Geron Posts In-Line Loss

Geron Corporation ( GERN - Analyst Report ) posted a net loss of 14 cents per share in the second quarter of 2012, in-line with the Zacks Consensus loss Estimate but narrower than the year-ago loss of 17 cents. Second quarter revenues of $130,000 were well below the Zacks Consensus Estimate of $200,000 and the year-ago revenues of $462,000. 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 14.9% to $18.6 million. Research and development expenses declined 22.8% to $12.8 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 increased 9.3% to $5.8 million. Higher personnel-related expenses and legal fees associated with the company`s intellectual property portfolio led to the increase in general and administrative expenses. This was partially offset by lower stock-based compensation expense.

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 non-small cell lung cancer, multiple myeloma and essential thrombocythemia studies should be out by year end, the company now expects top-line data from the breast cancer study in the first quarter of 2013, instead of year end 2012. Meanwhile, 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.

Neutral on Geron

We currently have a Neutral recommendation on Geron, which carries a Zacks #3 Rank (short-term ‘Hold’ rating). While Geron’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. We prefer to remain on the sidelines until we see data on the oncology candidates.