Geron Misses Estimates - Analyst Blog

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Geron Corporation ( GERN ) posted a net loss of 21 cents per share in the fourth quarter of 2011, wider than the Zacks Consensus loss Estimate of 20 cents but below the year-ago loss of 24 cents. Fourth quarter revenues of $251,000 were below the Zacks Consensus Estimate of $300,000 and the year-ago revenues of $1.1 million.

Full year 2011 loss came in at 73 cents, below the Zacks Consensus Loss Estimate of 74 cents and the year ago loss of 78 cents. Revenues came in at $2.4 million, below the Zacks Consensus Estimate of $3 million and the year-ago revenues of $3.6 million.

Quarter in Detail

Revenues consisted entirely of royalties and license fees. Geron has several license agreements with various oncology, diagnostics, research tools, agriculture and biologics production companies. Geron did not recognize any revenues from collaborative agreements in the reported quarter.

Total operating expenses remained almost flat at $25.2 million. Research and development expenses declined 6.4% to $19.7 million due to reduced clinical drug product purchases and manufacturing costs and lower scientific supply expenses resulting from the discontinuation of the stem cell programs.

In November 2011, Geron had announced its intention to exit the stem cell research market. The company, which was a leader in stem cell research, intends to focus on its oncology programs instead.

Key candidates in the oncology program include imetelstat, which is currently in four phase II studies (non-small cell lung cancer, breast cancer, essential thrombocythemia and multiple myeloma), and GRN1005 (in phase II studies for brain metastases arising from non-small cell lung cancer and breast cancer). While top-line data from the imetelstat studies should be out by late 2012, top-line data on GRN1005 should be available before the end of the second quarter of 2013.

Imetelstat is currently in four phase II studies. While two large randomized phase II studies are evaluating imetelstat for the treatment of non-small cell lung cancer and metastatic breast cancer, two other studies are evaluating the candidate for multiple myeloma and essential thrombocythemia.

Meanwhile, general and administrative expenses increased 18.2% to $5.5 million. The increase was due to higher personnel-related expenses resulting from management transitions.

During 2012, Geron expects cash usage of about $65 million. This means that the company will exit 2012 with about $90 million of balance sheet cash. Geron believes these funds will be sufficient to meet its requirements beyond mid-2013. R&D spend in 2012 will go down by $25 million as Geron was previously expecting to spend this amount per year on its stem-cell development programs.

As far as the stem cell candidates are concerned, Geron intends to divest these programs including GRNOPC1 (currently in phase I for spinal cord injury), programs in cardiomyocytes for heart disease, pancreatic islet cells for diabetes, dendritic cells as an immunotherapy vehicle and chondrocytes for cartilage repair.

Neutral on Geron

We currently have a Neutral recommendation on Geron, which carries a Zacks #3 Rank (short-term Hold rating). While the company's decision to focus on oncology should deliver in the long-term, we expect the stock to remain range-bound in the near term given the lack of catalysts. Results on the oncology candidates should start coming out in late 2012 -- we prefer to remain on the sidelines until we see data on these candidates.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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