This was a nice format, fireside-type discussion with Chip and Piper analyst:
-Four sources of value creation for 2014:
1. Profound activity of the drug at the end of 2013
2. Off of clinical hold - based on strong data presented to FDA
3. Janssen partnership
4. Transfer of IND from Mayo Clinic to Geron
It was apparent in the discussion that Janssen pursued Geron. Janssen sees the drug as transformational and while other companies and PI's showed strong interest, it was clear that Janssen sees the potential. Janssen has an oncology group that is 10x the size of Geron - so 450 cancer scientists and doctors waiting to get underneath the covers here. Overall the sheer power of Janssen with 35k people, a substantial presence in key malignancies and a strong hematology and oncology presence make them the perfect partner.
THESE TWO THINGS ARE IMPORTANT:
- Both sides were surprised they could move forward on the basis of 22 people in the study, based on such a small data set. "Janssen is VERY, VERY positive about the data." My read: Everyone is so shocked by the results - complete remission, partial remission and clinical improvements - they believe they have found a cure for cancer.
- The first part of the deal is for $35m, and Chip added, "and a continuation, part of the up front payment, will take it into triple digits." I had not heard that before, thinking that after the $35m they wouldn't see the next big payment until mid-2015 when the next trial is targeted to begin. Sounds like this other $65m comes sooner.
Chip was encouraging about the 2 presentations and 3 papers being presented at ASH. Earlier in the talk he mentioned that Dr. Tefferi would be making an MDS presentation at an as-yet-to-be-determined medical conference in 2015. He seemed to allude to something more in that.
From an investment standpoint I think this is a two to three year hold with a substantial upside.
Sentiment: Strong Buy
THE NEED TO DISCOVER, IMPROVE, AND ADVANCE
The results of a Mayo Clinic study demonstrate that
a drug named imetelstat induces remissions in some
patients with myelofibrosis. This is a form of chronic
leukemia that affects the patient’s bone marrow
that is replaced by fibrosis (scar tissue) instead
of blood-producing cells.
Scientists do not yet know the exact mechanism of
action for imetelstat, but believe it interferes with the
survival and proliferation of cancer cells by inhibiting
a critical enzyme called telomerase. One of the functions
of telomerase is to repair the ends of chromosomes
called telomeres, and because cancer cells have shorter
than normal telomere size, they are particularly susceptible
to the drug.
The study results are promising. Some patients
participating in the clinical trial taking imetelstat obtained
dramatic responses, and we have seen some complete
responses (tantamount to a cure), which is almost
unheard of in this disease.
Although patients may experience relief in response
to other treatments, their bone marrow does not
usually return to normal. But in the case of this new
therapy, some of the patients participating in the trial
developed normal bone marrow.
Researchers studied imetelstat in 33 patients at
Mayo Clinic and have now followed the first 22 patients
for more than six months. Among these 22 patients,
two achieved complete remissions and three partial
remission, including reversal of bone marrow fibrosis
in four of the five patients.
Sentiment: Strong Buy
Sdraw, excellent post. Thanks
Sentiment: Strong Buy
-11/6 - ASH abstracts to be published on line
-11/19 - Stiffel Health Care Conference - Geron presenting an update on imetelstat
12/6-9 - ASH annual conference
The call lasted 26 minutes, a few key points:
-Went over all the numbers - impressive that for the first six months of the year all key metrics are up at least 200%.
-Business model - Securities trading model - VP of strategy mentioned it might be similar to e-trade where less than 1/4 of their revenue comes from trading. The rest from other products and services. VP states they are offering products and services that will present JRJC with HIGH GROSS MARGINS AND HIGH PROFITS!
-Where will customers come from? They have millions of customers now who have trading accounts at other brokerages. They will convert them to use their full platform of products and services. Also, the new brokerage partners have millions of customers themselves that will use Securities Master platform.
-Expect to have the largest trading platform in China!!! Mobile trading platform is about to launch.
-Will be partnered with five firms (brokerages) by year end providing a wide choice of financial products. They did emphasize CITIC as a partner. (It is China's largest brokerage for stock trading and is state owned. It is also the state that is pushing stock trading as a major investment class.)
-There were only 4 or 5 questions. While this has been a pattern there was also no guidance. With the amount of change going on - understandable. In the past JRJC did give financial guidance.
Judge Boroff also provided a colorful analogy for the dispute between Apple and its would-be supplier. "I’m seeing what looks incredibly like a construction suit, where a homeowner says to the contractor, 'It didn't come out the way I wanted to,' and the contractor says, 'Well, it would have come out that way if you didn't continue to change the specifications.'"
