From Endtowar on the yahoo board... - rough copy paste
Part 1 Data Cont.
Well, as they say, the rest is history. Dr. Tefferi's Abstract was published showing
"Efficacy
"Overall response rate was 44%. This included five (28%) patients who met the BM and peripheral blood morphologic criteria for CR (n=4) or PR (n=1) and 3 patients with clinical improvement, pending validation of response duration and resolution of drug-induced grade-1 thrombocytopenia. The four (22%) CR patients experienced reversal of BM fibrosis and recovery of normal megakaryocyte morphology. Two CR patients were transfusion-dependent at baseline and became transfusion-independent. Complete molecular responses were documented in 2 CR patients..."
Dr Tefferi concluded:
"Conclusions: The current study signifies the potential value of telomerase-based treatment strategies in MF and identifies imetelstat as an active drug in that regard. The observed morphologic and molecular remissions confirm selective anti-clonal activity, which has thus far eluded other drugs in MF, including JAK inhibitors."
After confirmation of 5 CRs and PRs, all hell broke loose.
The stock price immediately doubled in the pre-market trading. Then, two days of perverse predatory trading in which GERNs stock volume reached 10 times normal as hedge funds set their traders the task of buying new positions, and the traders angled to buy the stock as cheap as possible. When the dust settled, almost all stock price gains had evaporated, the institutional holding had grown significantly at the expense of the small day traders, and everyone was uncertain what had just happened.
This is when the short side traders and their allies started questioning the results published in the abstract. Some said they were "cherry picked". Others complained that the abstract did not reveal symptom improvements. A well known doctor that supported the JAK drugs, was "confounded". Less
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Part 1 Data cont
Dr.Scarlett primed the market to watch for the Abstract by Dr. Tefferi. The abstract was published for public consumption on November 7, 2013, over one month before Dr. Tefferi was scheduled to discuss these findings at ASH.
Freed of the Ash "embargo" on discussion of the Abstract, that very day, GERN filed its 10Q with the SEC in which more information was provided about the Mayo Clinic Studies. The SEC filing states:
"The investigator has informed us that more than fifty patients have been enrolled in the Myelofibrosis IST. Enrollment of the first 11 patients in the first cohort of MF patients (Cohort A) in which the dose of imetelstat is given once every three weeks was completed at the end of March 2013 and the pre-specified criteria in the clinical protocol of at least two responders in the first 11 patients were met to enable expanded enrollment. Enrollment of the first 11 patients of the second cohort of MF patients (Cohort B) in which imetelstat was given weekly for four weeks, followed by one dose every three weeks was completed in May 2013 and the pre-specified criteria in the clinical protocol of at least two responders in the first 11 patients were met to enable expanded enrollment. In addition, the investigator has informed us that enrollment has commenced in additional cohorts to evaluate the safety and efficacy of imetelstat using different dosing algorithms, as well as to evaluate imetelstat in different patient populations, including patients with MF that has transformed into AML, or blast-phase MF, and certain subpopulations of myelodysplastic syndromes/myeloproliferative neoplasms (MDS/MPN), or MDS. We may determine to initiate pilot studies in other hematologic myeloid malignancies, including MDS and/or AML."
What is striking here is the disclosure that the Mayo Trials were rapidly enrolling and despite the Abstracts mention of only 33 patients, there actually were more than 50 enrolled by then. Less
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Data cont
After Dr. Tefferi spoke again about the 22 patients at ASH on December 9, 2013, Dr. Scarlett held an immediate investor conference to get the information into the public domain.
First and foremost, Dr. Scarlett confirmed that GERN had audited the data and came to the same conclusions as Dr. Tefferi. This adoption of the data by GERN is very important to confirm its reliability.
Second, Dr. Scarlett revealed that as of Mid October, 2013, all the responses were still holding.
Third, Dr. Scarlett announced for the first time that GERN definitely was going to conduct a multi center trial. This is the first time that GERN made that commitment and signifies an unexplained change in the data analysis. Something is improving, but what it is was not stated.
However, at that time, he did NOT announce that GERN would do pilot studies in AML or MDS, although the SEC filings said these were under consideration based on the data to be obtained from the Mayo Clinic.
