Geron Corporation (NASDAQ:GERN) Q4 2016 Results Earnings Conference Call March 1, 2017 4:30 PM ET
Anna Krassowska - Head of IR
John Scarlett - President and CEO
Olivia Bloom - EVP, Finance and CFO
Charles Duncan - Piper Jaffray
Thomas Yip - FBR & Company
Alexander Schwartz - Stifel
Good day, ladies and gentlemen and welcome to the Q4 2016 Geron Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]
I would now like to introduce your host for today's conference Ms. Anna Krassowska, Head of Investor Relations. Your line is now open.
Thank you, Sandra. Good afternoon, everyone, and thank you for joining us for the Geron fourth quarter and year end 2016 earnings call. With me this afternoon are Dr. John Scarlett, our President and Chief Executive Officer; and Olivia Bloom, our Executive Vice President of Finance and Chief Financial Officer.
Today we issued a press release that reported results for the fourth quarter and year ended December 31, 2016. This release can be found on our website at geron.com. Today’s call is also being webcast live on our website and will be available for replay through April 1.
Before we begin, please note 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 limitations, statements regarding, the timeline, milestones, prospects and plans for imetelstat, including the timing and current of additional data reviews and the outcome of those reviews related to IMbark and IMerge, the therapeutic potential and safety of imetelstat, Geron's desire to diversify patent coverage, potential payments under the Janssen collaboration agreement and financial or operating projections or requirements.
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 in IMbark and IMerge, whether IMbark and IMerge continue to proceed without any delays caused by health authorities or IRB's or any other factors or that one or both of the trials are discontinued. Janssen is able to timely collect the requisite data from IMbark and IMerge, imetelstat will overcome clinical safety and efficacy technical, scientific manufacturing and regulatory challenges. Geron patterns maintain their validly and whether Geron will actually receive continuation milestone and royalty payment from Janssen.
Additional information and factors that could cause actual results to differ materially from those in the forward-looking statements are contained in Geron's periodic reports filed with the Securities and Exchange Commission under the heading Risk Factors, including Geron's Annual Report on Form 10-K for the year ending December 31, 2016.
Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made, and the facts and assumptions underlying the forward-looking statements may change. Except as required by law, Geron disclaims any obligation to update these forward-looking statements reflect future information events or circumstances.
We will begin today's call with the summary of the 2016 fourth quarter and annual operating results from Olivia, and then Chip will review recent events and discuss ongoing activities with the imetelstat clinical trials being conducted by Janssen. Olivia?
Thanks, Anna. Good afternoon.
For the year ended December 31, 2016 we are reporting a net loss of $29.5 million or $0.19 per share compared to net income of $46,000 or $0.00 per share for the year ended December 31, 2015.
For each of the fourth quarters of 2016 and 2015, we are reporting a net loss of $8.5 million or $0.05 per share. In the fourth quarter of 2016 revenues were $94,000 compared to revenues of $220,000 for the comparable 2015 period.
For the year ended December 31, 2016 revenues were $6.2 million compared to $36.4 million for the year ended December 31, 2015. Revenues for 2016 included the full recognition of an upfront payment of $5 million from Janssen Pharmaceuticals Inc. under our license agreement for certain rights to specialize oligonucleotide backbone chemistry and novel amidates.
Revenues for 2015 included the full recognition of the $35 million upfront payment from Janssen Biotech Inc. our collaboration revenue upon transfer of the imetelstat license rate and completion of technology transfer related activities outlined under the imetelstat collaboration agreement with Janssen.
Total operating expenses for each of the fourth quarters of 2016 and 2015 were $8.9 million. Total operating expenses for the year ended December 31, 2016 were $36.8 million compared to $36.9 million for the year ended December 31, 2015. Operating expenses for 2015 included restructuring charges of $1.3 million in connection with the Company's organizational resizing announced in March 2015.
Research and development expenses for the fourth quarter of 2016 were $4.1 million compared to $4 million for the comparable 2015 period. Research and development expenses for the year ended December 31, 2016 were $18 million compared to $17.8 million for the year ended December 31, 2015.
The increase in research and development expenses in 2016 compared to 2015 primarily reflected the net results of higher costs for the Company's proportionate share of clinical development expenses under the imetelstat collaboration with Janssen partially offset by reduced personnel related costs resulting from the March 2015 organizational resizing and lower cost for the manufacturing of imetelstat drug product.