Rosario, whenever you produce 400m of anything you have a commodity. What's good about INVN's chips is that they are valued by the customers of INVN for more function (software & algorithms), price (due to the fabless mfgr model) and power consumption (at least 1/3 lower than the closest competitor.) Having an edge in one of those categories could be "close." Having an edge in all three makes it a chip of choice - labeled or not.
Ha! What a deal for Geron. Hold lifted, J&J will invest $1b, Geron will get 20% of all future sales and tens of thousands of lives will be saved.
Sentiment: Strong Buy
Being a newbie to this field and a long time casual follower of GERN a few thoughts and questions have bubbled up, I'll put them down and invite yours in return:
1. From last Nov to March the price of the stock hovered around $4.50 and then with the hold it tanked. Now with the hold off and the FDA obviously impressed by the results of Imetelstat the price should be HIGHER than March for the simple reason the government has seen what Imetelstat is capable of. Let's say it should be at $6 with the hold off
2. Given that the price should be around $6 based on the hold coming off, now with Janssen, the pharmaceutical company of J&J, buying in quite strongly it would seem that ALONE should have propelled GERN up to $9. $35m upfront, $900m if Imetelstat perform over the trials, and up to low 20's% royalties on future sales is a strong commitment to GERN if everything works. The J&J partnership says they have knowledge about what Imetelstat is capable of and the fact they are taking over in such a strong way is an obvious commitment to get to the marketplace.
3. As additional results of Imetelstat's capabilities come out, such as through more detailed presentations like ASH, GERN stock would seem likely to advance further, say to around $12.
4. Given those thoughts above, why hasn't it responded financially?
a. Is it a slow build and will just keep improving, but not have the explosiveness associated with other bio breakthroughs?
b. Is it shorts working with marketmakers to make an orderly retreat?
c. Does the marketplace not believe what is occurring or not consider it significant enough - yet?
d. Would you recommend continued adding to a position here or wait till next year and more study data?
Every part of the numbers look bad. Y to Y comparisons:
- Cash dropped by $80m, receivables are up by $30m.
- Revenue and cost of revenue - if they kept the same gross margin their revenue would have been $116m - so they gave away $25m to gain market share.
- If you look at the geographies generating revenue - of the $90m - $64m are Korea and the US. China - for all we're hearing about China - it went from $6m to $12m! So essentially Apple and Samsung. Just great - Samsung's profits shrunk by 60% - think they'll be looking for lower prices? And Apple - the US revenue went from $8m to $29m. We saw what kind of customer Apple is with the GTAT debacle.
- $13m profit last Sept, $7m loss this Sept.
- Cash provided by Operations - $16m last Sept, minus $2.7m this year.
- Cash last Sept - $118m; this Sept $38m.
- There are 7m stock options expected to vest, vs about 1.5m last year.
- Assets went up by $66m, and liabilities went up by $51m - however goodwill went up by $90m. So sans goodwill assets dropped by $24m while liabilities continued rising to $51m.
These might be "exciting times" for Abdi, but they are not exciting times for INVN stockholders. Just awful financial results. Maybe sometime in the future this turns around, but not anytime soon. AND this was the quarter Abdi pointed to.
Would not be surprised if what's going on now looks like this:
-Judge is not at all pleased with seeing Apple bait a business on the edge as solar stalled. Apple wants to order 2000 furnaces from GTAT. There's dancing in the streets in Salem, NH. Apple switches and says - you make the furnaces, we'll loan you the money and here's our contracts you must abide by. GTAT strapped to stay alive buys in.
-Judge reads about all the specification switches by Apple, by them not agreeing to have back up power and now he wants to see when Apple contracted with Corning for GG for iphone 6's and when they told GTAT.
-Judge sees the agreement that Apple signed off on so quickly with GTAT, essentially letting them off the hook for $450m owed.
-Judge talks with Apple attorneys and tells them their actions and behavior did this to GTAT and that he thinks Apple owes GTAT more. Make them whole he tells the attorneys.
-Apple comes back and agrees to pay all creditors involved in sapphire and agrees to pay off the second bond.
-GTAT exits bankruptcy
-GTAT resumes trading on NASDAQ without the scarlet Q
-First orders for Merlon are announced. Financial confirmation is received on previously announced order in the middle east.
-GTAT exits 2014 with a backlog of $800m for 2015
-Guiterrez and Squiller retire. Chairman Matt Massengill assumes CEO role until Dave Keck can move back from China to take over
-Good presentation coming up tomorrow at Stiffel
-Even for a layman it states there are major breakthroughs occurring that are curing patients using Imetelstat
-Even better is that at the ASH meeting the are presenting data on triple the number reported in the Stiffel presentation.