So we know that additional data from the 50 patients was sufficient to justify a commitment to a multi center trial. By this time we definitely know that responses can emerge rapidly after enrollment. So,.the announcement of the added GERN sponsored trial is a clear clue that the "responses" are continuing in the newly enrolled patients. The addition of more into the Mayo Trial would not be occurring if the responses were not favorable.
However, as I write this on Jan 20, 2014, no more responses have been reported and the Tefferi/Scarlett team is holding back some information that everyone wants to see. The reasons for it being held back are not yet clear
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Part 1 Data cont
Word was getting out that, if you have MF, you want to get enrolled in the Imetelstat trials where remissions were being achieved. The Mayo Clinic was being flooded with requests, often with very sick MF patients seeking a last try at staying alive.
Another thing was interesting about this discussion, GERN was not willing or able to disclose anything about efficacy in any of the additional patients.
Now, if you have stayed with me this far for the history lesson, this is where it will start to get interesting because I am going to help you with some of the conclusions you may want to draw.
The first conclusion may be obvious to some, and not others. GERN knows more about the Mayo Clinic trials than they are allowed to reveal. There is a working agreement between the Mayo Clinic and GERN that covers who owns the data (Dr. Tefferi) but who has rights to obtain it (GERN) and when and under what conditions it can be disclosed to regulators (like the FDA) and the Public. You can rest assured that everyone has protected themselves and this has given GERN a great deal of required access to the data.
On the other hand, it is investigator controlled data and we must assume that Dr. Tefferi okayed the release of the information in the SEC filing, including the expansion of the MF trials to over 50 patients.
Since Dr. Tefferi has been known to reveal CRs and PRs to Dr Scarlett before they go public, it is quite probably that this has continued and you should conclude that GERNs later decisions are being informed by this important information that has not yet been made public.
There are many considerations that are affecting how fast the data is being revealed, but Dr. Tefferi and Dr. Scarlett both must know that they may be making a part of medical history that will be spoken about in years to come. As one commentator said, in days to come, the world may be asking for their autographs!
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Data part cont
As the morning light shines, a new day is dawning on our data. The petals of the rose are slowly spreading out to reveal its beauty.
At the JPM presentation on Jan 15, 2014, GERN enlightened its audience with news that Dr Tefferi had relesed an update on the first 22 patients, and that none of them had lost their response, adding a full 3 months to the durability of the response reported at ASH.
While no specific efficacy data was released on other patients and Dr. Scarlett ducked a question about AML responses which have been rumored, GERN made the big step forward to announce it was going to conduct its own pilot trials in AML and MDS.
I will have more to say about this decision under the Deals section of this report, but for now, it is important to recognize that Dr. Tefferi is enrolling these additional indications in early November, and now, in Mid January, GERN is committing to conduct its own pilot trials. Hmmm.
Can this mean anything other than Dr. Tefferi has reported to GERN sufficient responses that GERN, who is carefully marshaling their resources to get a MF trial completed, now for some reason is going to spend money on AML and MDS trials--not just IST trials at Mayo Clinic, but their own trials, where they will own the data. What is going on here?
Well, based on GERN reports, more patients are being enrolled in the Mayo Trials. On 11/7/13, the SEC filing states more than 50 patients, but by the Ash presentation on 12/9/13, Dr Scarlett spoke of nearly 60 patients in the study.
And by January 15, 2014, Dr. Scarlett tells us there are two new cohorts of 11 patients enrolling, one in "blast phase" MF and the other in MDS, although Dr. Scarlett does not know if either are fully enrolled or even how many are enrolled in either of them.
The plan laid out at JPM, clearly puts the new emphasis on RARs, a subclass of MDS. What this specific info implies about collected data is vague and uncertain at this time.But clearly good!
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Data Cont.
It also bears mention that in addition to the SEC report filed on 11/7/13, GERN also put out a press release containing the information I have been discussing. In that PR, GERN said,
"In addition, the investigator has informed the company that enrollment has commenced in additional cohorts to evaluate the safety and efficacy of imetelstat using different dosing algorithms, as well as to evaluate imetelstat in different patient populations, including patients with MF that has transformed into AML, or blast-phase MF, and certain subpopulations of myelodysplastic syndromes/myeloproliferative neoplasms (MDS/MPN), or MDS."
