While praising the company's employees for theirpioneering role in moving stem cells closer to clinical utility, Geron CEO Dr. JohnA. Scarlett says that the economic landscape right now just doesn't make stemcell research a viable path for the company when it has promising cancertherapies that are more likely to turn profits in the foreseeable future. Thatmeans that nearly 40 percent of Geron's workforce is getting walking papers—66full-time positions total. As a result, the company expects one-time cashexpenditures of approximately $5 million in the fourth quarter of 2011 andapproximately $3 million in the first half of 2012. Geron expects to end 2011with cash and investments in excess of $150 million.
"In the current environment of capital scarcityand uncertain economic conditions, we intend to focus our resources onadvancing our Phase II clinical trials of imetelstat and GRN1005. These twonovel and promising oncology drug candidates target major unmet medical needsand have important clinical development milestones occurring over the next 20months," says Scarlett, who was brought on as CEO in late September to replace longtimeCEO Tom Okarma. "By narrowing our focus to the oncology therapeutic area, weanticipate having sufficient financial resources to reach these importantnear-term value inflection points for shareholders without the necessity ofraising additional capital. This would not be possible if we continue to fundthe stem cell programs at the current levels."
Scarlett insists that the decision to abandon stemcells has nothing to do with a lack of therapeutic potential and also nothingto do with any controversy around hESC research; instead, it was simply amatter of logic and economics, given that the oncology programs are muchfarther along.
Geron's hESC programs, for which the company isseeking partners or buyers, include oligodendrocyte progenitor cells (GRNOPC1)for central nervous system disorders, cardiomyocytes (GRNCM1) for heartdisease, pancreatic islet cells (GRNIC1) for diabetes, dendritic cells(GRNVAC2) as an immunotherapy vehicle and chondrocytes (GRNCHND1) for cartilagerepair.
The news of divesting the stem cell business followedclosely on the Nov. 3 financial report for Geron's third quarter of 2011. In Q3,the company reported a net loss of $19.5 million, or $0.16 per share, comparedto $18.3 million, or $0.19 per share, for the comparable 2010 period. Net lossfor the first nine months of 2011 was $65 million, or $0.52 per share, comparedto $52 million, or $0.54 per share, for the comparable 2010 period.
Revenues for the third quarter of 2011 were$220,000, well under half of the $546,000 seen in the comparable 2010 period.Revenues for the first nine months of 2011 were $2.2 million, compared to $2.5million for the comparable 2010 period.
With Geron out of the picture, Advanced CellTechnology is now the only company carrying out clinical trial work involving human embryonicstem cells, and Dr. Robert Lanza, the chief scientific officer of Advanced CellTechnology, has noted to the media that Geron leaving the market putssignificant pressure on his company.
"Stem cells continue to hold great medical promise,"Geron's Scarlett says. "We believe that our leadership role in the field andthe quality of our stem cell assets—which are widely recognized as being amongthe most innovative, comprehensive and advanced cell therapy programs in theworld—will be an important point of differentiation in our discussions topartner these assets."
To find a company or other entity to carry forththe stem cell work, Geron will retain a core group of employees from its stemcell operations through the end of the second quarter of 2012. As for ongoingtrial work in stem cells, Geron plans to close the GRNOPC1 trial for spinalcord injury to further enrollment, although it will continue to follow allenrolled patients, accruing data and updating the U.S. Food and DrugAdministration and the wider medical community on those patients' progress. Sofar, GRNOPC1 has been well-tolerated with no serious adverse events.
As for Geron moving forward, imetelstat iscurrently being evaluated in four Phase II clinical oncology studies for thefollowing indications: non-small cell lung cancer, breast cancer, essentialthrombocythemia and multiple myeloma. Geron expects top-line data from thesetrials to be available before the end of the fourth quarter of 2012. GRN1005 isentering two Phase II clinical trials this year, one for brain metastasesarising from non-small cell lung cancer and the other for brain metastases frombreast cancer. Geron expects top-line data from these trials to be availablebefore the end of the second quarter of 2013.
The oncology program basically breaks down intotwo areas: telomerase inhibition and LRP-directed peptide-drug conjugates.
For the telomerase inhibitor program, Geron'sproprietary nucleic acid chemistry platform is being used to generate potentand specific inhibitors of telomerase, an enzyme necessary for the indefinitereplicative capacity of many cancers and cancer stem cells. Imetelstat is the company'slead drug candidate in this program. With regard to the LRP-directedpeptide-drug conjugate program, the therapies are based on molecules thatdeliver anti-cancer drugs to tumors in the brain, including metastases—thereare currently no approved drug therapies for treating brain metastases,Scarlett notes. In the conjugates, the anti-cancer drugs are linked to apeptide designed to be actively transported across the blood-brain barrier vialipoprotein receptor-related protein (LRP) pathways, predominantly LRP1. LRP1is also upregulated in many tumors. GRN1005 is the company's lead drugcandidate in this program, and it has three paclitaxel molecules linked to aproprietary 19 amino acid peptide, Angiopep-2.
Zacks Investment Research wrote in an analyst notethat "Geron's announcement regarding its decision to exit stem cell therapycame as a surprise as the company was a leader in the field," adding that the company'sshares declined more than 20 percent on the news. "While the company's decisionto focus on oncology should deliver in the long term, we expect the stock toremain range-bound in the near term given the lack of catalysts. Results on theoncology candidates should start coming out in late 2012. We prefer to remainon the sidelines until we see data on these candidates. We remain Neutral onthe stock, which carries a Zacks #3 Rank (short-term Hold rating)."
At SeekingAlpha.com, contributor Henry McCuskersays that Geron's move will probably be widely seen as a setback for embryonicstem cell research versus adult stem cell research, because of the company's "centraland early role."
