Apr 26, 2013
Executives
Anna Krassowska - Investor and Media Relations Officer John A. Scarlett - Chief Executive Officer, President and Director Olivia Kyusuk Bloom - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance and Treasurer
Analysts
Charles C. Duncan - Piper Jaffray Companies, Research Division Chad J.
Messer - Needham & Company, LLC, Research Division Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division Jonathan Chang - Lazard Capital Markets LLC, Research Division
Operator
Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Geron Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Anna Krassowska, Head of Investor Relations.
You may proceed.
Anna Krassowska
Thank you, Frances. Good morning, everyone, and thank you for joining us for the Geron's first quarter 2013 earnings call.
With me today are Dr. John Scarlett, our President and Chief Executive Officer; Olivia Bloom, our Senior Vice President and Chief Financial Officer; and Craig Parker, our Senior Vice President of Corporate Development.
Today's call is also being webcast live on our website and will be available for replay until March 26. Before we begin, please note that except for statements of historical facts, the statements in this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
These include, without limitations, statements regarding the timelines, prospects and plans for imetelstat, including anticipated timelines for clinical study enrollments, clinical results and data, the therapeutic potential of imetelstat and financial or operational projections or requirements, including spending and cost savings guidance. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements.
Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in Geron's periodic reports filed with the Securities and Exchange Commission under the heading Risk Factors, including Geron's annual report on Form 10-K for the year ended December 31, 2012. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made, and the facts and assumptions underlying these forward-looking statements may change.
Except as required by law, Geron disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. I will now hand the call over to John Scarlett, our CEO.
John?
John A. Scarlett
Thanks, Anna. Good morning, everyone.
Yesterday afternoon in a press release, we provided an update on our development strategy for imetelstat including the status of the investigator-sponsored study in patients with myelofibrosis that is currently ongoing at the Mayo Clinic. We also announced that we're discontinuing our discovery research in companion diagnostics programs, reducing our workforce by 20 physicians, as well as not planning to advance clinical development of imetelstat in non-small cell lung cancer with short telomeres or in essential thrombocythemia.
The press release is available on our website. So this morning, I'd like to briefly discuss this update further, and then Olivia will provide a summary of the operating results for the first quarter ended March 31, 2013.
After that, we'll be happy to take your questions. So first, I'd like to comment on Dr.
Tefferi's myelofibrosis study at the Mayo Clinic. The study was originally designed last year after we and Dr.
Tefferi had began to see the results of our preceding imetelstat study in essential thrombocythemia, or ET, results that were subsequently reported at the American Society of Hematology meeting in December 2012. As many of you know, both ET and MF are myeloproliferative neoplasms.
In the case of ET, a malignant clone in the bone marrow results in the production of an increased number of megakaryocytes, which in turn cause elevated platelet counts. Our data showed that imetelstat not only reduced 93% of the patient's platelet counts to normal, but also resulted in molecular responses in 6 out of 7 patients with the JAK2 V617F mutation.
The reduction in the V617F allele burden strongly suggested that imetelstat was specifically inhibiting the malignant clone that was responsible for the elevated platelets in these patients and allowed us to infer that imetelstat was possibly disease-modifying in the ET. Because MF is also like ET, a myeloproliferative neoplasm, we and Dr.
Tefferi reasoned that imetelstat might have a similar disease-modifying effect in patients with MF, and therefore he initiated a study at the Mayo Clinic last year. His study is an open-label trial in patients with intermediate or high-risk primary or secondary MF, and it's designed to evaluate the safety and efficacy of imetelstat as well as determine an appropriate dose and schedule for further evaluation.
The primary endpoint is overall response rate, which is defined by the proportion of patients who were classed as responders. Meaning, that they have achieved either clinical improvement, or CI, partial remission, or PR, or complete remission, or CR, according to the International Working Group for Myeloma (sic) [Myelofibrosis] Research and Treatment criteria.
Secondary endpoint to the study include reduction of spleen size, transfusion independence, safety and tolerability. In patients in whom a JAK2 V617F mutation is present, which is the case with most MF patients, the V617F allele burden will be measured before and after imetelstat treatment.
When we began the study, one of the primary concerns was how tolerable imetelstat would be in the MF patients. MF is a disease in which much of the marrow's cellularity is replaced by collagen presumably generated by the malignant clone.