General and administrative expenses for the fourth quarter of 2016 were $4.8 million compared to $4.9 million for the comparable 2015 periods. General and administrative expenses for the year ended December 31, 2016 were $18.8 million compared to $17.8 million for the year ended December 31, 2015.
The increase in general and administrative expenses in 2016 compared to 2015 represents the net result of higher non-cash stock based compensation expense and an increase allocation of facilities and other overhead cost to general and administrative activities, partially offset by lower consulting and legal costs.
Interest and other income for the fourth quarter of 2016 was $321,000 compared to $196,000 for the comparable 2015 period. Interest and other income for the year ended December 31, 2016 was $1.2 million compared to $677,000 for the year ended December 31, 2015.
The increase in interest and other income for 2016 compared to 2015 corresponds to the higher yield earned on the Company's marketable securities portfolio. The Company ended 2016 with $129.1 million in cash and investments. We have non-incurred any impairment charges on our marketable securities portfolio.
For 2017, we are projecting an operating expense burn between $30 million to $35 million of which approximately $14 million to $16 million represents our proportionate share of cost for supporting the IMbark and IMerge trials under the Janssen collaboration. Approximately $9 million to $10 million represents personnel cost and approximately $7 million to $9 million represents corporate cost such as business development, legal, accounting, IT and facilities.
This projection does not include any changes to the current imetelstat development program or additional cost that would be associated with acquiring a new oncology asset program or company, as well as any subsequent development cost for such an acquisition. If such changes or an acquisition were to occur, we would update our guidance for the new activity.
I will now turn the call over to Chip to review Company events. Chip?
Thanks, Olivia. Good afternoon, everyone, and thanks for joining.
As this is our 2016 year-end call I'd like to take a moment to reflect on some of the important events occurred during the year. We believe the activities in 2016 provided a foundation on which further development of imetelstat can be evaluated. We remain very pleased with Janssen's continued steady engagement to broadly assess the potential development past very strong.
First on the translational research site, Janssen has continued to sponsor and conduct numerous pre-clinical studies. In 2016 at the Annual Meetings of both the American Association for Cancer Research or AACR and the American Society of Hematology or ASH, there were several presentations that describe data from such ongoing work. These studies explored the activity of imetelstat and other hematologic myeloid malignancies such as acute myeloid leukemia both as a single agent and in combination with drugs currently used in clinical practice.
Janssen have also sponsored academic research investigating the mechanisms to which telomerase in addition by imetelstat might inhibit the malignant progenitor cell clones in the bone marrow and exert the effects that have been observed in patients. All of these presentations can be found on our website.
A new abstract from the Janssen translational research group was recently accepted for poster presentation at the upcoming 2017 AACR Annual Meeting which will occur in April. This abstract summarizes preclinical data on the effects of combining imetelstat with the Bcl-2 inhibitor venetoclax for which both in vitro and animal models of acute myeloid leukemia or AML. The AACR abstract is expected to be published online at AACR.org later today.
While promising pre-clinical data have suggested the potential imetelstat and other hem myeloid malignancy such as AML, in the future there is still substantial work to be done before any new clinical studies can be designed. This is particularly the case of imetelstat would be using combination with another drug which we and Janssen currently believe will likely be necessary in AML.
We do not expect any trials in AML to be initiated until more data are available from the ongoing clinical studies in part because such data may inform the designs of any future trials including imetelstat dosing.
Beyond the translational research accomplishments of 2016, of course great effort has been focused on the ongoing IMbark and IMerge clinical trials in MF and MDS. Janssen's key 2016 execution objectives for imetelstat clinical development were to ensure adequate patient recruitment for IMbark and IMerge and to conduct internal data reviews of both trials to inform further development plans. A recent summarize the outcomes of the first data review is conducted in the third quarter of 2016 for both trials and then outline plans for the second data reviews occurring in 2017.
First IMbark is the Phase 2 trial in intermediate-2 or high risk myelofibrosis patients who are refractory too or have relapsed after treatment with the JAK Inhibitor. This trial is originally designed to evaluate two different doses of imetelstat and to confirm the drugs activity using co-primary endpoint of spleen response and symptom response assessed to 24-weeks. These endpoints are the same ones that were developed from previous pivotal myelofibrosis studies in which JAK inhibitor was used to treat front line MF patients.
The relapse to refractory patients being treated in IMbark have either never responded to a JAK inhibitor or the disease progressed during or after treatment with the JAK inhibitor. Treating non frontline myelofibrosis patient is clearly challenging. For example, recent data from Phase 3 trials of other JAK inhibitor compounds and previously JAK exposed patients have not been able to replicate the response rate absorbed in the original ruxolitinib Phase 3 trials in frontline MF patients.
