I think that we're really teed up and pretty much ready to go there. The development path is fairly straightforward, and I think that there aren't too many big questions that remain. So that's getting all of our prioritization right now. The MF is a little bit different because we don't really have predecessor studies from other drugs, et cetera, that have primarily focused on OS. They've always focused, as you know, on SVR and TSS, which are really oriented more towards the JAK inhibitors and their mechanism of action. So I think we want to really be confident before we start into that study that we have a well-described and well-understood path forward. Also, that study could take substantially longer if you're going for OS and certainly could cause a fair amount of money. So I think we really want to cross all the Ts and dot all the Is there before we would decide to move forward.

Okay. And with regard to either trial then, maybe especially for the MF if you go forward with it because it's, like you said, there's a little bit more uncertainty in the design of the protocol ongoing. Are you considering an SPA for either or both?

I think it's a little too early to talk about SPAs. As you know, Special Protocol Assessments often take quite a long time to negotiate. And I don't think we're really quite there yet, so I think we want to talk to both outside experts and also to regulators, and I think we can then decide what specific regulatory strategy we'll adopt.

This concludes our question-and-answer session. I would now like to turn the call back -- excuse me, to Suzanne Messere for any further remarks.

Thanks, Sarah. Thanks for joining the call today. As announced this morning, we plan to host an investor event on December 10. At the event, an investigator from each of the IMbark and IMerge trials will review the oral presentations from ASH. We plan to announce the event details, including how to access via web link, through a press release at the end of November. Thanks, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.