News Column

GERON CORP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 11, 2014

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "expect," "plan," "intend," "will," "should," "project," "believe," "predict," "anticipate," "estimate," "potential" or "continue," or the negative thereof or other comparable terminology. These statements are within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements appear throughout the Form 10-Q and are statements regarding our intent, belief, or current expectations, primarily with respect to our business and related industry developments. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-Q. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us and described in Part II, Item 1A, entitled "Risk Factors," and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I, Item 2 of this Form 10-Q.

OVERVIEW



The following discussion should be read in conjunction with the unaudited condensed financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q and with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on March 17, 2014.

We are a clinical stage biopharmaceutical company developing a telomerase inhibitor, imetelstat, in hematologic myeloid malignancies. The discovery and early development of imetelstat, our sole product candidate, was based on our core expertise in telomerase and telomere biology. Telomerase is an enzyme that enables cancer cells, including malignant progenitor cells, to maintain telomere length, which provides them with the capacity for limitless, uncontrolled proliferation.

Imetelstat is a potent and specific inhibitor of telomerase. Using our proprietary nucleic acid chemistry, we designed imetelstat to be an oligonucleotide that targets and binds with high affinity to the active site of telomerase, thereby directly inhibiting telomerase activity and impeding malignant cell proliferation. We developed imetelstat from inception, and we own exclusive worldwide commercial rights for imetelstat with U.S. patent coverage extending through 2025.

We intend, subject to release of the full clinical hold on our Investigational New Drug application, or IND, for imetelstat, as discussed below, to develop imetelstat to treat one or more hematologic myeloid malignancies such as myelofibrosis, or MF, which includes patients with primary MF, or PMF, post essential thrombocythemia MF, or post ET MF, or post polycythemia vera MF, or post PV MF, all of which are referred to collectively in this document as MF; myelodysplastic syndromes, or MDS; or acute myelogenous leukemia, or AML.

We have incurred operating losses every year since our operations began in 1990. Losses have resulted principally from costs incurred in connection with our research and development activities and from general and administrative costs associated with our operations. As of June 30, 2014, we had an accumulated deficit of $909.9 million. Since inception, we have primarily financed our operations through the sale of equity securities, interest income on our marketable securities and payments we received under our collaborative and licensing arrangements.

Substantially all of our revenues to date have been research support payments under collaborative agreements, and milestones, royalties and other revenues from our licensing arrangements. Revenues generated from these arrangements will not be sufficient alone to continue or expand our research or development activities and otherwise sustain our operations. We also currently have no source of product revenue. Imetelstat, which is our sole product candidate, will require significant additional clinical testing prior to possible regulatory approval in the United States and other countries, and we do not expect imetelstat to be commercially available for many years, if at all.

18



--------------------------------------------------------------------------------

Table of Contents

As of June 30, 2014, we had cash, restricted cash, cash equivalents and marketable securities of $147.6 million compared to $66.0 million at December 31, 2013. We estimate that our existing capital resources, amounts available to us under our equipment financing facility and future interest income will be sufficient to fund our current level of operations through at least the next 12 months. However, our future capital requirements will be substantial, and we may use our available capital resources sooner than we anticipate.

Developing Imetelstat to Treat Hematologic Myeloid Malignancies

Investigator-Sponsored Clinical Trial in Myelofibrosis (Myelofibrosis IST)

In November 2012, Dr. Ayalew Tefferi at Mayo Clinic, Rochester, Minnesota, initiated an investigator-sponsored trial, or the Myelofibrosis IST, to assess the effect of imetelstat in patients with MF. Preliminary efficacy and safety data from this trial were presented by the investigator at the American Society of Hematology, or ASH, Annual Meeting in December 2013. In the Myelofibrosis IST, the investigator is also evaluating imetelstat in patients with refractory anemia with ringed sideroblasts, or RARS, a subpopulation of MDS, and patients with MF that has transformed into AML, known as blast-phase MF. Data we receive from the Myelofibrosis IST regarding patients with RARS-MDS or blast-phase MF may inform, in part, our decision to initiate, subject to release of the full clinical hold on our IND for imetelstat discussed below, one or more potential studies of imetelstat in MDS or AML.