As a result, patients with an intermediate or high-risk MF often have low bone marrow reserves, that is low numbers of platelet white cells or red cells progenitors. Since imetelstat can cause cytopenias, Dr.
Tefferi selected a low-dose intensity for the first cohort of 11 patients. These patients received imetelstat every 21 days.
This was in contrast to the ET study in which patients were initially treated with imetelstat at weekly intervals. The protocol for the MF study preselected -- or sorry, it prespecified that in order for Dr.
Tefferi to continue the study beyond the first cohort, at least 2 responders, per the IWG-MRT criteria, had to be observed in the 11 patients treated in the cohort. Dr.
Tefferi has communicated to us that he has recently completed enrollment of the first cohort of 11 patients and that the prespecified criteria of at least 2 responders were met, thus enabling further enrollment. Since we have not yet independently reviewed the data from the MF study, we're not in a position to comment further today on the responses that Dr.
Tefferi has communicated to us. Dr.
Tefferi also informed us that the Mayo Clinic institutional review board has approved his protocol amendment to administer imetelstat with an increased dose intensity for a second patient cohort of an additional 11 patients. The increased dose intensity will be similar to that used in our ET study, by incorporating an induction phase with weekly dosing of up to 4 weeks, followed by a maintenance phase of dosing every 3 weeks.
Finally Dr. Tefferi has indicated to us that he expects to submit data from his MF study for presentation at the American Society for Hematology annual meeting to be held in December of this year.
We are pleased by the progress that Dr. Tefferi has made and expect that data from the study, if positive, will allow us to design and initiate a Geron-sponsored multicenter study in MF.
We believe that diseases such as MF represent the greatest value-creating opportunity for Geron because many patients have significant unmet medical needs. And unlike existing therapies, we believe imetelstat has the potential to be a disease-modifying treatment.
In addition to MF, we are working with select investigators to expand our directed program of investigator-sponsored trials in 2013 to other hematologic myeloid indications, such as acute myelogenous leukemia and myelodysplastic syndromes. When we have further clarity about the timelines for initiating such studies, we'll let you know.
Next, I'd like to briefly discuss why we're not planning to advance clinical development of imetelstat in ET. Because of the high clinical and molecular response rates we observed in ET patients treated with imetelstat, we considered whether we should develop the drug for commercial use in this disorder.
However, multiple medical experts advised us that ET patients are in fact adequately served by existing therapies. Therefore, they recommended that rather than pursuing an approval in ET, that we pursue other hematologic myeloid malignancies such as MF, where there is a clear unmet medical need for a product that could be disease-modifying.
The ET study was closed to enrollment of new patients at the end of last year after enrollment of a total of 18 patients with ET and 2 patients with polycythemia vera, or PV. However, we are continuing to treat and follow the patients who remain in the study, and we expect to present an update of the data that was originally presented at last year's ASH meeting, including longer-term follow up from these patients at the European Hematology Association annual meeting to be held in Stockholm in June.
I'd like to also comment on the status of our ongoing investigation into the liver function test observations from the ET study that we discussed on our year-end conference call in March. In an initial review of data from all of our other non-ET imetelstat trials, we found the patterns observed in the ET study were also observed in our non-ET studies, but with varying frequency.
No cases of Hy's Law have been observed and no new safety signals have emerged from this ongoing investigation. We have engaged several liver experts as consultants, and based on their initial reviews, there have been no recommendations to change imetelstat dosing or use.
We expect to conclude this investigation by the time of our next quarterly conference call. To support our focus on the clinical development of imetelstat in hematologic myeloid diseases, we announced yesterday that we are discontinuing our discovery research and companion diagnostics programs and closing our research laboratory facility.
This will result in a reduction in our workforce from 64 to 44 positions. While there will be cost savings in 2013 resulting from these actions, we do not expect a significant adjustment to the current operating budget for 2013 due to restructuring charges of approximately $1.9 million to be incurred in this year.
The discontinued programs and activities were expected to cost up to $19 million during the period 2014 through 2015. So I'd like to hand the call over to Olivia to review the first quarter financial results.
Olivia Kyusuk Bloom
Thanks, Chip. Good morning.
