The first positive surprise is that it is a supplement to the $200 million prospectus of October 11, 2012. For Geron's investors, this should be interpreted to mean that the feared "bad news" of stock dilution has already been accounted for -- almost 15 months prior! With that, let us start analyzing the document.
The next surprise that hit me was not in the first pages, but actually at page S-15, where the company tallies its shares. Effectively, in addition to the 128,949,459 shares of common stock outstanding as of September 30, 2013, there are also
- Options for 18,984,837 shares exercisable at an average of $3.44
- Warrants for 1,619,275 shares exercisable at an average of $3.91
- 14,472,070 shares for directors and 318,453 shares for ESOP
- $50 million in shares for MLV & Co. LLC -- which the document does not mention that they are exercisable at market, per the agreement on October 8, 2012.
In essence, the company has already outstanding warrants and options for about $122 million, in addition to the $66 million it reports on page S-14!
Hence, any fears about the finances of the company seems to have always been unfounded. Clearly, with continual success of course, they do have agreements for additional funding already on their books.
The second surprise actually comes from the description of the planned Phase-II trial and surrounding text. You can find these on pages S-10 and 11.
- The study is international, with 20-30 locations worldwide!
- Up to 150 patients will be enrolled with 3 different dosing regiments that are designed to test the standard does (9.4 mg/kg), a split dose (2x4.7mg/kg) and a lowered dose (7.5mg/kg)
- So as not to put words in the prospectus, I would just invite to examine the careful wording, in which I characterize the insertion of the word "full" as intriguing: "A primary goal for the planned Geron-sponsored Phase 2 clinical trial is to characterize the parameters appropriate for one or more potential randomized Phase 3 clinical trials that could be designed to potentially support full regulatory approval."
My take on the above is that this planned Phase-II represents a significant enough trial that if the results do confirm Dr. Tefferi's study, the FDA and its international equivalent would be hard-pressed not to a approve an early marketing status for this horrible disease that has no existing cure.
The third issue was that the company is still offering medicine to patients on the successful P-II ET trial -- page S-4. That is, my costing analysis in the valuation model article may have been higher than thought, since I did not factor the ET patients in my numbers. As reducing manufacturing cost of Imetelstat is essential to wider use and higher margins, I view this is good news to investors and patients alike.
It is worth noting that an underlying tone that strikes you from reading the document is that the company, similar to a video that was released for Dr. Tefferi, seems to be very confident and comfortable with all aspects of the standard dosing (q3 x 9.4mg/kg).
As for scientific data, than actually spelling out many of the details we got in bits an pieces in earlier news releases, conferences and filings, I did not find anything significant in this filing. Having said that, tit seems that beyond the 9 patients listed with "overall response" on page S-7, many others seem to have some response. In particular, Page S-8 lists (taken verbatim from the filing)
- Five of 13 patients (38.5%) with splenomegaly achieved spleen responses by palpation, which is defined as either >= 50% decrease if baseline >= 10 centimeters or becoming non-palpable if baseline 5 to < 10 centimeters.
- Three of 12 patients (25.0%) achieved anemia responses which are defined as either becoming transfusion independent if dependent at baseline or gaining >= 2 gram per deciliter in hemoglobin level if transfusion-independent but with a hemoglobin level < 10 gram per deciliter at baseline
- 10 of 13 patients (76.9%) who had constitutional symptoms at baseline achieved symptoms response, defined as 50% reduction from baseline in grade, as assessed by the investigator.
- 11 of 14 patients (78.6%) with circulating blasts at baseline achieved complete resolution.
- Seven of 15 patients (46.7%) with leukocytosis at baseline achieved normalization of white cell count.
- Seven of 9 patients (77.8%) with thrombocytosis at baseline achieved normalization of platelet count.
I view the above points are the most important issues I found in this current filing.
One needs to take into consideration all the risk factors that the company itself lists, starting Page S-16, and which goes on and on -- 25 pages in total-- including their particular opening statement on page S-20 statement that "Any delay or abandonment of our development of imetelstat in hematologic myeloid malignancies would have a material adverse effect on, and likely result in the failure of, our business." Further, I want to repeat my stated position that "biotech investing is highly speculative and will only pay off with diversification and over a very long time horizon."
With that, the above discussion supports my earlier stated position that Geron is a changed company with a - very - significant potential!