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Geron's (GERN) Q4 Loss In Line, Revenues Beat, Stock Up

Zacks Equity Research

Geron Corporation GERN incurred an adjusted loss of 5 cents (excluding settlement gains and change in equity fair value) per share in fourth-quarter 2018, in line with the Zacks Consensus Estimate as well as the year-ago quarter loss.

Quarterly revenues nearly doubled from the year-ago quarter number to $0.38 million, which outpaced the Zacks Consensus Estimate of $0.22 million. Revenues comprised royalty and license fee revenues received under various non-imetelstat license agreements.

Shares were up 1.4% in after-market trading on Mar 7. So far this year, shares of Geron have gained 43% compared with the industry’s 11.1% rally.

Research and development (R&D) expense more than doubled to $5.1 million. Following the termination of collaboration with Janssen, a subsidiary of J&J JNJ, for imetelstat development, Geron bears full development cost that was earlier shared equally with Janssen. This led to the significant increase in R&D expenses.

On the flip side, general and administrative (G&A) expenses fell 10.9% to $4.9 million due to lower personnel-related expenses, partially offset by higher consulting and legal expenses.

Geron ended the quarter with $182 million in cash and investments compared with $184.8 million at the end of the third quarter.

Full-Year Results

Geron’s yearly revenues remained flat year over year at $1.1 million in 2018. The company incurred an adjusted loss of 16 cents per share, narrower than the year-ago loss of 18 cents per share.

Pipeline Update

Following the termination of the agreement with Janssen in September 2018, Geron regained global development rights to imetelstat and decided to continue developing imetelstat independently. The transfer of rights to imetelstat from Janssen to Geron will be complete in the third quarter of 2019.

Currently, Geron is developing imetelstat as treatment for myelofibrosis and myelodysplastic syndromes (MDS).

A 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.

Also, a phase II/III study, IMerge, is evaluating imetelstat in MDS. Geron remains confident about the potential of the candidate in the MDS indication based on supportive data from initial and expansion arms of phase II portion of IMerge study. The company expects to start enrollment in the phase III portion of the study by mid-2019.

2019 Guidance

Geron announced that it expects operating expenses to be in the range of $65-$70 million in 2019. This will include few one-time costs related to transition of imetestat and transfer of investigational new drug (“IND”) sponsorship from Janssen to Geron among others. The significant increase in estimated operating expenses is also due to the fact that Geron is planning to expand its development team for imtelstat.

Our Take

With the termination of the agreement with Janssen, Geron lost a strong and experienced partner as well as its major source of funds. Although the cash resources, as of 2018 end, will be sufficient to initiate the phase III portion of the IMerge study in MDS but it is not enough to support the continuation of the study. Meanwhile, operating expenses are increasing as J&J shared half of the imetelstat development costs in the past.

We expect that the company might face serious difficulties if it is unable to find new avenues for funds like new partnerships or share sale.

Geron Corporation Price, Consensus and EPS Surprise

 

Geron Corporation Price, Consensus and EPS Surprise | Geron Corporation Quote

Zacks Rank & Stocks to Consider

Geron currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the pharmaceutical sector include Celgene Corporation CELG and Genomic Health, Inc. GHDX. While Celgene sports a Zacks Rank #1 (Strong Buy), Genomic Health carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene’s earnings estimates have been revised 7.8% upward for 2019 and 4.7% for 2020 over the past 60 days. The stock has rallied almost 33.7% so far this year.

Genomic Health’s earnings estimates have moved north 21.1% for 2019 and 4.5% for 2020 over the past 60 days. The stock has gained 14.1% so far this year.

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