In January 2014, Mayo Clinic closed the Myelofibrosis IST to new patient enrollment. Mayo Clinic's notification informing us of its decision to cease new patient enrollment did not indicate any concerns regarding efficacy or safety. In March 2014, we were informed by Mayo Clinic that the investigator's IND for the Myelofibrosis IST was placed on partial clinical hold by the U.S. Food and Drug Administration, or FDA, due to a safety signal of hepatotoxicity that was identified in our Phase 2 clinical trials of imetelstat and that it was unknown if this hepatotoxicity was reversible. In order to resolve the partial clinical hold, the investigator was required to provide follow-up information regarding reversibility of hepatotoxicity for all patients who received imetelstat in the Myelofibrosis IST. The investigator submitted a complete response to the FDA to seek release of the partial clinical hold, and the partial hold was lifted by the FDA on June 11, 2014. As of July 15, 2014, 33 patients out of the 80 patients enrolled in the Myelofibrosis IST continue to receive imetelstat treatment, which includes 23 out of 62 patients with MF, nine out of nine patients with RARS-MDS and one out of nine patients with blast-phase MF. The Myelofibrosis IST remains closed to new patient enrollment.

On July 31, 2014, or the Effective Date, we and Mayo Clinic entered into an agreement, or the Transfer Agreement, under which Mayo Clinic and the investigator agreed to transfer to us certain data and information from the Myelofibrosis IST, and agreed that we will assume full responsibility for the investigator's IND, as well as responsibility for the conduct of the Myelofibrosis IST as the trial sponsor. In connection with entering into the Transfer Agreement, Mayo Clinic transferred to us data available as of that date from the clinical trial database for the Myelofibrosis IST. We are currently in the early stages of assessing this data. Subject to completion of certain obligations and deliverables defined in the Transfer Agreement, we and Mayo Clinic have agreed that the investigator's IND, under which the Myelofibrosis IST has been conducted, will be transferred to us by September 30, 2014, or the planned IND Transfer Date. On the planned IND Transfer Date, we will also assume responsibility for the Myelofibrosis IST as the trial sponsor and Dr. Tefferi will continue as the principal investigator for the trial. Under our sponsorship, commencing on the planned IND Transfer Date, we expect to continue to collect data and information from patients who remain on study in the Myelofibrosis IST and have full access to such data and information. We plan to continue to conduct the Myelofibrosis IST at Mayo Clinic until the trial is closed, and we do not intend to enroll additional patients in the Myelofibrosis IST.

We have committed to the FDA that we will not initiate any new clinical trials under the investigator's IND for the Myelofibrosis IST that we expect to be transferred to us on the planned IND Transfer Date, until we have had further communication with the FDA regarding our own IND, which remains on full clinical hold, and regarding our development plans for imetelstat in hematologic myeloid malignancies with high unmet medical need. Given this commitment, until the FDA lifts the full clinical hold on our IND or permits us to study imetelstat for other indications, such as under a partial clinical hold, we are unable to submit any new clinical trial protocols to the FDA, and are unable to initiate any new clinical trials for imetelstat in the United States. As discussed below, we are working diligently to seek the release of the full clinical hold on our IND.

19



--------------------------------------------------------------------------------

Table of Contents

The investigator has informed us that he has submitted an abstract for the ASH annual meeting in December 2014 in which he has analyzed certain safety and efficacy data from MF patients in the Myelofibrosis IST and updated his analysis from the preliminary data he presented in December 2013. In accordance with ASH policies, abstracts submitted to the ASH annual meeting are embargoed from the time of submission. To be eligible for presentation at the ASH annual meeting, information contained in the abstract, as well as additional data and information to be presented at the annual meeting, may not be made public before the abstract has been published/presented in connection with the ASH annual meeting. We have not reviewed or independently analyzed the data selected by the investigator for inclusion in the abstract. Our analyses may result in conclusions that are materially different from the investigator's analyses and therefore additional or updated data should be considered carefully and with caution. Please refer to the risk factor entitled, "Risks Related to Our Business-Success in early clinical trials may not be indicative of results in subsequent clinical trials. Likewise, data reported by investigators from time-to-time is subject to review and verification procedures that could result in material differences to final data and may change as more patient data becomes available." in Part II, Item 1A entitled, "Risk Factors", in this Form 10-Q.