The useful thing to see is how the information flow has progressed, what is now collected but not yet released, and what inferences may be reasonably be drawn from the JPM trial plan about the data and about the Deals that GERN is working on.
As to the data, it is not possible to say how many patients are enrolled now in MF trials. From 11/13 to 12/14 there were about 60 patients enrolled in all the trials, and there was a three week halt by the FDA. That is an average of about 5 new enrollments per month. If enrollments are continuing at that pace, by Jan 15, the trials would be open for 13 months so, approximately 65 patients is a good guess.
Why RARs patients are mentioned in the GERN plan released at JPM was not explained. What does GERN know to focus specifically on that subclassification of MDS? Perhaps nothing more than that is an easier category of MDS to try to obtain a remission; or maybe, just maybe, Dr. Tefferi has already shown that you can get a remission in RARs MDS using Imetelstat?
So, in summary, their are about 60 to 65 patients enrolled in Mayo Clinic trials using Imetelstat on three indications, MF, AML and MDS, where the MF trials required 2 responses to move forward with enrollments. So far, there is no official report of 2 responses in AML or MDS, but GERN has declared it will do co.sponsored pilot studies.
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Deals
First, I cite Roche. They own the largest cancer drug franchise in Avastin, a drug that is a proven pan cancer drug worth perhaps 100 Billion! That company has everything that GERN needs to explore the potential of Imetelstat. They have the money, the human talent, the past experience with cancer drug trials and FDA approvals, and they have the big marketing organization that could get Imetelstat rolled out and sold to those doctors that could use it; and they have the need to maintain their grow, their sales, their profits and their competition with other cancer drug companies.
In my estimation, Roche would make a perfect partner for GERN and GERN would certainly benefit if the two companies combined forces to get Imetelstat approved for one or more indications.
My second company is Merck. I have posted over the last week some penetrating new information about Merck. This once top pharma has undergone a change for the worse. Over the last 8 years they have failed to maintain their past record of strong drug development. As a result, their current management is making some big changes to develop or buy new drugs. Authority has been delegated to many new managers to make deals. It is a giant drug company with tons of money and resources, like Roche, but it is especially hungry. GERN, I should think, makes a great candidate, even if it might be classified as an early stage company without a phase III underway.
In this post 2012 world of Break through therapy designations, all companies like GERN with BTD potential drugs are going to look better than they did in the past to these big pharma giants. Therefore I have concluded that Merck, who has worked with GERN before with telomerase vaccines is a prime candidate.
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Part 2 Deals
When GERN began business, 24 years ago, almost no one in the research world had ever heard of telomerase and few knew anything about telomeres. Today, it can fairly be said that GERN has been the leader in this very important field of cancer research, and as a result of its efforts in large part, the research literature contains thousands of articles and papers about this subject and why telomerase inhibition is a potentially good target for a cancer drug.
This is no longer a little niche idea. It has gone mainstream. Modern medicine wants to know if telomerase inhibition can have efficacy in the fight against cancers. Entire books and papers have been written about this.
And, it is widely recognized that if the answer is yes, perhaps 90% of all cancers that up regulate telomerase may be reachable. In other words, it is well known that Imetelstat could become a pan-cancer drug, as some refer to it.
I start with this because it is my belief that the time has never been more ripe for GERN to be looking for a deal to advance their Imetelstat program in a world that is ready to fully test and explore a drug which is getting spectacular results in ET and MF, suggesting it will be fulfilling the theoretical promise of a telomerase inhibitor in those indications and provoking the questions about AML, MDS and what's next? MM? . .
The second preliminary matter I want to discuss is who are the candidates that are likely to have an interest in doing a deal with GERN?
to answer that question, you need to ask, Which are the companies that have something that GERN needs and would be willing to pay GERN for what GERN has?
This is not a difficult list and I will just offer three examples of big pharma that must be interested in GERNs technology and imetelstat in particular. I think I could enlarge this list to over a dozen if I set out to do it.
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Right now, there are many things saying it is premature for GERN to lock down any deal or partner. The earliest logical time when this could occur is if a lot more extremely impressive data is announced by Tefferi. If the ORR response rate in MF can stay up at 40+% or better yet rise towards 60%, or if a slew of more CRs, and PRs are announced, they remain durable and they grow in number over time. Yes, then, with perhaps a sample size of 100 patients, GERN might get some big pharma interested enough to pay the price that GERN wants. But it is pretty hopeless now to expect GERN to find someone that will give it the Bucks that it is going to ask for.They just won;t get close if GERN does not severely discount Imetelstat.
