Geron: Uncertainties Abound In Imetelstat Clinical Trial
Sep. 15, 2016 4:04 PM ET|
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About: Geron Corporation (GERN)
Zach Hartman, PhD
Zach Hartman, PhD
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Summary
Imetelstat is Geron Corporation's lead oncology compound, which is in late-stage clinical trials for hematologic malignancies.
The clinical studies conducted so far with imetelstat have shown promising efficacy in difficult-to-treat malignancies like myelofibrosis.
A recent update from Geron's trial partner has led to a significant drop in share valuation, and I argue that this is due to uncertainty with these trials.
Geron Corporation remains a very intriguing risk/reward proposition at these levels.
Geron Corporation (NASDAQ:GERN) has been a hotly discussed company with a promising drug candidate in the oncology/hematology space: imetelstat. This drug blocks telomerase, which is thought to control the maintenance of cancer stem cells.
As of their most recent quarterly filing, GERN looked poised to capitalize on an exciting research program and deliver a product to market in a timely fashion.
In a recent press release, GERN announced that an internal review with Janssen identified the ongoing experience with imetelstat in the IMbark and IMerge studies, which are investigating imetelstat in myelofibrosis and myelodysplasia, respectively.
A few of the key takeaways from this press release include:
No new safety signals identified; everything remains consistent with earlier studies
One of the two dosing arms in the IMbark study will be suspended due to lack of clear efficacy. This was the 4.7 mg/kg arm. The 9.4 mg/kg arm remains in consideration, though
Enrollment in the 9.4 mg/kg arm is being halted to gather longer-term data so Janssen and GERN can see how the efficacy and safety will shape up
The IMerge study is tracking along similar lines to the Mayo clinic pilot study, and it is continuing as planned
None of these findings proves particularly bad, but the company provided guidance of the next data readout, scheduled to occur in the second half of 2017. Short-term investors, seeing dead money, have seemed to jump ship since the announcement of these interim data. The market cap for GERN plunged from nearly $500 million to around $300 million at the time of writing.
The fallout
The decline in stock price presents a very interesting situation for current and would-be shareholders of GERN. Clearly, if they move a product to market, the current price represents a major bargain. However, this most recent news may also portend a dearth of updates from the company for nearly a full year, theoretically making any investment "dead money."
In my experience, this is usually not the case; even when waiting on the big data update, company news will continue to flow, and the price can still swing wildly, despite the lack of updates on the imetelstat programs.
To me, the biggest risk associated with GERN at this time is efficacy in the myelofibrosis study, IMbark. The language of the press release makes it clear that the 4.7 mg/kg arm showed little to no benefit for patients.
However, the 9.4 mg/kg arm demonstrated "encouraging trends in the efficacy data." This means, to me, that IMbark could go either way, as trending toward success may not yield as much as shareholders were hoping for. There's also the potential issue of the higher dosing cohort leading to dose-limiting toxicity compared with the 4.7 mg/kg arm. Toxicity is a concern that I'm sure Janssen is paying attention to keenly, as it has been a sort of black cloud over imetelstat's development. And given that myelosuppression forced a significant number of patients to reduce the dose in a pilot study for myelofibrosis, it's something I'm going to be keeping a close eye on, as well.
To be clear, though, at this time there is no reason to suspect that imetelstat development will be derailed through toxicity. I'm more curious to see how these "trends" toward efficacy evolve in the coming year.
Financial risks?
Shareholders also need to consider whether the timeline presented by Janssen and GERN will be feasible without incurring extra cash raises.
According to its Q2 financial release, GERN holds around $130 million in assets, and they have operational expenses of around $9 million per quarter.
So the simple math says they have around 14 months of cash and marketable securities on hand needed to fund operations. However, with the partnership through Janssen, much of the operational liabilities are significantly curtailed, which explains GERN's relatively low R&D burn rate of $4.6 million.
Indeed, GERN is eligible for various milestones throughout the development of imetelstat that could be worth hundreds of millions of dollars in the coming year or two. According to the partnership agreement, once Janssen has primary results of IMbark, they will need to make a continuation decision. Whether they decide to opt in or not, GERN will be entitled to a $65 million milestone payment, which will buy more time without needing to incur further dilution.
Long story short: GERN has cash on hand to see itself through the primary analysis of IMerge and IMbark in 2017. They will likely receive more funds from their Janssen collaboration, as well.
Overall, this creates a calculation of risk/reward that is heavily weighted toward reward, at this time. The stock price has become substantially depressed, even though the outlook for the clinical programs hasn't really changed, except for one treatment arm in IMbark.
To me, these are all signs that traders and investors have adopted an overly pessimistic attitude toward GERN, and I would not be surprised if we are now seeing a bottom in the stock price.
Thank you for reading, and I'd like to thank in particular the GERN stakeholders and interested parties for the robust, lively discussion in my article comment sections. They provide crucial insight into the current outlook for the company, and everyone would do well to read these comments for further information.
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.
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