Impact of Full Clinical Hold on Geron-Sponsored Clinical Trials

In March 2014, we received written notice from the FDA that our IND for imetelstat had been placed on full clinical hold following the FDA's review of safety data in our then ongoing clinical studies. A full clinical hold is an order that the FDA issues to a trial sponsor to suspend all ongoing clinical trials and delay all proposed trials under a given IND. With this clinical hold, any patients in an ongoing Geron-sponsored clinical trial cannot receive any further treatment with imetelstat. Therefore, we stopped imetelstat treatment in our Phase 2 Geron-sponsored clinical trials in ET and multiple myeloma, or MM. For our Phase 2 ET trial, eight patients were affected and for our Phase 2 MM trial, two patients were affected.

In their notice to us, the FDA cited the following safety issues as the basis for the clinical hold: lack of evidence of reversibility of hepatotoxicity, risk for chronic liver injury and lack of adequate follow up in patients who experienced hepatotoxicity. To address the clinical hold, we are required to provide clinical follow up information on patients who experienced liver function test, or LFT, abnormalities until LFT abnormalities have resolved to normal or baseline and to provide information regarding the reversibility of the liver toxicity after chronic imetelstat administration in animals. We are working diligently to seek the release of the full clinical hold and are currently in the process of compiling preclinical and clinical information from our own studies, as well as information available to us from other imetelstat studies, such as the Myelofibrosis IST, regarding LFT abnormalities and the incidence and reversibility of hepatotoxicity. To permit extended follow up of patients who discontinued imetelstat treatment in our Phase 2 ET and MM trials, and to seek to collect their LFT information, we have obtained approval for amended clinical trial protocols from institutional review boards, or IRBs, at each clinical site that participated in our Phase 2 ET and MM trials, and we are seeking consent from patients who discontinued imetelstat treatment in our Phase 2 ET and MM trials to allow us to collect and evaluate their LFT information.

The timing for our submission to the FDA of a complete response to the full clinical hold on our IND for imetelstat depends on our ability to collect clinical follow up information from our Phase 2 ET and MM trials, and to assess such information together with the data and information we have received, and expect to receive in the future, from the Myelofibrosis IST. Until we are able to collect and assess clinical follow up information from our Phase 2 ET and MM trials, as well as data and information from the Myelofibrosis IST, which we may be unable to do in a timely manner, or at all, we will not be able to submit our complete response to the full clinical hold on our IND. If we are able to collect and assess such data and information in order to submit our complete response and the FDA agrees that such information adequately addresses the basis for the clinical hold in order for the FDA to lift the full clinical hold on our IND for imetelstat or to permit us to study imetelstat under a partial clinical hold, we would plan to initiate a Geron-sponsored clinical trial of imetelstat in MF in the United States. This clinical trial could potentially occur as early as the first quarter of 2015, assuming that we are able to submit our complete response in 2014 and the FDA lifts the full clinical hold on our IND for imetelstat or permits us to study imetelstat under a partial clinical hold in 2014. However, if additional clinical information is required by the FDA or if the information

20



--------------------------------------------------------------------------------

Table of Contents

we may collect from our Phase 2 ET and MM trials is not adequate, then we believe the initiation of a Geron-sponsored clinical trial of imetelstat in patients with MF in the United States could be delayed indefinitely, since we currently do not know whether the FDA will allow our development of imetelstat in MF if reversibility of LFT abnormalities in ET and MM is not fully established, or how much time will be required for LFT abnormalities to resolve to normal or baseline, if at all. Because of the uncertainty surrounding our ability to address satisfactorily the full clinical hold on our IND for imetelstat, if at all, we have explored the feasibility of initiating a Geron-sponsored clinical trial of imetelstat in patients with MF in locations outside of the United States where health authorities and ethics committees may view favorably the benefit-risk profile of imetelstat for MF. However, based on the results of our evaluation, we have decided to first proceed with our efforts to obtain the FDA's permission to lift the full clinical hold on our IND for imetelstat, or to permit us to study imetelstat under a partial clinical hold.

