Geron Corporation's (GERN) CEO Dr. John Scarlett on Q3 2017 Results - Earnings Call Transcript

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About: Geron Corporation (GERN)
by: SA Transcripts

Geron Corporation (NASDAQ:GERN) Q3 2017 Results Conference Call November 1, 2017 4:30 PM ET

Executives

Anna Krassowska - Head of IR

Dr. John Scarlett - President and CEO

Olivia Bloom - EVP, Finance and CFO

Analysts

Charles Duncan - Piper Jaffray

Alex Schwartz - Stifel

Operator

Good day, ladies and gentlemen and welcome to our Q3 2017 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 be given at that time. [Operator Instructions]

I would now like to turn the call over to Ms. Anna Krassowska, Head of Investor Relations. Ma’am, you may begin.

Anna Krassowska

Thank you. Good afternoon, everyone, and thank you for joining us for the Geron third quarter of 2017 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 third quarter ended September 30, 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 December 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 expectation plans, timeline and prospects for imetelstat, including the continued development of imetelstat by Janssen through the IMbark and IMerge clinical trials, feedback from the FDA regarding the safety and efficacy of imetelstat suggesting of potential, efficacy or survival benefit of imetelstat, patent coverage, potential milestones and payments under the Janssen collaboration agreement including timing and occurrence of the continuation decision 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 whether imetelstat is demonstrated to be safe and efficacious in IMbark and IMerge, Janssen decides to continue developing imetelstat and provides positive continuation decision to FDA or other help authorities or IRB’s or any other factors required that IMbark and/or IMerge be delayed or discontinued. Geron patterns maintain their validly and 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 quarterly report on Form 10-Q for the year ending September 30, 2017.

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 2017 third quarter operating results from Olivia, and then Chip will review ongoing activities imetelstat clinical trials being conducted by Janssen. Olivia?

Olivia Bloom

Thanks, Anna. Good afternoon. For the third quarter of 2017, the Company reported a net loss of $6.9 million or $0.04 per share, compared to $3.6 million, or $0.2 per share for the third quarter of 2016. Net loss for the first nine months of 2017 was $20.5 million or $0.13 per share, compared to $21.1 million or $0.13 per share for the first nine months of 2016. Revenues for the three and nine months ended September 30, 2017 were $163,000 and $874,000 respectively compared to $5.1 million and $6.1 million for the comparable 2016 period.

Revenues for the three and nine months period ended September 30, 2016 included license fee revenue of $5million, which represented an upfront payment under our license agreement Janssen Pharmaceuticals Inc., which is an affiliate of Johnson and Johnson, that is separate from Janssen Biotech Inc., which is the entity that is collaborating with Geron on imetelstat program and hematologic malignancies.

Areas of focus for Janssen Pharmaceuticals include neurological and infectious diseases. The license agreement with Janssen Pharmaceuticals was signed and became effective in September 2016. Total operating expenses for the three and nine months ended September 30, 2017 were $7.4 million and $22.3 million respectively compared to $9 million and $27.9 million for the comparable 2016 period.

Research and development expenses for the three and nine months ended September 30, 2017 were $2.6 million and $8.5 million respectively compared to $4.3 million and $13.9 million for the comparable 2016 period. General and administrative expenses for the three and nine months ended September 30, 2017 were $4.8 million and $13.8 million respectively compared to $4.7 million and $14 million for comparable 2016 period.

The overall decrease in research and development expenses for the nine months period ending September 30, 2017 compared to the same period in 2016, primarily reflected lower cost for Geron proportionate share of clinical development expenses under the imetelstat collaboration with Janssen as well as reduced personnel related costs.

So overall decrease in general and administrative expenses for the nine months period ending September 30, 2017 compared to the same period in 2016, primarily reflected lower consulting and legal costs, primarily offset by higher non-cash stock based compensation expense. We ended the third quarter of 2017 with $112.7 million in cash and investments. We have not incurred any impairment charges on our marketable securities portfolio.

I’ll now turn the call over to Chip to review our recent company events.

Dr. John Scarlett

Thanks, Olivia. Good afternoon, everyone, and thanks for joining. I'd like to begin today by briefly commenting on the status of IMbark, the Phase 2 trial and intermediate-2 and/or high risk myelofibrosis patients who are refractory too or who have relapsed after treatment with the JAK Inhibitor.

