Zacks_Analysts' Blog : Geron Posts Wider Loss - Analyst Blog

Geron Corporation (GERN) posted a net loss of 20 cents per share in the first quarter of 2011, wider than the Zacks Consensus Estimate of a loss of 19 cents and the year-ago loss of 18 cents. First quarter revenues of $1.5 million were just above the Zacks Consensus Estimate of $1 million and higher than the year-ago revenues of $0.9 million. Higher expenses led to the wider first quarter loss.

Quarter in Detail

Revenues consisted of $150,000 in revenues from collaborative agreements and $1.4 million 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 $25.9 million, 48.7% above the $17.4 million reported in the year-ago period. Research and development expenses increased 23.7% to $16.8 million.

Imetelstat is currently in four phase II studies. While two large randomized phase II studies are evaluating imetelstat for the treatment of non-small cell lung cancer and metastatic breast cancer, two other studies are evaluating the candidate for multiple myeloma and essential thrombocythemia.

Research and development expenses should continue increasing with imetelstat being evaluated in four phase II studies. Moreover, Geron is looking to move GRN1005, which is being developed in collaboration with Angiochem Inc., into a phase II study in the second half of the year.

The study will be conducted in patients with brain metastases. Another phase II study, in patients with glioblastoma multiforme, is expected to commence in the first half of 2012. We expect to see phase II proof-of-concept data on the candidate in 2012.

Meanwhile, general and administrative expenses increased 136.5% to $9.1 million. Management transition, mainly non-cash stock-based compensation expense, and higher legal costs led to the increase.

Neutral on Geron

We currently have a Neutral recommendation on Geron, which is supported by a Zacks #3 Rank (short-term Hold recommendation). We believe that the company’s telomerase technology platform represents significant commercial opportunity. The successful development of anti-telomerase therapeutics 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.