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Executive summary:

  • Geron is focusing on developing and commercializing cancer drugs that inhibit telomerase.
  • Its leading drug Imetelstat is targeting a $4 billion market of Essential Thrombocythemia and Myelofibrosis.
  • The nature of the diseases and stellar trial performance can also result in an accelerated approval.

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Geron was initially focused on stem cell development but that business eventually faded. After selling all intellectual property rights to Bio Time, Geron started off with the development and commercialization of cancer drugs that inhibit telomerase. Currently Geron is carrying out Phase 2 trials of its drug Imetelstat for the treatment of Essential Thrombocythemia (ET) and has announced promising results showing complete and partial responses from patients. Imetelstat is also being investigated in the treatment of Myelofibrosis and Geron has recently announced Phase 1 study results that were promising enough to initiate further trials.

Geron Corporation (GERN) is a clinical stage biopharmaceutical company which is developing the telomerase inhibitor, Imetelstat. The drug is used to treat Essential Thrombocythemia , Myelofibrosis (MF) and many other myeloid malignancies.

Imetelstat

For a normal human body to work as required, tissues are maintained and grown via cell divisions. Most cells are only able to divide a limited number of times and this division is regulated by telomere length. Every time a cell divides, the telomere shortens. Eventually it reduces to a very small length and detaches, which leads to the death of the cell and the division stops. Telomerase is a natural enzyme, which controls the length of the telomere. In a normal human being, telomerase becomes active and maintains the length of the telomere to promote the growth of cells; however as cells mature, telomerase becomes inactive causing the telomere to shorten and the cell to die. In cancer, telomerase is unregulated which enables the continued and uncontrolled proliferation (cell division) of the cells that drive the tumor to grow and progress. As most cancers have high levels of telomerase activity and short telomere compared to normal cells, Imetelstat is an anti-cancer drug that inhibits the activity of telomerase. This drug is being tested to treat different diseases such as Myelofibrosis and Essential Thrombocythemia.

Myelofibrosis (MF)

It is a disorder of the bone marrow. MF results in proliferation of abnormal bone marrow stem cells or the replacement of the marrow with collagenous connective tissue fibers. This bone disorder shifts blood production to the spleen and liver as well; leading to bone pain, fatigue and abdominal pain due to enlarged spleen. Acute myeloid leukemia or/and thrombohemorrhagic complications (bleeding) can be serious and life threatening risks.

Stages of Myelofibrosis

Risk Group

Score

Median Survival

Low risk

0

15.4 years

Intermediate -1 risk

1

6.5 years

Intermediate-2 risk

2-3

2.9 years

High Risk

4-6

1.3 years

There is an unmet need in the treatment of MF. The treatments currently available but are either more dangerous than or not as effective as Imetelstat. Stem cell transplantation is the only treatment available which can result in complete remission of the disease. However, it is limited to one-tenth of MF patients because of a lack of suitable donors, older age and co-morbidities. Lenalidomide and thalidomide may be used in its treatment but this can cause gout and the treatment costs around $163,381 per year per patient, which is very expensive.

In November 2011, FDA approved ruxolitinib (Jakafi) as a treatment for MF. Even though the treatment did show clinical improvement (progression free survival) it was unable to either partially or completely reverse the bone marrow fibrosis (PR/CR).

Phase 1 Trial Results

Criteria for response in MF

CR(complete remission)

Reversal of Bone marrow

Normal Blood count

PR(partial remission)

With bone marrow response but without full recovery of blood counts.

CI(clinical improvement)

No progressive disease (PFS), however no bone marrow response.

Results

Patients (in numbers)

Patients (in percentage)

Number (N)

22 patients

100%

(CR+PR)

5 patients

22%

CI

4 patients

18%

Overall Response

9 Patients

41%

After a successful Phase 1 trial, Geron is expected to initiate Phase 2 in mid-2014. The key goal is to identify a dosing regimen that optimizes the benefit-risk profile and define and validate components remission endpoint based on modifications to the 2013 criteria.

Essential Thrombocythemia

ET is a chronic blood disorder which results in an increased number of platelets produced by megakaryocytes in the bone marrow. Patients suffering from ET can also develop Myelofibrosis and Myeloid Leukemia. It is a slow progressive disorder and a majority of patients survive up to ten years after the diagnosis. Normally not all patients require treatment when diagnosed. Patients that have a high risk of bleeding or blood clotting (caused by old age or very high blood count) are treated by either hydrxyuera or anagrelide, which is effective in reducing the platelet count but does not alter the underlying biology of the disease. Imetelstat is used to treat ET via its breakthrough compound by regulating the telomerase activity.