In addition long term follow up from clinical studies of the JAK inhibitor ruxolitinib, the only drug approved for MF today also suggest that approximately 75% of patients have discontinued treatment by five year with suboptimal response a loss of therapeutic factors a major reasons for discontinuation.
The Janssen commercial team conducted an analysis of real world data presented at ASH last December. It reviewed treatment patterns and outcomes of MF patients from two U.S. medical claims data basis suggesting that once patient failed or discontinued ruxolitinib median overall survival is only 7 months. The relapse refractory patient population represents a significant unmet medical need and is clearly in need of new therapies.
In the first internal data review of the IMbark completed in September of last year, Janssen reviewed data from 20 patients from each dosing model at a 12 week time point in order to make an early assessment of the appropriate imetelstat starting doses schedule. Based on that internal review Janssen determine the following.
First, the safety profile was consistent with prior clinical studies in imetelstat and hem malignancies and no new safety signals were identified. Second, the starting dose of 4.7 milligrams per kilograms administered every three weeks did not show sufficient activity to warrant further investigation and was closed to further enrollment of the patients renaming in the treatment phase could continue to receive an imetelstat using 4.7 milligram per kilogram dose.
Third, the higher starting dose of 9.4 milligrams per kilogram every three weeks showed encouraging trends in efficacy amongst the first 20 patients and warranted further investigation. However new patient enrollment to this was suspended because of an insufficient number of patients met the protocol designed interim efficacy criteria 12 weeks to confirm the dose for further development.
While on the first data review Janssen amended the IMbark protocol to include allowing clinical investigators to increase the dose of their allegeable patients in the 4.7 milligram per kilogram on 9.4 milligrams per kilogram. This amendment then implemented in many clinical sites and Janssen has informed dissipate as of January of this year a number of patients have had the dose increased.
So let's move on to IMerge. This study initiated in the first quarter of 2016 is a Phase 2, 3 trial evaluating imetelstat in patients with low or intermediate one risk myelodysplastic syndromes who are dependent on red blood cells transfusions and who relapsed after or are refractory to treatment within erythropoiesis stimulating agent or an ESA.
Red blood cell transfusions which were required by many lower risk MDS patients can lead to elevated levels of ion and blood and other tissues which the body has no normal way to eliminate and is associated with core overall survival and higher risk of developing AML.
The primary endpoint of IMerge is the weight or percentage of patients who achieved red blood cell transfusion independence for at least a consecutive eight weeks period during the trial. The rate of 24 week red blood cell transfusion independence is a key secondary endpoint because it durable responsive of treatment is an important outcome measure in this patient population.
As you will recall, IMerge has two parts, part 1 is a Phase 2 open label single arm design of evaluating 7.5 milligrams per kilogram of the imetelstat administered every four weeks in up to 30 patients. This part of the trial has been fully enrolled.
Part 2 of the study is designed as a Phase 2 randomized placebo control trial of up to 170 patients. In September 2016, Janssen completed an internal review of data from the subset of patients from Part 1 of IMerge. Based on that review Janssen determined that emerging safety and efficacy data appear to be consistent with the data reported from the MDS patients in the Mayo Clinic pilot study and decided to continue part 1 of IMerge unmodified.
Since the first internal data reviews last September, treatment of patients remaining on study in IMbark and IMerge have been ongoing to obtain additional and more mature data from both trials. Janssen has already initiated the process for the second internal data reviews for these trials which will include comprehensive analysis encompassing safety, efficacy, pharmacokinetic and pharmacodynamic data, as well as other exploratory assessments such as cytogenetic and molecular data.
For IMbark the second internal review is expected to include data from patients who are enrolled in the 9.4 milligram per kilogram starting dose arm and have been followed for at least 24 weeks consistent with the protocol specified co-primary endpoint and efficacy endpoints.
Following the second internal data review, we expect Janssen could decide to do first, resume enrollment in a 9.4 milligram per kilogram dosing to reach total of approximately 100 patients, we started on 9.4 milligram per kilogram for the protocol specified primary analysis of spleen and symptoms response rate to 24 weeks. Second, they could decide to modify for example to add a new dosing arms or incorporate other modifications to the trial design or of course they could decide to close them.
