Shares of Geron Corporation (GERN - Analyst Report) were down 6.09% after the company reported first quarter 2014 results. Geron posted a net loss of 6 cents per share in the first quarter of 2014, in line with the Zacks Consensus Estimate but narrower than the year-ago loss of 9 cents. First quarter revenues of $474,000 were below the year-ago revenues of $765,000 and the Zacks Consensus Estimate of $1 million. A significant decline in expenses led to the narrower loss.
Quarter in Detail
Revenues consisted entirely of royalties and license fees.
Total operating expenses declined 27.8% to $9.2 million. Research and development expenses declined 34.9% to $5.2 million due to reduced personnel-related costs as well as lower costs resulting from the winding-down of the imetelstat (metastatic breast cancer and advanced non-small cell lung cancer) and GRN1005 (brain metastases) studies. This was partially offset by higher costs related to the manufacturing of imetelstat.
Meanwhile, general and administrative expenses declined 15.9% to $4 million mainly due to lower patent costs and transaction expenses associated with the Oct 2013 closing of the stem cell divestiture.
R&D expenses will remain consistent through the rest of the year unless the full clinical hold on imetelstat is lifted by the FDA or the agency allows Geron to study imetelstat for other indications, potentially under a partial clinical hold. Meanwhile, general and administrative expenses are expected to increase through the rest of the year due to the purported class action lawsuits and derivative lawsuit filed against the company.
Geron expects cash operating expenses of $35 million–$40 million this year. The company expects that new clinical trials of imetelstat in hematologic myeloid malignancies (like a phase II study in patients with myelofibrosis) will commence in the first quarter of 2015 which means study startup costs will be incurred in the fourth quarter of 2014. The guidance also assumes continued manufacturing of imetelstat and support of the myelofibrosis IST at Mayo Clinic.
In Mar 2014, the FDA had placed a full clinical hold on the company’s only pipeline candidate, imetelstat. Subsequently, a partial clinical hold was placed on an investigator-sponsored study on imetelstat. This means that new patients cannot be enrolled in the study which is being conducted by Mayo Clinic.
The FDA is concerned about the occurrence of persistent low-grade liver function test (LFT) abnormalities in the phase II study for essential thrombocythemia/polycythemia vera as well as the potential risk of chronic liver injury following long-term exposure to imetelstat. The agency is concerned about the possibility of reversing these LFT abnormalities.
Mayo Clinic is working on compiling and analyzing the LFT data which will be submitted to the FDA to address the partial clinical hold. Geron is also working on gathering data required by the FDA.
Geron is a Zacks Rank #2 (Buy) stock. We expect investor focus to remain on Geron’s efforts to get the clinical hold removed. Some better-ranked stocks in the health care sector include Alexion Pharmaceuticals, Inc. (ALXN - Analyst Report), Gilead Sciences Inc. (GILD - Analyst Report) and Myriad Genetics Inc. (MYGN - Analyst Report). All three are Zacks Rank #1 (Strong Buy) stocks.