Until the FDA lifts the full clinical hold or permits us to study imetelstat for other indications, such as under a partial clinical hold, we are unable to submit any new clinical trial protocols to the FDA, and are unable to initiate any new clinical trials for imetelstat in the United States, under our existing IND for imetelstat. If the FDA does not lift the full clinical hold, or does not permit us to study imetelstat for other indications, such as under a partial clinical hold, we will likely be unable to pursue the development of imetelstat in the United States. If the FDA lifts the full clinical hold, or partially lifts the full clinical hold, we expect to pursue development of imetelstat in one or more indications, such as MF, MDS or AML, where we believe there is a greater unmet medical need for a new product than is the case for diseases such as ET, for which survival is minimally affected by the disease. We have previously announced that our Phase 2 ET trial was a proof of concept study, and that we did not plan to develop imetelstat for commercial use in ET. We have committed to the FDA that we will not initiate any new clinical trials under the investigator's IND for the Myelofibrosis IST that we expect to be transferred to us on the planned IND Transfer Date, until we have had further communication with the FDA regarding our own IND, which remains on full clinical hold, and regarding our development plans for imetelstat in hematologic myeloid malignancies with high unmet medical need. Given this commitment, until the FDA lifts the full clinical hold on our IND or permits us to study imetelstat for other indications, such as under a partial clinical hold, we are unable to submit any new clinical trial protocols to the FDA, and are unable to initiate any new clinical trials for imetelstat in the United States.

Stem Cell Divestiture; Asterias Series A Distribution

On October 1, 2013, we closed the transaction to divest our human embryonic stem cell assets and our autologous cellular immunotherapy program pursuant to the terms of the previously disclosed asset contribution agreement, or the Contribution Agreement, that we entered into in January 2013 with BioTime, Inc., or BioTime, and BioTime's wholly owned subsidiary, Asterias Biotherapeutics, Inc., or Asterias (formerly known as BioTime Acquisition Corporation) and received 6,537,779 shares of Asterias Series A common stock. Under the terms of the Contribution Agreement and subject to applicable law, we are contractually obligated to distribute all of the shares of Asterias Series A common stock to our stockholders on a pro rata basis, or cash in lieu thereof. Our board of directors fixed the close of business of May 28, 2014 as the record date for the determination of stockholders entitled to receive shares of Asterias Series A common stock, or cash in lieu thereof, in the Series A Distribution. The Nasdaq Stock Market fixed July 22, 2014 as the ex-dividend date for the Series A Distribution. Commencing on this date, our shares of common stock traded without the right to receive shares of Asterias Series A common stock, or cash in lieu thereof, in the Series A Distribution. See further discussion in Note 3 on Divestiture of Stem Cell Assets and Note 9 on Subsequent Events in Notes to Condensed Financial Statements of this quarterly report on Form 10-Q.

Following completion of the Series A Distribution by Geron, Asterias is contractually obligated under the Contribution Agreement to distribute on a pro rata basis to the holders of Asterias Series A common stock five-year warrants to purchase 8,000,000 shares of BioTime common stock at an exercise price of $5.00 per share, or the BioTime Warrants. The BioTime Warrants were issued to Asterias by BioTime pursuant to the Contribution Agreement.

21



--------------------------------------------------------------------------------

Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2014 as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013 that materially impact our condensed financial statements.

Our condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported assets, liabilities, revenues and expenses. Note 1 of Notes to Condensed Financial Statements of this Form 10-Q describes the significant accounting policies used in the preparation of the condensed financial statements.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes historically have been minor and have been included in the condensed financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our condensed financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.

RESULTS OF OPERATIONS



Our results of operations have fluctuated from period to period and may continue to fluctuate in the future, based upon the progress of our research and development efforts and variations in the level of expenses related to developmental efforts during any given period. Results of operations for any period may be unrelated to results of operations for any other period. In addition, historical results should not be viewed as indicative of future operating results. We are subject to risks common to companies in our industry and at our stage of development, including, but not limited to, risks inherent in our research and development efforts, our dependence on the success of our sole product candidate, imetelstat, uncertainty of preclinical and clinical trial results or regulatory approvals or clearances, including release of the full clinical hold on our IND for imetelstat, need for future capital, enforcement of our patent and proprietary rights, reliance upon our collaborators, investigators and other third parties, and potential competition. In order for imetelstat to be commercialized based on our research, we and our collaborators must conduct preclinical tests and clinical trials, demonstrate the safety and efficacy of imetelstat, obtain regulatory approvals or clearances and enter into manufacturing, distribution and marketing arrangements, as well as obtain market acceptance. We do not expect to receive revenues or royalties based on imetelstat for many years, if at all.