First, this trial was ongoing and patients remaining in the treatment phase are continuing to receive imetelstat. All safety and efficacy assessments are being conducted as planned in the current protocol, including for survival.

Second, FDA recently requested updated efficacy and safety data including information regarding deaths in order to address the benefit risk profile with imetelstat IMbark and to justify continued treatment of patients in the trial. Janssen has informed us that they have submitted the requested information, including current overall survival data. Pardon me -- related interactions between Janssen and the FDA are ongoing.

Third, Janssen has informed us that to-date median overall survival has not yet been reached in the end dosing arm. Therefore, as we announced at the end of July, the timing of the primary analysis for IMbark, which includes an assessment of potential survival benefit will begin upon the earlier of either; first, a pre-specified number of deaths occurring in the trial; or second, the end of third quarter of 2018.

After the completion of that IMbark primary analysis, Janssen must make a continuation decision. That is they must notify us whether they elect to maintain the license rates and continue the development of imetelstat in any indication. Assuming that the primary analysis begins at the end of the third quarter of 2018, we expect that the latest time for Janssen continuation decision would be in the fourth quarter of 2018 or the first quarter of 2019.

I’d like to next review the newly published data from Part 1 IMerge, which is the ongoing trial of imetelstat in patients with lower risk MDS being conducted by Janssen. These clinical data have been accepted for a poster presentation at the American Society of Hematology or ASH Annual Meeting and were published this morning in an abstract on the ASH website at www.hematology.org.

As we described previously, IMerge is in two parts. Part 1 is a Phase 2 open label single arm trial that's been conducted 8 and 32 patients, administrating imetelstat intravenously every four weeks at a dose of 7.5 milligrams per kilogram. Part 2 not yet initiated is designed to be a Phase 3 study that will be conducted after Part 1 is completed and is designed to confirm in a randomizing control trial, the efficacy and safety of imetelstat in the patient population as well as dosing identified in Part 1.

In lower risk MDS patients, chronic anemia is predominant clinical problem. Treatment with in erythropoiesis-stimulating agent or an ESA, such as EPO can provide an improvement in the anemia, but the effect is transient. As a result, many patients become dependent on frequent red blood cell transfusions to manage symptoms of anemia and fatigue. Transfusion dependencies associated with poor survival because the toxicity associated iron overload as well as potential infections and allergic reactions.

To be enrolled in IMerge, all patients must have relapsed faster or would be refractory treatment within ESA. It's a naive patients were eligible, if their serum EPO level was greater than 500 milliunits per mL because in patients with EPO levels this high, ESA treatment is not effective and they're considered refectory to ESAs.

Among the 32 patients enrolled in Part 1 of IMerge, 28 patients or 88% had been previously treated with ESA while 13% or 43% -- sorry 13 patients or 43% had serum EPO greater than 500 milliunits per mL. Patients enrolled in the trial must also be dependent on red cell transfusions requiring at least four units of red blood cells during an eight week period prior to entry into the trial.

Among the 32 patients enrolled, red blood cell transfusions dependency was high. The median red blood cell transfusion burdened at entry to the trial with fixed units per eight weeks ranging from 4 to 14 units. The ultimate goal for most trials of investigational agents and lower risks MDS is to enable patients to become transfusion independent for as long as possible.

As such, the primary endpoint for both part of IMerge delayed for percentage of patients who achieved red blood cell transfusions independence for at least an eight week consecutive period. This has been a key regulatory endpoint in many disorders associated with anemia and transfusion requirement.

Secondary endpoint in IMerge includes the rate of 24 week in transfusion independence and the rate hematologic improvement. Hematologic improvement is the degree to which the frequency of transfusions are reduced and increases in serum hemoglobin levels are absorbed.

In addition, various measures and the durability of these transfusions in hematologic responses to imetelstat treatment are also being assessed for IMerge. As cited in the abstract, using the May 2017 data cut off and a medium follow-up with patients 48 weeks, efficacy data for imetelstat noted that 34% of the first 32 patients in Part 1 of IMerge achieve red blood cell transfusion independence lasting for at least eight weeks.

Similarly 63% of patients achieved hematologic improvement. The original inclusion and exclusion criteria for IMerge did not restrict the number or type of other prior MDS treatments of patient was allowed to have received before entering the trial, and therefore, there were no restrictions to any particular MDF subtype.