Sentiment: Strong Buy
-Dr. Tefferi will continue making breakthroughs with his commitment to a cure for cancer
-Janssen is going to drive the science through to product approval
-Lives are going to be saved
-FDA will approve Imetelstat
-Shorts are going to have to buy back
-GERN is going to rise
Sentiment: Strong Buy
Read excerpts of the full Squiller memo. Incredibly bad deal for GTAT the way it played out - not in concept, since there is stated and implied mutuality, but in reality.
-Apple was in fact acting as a joint employer by giving direction and supervision to GTAT employees, despite being told not to.
-Apple, it can be seen clearly, was using GTAT as an R&D experiment for the development of sapphire
-Apple changed specifications and when GTAT was carrying them out, changed back again
-Apple implied they would buy the sapphire and at the same time in the contract said they had no obligation to - where is the mutuality?
-Apple wanted an R&D facitlity - it bought the place, intended to buy the furnaces and make its own sapphire, developed a cache of IP for sapphire and yet was conflicted on what this whole endeavor was all about.
-Apple at some point went to Corning and ordered Gorilla Glass enhanced with IONs - did they do this while still working with GTAT in the production of sapphire, and causing GTAT to continue to incur millions of dollars in cost?
You could go on for hours I imagine over this. While GTAT may be willing to settle with Apple and then deal with the rest of us, they should be suing Apple for all they are worth. It is clear that Apple had something else going on here. This was not a partnership - no partnership works like that.
Exactly. That whiner sounds like he is just mouthing the same junk that came from the Time magazine article, which was fed by Corning with some disinformation. GTAT will be just fine, though it is tough to sit through not having sapphire in the iphones - at this point.
Whatever, it is a buy here.
-Apple has shared with the mayor of Mesa that they want to keep the plant operating and employees working
-The mayor has shared with the media that Apple is indicating they may make a deal with another company to take over and keep the plant operating producing sapphire.
-Apple and GTAT are negotiating and will most likely reach some agreement that:
-allows Apple to take over complete control of the plant, IP, equipment and employees by buying the LLC GTAT set up for Mesa and in consideration Apple forgives the $600m debt.
-allows GTAT to keep it's sapphire operations in NH and allows it to market sapphire however it wants except for the communications type devices Apple produces
-Stockholders equity may be preserved at some price
-if GTAT reaches agreement with Apple outside of bankruptcy, the main issue - pressing financial obligations - might allow GTAT to resume business
-however, now that creditors committees have been formed, if it is settled prior to a judge accepting the bk petition GTAT will need to assure the creditors committee that it in fact has a solar business and can pay them.
-GTAT has said on a number of occasions that it expects revenue to be flowing from Merlin this quarter and that it expects to receive its first order for Hyperion shortly. It has also said that a major upgrade cycle is about to begin for solar reactors and furnaces. GTAT is an important component in the US solar business. It needs to continue.
GTAT has one of the top law firms in the world. They are in good hands
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1 hour ago
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I do hate to bring this up at this time, but, GTAT might just have one of the finest and most competent boards of directors in the country. So if I'm doing anything over the next week or two, I'm watching this chess match VERY closely. Something quite unexpected is likely to happen; the negative news already happened, now, let's see how they save this company. And it is worth saving since it is one of the major solar foundrys in the world, with a large IP portfolio, all of the top solar players as customers and an upgrade cycle about to begin.
Information coming out in the Squiller Memorandum suggests that Apple "controlled" every aspect of the GTAT enterprise in Mesa, essentially making them joint employers and "partners" in the venture.
-In labor law when one company exercises control over another companies employees in regard to wages, hours and working conditions they are usually found to be joint employers. Much of what we are reading suggests that Apple exercised "extreme" control over everything, people included, and essentially squeezed Mesa and GTAT so hard that all 700 mfgr employees lost their postions. Squiller's memo also says they dominated engineers time, and an earlier Statement of Work, introduced to the court, for the whole project is not a statement of work for what GTAT is expected to do to perform the contract, so that it, GTAT exercises its management prerogatives over its employees; the statement of work is another controlling document directing GTAT's attention to a myriad of sub statement and other contracts.
-As creditors, bondholders, and stockholders seek to recover moneys due and company ownership, Apple should be held as a joint owner of GTAT since they knew every aspect of the dire straights GTAT was in when GTAT signed on to produce sapphire, they exercised near total control of GTAT even beyond Mesa during the year plus effort and they gave and made GTAT use Apple's equipment beyond the furnaces.
As shareholders, you do not want this Apple/GTAT agreement agreed to by the court until all your issues are ALSO resolved. If a judge accepts what Apple and GTAT have drawn up you may be left with no recourse.
Apple should be on the hook for the role it played in signing up GTAT and then micro managing almost every aspect of what GTAT did, ultimately deciding, no, they did not want to buy the product they jointly made. In the meantime it was that relationship between the two companies that was heralded publicly that encouraged tens of thousands of individuals to invest.