Geron Corp (GERN) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Q4 2014 Geron earnings conference call. My name is Ian, and I'll be your operator for today.

(Operator Instructions)

As a reminder, the call is being recorded for replay purposes. Now, I'd like to turn the call over to Mr. Kevin Eng from Investor Relations. Please go ahead, sir.

Thank you, Ian. Good morning, everyone, and thank you for joining us for the Geron fourth-quarter and year-end 2014 earnings call. With me today are Dr. John Scarlett, our President and Chief Executive Officer; Olivia Bloom, our Executive Vice President - Finance and Chief Financial Officer; and Melissa Behrs, our Executive Vice President - Business Development and Portfolio and Alliance Management.

This afternoon we issued a press release that reports results for the fourth quarter and year ended December 31, 2014. This release can be found on our website at www.Geron.com. Today's call is also being webcast live on our website, and will be available for replay until April 3.

Before we begin, I would like to remind listeners that except for statements of historical fact, the statements during this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These include, without limitation, statements regarding the timelines, prospects, and plans for imetelstat, including clinical study initiation and IND transfers. The therapeutic potential and safety of imetelstat, financial or operating projections or requirements, and Geron's desire to diversify its product portfolio.

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, that imetelstat is safe and efficacious, enabling Geron to receive continuation, milestone, and royalty payments from Janssen. Geron's dependence on Janssen for the development, regulatory approval, manufacture, and commercialization of imetelstat, unanticipated challenges in transferring imetelstat INDs and unanticipated expenses and charges not currently contemplated.

Additional information and factors that could cause actual results to differ materially from those in forward-looking statements are contained in Geron's periodic reports filed with the Securities and Exchange Commission under the heading risk factors, including Exhibit 99.1 of Geron's current report on Form 8-K filed on November 13, 2014. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made, and facts and assumptions underlying those 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.

We will begin today's call with a summary of the fourth quarter and year-end operating results from Olivia, and then Chip will comment on recent events and the impact of our business. Olivia?

Thanks, Kevin. Good afternoon.

Net loss for the fourth quarter of 2014 was $8.9 million or $0.06 per share, compared to $9.3 million or $0.07 per share for the comparable 2013 period. Net loss for 2014 was $35.7 million or $0.23 per share, compared to $38.4 million or $0.30 per share for 2013.

Revenues for the fourth quarter of 2014 were $178,000, compared to $225,000 for the fourth quarter of 2013. Revenues for 2014 were $1.2 million compared to $1.3 million for 2013. Revenues for the fourth quarter and year ended 2014 and 2013 periods reflect royalties and license fees from various agreements.

Total operating expenses for the fourth quarter of 2014 were $9.2 million, compared to $9.5 million for the fourth quarter of 2013. Total operating expenses for 2014 were $37.5 million, compared to $40.2 million for 2013. Operating expenses for the 2013 fourth quarter and 2013 year-to-date periods included restructuring charges of $430,000 and $1.5 million respectively, in connection with the Company's decision to discontinue its discovery research programs and close its research lab facility in 2013.

Research and development expenses for the fourth quarter of 2014 were $4.4 million, compared to $5.1 million for the fourth quarter of 2013. Research and development expenses for 2014 were $20.7 million, compared to $23.2 million for 2013. The decrease in research and development expenses for the fourth quarter and year ending December 31, 2014, compared to the same periods in 2013 primarily reflects the net result of lower clinical trial expenses with the wind-down of the imetelstat trials in solid tumors and GRN 1005 trials in patients with brain mets, and reduced personnel-related and other research costs resulting from previous restructurings, and the discontinuation of the Company's discovery research programs. All partially offset by higher costs for the manufacturing imetelstat drug product.

General and administrative expenses for the fourth quarter of 2014 were $4.8 million, compared to $4 million for the fourth quarter of 2013. General and administrative expenses for 2014 were $16.8 million compared to $15.6 million for 2013.

The increase in general and administrative expenses for the fourth quarter and year ending December 31, 2014 compared to the same periods in 2013, primarily reflect the net result of higher non-cash stock-based compensation expense, increased legal fees for the purported lawsuits filed against the Company, and transaction costs associated with the collaboration agreement with Janssen, all partially offset by transaction costs associated with the closing of the stem cell divestiture transaction in October 2013.

