Geron Corporation (GERN - Analyst Report) faced another pipeline setback recently with the company deciding to scrap the development of its phase II oncology candidate, GRN1005. GRN1005, which became a part of Geron’s pipeline under an agreement with Angiochem, Inc., was being studied for the treatment of cancers in the brain.
Geron decided to discontinue the development of the candidate based on an interim analysis of a phase II study (GRABM-B) being conducted in patients with brain metastases arising from breast cancer. Results showed that there were no confirmed intra-cranial responses.
Meanwhile, Geron decided to discontinue another phase II study (GRABM-L - patients with brain metastases arising from non-small cell lung cancer) due to enrolment issues.
Following its decision to discontinue the development of GRN1005, Geron sent a termination notice to Angiochem for the exclusive license agreement granting Geron rights to GRN1005 as well as an associated research collaboration and option agreement.
In addition to announcing the discontinuation of GRN1005, Geron said that it will be cutting down its workforce by 43 positions. The company expects to cut down its cash spend from $65 million in 2012 to $33 million in 2013. This includes restructuring costs of about $3 million and study discontinuation costs of about $3 million. The company expects to exit 2012 with cash and investments of about $90 million.
Geron also announced the departure of its Chief Financial Officer, Graham Cooper, who will be replaced by Olivia Bloom, the current Vice President of Finance, Chief Accounting Officer and Treasurer, effective Dec 7.
The discontinuation of GRN1005 is a major setback for Geron. Shares were down more than 20% on the news. This is the second major pipeline setback for Geron in the last few months. Geron suffered a huge setback earlier in September with the discontinuation of its oncology candidate, imetelstat, for breast cancer. Moreover, the company had said that the chances of moving the candidate into phase III development for NSCLC are pretty low.
Given the imetelstat update, hopes were pinned on the successful development of GRN1005. However, with GRN1005 also disappointing, Geron now only has imetelstat to bank on. Geron said that it intends to focus on the development of imetelstat for hematologic myeloid malignancies and in patients with solid tumors that have short telomeres.
The company will be reporting results on imetelstat from a phase II study conducted in patients with essential thrombocythemia on Dec 9. Although the company said that the data is promising, we prefer remaining on the sidelines until we gain more visibility on the late-stage development potential of imetelstat. Meanwhile, we note that Geron has entered into a non-binding letter of intent (LOI) with BioTime, Inc. and BioTime`s subsidiary, BioTime Acquisition Corporation (BAC), regarding Geron's stem cell program.
We currently have a Neutral recommendation on Geron, which carries a Zacks #3 Rank (Hold).