Investment Overview
Geron (NASDAQ:GERN) will announce its Q1 2023 results this Thursday, May 11th. I last covered the company in a Seeking Alpha post back in mid-March, issuing a “HOLD” recommendation.
Let’s recap the investment thesis. Geron’s lead and only asset is Imetelstat – a first-in-class telomerase inhibitor – which is indicated to treat Low or Intermediate-1 risk myelodysplastic syndromes (“MDS”), or lower risk MDS. As per the company’s 2022 10-K submission:
In January 2023, we reported positive top-line results from our IMerge Phase 3 clinical trial. The trial met its primary endpoint of 8-week transfusion independence rate and a key secondary endpoint of 24-week transfusion independence rate, demonstrating highly statistically significant (i.e., P<0.001 for both) and clinically meaningful benefits in imetelstat versus placebo.
Based on the positive top-line data from IMerge Phase 3 and the prior IMerge Phase 2, we plan to submit a New Drug Application, or NDA, to the FDA in the U.S. in mid-2023 and a marketing authorization application, or MAA, in Europe in the second half of 2023 for the use of imetelstat in adult patients with lower risk MDS.
Based in Foster City, California, Geron has not had a drug product approved in its 30-year history, but these Phase 3 study results – focused on lower risk MDS patients who are relapsed, refractory or ineligible for erythropoiesis stimulating agents (ESAs) – seem to suggest that this could be about to change, with Geron on the verge of submitting for US and European approval.
As I noted in my last post:
Imetelstat is a “a lipid conjugated 13‑mer oligonucleotide designed to be complementary to and bind with high affinity to the RNA template of telomerase,” according to Geron’s 2022 10-K submission, and Geron is the only company to have advanced a drug with such a mechanism of action into clinical studies.
Until 2018, pharma giant Johnson & Johnson’s (JNJ) drug development subsidiary Janssen was partnering with Geron over development of Imetelstat – Geron’s only drug – but after Janssen opted out, citing a “strategic portfolio evaluation,” Geron’s share price sank from ~$6, to ~$1.
The key question ahead of Q1 23 earnings is therefore whether Imetelstat will secure an approval, and what the market opportunity looks like. Shareholders certainly won’t be getting all the answers on Thursday but it will be interesting to hear what management has to say and what updates are available.
Geron’s share price is currently $2.8, and the company’s market cap stands at $1.43bn. In January, after announcing the positive IMerge data, Geron was able to raise $213m via a fundraising at $2.45 per share plus pre-funded warrants.
Imetelstat Market Overview
As we can see above, Geron envisages that imetelstat has a sizeable opportunity in low risk MDS – ~70% of the patient population, or ~26k patients. Management apparently believes this opportunity could be worth up to $1.2bn in peak sales or close to ~$500k per course of therapy before rebates and discounts are applied.
This is a market that is reasonably well served with approved therapies, however, even if there is room for a superior treatment. Geron lists its competition as follows in its 10K submission:
If approved for commercial sale for the treatment of lower risk MDS, imetelstat would compete against a number of currently existing therapies, including ESAs and other hematopoietic growth factors that are indicated for anemia; immunomodulators, such as Revlimid (lenalidomide) by Celgene Corporation, a Bristol-Myers Squibb Corporation, or Celgene; hypomethylating agents, such as Vidaza (azacitidine) by Celgene and manufacturers of generic azacitidine; Dacogen (decitabine) by Otsuka America Pharmaceutical, Inc. and other manufacturers in the U.S. and Janssen in the EU; Inqovi (oral combination of decitabine and cedazuridine) by Astex Pharmaceuticals, Inc., or Astex; and Reblozyl (luspatercept), a TGF-beta inhibitor, by Acceleron Pharma, Inc., or Acceleron (acquired by Merck & Co., Inc., or Merck, in November 2021), in collaboration with Celgene. In November 2022, Bristol-Myers Squibb Company, or BMS, announced that the Phase 3 front-line COMMANDS trial that compared Reblozyl (luspatercept) to ESAs was positive and that data would be presented in 2023 at a major medical meeting.
There are more therapies in late stage trials being developed by the likes of Bristol Myers Squibb (BMY) and Fibrogen, and many more Pharmas and biotechs in earlier stage studies. With no prior commercial experience, Geron faces a real challenge to establish a share of this market.
Nevertheless, management appears confident that imetelstat can achieve blockbuster sales in lower risk MDS, and become the standard of care therapy. The company has already begun to build its sales force ready in preparation for a full commercial launch – CEO John Scarlett, who has been at the helm of the company as Chairman and Chief Executive Officer since 2011, was quoted in the Q4 earnings release as follows:
Also in 2023, we will be implementing many of the long-lead time operational items needed to prepare for potential commercial launch of imetelstat in lower risk MDS in the U.S., such as establishing key sales-related systems, engaging a third-party logistics provider, manufacturing sufficient commercial supply of drug for launch and beyond, and hiring deeply experienced commercial talent
Myelofibrosis Opportunity
The above slide from a recent Geron presentation details the Phase 3 study design for Geron’s shot at an approval for imetelstat in myelofibrosis (“MF”), a market management discusses as follows in its 2022 10-K submission:
The current standard of care for the treatment of Intermediate-2 or High-risk MF is the use of JAK inhibitors, to address the patient’s symptoms. Once JAK inhibitors fail or are no longer effective, a variety of best available therapies are used since there are no approved treatments for this patient population and median OS is 14 – 16 months after discontinuation from the predominant JAK inhibitor being used today.
