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Geron (GERN) Stock Up Despite Q2 Earnings & Sales Miss

Zacks Equity Research

Geron Corporation GERN incurred a loss of 8 cents per share in second-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 6 cents. In the year-ago quarter, the company had incurred a loss of 4 cents per share.

Quarterly revenues in the quarter came in at $0.1 million, which missed the Zacks Consensus Estimate of $0.2 million. Notably, the top line comprised royalty and license fee revenues received under various non-imetelstat license agreements. In the year-ago quarter, revenues totaled $0.21 million. Revenues declined as the number of active license agreements declined due to expiry of patents of Geron’s underlying technology.

Research and development (R&D) expense were up 215% year over year to $10.1 million. Transition costs, including resuming sponsorship of imetelstat clinical studies from J&J JNJ, costs related to start-up of phase III portion of the IMerge study (evaluating imetelstat in myelodysplastic syndromes) and expansion of development team, resulted in the significant increase in R&D expenses.

General and administrative (G&A) expenses rose 23.8% to $5.2 million, reflecting legal costs related to patent litigations and recruitment expenses for additional headcounts.

Geron ended the second quarter with $162.3 million in cash and investments compared with $170 million at the end of the first quarter.

2019 Guidance

Geron anticipates its full-year operating expense to lie in the range of $80-$85 million. This includes one-time cost of $20-$25 million related to activities for transition of imetelstat from Janssen to Geron and purchase of material for the phase III portion of IMerge study. Geron expects to end 2019 with approximately $100 million in cash and investments.

Pipeline Update

Following the termination of the agreement with Janssen, a subsidiary of J&J, in September 2018, Geron regained global development rights to imetelstat and decided to continue developing imetelstat independently. The transition activities, including ex-U.S. clinical and regulatory responsibilities, are expected to be completed in the third quarter.

Geron assumed sponsorship of the investigational new drug application for imetelstat in May this year. By August end, the company will initiate enrollment in the planned phase III portion of phase II/III study, IMerge, in patients who have not received prior treatment with hypomethylating agents and lenalidomide. This may have led to the price rally of more than 5% in shares of Geron in after-market trading on Aug 1. So far this year, the stock has gained 15% against the industry’s 0.4% decrease.

Another phase II study – IMbark – is evaluating the candidate in myelofibrosis. In December, Geron presented updated median overall survival (“OS”) data from the higher dosage arm (9.4 mg/kg) of the study. The candidate achieved median OS of 29.9 months, which suggests a meaningful survival outcome. A decision on the path toward late-stage development in myelofibrosis is expected to be announced by the third quarter of 2019.

Geron Corporation Price, Consensus and EPS Surprise

Geron Corporation Price, Consensus and EPS Surprise

Geron Corporation price-consensus-eps-surprise-chart | Geron Corporation Quote

Zacks Rank & Other Stocks to Consider

Geron currently carries a Zacks Rank #2 (Buy).

A couple of top-ranked biotech stocks include Axovant Sciences AXGT and Acorda Therapeutics ACOR, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Axovant’s loss estimates have narrowed from $7.00 to $5.34 for 2019 and from $6.48 to $3.59 for 2020 over the past 60 days.

Acorda’s loss estimates narrowed from $3.59 to $3.51 for 2019 and from $3.09 to $3.05 for 2020 over the past 60 days.

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