Among the first 32 patients enrolled in Part 1, 25% had previously been treated with hypomethylating agents such as azacitidine and decitabine; and 38% with immunomodulatory agents such lenalidomide. Approximately half or 56% of patients have not received either HMA or lenalidomide, also 22% or 7 patients have a del(5q) chromosomal abnormality.

Among the 32 patients enrolled in Part 1, a subset of 13 patients have not received prior treatment with either in HMA or lenalidomide, and also did not have a del(5q) chromosomal abnormality.

In the U.S., hypomethylating agents or HMAs are approved for the treatment of both lower risk and high risk MDS patients and the immunomodulatory agent lenalidomide is approved for the approximately 15% of lower risk MDS patients, who have a deletion in the short arm of chromosome 5 or so-called del(5q) abnormality.

Physicians in the U.S. particularly outside of the main academic centers used both HMAs and lenalidomide broadly in lower risk MDS because there are limited alternative treatment options available. In contrast, in Europe, HMAs are not approved for lower risk MDS, nor lenalidomide approved for non-del(5q) patients. As a consequence, very few if any lower risk European patients are treated with either lenalidomide or HMA at least until they can be characterized as higher risk MDS patients.

As cited in the abstract, using the same May 2017 data cut off in a median follow-up of patients of 48 weeks as was reported for the overall population, the 13 patients without del(5q) who are naive to lenalidomide and HMAs showed an increased rate and durability of transfusion independence compared to the overall trial of population. With 54% of the 13 patients have set, achieving red blood cell transfusion independence lasting for at least 8 weeks.

Furthermore, 31% of the 13 patients subset achieved red blood cell transfusion independence lasting for at least 24 weeks compared to 16% of the overall trial population. In addition, 69% in the N is equal to 13 patients subset achieved in an rethloid hematologic improvement suggesting some degree of clinical benefit was observed in the majority of the imetelstat treated patients.

As noted in the abstract, the safety profile in Part 1 was consistent with prior clinical trials that imetelstat and hematologic malignancies and no new safety signals were identified. The most common adverse events were reversible cytopenias, which were manageable with dose reductions or delays, and included Grade 3 and Grade 4 neutropenia and 66% and 41% of the patients respectively. Grade 3 and Grade 4 thrombocytopenia was observed in 50% and 19% of patients respectively.

Dose reductions or cycle delays due to adverse events were required for 59% of patients. The safety profile in the 13 patients subset was similar to the overall trial population. We expect the poster presented at ASH will include updated data from more recent data cut. The evening after that posters presented, Geron will be hosting a webcasted event in order to allow all investors to be informed of the updated data.

We and Janssen believe that these results from 13 patients subset who were naive to lenalidomide and HMA and who lacked the del(5q) chromosomal abnormality, suggest the imetelstat could offer lower risk MDS patients and much needed alternative prior to preceding to HMAs and to a lenalidomide treatment.

In comparison to a 54%, eight-week transfusion independence rate observed for imetelstat, much lower rates approximately 17% for HMAs and 27% for lenalidomide and no better safety profiles have been previously reported in similar lower risk MDS patient populations. As such, we expect of targeting this lower risk MDS population would not reduce the population of patients potentially eligible for imetelstat, but instead sequence imetelstat ahead of HMAs and lenalidomide in the treatment paradigm.

I’m pleased to note, the Janssen used the data from Part 1 of IMerge to apply to the FDA for Fast Track designation for imetelstat, which was granted. For the treatment of adult patients with transfusion-dependent anemia due to lower risk MDS, who are non-del(5q) and who are refractory or resistant to erythropoiesis. We announced this in press release yesterday morning.

As we announced at the end of July, Part 1 of IMerge is being reopened and expanded to enroll approximately 20 additional patients who are non-del(5q) and naïve to HMA and lenalidomide treatment. This is intended to increase the experience and confirm the benefit-risk profile of imetelstat in this refined target patient population.

With appropriate approximately 20 additional patients, the total number of patients in Part 1 who were representative of the refined target patient population will be approximately 30, which was a sample size originally purposed for the protocol for Part 1 on which decision and move to Part 2 would be based.

Enrollment for this expanded Part 1 is now open in several sites. In addition, the clinical data from IMerge, three preclinical abstracts by academic collaborators were also selected for presentations. All three abstracts build on data from previous studies investigating imetelstat effects and mechanism of action in preclinical models of hematologic myeloid malignancies.