For the first quarter of 2013, the company reported operating revenues of $765,000 and operating expenses of $12.8 million, compared to $1.3 million and $20.2 million, respectively, for the comparable 2012 period. Net loss for the first quarter of 2013 was $11.9 million or $0.09 per share, compared to $18.7 million or $0.15 per share for the comparable 2012 period.
The company ended the first quarter of 2013 with $79.8 million in cash and investments. Revenues for the first quarter of 2013 and 2012 included royalty and license fee revenues under various agreements.
Interest and other income for the first quarter of 2013 was $81,000 compared to $176,000 for the comparable 2012 period. Research and development expenses for the first quarter of 2013 were $8 million compared to $15.1 million for the comparable 2012 period.
The decrease in research and development expenses primarily reflected reduced personnel-related costs, lower costs for the manufacturing of imetelstat and GRN1005 drug product and reduced clinical trial expenses with the wind down of the imetelstat trials in metastatic breast cancer and advanced non-small cell lung cancer as well as the GRN1005 trials in patients with brain metastases. General and administrative expenses for the first quarter of 2013 were $4.8 million compared to $5.1 million for the comparable 2012 period.
The decrease in general and administrative expenses primarily reflected a decline in personnel-related expenses associated with separations of employment of certain members of senior management. As Chip described, we'll be undergoing a restructuring to reduce our workforce from 64 positions to 44 full-time positions, representing a reduction of approximately 31% of our workforce.
We currently anticipate we will incur aggregate restructuring charges of approximately $1.9 million with the majority expected to be recognized in the second quarter of 2013. The cash portion of the restructuring charges is approximately $1.3 million, and the majority of payments are expected to be made in 2013.
These cash expenditures represent one-time termination benefits of approximately $620,000 and facility-related cost of approximately $650,000. The noncash portion of the restructuring charges is approximately $600,000 and reflects stock-based compensation expense of approximately $20,000 and write-downs to lab equipment and leasehold improvement of approximately $570,000.
We may incur other charges and will record these expenses in the appropriate period as they are determined. We plan to sell any excess equipment.
The net proceeds of which, if any, may offset some of these future charges. And that covers the financial part of the call.
Chip?
John A. Scarlett
Thanks, Olivia. Before we start the Q&A, I'd like to acknowledge the efforts of the employees we are letting go and thank them for their many contributions to our scientific program.
I'd also like to take this opportunity to thank Steve Kelsey, our Chief Medical Officer, who will be leaving Geron on May 3. Steve has made really significant contributions in leading the team that was tasked to study the indications where imetelstat might have meaningful clinical utility for patients and where we now feel we have a potential path forward.
We're sorry to see him go, but I have full confidence in the strength of the remaining team and their expertise and experience to advance the clinical development of imetelstat in hematologic myeloid malignancy. With that, operator, let's open the call to questions, please.
Operator
[Operator Instructions] Our first question is from the line of Charles Duncan from Piper Jaffray.
Charles C. Duncan - Piper Jaffray Companies, Research Division
Thanks for all the color in the call and especially with regard to the MF study. I had a couple of questions.
First of all, with regard to that study, I understand that it's not your study, but can you tell me what you would anticipate in terms of the timing of the second cohort? Could we get an update of that cohort at ASH?
John A. Scarlett
Charles, again, as you stated, it's not our study, but probably more to the point, it's not 100% clear exactly what all of the timing will be. But I think we would be hopeful that there would be data available for ASH.
It's a ways away still, so I think that would be our hope, but I can't promise it.
Charles C. Duncan - Piper Jaffray Companies, Research Division
Okay. And then also Dr.
Tefferi probably didn't share much with you, but were there more than 2 responders? And he increased the intensity for the second cohort, that suggests a pretty good tolerability for the drug?
John A. Scarlett
I think your latter supposition is correct, otherwise the IRB and Dr. Tefferi would not have felt comfortable moving on to a higher dose intensity.
With regard to the responses, Charles, I think as we commented on the verbal portion of the call earlier, we have not had -- we're just not going to be in a position to be able to comment today on this. It will evolve, I'm sure.
Charles C. Duncan - Piper Jaffray Companies, Research Division
Okay. And then with regard to your own efforts in MF, I certainly appreciate and respect the strategy of waiting for data to guide the design of the next study.
But it seems to me that you ought to be able to design a study in perhaps the second half maybe in conjunction with guidance from Dr. Tefferi.
