Geron: Science And Silence

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About: Geron Corporation (GERN)
by: BioTrench
Summary

Imetelstat in MDS looks solid, but current developments may solidify it as being more relevant in intermediate-1 MDS.

Development in MF is still unclear while competition starts cropping up over the horizon.

Dilution risk is more real than expected with GERN selling shares over Q2.

Fundraising under current conditions suggests that GERN may not anticipate significant near-term catalysts.

The current situation makes GERN a risky asset.

Following the breakdown of the collaboration with JNJ, Geron (GERN) is finally ready to restart imetelstat's development. The Investigational New Drug ("IND") sponsorship transfer is now complete and the phase 3 trial for imetelstat in lower risk myelodysplastic syndrome ("MDS") is going to begin enrolling patients soon. While GERN's science continues to impress, management risks are piling up. To begin, we will look at imetelstat's status in MDS and myelofibrosis ("MF"), followed by a more holistic corporate overview.

Update on imetelstat in MDS

Imetelstat's clinical efficacy is continuing to impress. By way of reminder, the MDS trial looked at transfusion dependency following imetelstat treatment in non-del 5Q lower risk (low + intermediate-1) MDS patients that were relapsed/refractory to erythropoiesis stimulating agents.

IMERGE results Figure 1. Data for imetelstat in MDS from the June 2019 KOL event.

According to a recent presentation (Figure 1), 8-week transfusion-independence ("TI") rates increased from 37% to 42% (16/38) as the data matured. In addition, 11 patients (29%) were still transfusion independent by 24-weeks, which is remarkable. That being the case, there is one interesting point to note - imetelstat performed much better in intermediate-1 than in low risk MDS.

IMERGE results breakdown

Figure 2. Data for imetelstat in MDS from the June 2019 KOL event.

Of the 38 patients, 14 and 24 patients had intermediate-1 and low risk MDS respectively. However, of the 16 8-week TI responders, only 5 had low risk MDS (~21% of low risk population), while 11 had intermediate-1 MDS (79% of intermediate-1 population).

Intricacies aside, everything is on track for a phase 3 trial in MDS, with patient recruitment to begin in August 2019. Given its past track record, imetelstat will likely perform well in the trial.

Challenges in MDS

If the difference in response rates between intermediate-1 and low risk MDS is replicated in a larger trial, then it will likely further cement imetelstat as a follow-up drug to luspatercept failure.

MEDALIST trial results Figure 3. MEDALIST results presented at ASH 2018.

A cursory look suggests that imetelstat (21% 8-week TI rate) may not perform better than luspatercept (38% 8-week TI vs 14% in placebo) in low risk MDS when it comes to 8-week TI rates. While the MEDALIST trial also included very low risk MDS patients, the majority of false responses are likely accounted for in the placebo response rate, leaving a residual response in the mid-20s. As such, imetelstat's advantage would be in the sicker intermediate-1 MDS population, especially since luspatercept has a more benign toxicity profile.

MDS market Figure 4. MDS market breakdown from the June 2019 KOL event.

This observation could also have some implications on imetelstat's immediate addressable market. The MEDALIST trial, with its less sickly population, had more than 80% of its patients classified as low or very low risk versus ~60% in IMERGE. If this distribution is representative of the greater lower risk MDS population, then imetelstat's immediate market could be reduced by 50-75%, while the secondary, post-luspatercept, market accounts for the rest. This may translate to a slower uptake; however, with the increase in disease severity, they may be able to command a higher price. Since this situation will develop in the far future, there is little value in further speculation.

Update on imetelstat in MF

GERN is figuring out its next step for imetelstat in MF. Again. The study originally used change in spleen response and total symptom scores in intermediate-2/high risk MF patients who were relapsed/refractory to ruxolitinib as the primary endpoints. However, due to lukewarm results, the focus eventually pivoted to overall survival ("OS"). The issue at hand now is how to interpret the data given the lack of a control arm. As an OS study is time consuming and expensive, GERN has been making an argument for interpreting the results by comparing against historical real world data.

IMARK RWD comparison

Figure 5. Results for imetelstat in MF from the June 2019 KOL event.