In an oral presentation, Dr. Steve Lane, colleagues of University of Queensland in Australia will describe their continuing exploratory work to understand the potential clinical efficacy of imetelstat and AML by using preclinical models throughout some patient samples.

In two separate post presentations, Dr. Ronald Hoffman and his colleagues from the Icahn School of Medicine at Mount Sinai at and Dr. Catriona Jamieson and colleagues from the University of California at San Diego will present data from two independent preclinical studies investigating impact of imetelstat on malignant progenitor and stem cells in models of myelofibrosis and blast crisis chronic myeloid leukemia.

We announced the dates and times of the imetelstat presentation at ASH in the press release this morning that is available on our website. Before we open the call to questions, I will also note that our search and evaluation process to identify and evaluate oncology products, programs and companies for potential acquisition continues.

With that, operator, let’s open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Chad Messer from Needham. Please go ahead sir. Sir, your line maybe on mute. And our next question comes from the line of Charles Duncan from Piper Jaffray. You may begin.

Charles Duncan

Hi, guys. Thanks for taking the question and congratulations on some of the upcoming abstracts that you presented at ASH. It looks like some early, but interesting results that you're seeing certainly in the IMerge?

Dr. John Scarlett

We were very pleased to see the results, Charles.

Charles Duncan

So, Chip, quick question regarding the recent Fast Track designation in the MDS patients subset. I guess I’m wondering, you said that they used part of the observations to support them, but I'm wondering if you think that they could impact the strategy or even the timelines for moving from Phase 2 to Phase 3?

Dr. John Scarlett

That's an interesting question. Well, let me just comment broadly speaking that for those on the call who may not be as familiar with some of these designations. Fast Track does give you some additional access to the FDA or at least in principle it does. It's mainly been useful for companies and I'm aware of and prior companies that I have been involved with, in terms of being able to rolling submissions, which is can be very helpful. That is a certain portion of, for example, an MD&A prior to having everything done.

So, it's certainly permissible from that perspective. But it all of that -- and the timing may be impacted by the ability to have more frequent conversations with the FDA, and of course, by what I just described because interactions with reviewers of MD&As can be accelerated because of the rolling nature of submissions. But honestly, I'm not sure that it really would make any difference between -- going between Phase 2 and Phase 3. It’s encouraging that FDA view this positively enough to designate it as a Fast Track us eligible set of submission.

But I think we still have to take the same amount of time to really understand the drug and we certainly will still need to do any of the necessary testing going forward. It doesn't really get you off the hook of providing the typical kinds of proof sources for your data that that would be required without it. Accelerated approval is a different story and this is not accelerated approval. Obviously, accelerated approval has to do with being able to forego some of the later stages of development and being able to do that, if you will afterwards in the Phase 4 setting. So, I don’t know if that answers your question, but that's kind of the way I view it.

Charles Duncan

It certainly does. And yes future lies ahead in my book on that other designation. You mentioned enrolling a few more patients in Part 1. Do you have a sense of timelines for that or at least timelines for data? Is that something we may be able to look forward to in 2018, say, ASH 2018 about a year from now?

Dr. John Scarlett

Yes. I mean I'd love to be able to give you that clarity, but we're just -- we're just now reopened a number of sites. I can say, investigator enthusiasm will argue for a pretty rapid enrollment in these additional patients. But I think -- that’s always just when CEO says that, if everything slows up, right. So, I think we should probably just simply say that stay tuned, and when if we have better visibility on that, we’ll let you know. But at the moment, I’m pretty confident that things are going to go reasonably well. But we’ll see.

Charles Duncan

And then let’s say last question I’ll have to get back to you. I had one additional one I wanted to ask you relative to that. But the other question that I had on the broader program for imetelstat. Is that, thinking about mechanism and you actually mentioned this in myelofibrosis that transfusion depended has some real downside risk or myelodysplastic syndrome. And then obviously myelofibrosis, there is some downside. So I’m just going back and thinking about mechanism of action for imetelstat. Do you believe that perhaps overtime, you can get some real survival advantage as well? You did see that with at least one hypomethylating agent as I recall? And is it possible that you could really be changing that course of disease in both cases?

Dr. John Scarlett

Right, well, I think that the way that we believe that imetelstat is at least putatively working in all of these myeloproliferative diseases is by surpassing or reducing the proliferative nature of the underlying -- in this case just clone up malignant progenitor cell clone, that’s causing the disease and causing dysplastic bone marrows and dysfunctional hematopoiesis. So in principle, if one reduces the proliferative ability of those clones, you would expect to see those kinds of outcomes and potentially survival outcomes.