Again, I don't see the need now for GERN to drop its price just to get a deal. Dr. Scarlett knows what he potentially has to sell and I don't agree with those who have said he is intentionally lowering GERNs PPS and looking for a quick low ball deal. I could be wrong, of course, but negotiation 101 says that Dr. Scarlett started the game at JPM.
What he did there is to imply that he can handle the entire multi center trial without a partner. He will have the option based on his projections of costs to go it alone at least that far. And he can augment funds at any time with his shelf offering.
Besides putting a low cost on the 150 man trial, everyone knows he has a BTD probably in the works. He even said, in a back handed way, that the only thing he needs is to develop his surrogate endpoints.
Add to those elements the new wild cards that AML and MDS bring to the table, Dr. Scarlett is clearly working on a valuation equation for GERN that will be boosted by an order of magnitude of 5 times if he can get evidence that Imetelstat can be used for much less rare blood diseases. The discounted cash flow computations go way up with either AML or MDS added in. So, I think we must not expect a deal now.
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Deals cont.
Even assuming there might be a match, there are an obvious catelogue of factors that are slowing the forming of the match and the signing of the contract.
First, There are two big issues that dominate. 1. What is the likelihood that Imetelstat will become an approved drug? and 2. How much income and net profit can Imetelstat be expected to generate if it does become an approved drug. There is a large family of sub-questions under each of the big two. In short, the problem of what to pay for GERN is hard to calculate. GERN as a seller wants to maximize its selling price for what ever it sells or licenses. But the buyer wants to minimize this.
Second, the value of GERN is a moving target constantly changing as data is obtained that may help assess the probability that it can win FDA approval and even more, the value keeps changing as one attempts to determine which indications Imetelstat may be approved to treat. The calculation presents a complex multiple regression analysis and the answers are going to depend heavily on the assumptions, Ie different players will make different assumptions and results can vary a great deal.
Third, a very big part of the problem for a "buyer" of rights is to assess whether there are any other credible buyers, and what other buyer's may offer. Of course GERN wishes to generate a bidding war and as much competition as possible.
Fourth, is the massively important question of when GERN decides to sell anything. If the value of the asset Imetelstat is growing as data is released by the Mayo Clinic, GERN has every incentive to keep the product off the market and let it appreciate. Why sell it when their is so much more data already in the can waiting for release. This goes double if GERN knows that data is good and will enhance the value.
Fifth, even if GERN gets a good offer, why take it when the data is still improving. Once GERN knows it can make a good sale, shouldn't it hold out for better data and a better number?
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Deals cont
Okay so those 9 items listed above are some general considerations. Lets look at a few key developments to assess what is really going on.
We currently know that GERN needs money to move Imetelstat to an NDA approval; and we can see that to minimize the burn rate they the have reduced their staff greatly. This GERN is lean and mean, but it is far less capable of working successfully with the FDA and it has no sales organization if it ever got a drug approved. It plainly needs help. Both money and know how support, and they also need the kind of good people working with them on the NDA as they have obtained at the Mayo Clinic on these early trials. In short, GERN is very needy.
Their AT Market shelf is a key counter weapon. So long as they have that ready to go, they have an alternative and this plays a big role in negotiations. Do you have an alternative or can you make the persons on the other side of the table believe you have an alternative to a low ball offer.
GERN logically must be working very carefully to try to get multiple parties interested so that there will be competitive alternatives too. But this takes more time; and the greatest likelihood of getting competive offers is going to happen if GERN waits and develops some better data. Most deals of any size happen in Phase III after the prospects look good. Most of the time, Big Pharma only swoops in to do a deal after it is clear there will be a drug approval, or at least the odds are known to be good.
At this stage, with only an IST that has "preliminary data" that looks good, even though their may be fast track potential, the "Buyer" should be expected to wait for more clairity unless there is known to be a competitive suiter that will buy early.
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Deals cont
Sixth, since the ASH data is only a little over 1 month old and that is the first data that puts great value on GERNs Imetelstat, it is simply far too soon to expect deal making to have progressed much yet.