Phase 2 Trial Results

Efficacy Results

The trial closed enrollment in December 2012 with a total of 20 patients, 18 of which were ET diagnosed and 2 were Polycythemia Vera (PV) with 8 months treatment of Imetelstat. The results showed:

  1. All 18 patients either refused or were intolerant to hydroxyurea, anagrelide and/or interferon-alpha.
  2. Platelets counts were reduced in all 18 patients (100%)
  3. Complete remission was observed in 16 patients (89% CR)
  4. The JAK2 V617F gene mutation was detected in eight patients. Seven out of the eight (88%) patients achieved 72% to 96% reductions in JAK2 V617F that qualified as partial molecular responses (PRs)

Safety Results

The drug was generally well tolerated. The majority side effects were mild to moderate bleeding, fatigue and gastrointestinal events. Three patients had grade 4 neutropenia. Overall the drug was tolerant and safe and, for that reason, patients have decided to continue the drug for further use.

The overall safety and efficacy profile of the candidate showed responses that not only stopped the disease from spreading but the drug was also effective enough to show partial and complete responses with patients undergoing gene changes resulting in a decrease of the disease's recurrence. We believe that Imetelstat will be approved by FDA as current treatments, such as hydroxyurea, are only effective in controlling ET rather than reducing it.

Market of Imetelstat

We will take Geron's estimates for the population of Myelofibrosis; 13,000 patients in the US. On the other hand there are around 130,000-150,000 patients in the US suffering from ET. The price of Imetelstat is yet to be announced so we will assume the price of the competitor product Jakafi, at around $84,000 per year per patient.

Disease

Target Population

Price of drug

Penetration

Peak Sales

ET

91,000*

$84,000

50%

$3.8 Billion

MF

13,000

$84,000

30%

$327 million

Both

143,000

$84,000

---

$4.127 Billion

*we assumed that early stage ET patients will not use treatment, so we took 70% of the 130,000 ET population.

Even though there is mat still be time in the drug's approval and launch, we believe that it can generate billion-dollar revenues; especially from the ET market because even though the substitute products are effective in increasing the progression free survival rate, they do not have any effect on the biology of the disease. However, Imetelstat in its Phase 2 trials was successful in showing partial molecular responses where the underlying disease was altered and patients were rendered disease free (complete remission).

On the other hand Imetelstat's ability to be used as a drug to cure MT is still in question because it has yet to produce solid results in the upcoming Phase 2, even though the phase 1 results were promising. Our estimates for the MF market are conservative due to uncertainty surrounding the future of Imetelstat in treating the disease.

Potential Upcoming Catalysts

  1. Phase 2 studies for MF:
  2. Study design will be finalized in Q1:14
  3. Study will be initiated by mid-2014
  4. Preliminary data projected around mid-2015
  5. Potential pilot study of the drug in MDS (Myelodysplastic Syndromes) in 2014
  6. Potential pilot study of the drug in AML (Acute Myeloid Leukemia) in 2015

Valuation

Geron's market cap is approximately $600 million. However, according to our estimates, the value of the drug is around $4 billion once it gets launched. At present Geron is trading at $5 per share and is expected to reach $9 in the short term.

Financial Review

Account type

Q3:13 ($)

Q2:13 ($)

Cash & Cash Equivalents

$67 million

$71.6 million

Total Cash from Operating activities

$5.7 million

$7.92million

Average Cash Burn Rate for Two Quarters

$2.27 million per month

If the company continues to burn cash at this rate, it has the ability to survive till the start of 2016 (1Q:2016). However, on 30th Jan 2014 the company announced a proposed public offering of common stock at $4 per share which will provide it with gross proceeds of $90 million. The cash balance will increase to around $157 million, increasing the company's ability to finance its operations till mid-2019. Nonetheless, we expect the cash balance to dilute faster because of various pilot studies and clinical trials that are going to be initiated in 2014.

Conclusion

Imetelstat appears to outperform its competitors in terms of efficacy and safety. However, the drug is in its initial stages and Geron is carrying out pilot studies in the coming years to further investigate drug's effectiveness in other areas of myeloid malignancies. There is also a chance that with positive results FDA will approve the drug on an accelerated basis, as current treatments such as Hydroxyurea or Anagrelide are used only to control the progression of the disease, and Imetelstat has shown superior effectiveness with patients having complete and partial remissions, and as ET is a rare blood disorder (serious disease) hence FDA can speed the development and availability of the drug.

The patent expires in 2025 which is worrisome for investors as the company will face fierce competition from big generic pharmaceuticals. Overall, the drug has blockbuster potential and will eventually hit it big. Our recommendation for the stock is a buy based upon its long term future outlook.

Source: Geron: Billion-Dollar Drugs And Possibility Of Accelerated Approval

Additional disclosure: Equity Flux is a team of analysts. This article was written by our Healthcare analyst. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.