Geron Stock: Just One More Year Of Patience, Then Decision Time (GERN)

Just when I thought Geron (GERN) could not go down any further, I see it is down 42% since my last coverage in June. That is sad, because in imetelstat Geron has one of the most promising, pioneering cancer technology in the sector, and yet, despite all its promise, the stock keeps going down and down. Some people, I know, blame poor execution on the part of management. Dr. John Scarlett has been Geron’s CEO since 2011. Prior to that, Dr. Scarlett was CEO of Proteolix, which was acquired by Onyx Pharma in 2009 for $811mn during his tenure. Proteolix owned license to Carfilzomib, a compound developed at the lab of Dr. Craig Crews at Yale. This was later approved by the FDA for relapsed or refractory 2nd line multiple myeloma, and is currently owned by Amgen (NASDAQ:AMGN) after its 2013 buyout of Onyx, where it became a blockbuster drug, bringing in nearly $1bn in global sales by 2018.

Before Proteolix, Scarlett was also the CEO of Tercica, which owned and developed an FDA-approved drug called Increlex. Tercica was acquired by Ipsen (OTCPK:IPSEY) during Scarlett’s tenure for $404mn.

I provide this history because this may reflect on the mindset of Geron management led by CEO Scarlett. John Scarlett once let go of a blockbuster potential drug for a relatively low price. Before that, he sold another company that later became a global biopharma major. I am guessing here, but Scarlett may be holding on to imetelstat – not selling out, I mean – because he has this prior experience in mind where he let go of opportunities after seeing them through proof of concept.

Anyway, this is just a lot of guesswork. Few people have figured out how company management works, let alone management as experienced in the industry as John Scarlett. Geron has a huge retail support group in social media, and over the years I have heard all sorts of opinions about Dr. Scarlett from that club. Most of these opinions are of the form – “he is raking in money while retail investors are losing.” There was a poem recently, posted in one of my articles:

I am sharing this because it is funny. I have no way to figure out whether these opinions are based on any information, or simply stem from frustration at the glacially slow speed at which Geron moves. But the biography discussion helps me form an opinion about why the CEO may want to run this down to the end without selling out when the price was good.

Coming to other updates since my June article, in December, Geron posted three abstracts at ASH 2021. These were:

Lower Risk Myelodysplastic Syndromes (MDS)

Abstract Title: On-Target Activity of Imetelstat Correlates with Clinical Benefits, Including Overall Survival (OS), in Heavily Transfused Non-Del(5q) Lower Risk MDS (LR-MDS) Relapsed/Refractory (R/R) to Erythropoiesis Stimulating Agents (ESAs) Abstract #2598

Refractory Myelofibrosis (MF)

Abstract Title:A Randomized Open-Label, Phase 3 Study to Evaluate Imetelstat Versus Best Available Therapy (BAT) in Patients with Intermediate-2 (Int-2) or High-risk Myelofibrosis (MF) Refractory to Janus Kinase Inhibitor (JAKi) Abstract #1503 Trials in Progress

Pre-Clinical Poster – Pediatric Acute Myeloid Leukemia

Abstract Title: Imetelstat Significantly Reduces Leukemia Stem Cells in Patient-Derived Xenograft Models of Pediatric AML Abstract #3352

The first abstract pertains to data on safety and efficacy of imetelstat from the IMerge phase 2 trial.

…that patients who achieved optimal pharmacodynamic (PD) effect achieved higher rates of red blood cell transfusion independence (RBC-TI), longer RBC-TI and a trend toward improved overall survival. Importantly, these patients did not have higher rates of Grade 3+ neutropenia, thrombocytopenia or liver function elevations compared to patients who did not achieve optimal PD effect.

A confirmatory phase 3 IMerge trial is fully enrolled and expected to readout topline data by January 2023. This is the lead indication. LR MDS is valued at $1.2bn in market potential across the US and EU.

The second poster is about an ongoing trial, the phase 3 registration-directed IMpactMF trial targeting refractory MF. No data here – the market potential is estimated to be $1.8bn across US+EU. The third is a preclinical poster.

Imetelstat has a Fast Track designation for two indications, non-del(5q) lower risk MDS patients refractory or resistant to an erythropoiesis stimulating agent, and Intermediate-2 or High-risk MF patients with relapsed or refractory disease after Janus associated kinase (JAK) inhibitor treatment. Together, the two indications have a market potentially valued at above $3bn per year, the US and EU combined.

In an investor event held last year, KOLs said good things about imetelstat’s potential in LR MDS and MF. In LR MDS, there remains an unmet need for patients who are ringed sideroblast negative. In MF, there are very few options remaining post failed JAKi treatment. KOLs think that Geron’s phase 2 data provides strong evidence that imetelstat can meet this unmet need. Not only so, the clinical benefits observed in these trials can only be possible if imetelstat is a disease-modifying therapy, because these patients are too far gone for anything else to work. If imetelstat is successful in the ongoing phase 3 trials, it will be transformative for this disease area. Indeed, analysts have said that cross-trial data seems to show imetelstat has a better profile and broader indication than Bristol Myers Squibb (NYSE:BMY) and Acceleron’s (NASDAQ:XLRN) Reblozyl (luspatercept-aamt).

Financials

GERN has a market cap of $334mn and a cash reserve of $215mn. Research and development expenses for the three months ended September 30, 2021 were $18.5 million, while general and administrative expenses were $7.3 million. At that rate, the company expects its cash to last to Q1 2023. This estimate includes expected future non-dilutive funding under a current debt facility. The IMerge phase 3 trial will be over by then, I expect. However, it will be at least one more year before approval in a best case scenario. So expect considerable dilution before that time. Since the stock is down and there’s no major near-term catalyst, expect a dilution from a position of weakness – unless Geron plays it very tight and waits until IMerge data. If that data is good, and the stock goes up, and then there’s a dilution, that will be bold but risky for Geron.

Bottomline

Geron is what it is; year after year, trial after trial, promises, promises. You take it, you leave it – management is in no hurry to make running deals and sweeping statements. I choose to leave it because I am a conservative investor. Others may think differently. The price, certainly, is at the edge of its 52-week and all-time range.