For IMerge the second internal data review is expected to recruit data from all of the patients enrolled in part 1 in order to assess the benefit risk profile of imetelstat including the durability response. We believe this assessment will inform Janssen's decision whether to move forward to part 2 of IMerge. If Janssen does decide to move forward with Part 2, we expect the Phase 3 stage of the IMerge to be opened for patient enrollment in approximately mid-2017. We also expect Janssen to select data from Part 1 of IMerge to be considered for presentation at a medical conference in the future.
We believe the outcomes from the second internal data reviews, regulatory considerations and the totality of other program information including the evolving treatment landscapes in MF and MDS will inform Janssen's decision regarding future development plans for imetelstat.
Following the second internal data reviews, Janssen could decide to resume, modify or terminate IMbark, IMerge, the imetelstat program for the collaboration agreement. And we expect their decision making to occur in the second quarter of 2017. We also note that Janssen's decisions regarding any future development plans for imetelstat maybe subject to subsequent regulatory feedback.
Before we open the call to questions, I will also note that our search and evaluation process to identify and evaluate oncology products, programs or companies for potential acquisition continues but we have not yet found such candidate. Thanks for listening. I will be pleased to answer questions in the time we have remaining.
With that operator, let's open the call for questions.
[Operator Instructions] And our first question comes from the line of Charles Duncan with Piper Jaffray. Your line is now open.
Hi guys, thanks for taking the questions and congrats in the progress in the quarter. Chip hope you're feeling - doing well, and wanted to ask you specifically about the imetelstat program thanks for the update and thorough update, sounds like Janssen may have some additional information in the second quarter, I guess I'm wondering if you could see a scenario whereby say that clinical data seems positive but for strategic reasons or other considerations Janssen doesn’t decide to move forward and therefore you would have this asset back in your hands, completely in your hands?
Thanks Charles. Sure, that is always a possibility, they have right to actually terminate the program at any time for any reason that they would deem appropriate, it's very kind in these types of agreements. So it maybe - the potential is always there for them to make that decision on really just about any basis and I wouldn't want to speculate on whether it would be on the basis of clinical data or their own internal thoughts about, other programs that they might have or what happens there is always complicated with large sophisticated companies and that certainly what they are.
Yes. So your team is involved I know to some extent but I'm wondering if your team has ongoing interaction with investigators and if so, what the recent feedback has been on - from investigators not necessarily on patient disposition because I know you really can't provide much information and investigators probably can't either but really on the imetelstat value proposition and mechanism of action what's your sense of that?
So first of all we do not have specified what we don't have investigator interaction. Janssen's really responsible for all of the activities of the clinical trials. So we really don’t have those interactions. And I really don’t think that I can really make any comments about that in the absence of good interactions.
And that makes sense. And then last thing is you mentioned your efforts to possibly identifying licensing candidates, is it the case that if Janssen moves forward into later stages of development for imetelstat, you may realize some milestone payments and would those milestone payments be useful to in-licensing any candidate, is it that you haven’t found anything yet that is attractive to you or under the current circumstances in which you are not certain about that collaboration you just haven't pulled the trigger?
You know Charles first of all, I'd comment that we have always said that the collaboration agreement was in effect self-funding assuming everything went forward because of the milestone payments with in essence cover or it would be expected to cover the additional cost that we would be responsible for as part of that program.
So, I don’t think we would be counting on any revenues if you will in excess of what we would be spending from the collaboration agreement and certainly not in the early years. Essentially so it might turn out to be very cash flow positive situation but certainly not in early years.
So I think that – that's not really the tree we have been barking up but we have a substantial amount of cash available today as Olivia described and I think we would anticipate having to consider how to use that cash going forward with another program as opposed to keeping it in our back pocket at the moment.
Okay. And I guess my question is if not found anything or you feel like maybe strategically you might want to wait until, you just wait until you hear something for Janssen or both.
Yes, I think both but honestly first of all, I would say that we have a evaluated quite a few opportunities and for one reason or another we haven't found the right opportunity for us and that as you can imagine Charles is a very wide range of different possibilities from things didn't seem to work out when we did our due-diligence to, we didn’t eventually conclude that it was a business that we wanted to gain et cetera.
But I would also say that you're quite right that now we have - we're on the cost of learning more about the imetelstat program and I think it's a would be quite wise for us to keep our powder dry and see how that plays out.
Okay. Thank you for taking my questions and for the added color.
And our next question comes from the line of Thomas Yip with FBR & Company. Your line is now open.
