Geron: Where Things Stand With Several Milestones On The Horizon

"We are so accustomed to disguise ourselves to others, that in the end, we become disguised to ourselves." - Francois De La Rochefoucauld

Today, we put small-cap biopharma Geron Corporation (NASDAQ:GERN) back in the spotlight for the first time since we last looked in on the company in July of last year. GERN shareholders have had somewhat of a wild ride as the company gears up for a long-awaited FDA approval and the potential launch of its primary drug asset. What lies ahead for Geron in the quarters ahead? An updated analysis follows below.

Company Overview:

This San Francisco-headquartered biotech concern is focused on the development of therapeutics for hematologic myeloid malignancies. Imetelstat, a telomerase inhibitor which inhibits the uncontrolled proliferation of malignant progenitor cells in hematologic myeloid malignancies to reduce dysfunctional blood cell production and enable recovery of normal blood cell production, is Geron's primary and only real asset. GERN stock currently trades near $2.50 a share and sports an approximate $1.3 billion market capitalization.

Recent Developments:

Some key events have happened this year for Geron Corporation. In early January, the company provided encouraging topline data from its IMerge Phase 3 clinical trial for imetelstat treating lower-risk myelodysplastic syndromes (MDS) patients.

The 178-person IMerge study hit both its primary and secondary endpoints and the treatment-emergent adverse events or TEAEs from the trial were found to be in line with prior clinical findings, and no new safety signals were detected. The data will support a marketing application for imetelstat to treat MDS for the U.S. mid-year, with an application for Europe soon thereafter. If all goes according to timeline, the commercial launch of imetelsat sometime in the first quarter of 2024 for the United States and Europe late in 2024.

The trial news boosted GERN stock, which the company took advantage of by launching a large secondary offering the same week of the announcement that raised some $213 million in proceeds to support the long-awaited launch of imetelsat.

Analyst Commentary & Balance Sheet:

So far in 2023, five analyst firms including Wedbush and Needham have reissued Buy/Outperform ratings on GERN. Price targets proffered range from $4 to $6 a share. Goldman Sachs seems the lone pessimist on the stock, maintaining a Neutral rating and $3 price target on the shares.

Goldman's analyst does project $1 billion in unadjusted peak global sales for imetelsat in low-risk MDS. She also stated that imetelsat's potential to treat myelofibrosis will be limited, given the competition and a challenging tolerability profile.

She sees only $260 million in potential peak sales for that indication. These estimates seem significantly below where management sees the addressable market.

Interim analysis of a key study for that indication should be out sometime in 2024. It should be noted that the trigger for the interim analysis for this study is that death events need to occur in more than 35% of the total planned enrollment of 320 patients. Therefore, the exact timing is hard to predict.

Just over four percent of the outstanding float in the shares is currently held short. There have been some notable insider selling in the stock recently. Several insiders, including the CEO, have dumped more than $6.5 million worth of shares collectively since February. This was the first insider activity in equity since 2020.

The company ended FY2022 with just under $175 million in cash and marketable securities on its balance sheet. It added nearly $60 million via the cash exercise of outstanding warrants in January and February 2023 and more than $200 million from its secondary offering in January. The company has no long-term debt. Management:

believe that these capital resources will be sufficient to fund our projected operating requirements through the end of the third quarter of 2025.

Leadership expects non-GAAP total expenses in the range of approximately $200 million to $210 million for FY2023.

Verdict:

The analyst firm consensus has Geron Corporation losing 43 cents a share on minimal revenue in FY2023. They see losses falling to 30 cents a share in FY2024 on just over $100 million. It should be noted, there is a wide range of sales estimates ($40 million to $200 million) for fiscal 2024. Note that GERN is expected to report Q1 earnings on May 9.

Geron Corporation has a potential catalyst/milestone filled year ahead of it. Imetelsat seems to have significant potential, with Goldman recently estimating some $1.25 billion of potential peak sales for MDS and MF. FDA approval seems likely, but the approval process can always have hiccups. Funding is now in place for the initial rollout of imetelsat, but Geron is more than likely to have to raise additional capital before the compound can power the company to profitability.

Initial rollouts of new drugs usually can be tricky, especially for a company with no other compounds on the market. The insider sales are a bit worrisome, especially since it seems the Geron Corporation CEO ditched a large stake in the firm. Therefore, the equity probably merits a "watch item" position until further progress is made. Options are available against this equity, which is why I hold a small position in Geron Corporation via covered call holdings.

"There be many wise men, that have secret hearts, and transparent countenances." - Francis Bacon

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