Their recent EHA abstract is an extension of this. GERN obtained patient data from the Moffitt Cancer Center and identified a comparable cohort that received best available therapy. According to their analysis, imetelstat theoretically more than doubled OS (12.04 mo vs 30.7 mo) vs historical data. However, what happens next is unclear.

Previously, GERN had indicated that they would decide on their next step by the end of Q3 2019. However, the new development team had proposed a different approach that required additional analysis. As a result, GERN will seek an end of phase 2 meeting with the FDA by the end of Q1 2020 before making a final decision. While the details surrounding the additional data analysis is lacking, it does beg the question of whether this current approach was discussed with JNJ prior to the collaboration discontinuation or not, given the origins of many in their R&D team.

Challenges in MF

If the FDA does not come up with a cost effective route following the Q1 2020 meeting, imetelstat's future in MF may become more bleak.

The usage of real world data is a relatively new approach, so it will be difficult to determine what the FDA will do. However, if the FDA's proposed solution requires an extended period to carry out, then imetelstat may run into more challengers in MF, if it does not get temporarily shelved first.

In the original pilot performed by Dr. Tefferi, there were cases of partial and complete remissions being observed in MF.

Partial and complete remission was defined as follows:

Accordingly, complete or partial remission in myelofibrosis requires hemoglobin level ≥10 g/dL without transfusion, platelet count ≥100 x 10(9)/L, neutrophil count ≥1 x 10(9)/L and resolution of disease-related symptoms, palpable hepatosplenomegaly and leukoerythroblastosis; in addition, reversal of bone marrow fibrosis and normalization of bone marrow cellularity is required for complete remission.

Source: Appendix of NEJM article

However, no complete remissions were observed in the current phase 2 study, although 18% did have bone marrow improvement. This was in part blamed on the patients being sicker (required to be relapsed/refractory to Jak inhibitors) than in the original pilot (had MF and previous, but not concomitant, JAK inhibitor use was allowed).

Whatever the cause may have been, the lack of complete remissions may dull GERN's glamour against upcoming therapies. While it is still too early to perform a deeper comparison, it is interesting to note that both Constellation Pharmaceuticals (CNST) and Promedior have phase 2 trials for MF with drug candidates that do not rely on JAK inhibition.

Constellation BET presentation Figure 6. CPI-0610 overview from Constellation's corporate overview

CNST's CPI-0610 is a BET inhibitor that is being tested as a monotherapy and in combination with ruxolitinib in both first and second line settings. With less than half of their phase 2 target numbers enrolled, more time will be required to get a better picture of its efficaciousness. However, CNST has been seeing some interesting, and potentially disease modifying, results in the meantime in MF (Figure 6). Interestingly, CNST also highlighted a patient that happened to have received prior imetelstat treatment that went on to achieve hemotological and bone marrow improvements following CPI-0610 monotherapy (Figure 7).

CPI-0610 in imetelstat treated patient Figure 7. CPI-0610 in imetelstat-treated patient from Constellation's corporate overview.

In contrast, Promedior's PRM-151 is a recombinant pentraxin-2 molecule involved in the fibrosis pathway. Like CPI-0610, it is also in a phase 2 trial, but instead of looking at spleen sizes, the primary outcome is a reduction in bone marrow fibrosis score. A review of a recent abstract suggests that this has been met with some success in patients ineligible for, or previously treated with, ruxolitinib.

While the trial designs for CPI-0610 and PRM-151 are quite different from GERN's, and there's something to be said about overall survival as an endpoint, a deeper comparison is well beyond the current scope. Instead, it is more to note that 1) competitors in MF have been identifying new therapeutics that are not JAK based and 2) the development gap may narrow if GERN gets dealt a hard hand from the FDA.

New blood

GERN has been gradually filling up its ranks with new hires in preparation for becoming an actual company again. Interestingly, some of these senior hires are from JNJ and were part of the original imetelstat MF/MDS clinical trials. This includes their new Chief Medical Officer (Dr. Rizo), VP Clinical Development (Dr. Feller), VP Clinical Sciences and Operations (Ms. Sherman), VP Biometrics (Dr. Wan), and others. Beyond filling out senior roles within GERN, it seems that they also appointed two new independent board members. But while this may help out their longer term strategy, there are more pressing considerations for current investors.