Revenues



We have entered into license and option agreements with companies involved with oncology, diagnostics, research tools and biologics production. In each of these agreements, we have granted certain rights to our technologies. In connection with the agreements, we are eligible to receive license fees, option fees, milestone payments and royalties on future sales of products, or any combination thereof. We recognized license fee revenues of $185,000 and $535,000 for the three and six months ended June 30, 2014, respectively, compared to $20,000 and $665,000 for the comparable 2013 periods related to our various agreements. The increase in license fee revenues for the three months ended June 30, 2014 compared to the comparable 2013 period primarily reflects the full recognition of non-refundable license payments in 2014 for research licenses related to our human telomerase reverse transcriptase, or hTERT, technology. The decrease in license fee revenues for the six months ended June 30, 2014 compared to the comparable 2013 period primarily reflects the full recognition of a non-refundable up-front license payment in 2013 for an exclusive commercial license using our telomerase promoter technology for oncology-related in vitro assays. We recognized royalty revenues of $156,000 and $280,000 for the three and six months ended June 30, 2014, respectively, compared to $92,000 and $212,000 for the comparable 2013 periods on product sales of telomerase detection and telomere measurement kits to the research-use-only market and cell-based research products. The increase in royalty revenues for the three and six months ended June 30, 2014 compared to the comparable 2013 periods primarily reflects the receipt of a milestone fee in the second quarter of 2014 in connection with the achievement of a net sales milestone by a licensee of our hTERT technology. Current revenues may not be predictive of future revenues. Future license and royalty revenues are dependent upon additional agreements being signed and current agreements being maintained.

22



--------------------------------------------------------------------------------

Table of Contents

Research and Development Expenses

For our research and development programs, we incur direct external, personnel related and other research and development costs. Direct external expenses primarily consist of costs to outside parties to perform laboratory studies, develop manufacturing processes and manufacture raw materials and clinical trial drug materials, conduct and manage clinical trials, including investigator-sponsored clinical trials, and provide advice and consultation for scientific, clinical and regulatory strategies. Personnel related expenses primarily consist of salaries and wages, stock-based compensation, payroll taxes and benefits for those individuals involved with ongoing research and development efforts. Other research and development expenses primarily consist of laboratory supplies, research-related overhead associated with leasing, operating and maintaining our facilities and equipment depreciation and maintenance. All of these costs apply to our current and historical clinical programs and our historical preclinical programs and discovery research efforts. A product candidate is designated a clinical candidate once an IND has been filed with the FDA, or a similar filing with regulatory agencies outside the United States, for the purpose of commencing clinical trials in humans. Preclinical programs represented product candidates undergoing toxicology, pharmacology, metabolism and efficacy studies and manufacturing process development required before testing in humans could commence.

Research and development expenses were $5.2 million and $10.4 million for the three and six months ended June 30, 2014, respectively, compared to $4.8 million and $12.7 million for the comparable 2013 periods. The increase in research and development expenses for the three months ended June 30, 2014 compared to the comparable 2013 period is primarily the net result of an increase in direct external costs for the manufacturing of imetelstat drug product, partially offset by lower direct external costs due to the wind-down of our GRN1005 trials in patients with brain metastases and imetelstat trials in solid tumors, reduced personnel related costs resulting from previous restructurings and lower costs for scientific supplies and services due to the discontinuation of our discovery research programs in April 2013. The decrease in research and development expenses for the six months ended June 30, 2014 compared to the comparable 2013 period is primarily the net result of lower direct external costs due to the wind-down of our GRN1005 trials in patients with brain metastases and imetelstat trials in solid tumors, reduced personnel related costs resulting from previous restructurings and lower costs for scientific supplies and services due to the discontinuation of our discovery research programs in April 2013, partially offset by an increase in direct external costs for the manufacturing of imetelstat drug product. Overall, we expect research and development expenses in 2014 to remain at current levels, unless we are permitted by the FDA to initiate new clinical trials of imetelstat in hematologic myeloid malignancies in 2014, which may not occur in a timely manner or at all.