Interest and other income for the fourth quarter of 2014 was $100,000, compared to $115,000 for the fourth quarter of 2013. Interest and other income was $373,000 for 2014, compared to $951,000 for 2013. The decrease in interest and other income for the fourth quarter and year ending December 31, 2014, compared to the same periods in 2013, primarily reflects the net result of the gain on the sale of excess lab equipment, in connection with the closure of the Company's research lab facility in 2013, partially offset by higher interest income, due to increased cash and investment balances with the receipt of $96.8 million in net cash proceeds from the underwritten public offering completed in February 2014.

The Company ended 2014 with $170.6 million in cash and investments, which included receipt of an upfront payment of $35 million from Janssen upon the effectiveness of the collaboration and license agreement with them. This upfront payment has been recorded as deferred revenue, as of December 31, 2014.

For 2015, we are projecting an operating expense burn of approximately $38 million, which is comprised of approximately $17 million for supporting the imetelstat trials under the Janssen collaboration, approximately $16 million in personnel-related costs, and approximately $5 million for corporate costs such as BD, legal, accounting, IT and facilities. Included in the $16 million personnel-related cost figure I just mentioned is approximately $1.5 million in one-time cash payments related to the organizational resizing that was announced this afternoon, and that Chip will discuss shortly.

We expect this resizing will reduce our personnel-related annual burn rate by approximately $5 million. I'll now turn the call over to Chip to review our recent Company events. Chip?

Thanks, Olivia, and good afternoon, everyone. Before I describe our planned business activities in 2015, I would like to comment on our ongoing collaboration with Janssen for imetelstat.

The transition of the operation to the imetelstat program is progressing very well. We've been pleased by the enthusiasm and energy shown by Janssen team, the level of corporate commitment they have shown, as well as the highly collaborative interactions that we've had with them. We're in the process of transferring the operational exclusion of clinical, regulatory, and manufacturing activities for imetelstat to Janssen, and we expect the majority of these transition activities to be completed by mid-2015.

We anticipate that prior to the initiation of initial Phase II MF study, that imetelstat INDs will be transferred to Janssen. At that time, Janssen will also assume sponsorship for the MF pilot study being conducted at Mayo Clinic by Dr. Tefferi. As a reminder, no new patients are being enrolled in this study, and the remaining patients in the study continue to receive imetelstat treatment.

Upon transfer of the sponsorship of the MF pilot study to Janssen, Janssen will assume responsibility for collecting the data and information from the study. We expect Dr. Tefferi will submit an abstract with data from the MDS cohort of patients treated in that study to a medical conference in 2015. Although we anticipate the demands from Janssen on our clinical, regulatory, and manufacturing operating teams will decrease significantly in the second half of the year, we plan to continue to diligently represent Geron's interest on the imetelstat joint development committee and joint steering committee, as well as on several joint working groups, operating under the purview of the joint steering committee.

Through these committees, our responsibilities these include active review and approval of all clinical studies, manufacturing plans and budgets, and leading the filing, prosecution, and maintenance of the imetelstat global patent portfolio. For example, work with Janssen is ongoing on the protocol for the new Phase II MF trial. As we've previously commented, one of the main objectives of this next MF trial will be to identify appropriate imetelstat dosing for MF patients.

In addition, the trial will be conducted in multiple treating centers to broaden the clinical experience with imetelstat in MF patients. We expect Janssen to initiate this trial in mid 2015, and we plan to share more details about the design of this trial, including patient population, study endpoints, and dosing regimens after the study is initiated. Once the MF trial has been launched, work will begin on the Phase II MDS study, which is expected to be initiated by the end of 2015.

Outside of the collaboration with Janssen for imetelstat, we are conducting a business development effort to explore, identify, and perform diligence reviews of potentially promising oncology product candidates, programs, and/or companies, that if acquired or partnered by Geron, may allow the Company to diversify its development portfolio. Melissa Behrs, who is on this call, will head up this BD effort. To leverage our past and ongoing imetelstat experience in this BD effort, we expect to target Phase I or early Phase II clinical stage candidates for hematologic malignancies, although we will remain optimistic with regard to oncology-focused compounds, programs, or companies beyond hematologic malignancies.