Overview of finances

Dilution has a moderate to high probability of hitting hard within the next two to three years. According to the Q2 press release, operating expenses for 2019 will be $80-85M, although $20-25M will be one time expenses. Three and six months operating expenditure ending June 30 was ~$15.2M and $26.5M respectively, while current cash and equivalents is ~$160M. This would imply that by EoY 2019, GERN's cash position would be ~$100M.

Excluding the one-time fees would suggest that ~$60M would be recurrent to a degree. This number will likely increase for 2020 given the following:

  1. Over the remainder of 2019, GERN will look to increase staff count from 38 people to ~45-50.
  2. GERN will be operating out of two sites, as opposed to one.
  3. Clinical trials and other research programs are not fully up and running yet at this stage, so expenses will likely grow over time.

Therefore, something in the ball park of ~$80M for 2020 may not be surprising. This would mean that GERN will have just enough cash for 2020, with more funds being required going forward.

Much of the groundwork for additional offerings has already been laid. GERN voted on increasing authorized shares up to 450M at the recent Annual General Meeting and has a $250M shelf offering from 2018 that can be drawn on. If GERN is unable to shake off negative sentiment or produce something meaningful, then they may need to raise funds at less than desirable prices, resulting in high dilution rates.

And so it begins

Since May 2019, the Company has raised cumulative net cash proceeds of approximately $2.6 million from the sales of an aggregate of 1,893,091 shares of common stock under an At Market Issuance Sales Agreement

Source: 2019 Q2 press release

The dilution is gradually taking place already. At the time of the AGM, there was ~186M outstanding shares. A sell of 1.9M shares equates to a dilution of ~1%. While it is unclear what they intend to use this for, given that they still have ~150-160M in cash and equivalents, it does raise an eye brow.

The sales agreement, originally established for $100M with an expiration date in 2021, still has ~$58M left on it. If the remainder was sold, then it could provide enough cash for most, if not all, of 2021. However, continued sales in the $1.00 - $1.50 range would result in an addition of 39M - 58M shares, or a 20 - 30% increase. It may be of interest to note that this sales offering is part of the $250M shelf offering mentioned prior, so, even if it is used up, there is still a possibility of additional offerings.

GERN's silence

GERN is busy keeping everything under wraps. The only known potential catalyst for the next year is the FDA meeting for MF. Beyond that, it would be the MDS trial data readout, which is ~3 years out.

Everything else after that is a literal gamble - partnerships, additional indications, etc. That GERN is selling shares at current prices could suggest that they do not see any near-term positive catalysts that may be worth waiting for and selling into - or at least none that have a high probability of playing out within the next year or so before they run low on cash (e.g. a partnership with upfront payments). Alternatively, it could also suggest that their burn rate in 2020 could be running higher than assumed.

In the event of minimal meaningful news over the next year, GERN may continue to quietly sell into the market in order to raise funds for 2021 and possibly 2022. At $80M/year, GERN will need to raise $80-160M. This is assuming they do not attempt an acquisition or put additional indications into trials. In the event that they do pursue additional indications, it is likewise unlikely that we will be seeing any worthwhile catalysts in the first few years, as a new trial design plus a phase 2A study will likely take more than 2 years.

If current prices hold, there is a high probability of shares increasing 30-100% over the next two years. The current fundamentals make it a difficult hold, given the dilutive risk, long time frames, and uncertainty involved.

Concluding remarks

While imetelstat remains promising and has a decent probability of being approved, it is unclear if management can garner the public confidence required to not wipe out shareholder value during the meantime. MDS and MF results still look great on paper, but there are a few nuances in the area of development and management that has likely led to GERN being heavily discounted.

  1. Imetelstat may end up with a smaller immediate market due to luspatercept.
  2. There's little precedence insofar as how the FDA will treat the usage of real world data, which, in an extreme situation, may lead to MF being shelved. Moreover, an impediment may allow some interesting rivals to catch up.
  3. Dilution is expected. Dilution at current levels is surprising, however. If this continues through Q3, it may even be foreboding and add to the overhang.
  4. GERN's overall "quietness" regarding its strategy can be interpreted both positively and negatively, depending on perspective, but we are not exactly encouraged by it.
  5. The time required for development will be long.

While we believe in the potential of imetelstat, there is little desire to hold it through thick and thin given the risks involved. However, imetelstat's progress is worth monitoring as a catalyst play in the future.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.