Research and development expenses for the three and six months ended June 30, 2014 and 2013 were as follows:

Three Months Ended Six Months Ended June 30, June 30, (In thousands) 2014 2013 2014 2013 (Unaudited) Direct external research and development expenses: Clinical program: Imetelstat $ 2,266$ 1,215$ 4,190$ 2,732 Clinical program: GRN1005 (1) - 59 - 1,051 Clinical program: GRNOPC1 (2) - 97 - 155 Preclinical programs (3) - 23 - 224 Personnel related expenses 2,370 2,401 5,055 6,497 All other research and development expenses 515 1,012 1,117 2,069 Total $ 5,151$ 4,807$ 10,362$ 12,728



--------------------------------------------------------------------------------

(1) In December 2012, we discontinued the GRN1005 program and returned the asset to Angiochem, Inc. in May 2013.

(2) On October 1, 2013, we closed the transaction to divest our human embryonic stem cell assets and our autologous cellular immunotherapy program to Asterias. Asterias assumed all post-closing liabilities with respect to all of the assets contributed by us, including any liabilities related to the GRNOPC1 and autologous cellular immunotherapy clinical trials.

(3) In April 2013, we announced the decision to discontinue our discovery research programs and companion diagnostics program based on telomere length and close our research laboratory facility located at 200 Constitution Drive, Menlo Park, California.

23



--------------------------------------------------------------------------------

Table of Contents

At this time, we cannot provide reliable estimates of how much time or investment will be necessary to commercialize imetelstat. For a more complete discussion of the risks and uncertainties associated with the development of imetelstat, see the sub-sections entitled, "Risks Related to Our Business" and "Risks Related to Clinical and Commercialization Activities", in Part II, Item 1A entitled, "Risk Factors," in this Form 10-Q.

Restructuring Charges



In April 2013, we announced the decision to discontinue our discovery research programs and companion diagnostics program based on telomere length and close our research laboratory facility located at 200 Constitution Drive, Menlo Park, California. With this decision, a total of 20 positions were eliminated. In connection with this restructuring, we incurred aggregate restructuring charges of approximately $1.4 million for the year ended December 31, 2013, of which $824,000 was recorded in the second quarter of 2013. For the three months ended June 30, 2013, the restructuring charges recognized under the April 2013 restructuring included $624,000 related to one-time termination benefits, including $28,000 of non-cash stock-based compensation expense relating to the extension of the post-termination exercise period through the end of December 2013 for certain stock options previously granted to terminated employees, and $200,000 related to non-cash charges for write-downs of excess equipment and leasehold improvements. The remaining restructuring charges related to costs associated with the exit of our research laboratory facility and were recorded in the second half of 2013. All actions associated with this restructuring were completed in 2013, and we have no remaining obligations under the April 2013 restructuring. See Note 4 on Restructuring in Notes to Condensed Financial Statements of this Form 10-Q for further discussion of the restructuring charges.

General and Administrative Expenses

General and administrative expenses were $3.9 million and $7.8 million for the three and six months ended June 30, 2014, respectively, compared to $3.4 million and $8.2 million for the comparable 2013 periods. The increase in general and administrative expenses for the three months ended June 30, 2014 compared to the comparable 2013 period is primarily the net result of higher non-cash stock-based compensation expense of $785,000, partially offset by reduced patent costs and transaction fees of $257,000 associated with the stem cell divestiture which closed in October 2013. The decrease in general and administrative expenses for the six months ended June 30, 2014 compared to the comparable 2013 period is primarily the net result of reduced patent costs and transaction fees of $1.5 million associated with the stem cell divestiture, partially offset by higher non-cash stock-based compensation expense of $1.2 million. Due to the purported securities lawsuits and the derivative lawsuit filed against us and/or certain of our officers and directors, we expect that our legal expenses will increase in 2014 as we intend to vigorously defend against these lawsuits.

Unrealized Gain (Loss) on Derivatives

Unrealized gain (loss) on derivatives reflects a non-cash adjustment for changes in fair value of options held by non-employees that are classified as current liabilities. Derivatives classified as assets or liabilities are marked to fair value at each financial reporting date with any resulting unrealized gain (loss) recorded in the condensed statements of operations. We incurred an unrealized loss on derivatives of $147,000 and $24,000 for the three months ended June 30, 2014 and 2013, respectively, compared to an unrealized gain on derivatives of $77,000 and $1,000 for the six months ended June 30, 2014 and 2013, respectively. The unrealized gains and losses on derivatives for the three and six months ended June 30, 2014 and 2013 primarily reflected the change in fair values of derivative liabilities as a result of fluctuations in the market value of our stock and changes in other inputs factored into the estimate of their fair value such as the volatility of our stock. See Note 2 on Fair Value Measurements in Notes to Condensed Financial Statements of this Form 10-Q for further discussion of the fair value of derivatives.