Could you envision getting started on your own sponsored MF study maybe in the first half of next year?
John A. Scarlett
Charles, we are going to defer any commentary about our own plans in MF. I think we need to see the results of this ongoing study of Dr.
Tefferi's. And as soon as we have those plans in a position to really relate them in a proper and highly qualified way, we'll do that.
As of today, I don't think we're prepared to comment on it.
Charles C. Duncan - Piper Jaffray Companies, Research Division
Okay. And final question with regard to Steve leaving.
Do you anticipate replacing him with a, call it, hematology-focused CMO? Or what do you intend to do?
John A. Scarlett
We're very fortunate to have had a hematologist/oncologist with quite a bit of drug development experience, who's actually been involved with this program from Day 1 and who's had a lot of the primary responsibilities for this. So I think at the moment, we will see how it all shakes out.
But at the moment, I feel very confident that we have a team that's capable of fully developing the drug today if that's the decision that we take.
Operator
Your next question comes from the line of Chad Messer from Needham & Company.
Chad J. Messer - Needham & Company, LLC, Research Division
You guys have kind of covered most of what I would ask. I wouldn't want to flog a dead horse here.
With regards to the telomere length test that you were trying to develop, I know at one point you were surveying other tumor types to look for where you might see increased lengths of telomeres, whatever came of that effort? Anything to report?
John A. Scarlett
No, we don't have anything to report, Chad. It is something that we're not focusing on at the moment.
So I think we'll just -- again, if anything comes of it that's notable, we will certainly be in a position to talk about it. I would just simply comment that the company is clearly pivoted to hematologic indications and, in particular, myeloid tumors.
And so that's really the focus of all of our efforts going forward. So I don't think you should be looking for a lot of color on some of these other items.
Chad J. Messer - Needham & Company, LLC, Research Division
All right, that's clear. And with regards to the discovery research you're discontinuing, is there anything in there of value that's left anything that would be partnerable, or is it all too early stage at this point?
John A. Scarlett
It's all very early stage, and I would not be suggesting to anyone that there will be any meaningful economics or other activities to come out of that in the future.
Operator
Your next question is from the line of Brian Klein from Stifel.
Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division
Firstly, on the ongoing MF study, how many cohorts do you think Dr. Tefferi will have to enroll before you feel comfortable moving forward into your own study?
John A. Scarlett
I guess it depends on what he finds in each of the cohorts, doesn't it? I think that everybody needs to realize that one of the challenges for us, Brian, right now is that we're kind of in the middle of this.
As you know, we started and he's now completed a first cohort and he's now starting a second cohort. The length of time that it likely takes for most of these patients to see results with any of the drugs is long enough that -- and depending on the exact number of -- length of-- the sequencing of patients, it's a little hard to know when there is an exact end point, so that you would say, okay, we're there and we can make decisions.
So that's why we're being purposely careful in trying to not make promises that we can't keep. So with regards to the number of cohorts, the length of time that we will study patients on a cohort, this is truly exploratory.
I think this has turned out, in my view, to be a very attractive way to go about looking at a drug in these indications. But unfortunately, conference calls come at the end of quarters, and we're just not really in a position to make too many other comments at this moment in time.
Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division
Got it. I wanted to ask how you guys view the current commercial opportunity for myelofibrosis on its own right now?
How do you guys see that market evolving?
John A. Scarlett
Well, that's a very good question. I think that -- of course, we have a particular point of view -- excuse me.
I think we have a particular point view which is that, first of all, there have been meaningful improvements for these patients over the last number of years. I think the development of the JAK inhibitors has certainly been movement forward.
As all of us know, these patients have a very difficult course. The challenge is how to attack the underlying neoplasia.
And obviously we've said now on numerous occasions that we feel that the opportunity for us is to actually have a disease-modifying agent as opposed to symptomatic relief and perhaps some spleen shrinkage. So if that turns out to be the case, I think that -- I suspect that there will be 2 things that happen or at least the possibility, one is the usual carving of share from other products.
But I think that as more useful drugs and particularly ones that might be disease-modifying come on board, perhaps even the market will expand a bit. As for actual numbers, et cetera, we're actually in the midst of evaluating that ourselves, but it's a little too early for us to make any comments or certainly not promises.
Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division
Okay. Do you think the company is the right size now given the recent downsizing?
