Geron Narrows Loss on Lower Costs

Geron Corporation ( GERN - Analyst Report ) posted a net loss of 15 cents per share in the first quarter of 2012, narrower than the Zacks Consensus loss Estimate of 18 cents and the year-ago loss of 20 cents. First quarter revenues of $1.3 million were well above the Zacks Consensus Estimate of $500,000 but below the year-ago revenues of $1.5 million. A significant decline in expenses led to the narrower loss.

Quarter in Detail

Revenues consisted entirely of royalties and license fees. Geron has several license agreements with various oncology, diagnostics, research tools, agriculture and biologics production companies. Geron did not recognize any revenues from collaborative agreements in the reported quarter.

Total operating expenses declined 22% to $20.2 million. Research and development expenses declined 10.1% to $15.1 million due to reduced personnel-related costs and lower scientific supply expenses resulting from the discontinuation of the stem cell programs. This was partially offset by higher costs related to the studies being conducted with imetelstat and GRN1005. Meanwhile, general and administrative expenses fell 44% to $5.1 million. Lower personnel-related expenses resulting from management transitions led to the decline.

In November 2011, Geron had announced its intention to exit the stem cell research market. The company, which was a leader in stem cell research, intends to focus on its oncology programs instead.

Key candidates in the oncology program include imetelstat, which is currently in four phase II studies (non-small cell lung cancer, breast cancer, essential thrombocythemia and multiple myeloma), and GRN1005 (in phase II studies for brain metastases arising from non-small cell lung cancer and breast cancer). While top-line data from the imetelstat breast cancer and non-small cell lung cancer studies should be out by year end, top-line data on GRN1005 should be available before the end of the second quarter of 2013.

During 2012, Geron expects cash usage of about $65 million.

As far as the stem cell candidates are concerned, Geron intends to divest these programs including GRNOPC1 (currently in phase I for spinal cord injury), programs in cardiomyocytes for heart disease, pancreatic islet cells for diabetes, dendritic cells as an immunotherapy vehicle and chondrocytes for cartilage repair.

Neutral on Geron

We currently have a Neutral recommendation on Geron. While the company’s decision to focus on oncology should deliver in the long-term, we expect the stock to remain range-bound in the near term given the lack of catalysts. Results from the oncology candidates should start coming out in late 2012 - we prefer to remain on the sidelines until we see data on these candidates.