Given our projected reduced operational demands, we determined an organizational resizing is appropriate. We expect to reduce our workforce from 39 to 21 positions by the third quarter of 2015. We believe the remaining core group of employees, including the senior management team, have the drug development experience and technical skills to direct and manage the Company. Today, Geron has a strong, motivated, collaborative partner for imetelstat with deep expertise in hematologic malignancies.

We are in a stronger financial position now than a year ago, with approximately $170 million in cash and investments at the end of 2014, and potential cash flows from the Janssen collaboration that reduce our need to raise capital to support the imetelstat program. We believe that conserving our cash resources by right-sizing the Company will help enable us to potentially diversify with another product candidate, to add value for our shareholders.

Before we start the Q&A, I would like to acknowledge the efforts of the employees that will be leaving the Company this year, and thank them for their support of the imetelstat program. Their many contributions have led to imetelstat being a potentially transformative drug for patients with hematologic malignancies. So with that, operator, let's open the call to questions please.

(Operator Instructions)

Chad Messer, Needham & Company.

Great. Thanks for taking my question, Chip and everyone. Could you talk a little bit more about the positions that are being eliminated? If you are going out there trying to diversify and bring in a new Phase I or II compound, might you just be getting rid of people that you might need to hire back?

Chad, the majority of the decisions being eliminated are in the clinical operations and technical operations area, with a few people who provide other support for those individuals. We certainly believe that the remaining core of the employees, including the senior management team, can form a pretty solid foundation for development of a new asset. And I must say, of course if we acquire or in-license an asset, we will probably need to recruit additional personnel.

But that is, to be honest with you, an uncertain time frame for that, and also exactly what will be needed will be determined by that asset. We felt that it was very prudent to take these actions today, and we will fill in as necessary in the future.

Understood. Thank you.

Brian Klein, Stifel.

Thank you for the update and for taking my questions. First, I want to get a better sense of the ongoing activities involving business development. Could you give us a sense of where you are in terms of your diligence?

Could you give us an update on potential timing, where we might see a new product in licensed? Are you limiting yourself to just one product, or are you potentially willing to in license a platform or a portfolio of products? Any additional details would be great. Thank you.

Thanks, Brian. The process has recently been started. This is obviously a very competitive process, so I don't think we're going to go into a deep level of detail regarding our search criteria at this time. But I think Melissa might have a few comments about the general commentary around that.

Sure. Obviously, not surprisingly, our thinking right now is that our search will remain focused on oncology, and given our expertise in hemalignancies, we'll be particularly interested in evaluating opportunities in that space. In terms of the stage of development, we're not going to rule out possibility of finding something attractive at the pre-clinical stage, our focus will rest mostly in the Phase I to early Phase II area and stage of development.

The timing, as I'm sure you can appreciate -- it's hard to predict how long these processes will take. Particularly -- we're not any particular rush to bring something in. I think what's most important is that we find and focus on assets that are of high-quality, and we will take time necessary to really find out that type of asset.

With regard to one versus more, I think, Brian, we have an open mind about that. Obviously the goal of most people who do these processes is to find a platform technology with a lead candidate that looks really good, and we would never turn our nose down at that. But on the other hand, history suggests that doesn't happen every time. It's not something that is -- that's not a criterion that we are applying in any specific way.

Great. Thanks for additional details. And moving on to the ongoing study with Dr. Tefferi, are you capable of giving an update there in terms of how many patients remain on therapy? And if we can expect potentially to see an update at this year's ASCO?

As of January 30, 20 patients out of the 80 patients that were enrolled in Dr. Tefferi's study continue to receive imetelstat treatment, Brian. That includes 15 out of 60 patients with MF, four out of the nine patients with RARS MDS, and one out of the nine patients with blast phase MF. With regard to future clinical studies, or sorry future meetings, we don't have any specificity about where that will be, but I'm unaware of anything that has been submitted to ASCO. It will probably be after ASCO, but we still expect something for this year.

Great, thank you for taking my questions.

Thomas Yip, MLV & Company.

Thank you so much for taking my questions. I just have a very quick one for Olivia first. Can you please tell us how is the $35 million license fee from Janssen that I assume is an early receipt, how is that counted for in the P&L?

You are correct, Thomas. We did receive that money at the end of 2014. That's why it's included in the cash balance.