John A. Scarlett
I do. And I think we have a laser-like focus on hematologic myeloid malignancies.
We have just about the right set of number in people and the right qualities for those people as well as distribution of skills. It may need to, depending on what happens, it may need to grow a little bit more, but that's speculation.
We'll have to see what the decision making is as we go forward. I wouldn't anticipate any further large reductions in force, et cetera.
I think we've got a very fine group of people, and I think we're squared up on the area that we're going to, and I think we are bringing great purpose and focus to that area.
Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division
And then just lastly. Could you give us some indication of your estimated cash burn for 2013?
John A. Scarlett
Olivia will comment on that.
Olivia Kyusuk Bloom
Brian, we are not updating or changing our guidance for 2013. As we described that although there will be some savings associated with the closing of the discovery research program and the pursuit of some of the other activities that Chip mentioned, the savings will be offset by the other cash expenses in connection with the restructuring for termination benefits as well as exit of the research lab facility.
So we expect that all the actions that were announced in yesterday's press release will be cash neutral for 2013.
Operator
Your next question is from the line of Ryan Martins from Lazard Capital Markets.
Jonathan Chang - Lazard Capital Markets LLC, Research Division
Actually, it's Jonathan Chang, stepping in for Ryan Martins. I'm hoping you can speak -- well, I'm curious to know more about your decision to expand enrollment.
Was there more to the prespecified criteria than just the number of responders? Was there also a safety criteria?
And also, do the responses need to be a specific type of response or certain magnitude of response?
John A. Scarlett
So we can give a little bit of color on this. I think you can assume that there would be fundamentally an assessment that the drug had to be safe in the patient population that was being given for the IRB to make their determination, which they clearly did.
I'm unaware of any prespecified safety criteria there. I'm not aware of any myself.
But the general assessment certainly had to be there. The protocol was quite clear.
The responses required had to either be CIs, PRs or CRs based on the IWG criteria, and there had to be at least 2 of those in order to go to the next dosing cohort. And we crossed that line.
Beyond that, I'm unaware of any specificity around that. It just had to be -- I think that's just what -- it was basically that bar.
Operator
Your next question comes from the line of Tony Hector.
Tony Rector
It's Rector, R-E-C-T-O-R, please. Anyway, as a shareholder for over 7 years back in the good old $6, $7 days, I really would appreciate knowing that the list of major shareholders on Yahoo!
Financial, is that still a list of active shareholders or previous shareholders or what have you. I can forward that list to Anna right now and get her response or someone's response perhaps next week.
John A. Scarlett
Well, Tony, thank you for your perseverance in being a shareholder for 7 years. I actually don't have any answers for your question.
We don't follow Yahoo! Finance.
So we'll do whatever we can within the bounds of usual propriety, but I apologize, I can't really make very many comments about that.
Tony Rector
Who can I forward this list to, please?
Olivia Kyusuk Bloom
Tony, this is Olivia. So I believe that the shareholder information is actually private.
So it would be a bit difficult for us to actually share information that is private to individuals.
Tony Rector
Although it's private, it seems to me to be listing on Yahoo! Financials comes from some source and should be proprietary, I would think, or should be available.
Olivia Kyusuk Bloom
Yes, but that information is not coming from the company. So again, it's not in our place to really be able to comment for information that's being sourced from places that are not from the company.
Tony Rector
Well, to be quite candid with you, I plan to attend the 22nd board meeting and our shareholders meeting, and really I'm looking for confidence insofar as some of these people that are listed. Some of these companies and major firms that are listed are quite impressive.
And if they're still active or hanging in there, perhaps as civilians, if you will, that would really endear me to keeping my 10,000 shares.
John A. Scarlett
Well, Tony, thank you very much for the questions. I think we've pretty much answered as much as we can.
And if you are coming to the shareholder meeting, we look forward to meeting you. But I think that's about all we can comment on this, so thank you.
Operator
And at this time, there are no other questions. I'd like to turn the call back over to Dr.
John Scarlett for your closing remark.
John A. Scarlett
Well, thank you all very much for your questions and for your attention to the company. We look forward to the next remainder of this year with a lot of enthusiasm.
We'll see where we get to. So thanks a lot, and we'll talk to you on the next conference call.
Bye-bye.
Operator
And ladies and gentlemen, this concludes your presentation. You may now disconnect and have a good day.