24



--------------------------------------------------------------------------------

Table of Contents Interest and Other Income



Interest income was $99,000 and $182,000 for the three and six months ended June 30, 2014, respectively, compared to $56,000 and $137,000 for the comparable 2013 periods. The increase in interest income for the three and six months ended June 30, 2014 compared to the comparable 2013 periods is primarily due to an increase in our marketable securities portfolio in connection with the receipt of the net cash proceeds from the underwritten public offering of shares of our common stock that we completed in February 2014. Interest earned in future periods will depend on the size of our marketable securities portfolio and prevailing interest rates.

Interest and Other Expense



Interest and other expense was $23,000 and $39,000 for the three and six months ended June 30, 2014, respectively, compared to $14,000 and $32,000 for the comparable 2013 periods. The increase in interest and other expense for the three and six months ended June 30, 2014 compared to the comparable 2013 periods is primarily due to higher bank charges related to the increase in our cash and investment balances in connection with the receipt of the net cash proceeds from the underwritten public offering of shares of our common stock that we completed in February 2014.

Net Loss



Net loss was $8.7 million and $17.2 million for the three and six months ended June 30, 2014, respectively, compared to $8.9 million and $20.8 million for the comparable 2013 periods. The decrease in net loss for the three months ended June 30, 2014 compared to the comparable 2013 period is primarily due to higher license and royalty revenues for licenses related to our hTERT technology. The decrease in net loss for the six months ended June 30, 2014 compared to the comparable 2013 period is primarily due to reduced operating expenses as a result of the wind-down of our GRN1005 trials in patients with brain metastases and imetelstat trials in solid tumors, decreased personnel related costs resulting from previous restructurings, reduced costs for scientific supplies and services with the discontinuation of our discovery research programs in April 2013 and lower patent costs and transaction fees associated with the stem cell divestiture which closed in October 2013.

LIQUIDITY AND CAPITAL RESOURCES

Cash, restricted cash, cash equivalents and marketable securities at June 30, 2014 were $147.6 million, compared to $66.0 million at December 31, 2013. We estimate that our existing capital resources, amounts available to us under our equipment financing facility and future interest income will be sufficient to fund our current level of operations through at least the next 12 months. We have an investment policy to invest these funds in liquid, investment grade securities, such as interest-bearing money market funds, certificates of deposit, municipal securities, U.S. government and agency securities, corporate notes and commercial paper. Our investment portfolio does not contain securities with exposure to sub-prime mortgages, collateralized debt obligations, asset-backed securities or auction rate securities and, to date, we have not recognized any other-than-temporary impairment charges on our marketable securities or any significant changes in aggregate fair value that would impact our cash resources or liquidity. To date, we have not experienced lack of access to our invested cash and cash equivalents; however, access to our invested cash and cash equivalents may be impacted by adverse conditions in the financial and credit markets. The increase in cash, restricted cash, cash equivalents and marketable securities in 2014 was the result of the receipt of net cash proceeds of approximately $96.8 million, after deducting the underwriting discount and offering expenses payable by us, from an underwritten public offering of 25,875,000 shares of our common stock at a public offering price of $4.00 per share that we completed in February 2014.

In October 2012, we entered into an At-The-Market Issuance Sales Agreement, or sales agreement, with MLV & Co. LLC, or MLV, which provides that, upon the terms and subject to the conditions and limitations set forth in the sales agreement, we may elect to issue and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through MLV as our sales agent. We are not obligated to make any sales of common stock under the sales agreement. To date, we have not sold any common stock pursuant to the sales agreement.