You will see on the balance sheet a large increase in our current liabilities, because of this recognition of deferred revenue for that $35 million as of the end of 2014. Upon conversations and agreement with our auditors, we have determined that we will be recognizing the revenue from that upfront payment once the transfer activities related to the program have been complete. And we expect that to be occurring sometime around -- between Q2 and Q3 of this year.

Okay. And will that be the lump sum immediately recognized, or will that be amortized over some period of time?

It will be recognized in entirety.

Okay. My next question, I know it's a little bit early since we just looking at starting MF and MDS trials in 2015. But regarding future plans for AML, I'm just wondering what is the scope and the economics of potentially expanding into AML?

Thomas, this is Chip. The agreement with Janssen contemplates two -- or specifies, I should say, two initial studies that are well laid out. The first one is the Phase II MF study, the second is the Phase II MDS study, both of which we expect to initiate this year. Beyond that, although AML, as you point out, is referred to in the CDP, et cetera, there are no specificity around that, and until we gain greater specificity, we really can't get anything -- we really can't answer your question at the moment.

How that plays out will be talked about a little bit in the future at some point. As of right now, I really don't have anything we can tell you about it.

I missed it. Thank you so much again for taking my question.

George Zavoico, [James Trading].

Thank you for taking my questions. It seems to me that pretty much the whole imetelstat package is moving over to Janssen. And without -- and with you having discontinued your research, or sorry, your discovery programs, what about learning more about telomerase biochemistry and physiology in these diseases? Biomarkers and that sort of thing?

There is still a lot that can be learned. Has all of that been moving over to Janssen as well? Especially with regard to post hemalignancies because telomerase is present in all cancers?

That's a great question, George, thank you. The answer is yes. It is moving over to Janssen. I'm happy to say they have an awful lot of people in their translational program, and they've been -- even though we've not spoken in any specificity around it, I can assure you that they're very interested in this.

When we have something to report, we will, but I feel very confident that these areas are going to continue to -- generally speaking, translational research, especially into the mechanism of action of the drug and deeper into telomerase actions in various diseases and so forth, I think we will see programs being put together. It's too early to make any promises in that regard, or to be -- have any specifics, but that is going to go over to Janssen.

The partnership however, just includes hemalignancies, so if that happens, does Geron to any economics from that? If it happens?

Actually the partnership covers all human therapeutic uses, George, including non-hemalignancies and even should there be any other uses. They've licensed the product for all human therapeutic uses. So obviously, the scope of interest is broader than just hemalignancies at some point.

That was a minor point I recall, when the agreement was first announced. Good luck with that. I hope the platform emerges over the course of the next few years, and moves beyond the hemalignancies.

Good luck, and thank you, and look forward to the start of trials and data coming out later this year. Thank you.

Charles Duncan, Piper Jaffray.

I apologize if you addressed this earlier, in your prepared remarks. Or answers to other questions. I hopped on late.

But I wondered if you could provide us any color on your evaluating other technologies or potential assets? Is that something that is an ongoing set of efforts? Or are you focused more on working with the current partnership?

It's definitely outside of our BD process, is definitely outside of the current Janssen collaboration, which is really focused very much on imetelstat. The process has really just recently begun. I commented earlier, this is a very competitive process, so we're not going into a deep level of detail regarding our search criteria at the time.

But fundamentally, we've commented that we are focusing predominantly in -- although we will not rule out a pre-clinical opportunity, but are primarily looking at Phase I and early Phase II compounds. And while we remain opportunistic for other general oncology-related assets, we certainly will be particularly focused on hemalignancies which is the therapeutic area that we know particularly well.

That makes sense to me, Chip. And without giving guidance or setting expectations, but could you foresee that process coming to fruition over the course of the next 12 months?

I think that if you look historically at these processes in our industry, and look at them from when you start to when you come to some sort of conclusion, 12 months is a pretty good length of time. But as you say, we're certainly not in a position to be promising or even leading anyone on with regard to any specificity, because we're still early in the process, so it's a little tough to do so.

Okay. That makes sense to me. Thanks for taking the questions.

That answered the questions for today, so I'd now like to hand back to Chip for closing remarks.

Thanks, everybody, for your time today. I look forward to future discussions about the activities of the Company and about imetelstat's progress with Janssen, and also with regard to our own other non-imetelstat related activities. Thanks a lot, and have a good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.