If approved for commercial sale for the treatment of MF, imetelstat would compete against currently approved JAK inhibitors: Jakafi (ruxolitinib) by Incyte Corporation, or Incyte, and Inrebic (fedratinib) by Celgene, as well as a kinase inhibitor, Vonjo (pacritinib), by CTI Biopharma Corp., which was approved in February 2022 for the treatment of adults with Intermediate or High-Risk primary or secondary myelofibrosis with a platelet count below 50 × 109/L.
The trial will continue until a certain number of deaths has occurred, meaning there is no specific date for a data release. Geron says this is the only Phase 3 stage study in MF that is using Overall Survival as a primary endpoint, and if that is met, it could mark the drug out as a potential long-term fixture in this market also. In fact, management views this as a bigger opportunity than low risk MDS.
Of course, these figures belong to Geron, who are bound to be bullish on the market opportunity, but $1.8bn is broadly comparable with figures I have heard discussed by analysts in relation to other MF targeting drugs such as MorphoSys’ (MOR) BET inhibitor Pelabresib, or GSK’s New Drug Application (“NDA”) stage Momelotinib, which it recently acquired via its buyout of Sierra Oncology for $1.9bn. A conservative estimate of imetelstat’s peak sales opportunity in both low risk MDS and MF could be ~$1bn, in my view, and I would be inclined to use a lower figure when valuing Geron.
Nevertheless, if Geron were to trade at 5x a blockbuster ($1bn per annum) sales opportunity then its current market cap valuation ought to be substantially higher than $1.4bn – in fact if we discount it by 50% to factor in risk, and the time value of money, Geron’s market cap would be $2.5bn. We ought to find out in less than a year – provided management gets its paperwork and data over to the FDA on time – whether the drug will be approved in low risk MDS, and a share price spike feels almost inevitable should it do so.
Some Risks To Consider In Relation To Geron
After its January raise, Geron had close to $400m in cash, and the company’s net loss in FY22 was $141.9m, or $(0.37) per share. It ought to be interesting to see if management has managed to narrow losses in Q123 – its presentation states current cash ought to see the company through to 2025.
Geron has never commercialised a product before, and it is by no means guaranteed the FDA will approve Imetelstat, although it has to be said the Phase 3 success seems persuasive.
In my last note on Geron I noted a potential issue on the safety side – 18-month follow-up data suggested that by then, some 77% of patients had discontinued therapy, although this could be due to their having sustained transfusion independence.
28 patients did apparently cite a lack of efficacy as their reason for discontinuation, whilst another discontinued due to an adverse event, according to data shared in Geron’s investor presentation – could the drug’s tolerability profile be an issue?
Otherwise, Geron’s lack of commercial experience would be a concern – with so many therapies on the market, can Imetelstat show the same outperformance in a real world setting as it did in IMerge? If it is broadly comparable to other approved therapies, will management be able to compete with better resourced rivals, especially Bristol Myers Squibb, who expect Reblozyl to become a $4bn peak selling drug.
Physicians may be reluctant to prescribe Imetelstat if the tolerability of the drug is an issue – the FDA may also think the same and convene an advisory committee to discuss with a panel of experts whether to approve the drug.
In short, Geron is not yet at the finish line with imetelstat, and its current valuation likely reflects that. A further point to consider is Janssen’s decision to stop partnering with Geron on the drug – a strange decision when subsequent data has been so positive, or a potential red flag?
A final point, perhaps, is that besides imetelstat, Geron does not have any other assets of note – the company is all-in on the success of this single drug.
Concluding thoughts ahead of earnings & management updates
Geron is one of those biotech stocks that you know is mispriced, however you cannot be sure whether it is overvalued or undervalued. If Imetelstat is approved sometime next year, I would expect the company’s stock price to soar and perhaps recapture the highs of $6 per share enjoyed in the days when Janssen was still a partner. A regulatory setback would significantly damage Geron’s business model however, and put the entire company’s future under threat.
Looking further ahead, however, my longer term concern would be the crowded markets in which Geron must try to make its mark, and the company’s lack of funding – as such I will be listening out for any discussion as to why insurers may reimburse for imetelstat over rival therapies, if approved, or why physicians may prescribe it ahead of other therapies, or perhaps how the company plans to compete on price. I’d also be interested to hear what data precisely will be presented to the FDA, and whether an Advisory Committee is likely to be convened, and some confirmation that the safety profile of imetelstat is satisfactory.
The outlook is a little too risky for me to back buying Geron stock at this time – this is only my personal opinion – and with not too many near-term catalysts in play – MF data is not due until next year – I’ll be maintaining a watching brief.
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