25



--------------------------------------------------------------------------------

Table of Contents

Our future capital requirements will be substantial. Changes in our research and development plans or other changes affecting our operating expenses or cash balances may result in the unexpected expenditure of available resources. Factors that may require us to use our available capital resources sooner than we anticipate include:

the accuracy of the assumptions underlying our estimates for our capital needs for 2014 and beyond;

changes in our development plans for imetelstat, including changes which may result from the current or any future clinical holds on our IND or any other INDs, including the investigator's IND for the Myelofibrosis IST that we expect to be transferred to us on the planned IND Transfer Date, for imetelstat;

our ability to meaningfully reduce manufacturing costs of imetelstat;



the magnitude and scope of our imetelstat research and development program, including the number of indications we may pursue, subject to permission from the FDA;

the progress made, if any, in our imetelstat research and development program, including existing or potential future Geron-sponsored and investigator-sponsored clinical trials;

our ability to establish, enforce and maintain strategic arrangements for research, development, clinical testing, manufacturing and marketing of imetelstat;

the time and costs involved in obtaining regulatory clearances and approvals in the United States and in other countries;

expenses associated with the pending and potential additional related purported securities lawsuits and derivative lawsuits, as well as any other litigation; and

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims.

In addition, changes in our business may occur that would consume available capital resources sooner than we expect. If our existing capital resources, equipment financing arrangement and future interest income are insufficient to meet future capital requirements, we will need to raise additional capital to fund our operations. We anticipate that we will need to seek additional funding through public or private equity financings, including pursuant to our sales agreement with MLV, equipment loans or other financing sources that may be available, including debt financings or collaborative and licensing arrangements. However, we may be unable to raise sufficient additional capital when we need it, on favorable terms or at all. Our ability to raise additional funds will be severely impaired if we are unable to obtain release of the current or any future clinical holds on our IND or any other INDs, including the investigator's IND for the Myelofibrosis IST that we expect to be transferred to us on the planned IND Transfer Date, for imetelstat, or if imetelstat fails to show adequate safety or efficacy in existing or potential future Geron-sponsored and investigator-sponsored clinical trials, including the Myelofibrosis IST. If we are unable to obtain adequate funds on reasonable terms, we may be required to curtail operations significantly or obtain funds by entering into financing, supply or collaborative agreements on unattractive terms or we may be required to relinquish rights to technology or imetelstat or to grant licenses on terms that are unfavorable to us, or we may otherwise be required to delay, reduce the scope of, suspend or eliminate some or all of the elements of our imetelstat program, any of which could have a material adverse effect on our business.

Cash Flows from Operating Activities. Net cash used in operations for the six months ended June 30, 2014 and 2013 was $14.7 million and $24.2 million, respectively. The decrease in net cash used in operations in 2014 compared to 2013 primarily reflects the wind-down of our GRN1005 trials in patients with brain metastases and imetelstat trials in solid tumors, decreased personnel related costs resulting from previous restructurings, reduced costs for scientific supplies and services with the discontinuation of our discovery research programs in April 2013 and lower patent costs and transaction fees associated with the stem cell divestiture which closed in October 2013.

26



--------------------------------------------------------------------------------

Table of Contents

Cash Flows from Investing Activities. Net cash used in investing activities for the six months ended June 30, 2014 was $86.5 million. Net cash provided by investing activities for the six months ended June 30, 2013 was $10.9 million. The decrease in net cash provided by investing activities in 2014 compared to 2013 primarily reflects higher purchases of marketable securities with the net cash proceeds received from an underwritten public offering of shares of our common stock that we completed in February 2014.

As of June 30, 2014 we had approximately $500,000 available for borrowing under our equipment financing facility. We renewed the commitment for this equipment financing facility in 2009 to further fund equipment purchases. If we are unable to renew the commitment in the future, we will use our existing cash resources to fund capital expenditures.

Cash Flows from Financing Activities. Net cash provided by financing activities was $97.7 million and $60,000 for the six months ended June 30, 2014 and 2013, respectively. Net cash provided by financing activities in the first half of 2014 primarily reflects the receipt of net cash proceeds of approximately $96.8 million, after deducting the underwriting discount and offering expenses payable by us, from an underwritten public offering of 25,875,000 shares of our common stock at a public offering price of $4.00 per share that we completed in February 2014.

Contractual Obligations



Our future minimum contractual obligations were reported in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC.

On February 27, 2014, we amended the lease agreement for our premises at 149 Commonwealth Drive to extend the lease term from July 2014 through January 2016. Operating lease obligations under the amended lease agreement for the extended lease term include aggregate future minimum payments of $1.4 million.

Other than as described above, there have been no other material changes from the contractual obligations previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

Off-Balance Sheet Arrangements

We have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters