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August 3, 2010
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Geron Corporation (GERN) posted a net loss of 18 cents per share in the second quarter of 2010, a penny below the Zacks Consensus Estimate and 4 cents below the year-ago loss of 23 cents. Second-quarter revenue of $1 million was in line with the Zacks Consensus Estimate.
Quarter in Detail
Revenues consisted of $225,000 in revenues from collaborative agreements and $776,000 in the form of royalties and license fees. Geron has several license agreements with various oncology, diagnostics, research tools, agriculture and biologics production companies.
Total operating expenses were $17.9 million, below the $18.8 million reported in the year-ago period. Research and development expenses declined 11.4% to $13.4 million mainly due to lower manufacturing costs for GRNVAC1 and lower preclinical study costs.
Meanwhile, general and administrative expenses increased 17.2% to $4.5 million mainly due to higher consulting costs and stock-based compensation expense. Going forward, we expect research and development expenses to increase as the company progresses with the development of imetelstat and its human embryonic stem cell (hESC) programs. Imetelstat will be in four phase II studies during the year. Patient enrolment for a non-small cell lung cancer phase II study with imetelstat commenced in July.
The company expects cash burn in the range of approximately $48 - $50 million in 2010, up from the $43 million cash burn rate in 2009. Cash burn will be driven by the cost of the oncology trials and preparation for re-initiation of the spinal cord injury trial.
GRNOPC1 Clinical Hold Lifted
In addition to announcing second-quarter results, Geron announced that the US Food and Drug Administration (FDA) has lifted its clinical hold on Geron’s pipeline candidate, GRNOPC1, a human embryonic stem cell (hESC)-based product, which is being developed for the treatment of spinal cord injury.
The lifting of the clinical hold is a major positive for Geron, which is now looking to move ahead with its phase I clinical study with the candidate. The clinical hold was initiated based on preclinical data, which showed a higher frequency of cysts in animals treated with GRNOPC1.
While Geron intends to develop GRNOPC1 initially for spinal cord injury, the company has plans to study the candidate for other neurological diseases, including multiple sclerosis, Canavan disease and Alzheimer’s disease.
Neutral on Geron
We currently have a Neutral recommendation on Geron, which is supported by a Zacks #3 Rank (Hold). We consider Geron to be a front-runner in the development of anti-telomerase inhibitors. Geron’s telomerase technology platform represents significant commercial opportunity. The successful development of products that target telomeres could very well change the treatment paradigm for several diseases including oncology and chronic degenerative diseases.
While we are impressed with Geron’s technology platforms, we note that the company remains several years from achieving profitability given the lack of any marketed product in its portfolio and the early stage nature of its pipeline.
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