I think we all know that survival must ultimately be demonstrated in relatively large, relatively long life studies with adequate controls. You can try to get a sense of whether or not it’s improve, but ultimately that’s a test for sophisticated clinical study. So, I think mechanistically, there is a reason to believe that this could definitely happen, but the proof will be in the pudding of a large and as I say much more sophisticated study.

Charles Duncan

But to be clear both in MDS as well as myelofibrosis neither indications have historically relied on survival advantage, it's really more upper biomarker change.

Dr. John Scarlett

Yes. I mean, I think that we’ve seen now ruxolitinib that it’s taken quite a few years, when you have reasonably effective therapy to see any kind of survival advantage in MF. And so one would not know exactly what would be required. I think if you are able to demonstrate a survival advantage, obviously, that would, my assumption is just mine is that, that would be a trump card, if you will. Like I said it's a bad word to use these days. It would be a good card to use in the ultimate improvability of really any drug and any indication.

In MDS, so in MF, I think it remains on the table. These patients are quite ill and once they’ve failed a JAK inhibitor, they have very limited survival. So I think that’s a realistic place to consider survival. In MDS, in lower risk MDS in particular, these patients have a lot longer expected lifespan. So, I think that would be from a clinical trial perspective, quite challenging to demonstrate. There, I think we have a plethora of good non-survival end point such as eight week TI and HIE rates. So, I think we would expect that we like, pretty much everyone else, would rely on non-survival end points in MDS.

Charles Duncan

Okay, sounds good. Thanks for taking my questions, 2018 shaping up to be a pretty interesting year for you folks.

Dr. John Scarlett

I would agree.

Operator

And our next question comes from the line of Tom Shrader from Stifel. You may begin.

Alex Schwartz

Hi, John and team, this is Alex Schwartz filling in for Tom Shrader. I just had a one question. With today's IMerge abstract, there were some notable imetelstat dose reductions or cycle delays. I was just thinking back to ASH 2015, I believe your speaker talked about just a physician learning curb of the drug and that dose reduction point actually make the hematologic adverse events worse. And kind of these physicians may just have to live off the patient cytopenia, where all kind of the stem cells are being replaced, are replacing the emelia blood cells? What's the additional patient data? Do these thoughts still hold true? And kind of are you -- are physicians still dosing the drug as you like to see. Kind of what have you learned with few additional patients? Any thoughts will be great.

Dr. John Scarlett

Alex, thanks for the question, and you're right. It's interesting and very relevant question. I'm going to be limited in what I can talk today because we have to stay within the four corners of the abstract. I expect there may be some additional data that may be presented at ASH when the data is actually presented. But I can make a couple of broader comments that may bear on your question. So, there is as you quite rightly pointed out the abstract today describes the fact that, a very significant number of patients did benefit from dose reduction in cycle delays.

I just simply say that across the program, we have looked very carefully at dosing. And I think that the dose that’s described in the abstract today offers a good, at least in our broad based view. And again without any specificity, I think it offers a very good starting dose. And the fact that a reasonable number of patients experiencing their dose delays and dose reductions, I think that probably is a good indicator of ways that these types of drugs are often used in the real practice by Heme/Oncs. They're pretty comfortable with that.

I think we'll have to wait for the more fulsome presentation of the data to talk about it, the effects of other dosing strategies in the program. But thank you for the question and it's a very thoughtful one. Thank you.

Alex Schwartz

Okay. Yes, I understand, looking for next month’s update. Thank you.

Operator

And I'm showing no further questions at this time. I’d now like to turn the call back to Ms. Anna Krassowska, Head of Investor Relations for any closing remarks.

Anna Krassowska

Yes, thank you. I just wanted to take the opportunity to highlight a couple of upcoming events. So, as Chip said, we will be hosting an investor event during ASH following the IMerge Part 1 Data Presentation on December 11. We will announce the time and provide webcast information in the coming weeks, so do look out for that. But before ASH, we will also be participating in two Investor conferences, the Stifel Healthcare Conference on November 14 and the Piper Jaffray Healthcare Conference on November 28. So, again look out for our announcements related to those conferences. And again thank you for joining today.

Operator

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.