Hi everyone, thank you for taking my questions and Chip I hope you're feeling better as well. First question that I have is regarding going IMbark. Can you tell us how many patients so far have switched from the low dose arm to the high dose arm and can you remind us also do those patients come towards the enrollment target of 100 patients that you're looking for the primary analysis?
Well, first of all Tom thanks for the well wishes and these patients do not - first of all, we have not released the actual numbers of patients who have gone from 4.7 to 9.4 and are not planning to do so at least at this time.
Second of all, they will be a separate analysis cohort right because they are been treated differently than the patients who were initially started on for example 9.4, and have always been on 9.4 as opposed to those who stood on 4.7 and stayed on 4.7 so it’s sort of an intermediate cohort.
So it’s an interesting cohort, since I'm sure there won't be ultimately analysis done on them but they're really not part of the fundamental analysis that was envisioned and is envisioned in the protocol.
Okay. Thanks for the clarification. My other question regarding IMbark as well is the 24-week interim review that we should expect in the second quarter that’s on target. Should we expect to learn more about the protocol defined criteria that you guys opted at 12 week and if not when should we expect to see that in term criteria.
You're asking me to predict exactly the course of what Janssen and others are planning to say. I mean here's what I can tell you today Tom, as was the case with the first interim review there are protocol to find efficacy criteria for the second interim review and that interim review will include a very comprehensive set of analysis that I alluded to in the other comments.
Janssen has substantial latitude in making decisions about the future conduct of the trial and of course about the future development program of the drug in MS and will undoubtedly be related to that. When exactly the actual analysis and the results of those analysis will be publicly disclosed, I don't know the answer to that and certainly that's - that is a something that will need to be past for the Janssen lease, that will be – it's important that we don’t know the answer today.
Okay, that’s reasonable. Thank you again for taking my questions and looking forward to the announcement of the two interim review.
And our next question comes from the line of Thomas Shrader with Stifel. Your line is now open.
Hi Chip and team, this is Alex Schwartz going in for Tom Shrader. I had two questions. The first is can you talk about and tell us that potential and different myelofibrosis mutations. And in your pilot study you presented some interesting data segmenting by different mutations, just was potentially different mutations can you talk about the sequencing work done to identify them and then is it possible to launch a Phase 3 trial and certain mutations or exclude certain mutations any comments around that that would be excellent.
Sure, well I think as you know Alex and others on the call know, this is the whole mutation analysis of responders, non-responders - the hoped for ability to use these mutational analysis for patient selection is a very hot topic in the field as a whole not just what with we're doing. We’re doing exactly what you'd expect a sophisticated program to do there's an assessment of both cytogenetics and also mutational and molecular changes in these patients both before and after treatment with imetelstat that's going across both studies and I couldn't tell you the precise nature of that but I think we would all conclude that it will be quite comprehensive.
The challenge with all of this is that we know from many studies done by multiple investigators in these patient population, so there is no single phenotype for - associated with in general particularly good or particularly bad outcomes much less associated to date with imetelstat responses.
We know that there is some mutations that across the board appear to be generally correlated with poor prognosis and perhaps a few correlated with better but this is going to be a major effort by anyone in the field because the results are quietly atrophic it's not as if every single patient winds up. It's not if there's a single mutation that appears to confer a particular clinical phenotype.
So, I think that while we are very actively looking at that or I should say Janssen are very actively looking at that, I don't know that we're going to have any aha moments in the near future with it, we'll have to wait and see. We will be looking at that data will be included in the second analysis.
Okay, very good. Thanks for additional color. And just a more administrative question if I can. Just how will the next interim update be communicated to us, will it be press release followed by a call like the last one or how is it going to be communicated to us?
Well I guess kind of all depends doesn't it. I mean it's a - generally speaking we are - generally speaking we are committed to doing the - making sure that you know when appropriate level of detail but I don't really think we can pre-specify today whether it’s going to be by press release, conference call or what have you, we’ll have to see. Do have any other comments?
I think that - I also think one thing to look through is how the first review with handle, I think that we talked about how that wasn't necessarily any specific data that was being disclosed but obviously any material and actions in connection with the studies and would definitely be something to be discussed. So I think you want to look towards how we treated the first review and there is obviously a lot of similarity between the two.
Okay, very good. Well thanks for the additional color and looking forward to future update.
And this does conclude today's Q&A session. I’d now like to turn the call back over to Dr. Scarlett for any further remarks.
Thanks very much everyone for dialing in and we look forward to future communications. Bye, bye.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.
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