Seventh, for those of us that used to listen to Tom Okarma talk about partnership, you know that GERN can fail to make a deal and Imetelstat is probably a product that he attempted to peddle unsuccessfully, so there is the looked at that, rejected a deal problem. Even though Dr. Scarlett has much more to work with now than Tom Okarma ever had, at least with Imetelstat, this asset has been shopped before. Since the value should be greater, GERN probably is asking a lot more for Imetelstat than it previously did ask.
Eighth, Dr. Scarlett's GERN has never spoken about partnership or deals before. Recently, GERN was invited to and attended a conference for companies looking for partners. GERN has only begun to look seriously for the right partner and the word was not even on their lips until it found its way into the JPM slides. It looks to me like GERN is just starting to explore what kind of offer it can get.
Ninth, there is no rush for GERN, as time is on its side. The longer it can wait, the more data and valuation creation is possible. At the present time the market is placing a very low value on GERNs asset, Imetelstat. Moreover, it is trading on the low side of its range. This is not conducive to finding a buyer of rights. And there is no real worry that barbarians will come to the gate and make a unwelcome offer because they have defenses in place that make that unlikely to succeed. Aside from the fact that they can just say no to a low ball deal, GERN has the right to issue preferred shares to block any takeover bids. So, who over they marry, it is not likely to be a shotgun wedding.
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Deals cont
For my third large pharma with an obvious interest in GERN I will name Novartis. It has developed the leading Jak2 drug and it occupies the same space as GERN is looking at. It has the money, the human resources, the extensive expertise working with the FDA, a great interest in GERNs patents, and there is a natural fit between the JAK2 inhibitors and the telomerase inhibitor. How those two drugs can work together is a significant question, and no one better than Novartis can work on the answer. Moreover, from a position of securing its market with a potential new first line drug, this makes all the sense in the world to Novartis
There are many more big US companies (eg PFE) that could benefit from increasing their drug pipeline and might be tempted by the results show so far with ET and MF, and if you look at the problem from a "territorial" perspective, there are many foreign base companies that would be willing to divide up the world and buy license rights in some territory or terrorizes.
So, why has there been no deal so far? The exact answer to that question requires insider knowledge which this author does not possess, so I will simply furnish the broad outlines of the answer.
Any deal, no matter which one, requires both sides want it. GERN is not going to want any deal that does not provide it a great deal of funding. The deals I foresee for GERN involves up front payments to GERN between $100 Million for some simple licenses, and up to $1 Billion or more for control of Imetelstat. If I am right, there is a lot of money at stake. GERN has already expended nearly $900 Million of SHs money getting this far. It is not going to be easy to find a match between what GERN wants and what some other company will be willing to pay.
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Dilution Part 3
So, what about those that want to figure out their investments. How much can GERN tell them about their plans? Not very much!
Are they going to make a dilutive sale of stock? Hopefully, they have good data coming and they can afford to wait. But there can be no guarantee if or when they will decide they need to raise capital. Part of the negotiation with a partner is to get front money so they don't have to dilute in the open market. But if they do find a partner there will undoubtedly be a buy in by the partner that will dilute. But the market will see that deal as accretive not dilutive and the stock likely will rise, not fall.
Unfortunately for those shareholders that wish GERN would tell them everything ahead of time, they simply can't. They can not announce they will dilute as the stock price would quickly decline. GERN cannot promise not to dilute. They just need to act in the Shareholder's best interest.
They can not lay it out for you what they want to do, beyond telling you then seek a partner. This is a major league negotiation over a valuable drug asset and you just don't tell your negotiation opponents what you are thinking about or willing to do.
Indeed, you are more likely to feed them misinformation or bluffs than let them know if you are disparate. From where I sit, it looks to me like the JPM presentation was round 1 in the bargaining plan. The message they sent is they are not rushed, and that they are not forced to do a secondary any time soon.
There is no immediate need for a capital raise or a secondary and there has been none done. Shareholders must wait and see if GERN can gain funds from selling assets or partnering, or if there will be dilution. At least while the Asterias distribution is pending, they may eschew any secondary.
My bet is that they will get money from a partner and never do a secondary. But that is a data centric question, not yet answered.
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